PGR.L Regulatory News (PGR)

 28 September 2012

ANDES ENERGIA PLC

("Andes" or the "Company" or with its subsidiaries the "Group")

ANDES ENERGIA PLC - UNAUDITED 2012 INTERIM RESULTS

Andes (AIM: AEN; BCBA: AEN), the Latin American energy group, announces its interim results for the six month period ending 30 June 2012. The electricity business was demerged from the Group on 11 July 2012 after the period end. Andes remains the ultimate holding company of the E&P business but no longer has any interest in the electricity business which has been transferred to Andina plc ("Andina"). As the demerger was completed after the period end these results incorporate the results of the E&P business and the electricity business, which are not reflective of Andes's operations post demerger.

Operational highlights

·; Discovery of oil and gas in well YPF.NQ.MMO.x-1 in the Vaca Muerta formation in the Mata Mora block. Net prospective resource of 19.9 mmboe attributed to Andes's participation 

·; Discovery of oil and gas in well YPF.NQ.Corr.x-1 in the Vaca Muerta formation in the Corralera block. Net prospective resource of 87.7 mmboe attributed to Andes's participation

·; Acquisition of A.H.I. S.A. with conventional and unconventional interests in Argentina and Paraguay

·; Current production approximately 210 bopd

Post period end highlights

·; Successful completion of the demerger of the Group's E&P activities and its electricity assets

·; Tendered for three blocks in Mendoza

·; New management team

Nicolas Mallo Huergo, Chairman, said: "We have completed successfully the demerger of the E&P activities and the electricity assets and strengthened our management team to reflect this. We continue to develop our assets and are particularly pleased with the drilling results in the Mata Mora and Corralera blocks and the acquisition of AHI has doubled our production and increased our reserves by 5.9 million barrels of oil in addition to providing us with additional 191 million barrels of oil of risked prospective oil resources and 8.1 TCF unrisked unconventional prospective resources of gas. We continue to expand the Group's interests and believe we have a portfolio of assets with enormous potential in conventional and unconventional resources."

Enquiries:

Note to Editors:

Andes is a Latin American oil and gas group, with interests in Argentina and Paraguay. The Company's focus is on the oil and gas sector in South America, which it believes offers premium assets at undervalued prices.

Chairman's review

ANDES (E&P Business)

Oil and Gas interests

A well drilled on the Mata Mora block discovered oil and gas in the Vaca Muerta formation. The well encountered a thickness of 136 metres (446 feet) in the Vaca Muerta formation and during the initial 48 hour period, the well flowed at an average rate of 97 bopd of 31° API light crude oil. Ryder Scott has attributed prospective resource of 140.8 mmb of oil and 39 bcf of gas to the block, which represents a net equity resource of 19.9 mmboe to Andes (13.5% carried interest).

A well drilled on the Corralera block also discovered oil and gas in the Vaca Muerta formation. The well was successfully drilled and cased to a depth of 2,405 metres (7,889 feet). The well found a thickness of 346 metres (1,135 feet) in the Vaca Muerta formation. Petrophysical and log analysis confirm the highly prospective quality and quantitative properties of the Vaca Muerta shale formation and Ryder Scott has attributed 649.8 mmboe of prospective resource to the block, which represents a net equity resource of 87.7 mmboe to Andes (13.5% carried interest).

The wells were drilled by Andes's partner and operator YPF, Argentina's largest oil and gas development company. The Vaca Muerta formation is one of two principal source rocks in the Neuquén basin in Argentina. The formation is late Jurassic/early Cretaceous in age and covers an area of approximately 7.41 million acres (30,000 km²), varies in depth between 5,500 to 14,000 feet and is in places up to 1,400 feet thick. In published reports, the U.S. Energy Information Administration has independently estimated a risked, recoverable resource of 240 trillion cubic feet ("TCF") of shale gas from the Vaca Muerta formation in the Neuquén basin.

On 7 June 2012 Andes announced that an agreement had been reached to acquire A.H.I. S.A. ("AHI"). AHI owns; a 100% conventional and unconventional interest in the Repatriación block in the Chaco-Parana basin in Paraguay; a 100% conventional and unconventional interest in the Los Buitres, Mina Baku and La Brea blocks in the Neuquen basin; a 100% interest in the Agrio formation and a 40% carried interest in the other formations in a 296 km2 area of the El Manzano block in the Neuquen basin. The total consolidated acreage of the AHI assets is 600,683 acres with 2P reserves of 5.9 million barrels of oil and risked conventional and unconventional prospective resources of 191 million barrels of oil and unrisked unconventional prospective resources of 8.1 Tcf of gas. Andes also signed an option to acquire the Santa Rosa block, 1,901,228 acres, in the Cuyana Basin in Mendoza, Argentina.

ANDINA (Electricity business)

EDEMSA

In the first six months of 2012 EDEMSA generated EBITDA of US$9.7 million on revenues of US$95.8 million, compared to EBITDA of US$10.9 million on revenues of US$85.6 million for the corresponding period last year.

EDEMSA's results have, obviously, been impacted by the continued delays in the approval of the implementation of tariff adjustments. EDEMSA's tariffs during the period were those still based on 2008 cost values. Since the end of the period the province has approved an initial average VAD increase of 9.15% representing an effective average tariff increase of 5.5%.

During 2011, EDEMSA entered into a syndicated loan agreement for AR$144 million to facilitate the buy back and cancellation of the EDEMSA bonds then in issue and the termination of the TRS with Andes and allow EDEMSA to accelerate the implementation of work plans and provide working capital. EDEMSA has now repaid its dollar denominated debt thus significantly reducing its exposure to foreign exchange risk. Due to the deteriorating financial condition of EDEMSA, at the end of the period it failed to fulfill certain requirements of the syndicated loan. This gives the syndicate administrative agent, at the request of a majority of the lenders, by written notice, the ability to declare immediate repayment of all amounts outstanding. At the date of this announcement EDEMSA has not received such notice but has recognised the full balance due as a current liability. EDEMSA is negotiating with the financial institutions to seek modifications to the syndicated loan covenants and a waiver of non-compliance. The financial information has been prepared assuming the normal course of operations and does not include the effects of any adjustments and/or reclassifications, if any, that may be required if the above situation is not resolved in favour of EDEMSA. To date it is not possible to predict the final outcome of this process and, consequently, the financial information should be considered in light of these uncertainties. As noted above, Andes no longer has any interest in the electricity business.

HASA

Reduced rainfall and reduced water accumulation has adversely impacted the performance of Hidroeléctrica Ameghino S.A., which resulted in an EBITDA for the period of US$0.3 million on revenues of US$1.4 million compared to an EBITDA of US$1.4 million on revenues of US$2 million for the comparative period last year. However, such cycles are not unusual and since the period end the water level has been on a rising trend.

We successfully completed the demerger of the E&P activities and the electricity assets, which we believe will result ultimately in the value of each business being reflected more accurately in the markets. We have also made a number of changes to the board to reflect the need to adapt to the future business structure and environment needs. We are extremely pleased to have been able to attract directors with extensive oil exploration and production experience.

We now have assets with enormous potential and the management in place to fully exploit them.

Nicolas Mallo Huergo

Chairman

28 September 2012

Group income statement for the six months ended 30 June 2012

Consolidated statement of financial position as at 30 June 2012

Consolidated statement of changes in equity for the six months ended 30 June 2012

Consolidated cash flow statement for the six months ended 30 June 2012

Notes

1. Basis of preparation

The Group consolidates the financial statements of the Company and its subsidiary undertakings.

The financial information has been prepared under the historical cost convention in accordance with International Financial Reporting Standards (IFRSs). The financial information set out in this half-yearly report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The same accounting policies, presentation and methods of computation are followed in this interim condensed consolidated report as were applied in the Group's annual financial statements for the year ended 31 December 2011. The auditor's report on those financial statements was unqualified and did not contain any statements under section 498(2) or section 498(3) of the Companies Act 2006.

2. Segmental analysis

2. Segmental analysis (continued)

3. Earnings per share

Earnings per share is presented on two bases: basic earnings per share and diluted earnings per share. Basic earnings per share is in respect of all activities and diluted earnings per share takes into account the dilution effects which would arise on conversion or vesting of warrants in issue. Adjusted basic and diluted (loss)/earnings per share is presented after adjustment of exceptional items.

4. Acquisitions

As a result of the acquisition of the AHI, announced on 6 June 2012, the Group recognized an exceptional gain of US$2,078,378 arising from the difference between the consideration paid and the fair value of the net assets acquired.

5. Demerger

The demerger of the E&P activities and electricity assets was completed on 11 July 2012, after the period end. Following completion of the demerger, Andes remains the ultimate holding company for the E&P business, with the electricity business being transferred to a newly incorporated company, Andina plc,

6. Other

A copy of this report will be made available on Andes's website at www.andesenergiaplc.com.ar