PGR.L Regulatory News (PGR)

25 August 2016

Andes Energia plc

("Andes" or "the Company")

Chachahuen Exploration Operational Update

New exploration success in Chachahuen block

The Board of Andes (AIM: AEN; BCBA: AEN), the producer and explorer in Argentina and Colombia, is pleased to provide an update on current exploration operations in the Chachahuen block in the Province of Mendoza, Argentina, based on drilling and completion reports, provided by YPF, the operator on this block.

Highlights:

• Four exploratory wells were drilled and completed

• An oil discovery was made in exploration well "Cerro Redondo x-1" encountering 6 metres of net oil pay in the sandstone of the Rayoso formation (cycle 1)

• Gas was found in exploration well "La Orilla x-1" in the deeper horizon of the Lotena formation

• Gas was found in the exploration well "Remanso del Colorado x-1" in the deeper horizon of the Cuyo Group

• Well "Cerro Montoso x-1" was plugged and abandoned providing valuable geological and engineering data for the on going exploratory campaign

• A fifth well "Cerro Morado Este x-1" was spudded on 5 July and is currently in the completion stage, with the main target to investigate the Centenario formation

The discoveries from the exploration program will add new potential resources for future development in the field.

Exploratory Activities

La Orilla x-1

The well is located approximately 17 km southeast of the first discovery well "Chus x-2", on the "Chachahuen Sur" evaluation block and was drilled to test a four-way closure structure at multiple horizons investigating the complete stratigraphic column, with the primary target the Centenario formation and the deeper Tordillo and Lotena formations the secondary targets. The Centenario formation occupies the eastern margin of the Neuquén Basin. The facies of this formation is fluvial/lacustrine, typical of the basin margin and these non-marine deposits interfinger with the marine formations of the upper part of the Mendoza Cycle and with the evaporitic facies of the Rayoso Cycle.

The well reached a total depth of 1,353 metres and encountered oil and gas shows in the lower Centenario, Tordillo and Lotena formations. During the completion stage, the deeper horizon of the Lotena formation (depth 1,266 metres) tested for intermittent natural flows of gas and water, with the gas flared at the location. A production string was installed in order to perform extended well tests to define productivity.

Cerro Montoso x-1

The well is located approximately 37 km northeast of the discovery well "Chus x-2", on the "Chachahuen Centro" block and was drilled to test a three way closure against a bounding fault structure at multiple horizons with the primary target the lower Centenario formation and the deeper Tordillo formation the secondary target.

The well was drilled to a total depth of 980 metres. Lost circulation was encountered whilst drilling and no oil shows were seen. The well was cased and formation water was recovered from the Centenario and Tordillo formations through swabbing. The well was subsequently plugged and abandoned.

Remanso del Colorado x-1

The well is situated approximately 9.5 km southeast of the discovery well "Chus x-2" on the "Chachahuen Sur" evaluation block with the primary target to investigate the sandstone of cycle 1 of the Rayoso formation into the combined structural/stratigraphic traps where the updip seal is the claystones of the Neuquen Group above an unconformity.

The well was drilled to a total depth of 2,418 metres investigating the complete stratigraphic column. A comprehensive well test program was carried out testing separately the following formations: Rayoso, Agrio, Mulichinco, and an intrusive of the Vaca formation. Formation water was recovered from each one, whilst the deeper horizon of the Group Cuyo formation tested for natural flows of gas and water with the gas flared at the location. An extended well test is planned to define productivity.

Cerro Redondo x-1

The well is situated approximately 4.3 km northeast of the discovery well "Chus x-2" on the "Chachahuen Sur" evaluation block with the primary target to investigate the sandstone of cycle 1 of the Rayoso formation into the combined structural/stratigraphic traps where the updip seal is the claystones of the Neuquen Group above an unconformity.

The well was drilled to a total depth of 1,810 metres investigating the complete stratigraphic column. Oil shows were seen during the drilling process, however, wireline logs showed the deeper horizons of the Troncoso, Agrio, Mulichinco, Quintuco/Vaca Muerta, Tordillo and Grupo Cuyo formations to be water saturated. The shallow horizon encountered good quality reservoir sandstone with a net oil pay of 6 metres. The well was cased at depth of 845 metres to test the Rayoso formation. After fracture stimulation the well produced by natural flow 135 bpd with a water cut of approximately 15%. A buildup test was performed to further evaluate the potential reservoir properties of cycle 1 of the Rayoso formation.

The well came on stream on 27 June and after an initial clean up period produced at a rate of 81 bpd.

An appraisal program and extensive follow-up exploration activities will now be considered targeting cycle 1 of the Rayoso formation.

Nicolas Mallo Huergo, Chairman, commented: "The new oil discovery at the "CoRe x-1", untapped a new reservoir to be appraised and developed, in the same way the presence of gas identified in the deeper horizons of wells "LaO x-1"and "Re Co x-1" opens a new exploratory frontier, which reaffirms the large scale hydrocarbon potential of Chachahuen."

For further information please contact:

Qualified Person Review

In accordance with AIM guidance for mining, oil and gas companies, Mr. Juan Carlos Esteban has reviewed the information contained in this announcement. Mr. Juan Carlos Esteban, an Officer of the Group, is a petroleum engineer with over 30 years of experience and is a member of the SPE (Society of Petroleum Engineers).

Note to Editors:

Andes Energia plc is an oil and gas exploration and production company focused on onshore assets in South America with a market capitalisation of circa £100m. The Company has its main operations in Argentina and Colombia.

The Company has approximately 25* MMbbls of conventional 2P reserves, and it also has certified prospective resources of 640 MMboe, primarily in the Vaca Muerta unconventional development in Argentina and over 7.5 million acres across South America.

The Company has approximately 250,000 net acres in the Vaca Muerta formation, which is the second largest shale oil deposit in the world and the only producing shale oil deposit outside of North America, currently producing 45,000 boepd. Over 300 wells have already been drilled and fracked in the Vaca Muerta formation.

Andes is the only AIM quoted company on the London Stock Exchange with exposure to the Vaca Muerta shale.

The Company currently produces approximately 3,300* boepd in Argentina and Colombia from six conventional fields in Argentina and two in Colombia, with positive cash flows generated.

*Includes 100% of Interoil's net reserves and production