Acquisition of Interest in Interoil

23 December 2014

Andes Energia plc

("Andes" or "the Company" or "the Group")

Acquisition of Interest in Interoil

The Board of Andes (AIM: AEN; BCBA: AEN) is pleased to announce that it has agreed with the board of Interoil Exploration and Production ASA ("IOX") to invest NOK 36.3 million (US$4.95 million) in IOX through a private placement subject to certain conditions, including the successful restructuring of IOX's NOK 310 million (US$42.2 million) corporate bond the ("Bond") and the US$6.2 million debt due to Proseis AG (the "Proseis Debt"), and approval of the IOX shareholders and corporate bondholders.

The new shares to be issued to Andes will represent approximately 51% of the enlarged share capital of IOX, following the private placement and debt restructuring. The IOX board will be expanded to seven members of which four will be nominated by Andes, including the positions of Chairman, CEO and CFO.

Highlights

· Acquisition provides substantial increase in cash-flow and 2P reserves

· Significant enhancement of Andes's operating capabilities in Colombia

· Addition of robust cash flow generation capable of funding capital expenditure to access additional upside (including all commitments), even at conservative price assumptions, as well as servicing the new debt

· Potential for material synergies across the portfolio given proximity of IOX's operating licences to Andes's current assets in Colombia

· Management believes there is significant resource upside available

· Initial controlling 51% stake acquired with funding in place for potential full acquisition via mandatory offer

Background on IOX

IOX operates production and exploration oil and gas licences in Colombia and has 9 years of operating experience in the country. Previously IOX operated in Peru also but these operations were discontinued in November 2014. The Colombian licences currently produce 1,571 boe/d (1,040 bbl/day oil and 531 boe/day gas), and have approximately 5.7 MM boe of net 2P reserves* (3.5 MM bbls of oil and 11.8 BCF of gas).

*Source IOX 2013 IOX Annual Report. Reserves audited by Gaffney, Cline & Associates Inc.

The Private Placement

Andes has agreed to subscribe for 330,000,000 new shares in IOX at NOK 0.11 per IOX share for a total consideration of US$4.95 million, to be satisfied from existing cash resources. These new IOX shares will represent approximately 51% of the enlarged share capital of IOX, following the private placement and debt restructuring.

The Debt Restructuring

The NOK 310 million (US$42.2 million) Bond and US$6.2 million Proseis Debt will be replaced with a new US$32 million bond to be issued by IOX (the "New Bond"), denominated in US$ with a coupon of 6% per annum and maturity in 2020 with the option to satisfy coupon payments in the first 2 years by issuing additional New Bonds to the equivalent value.

As part of the restructuring, current bondholders will be offered to convert part of the existing Bond into 65,000,000 shares in IOX, equivalent to approximately 10% of the enlarged share capital following the private placement and debt restructuring. This restructuring is subject to completion of the private placement and the approval of the shareholders and bondholders of IOX.

Mandatory Offer

Completion of the private placement will trigger an obligation for Andes to launch a mandatory offer for the existing shares in IOX at NOK 0.11 per IOX share.

Andes will also offer to the IOX bondholders a guarantee, on the same terms as the mandatory offer, that bondholders will have the option to buy any shares tendered under the mandatory offer at NOK 0.11 per share. The mandatory offer will be in cash and must be outstanding for four weeks according to Norwegian law. The mandatory offer document must be filed with and approved by the Oslo Stock Exchange prior to the commencement of the offer period.

The acquisition of 100% of IOX would take Andes's net production to approximately 3,300 boepd and 2P reserves to 25.7 MM boe.

Meetings to Approve the Transaction

The private placement and restructuring are subject to shareholder and bondholder approval. IOX will be issuing a notice to convene meetings for the shareholders and bondholders, which are expected to be held on or around 19 January 2015 and 21 January 2015 respectively.

The offer to the IOX board will automatically terminate on 31 January 2015 if the IOX shareholders and bondholders have not approved the offer and related transactions by that time.

Alejandro Jotayan, CEO of the Company, commented:

"We are pleased to become the majority shareholder of IOX, which will allow Andes to approximately double its consolidated production and increase and diversify its reserves base. Our management and technical capabilities established in the region, combined with IOX's existing operational base and personnel will contribute to accelerating the development of both companies' current assets in Colombia.We are acquiring current production which provides significant robust cash flow and additional self-funded exploration and development potential."

Pareto Securities AS is acting as financial adviser to Andes in this transaction.

For further information please contact:

Note to Editors - Andes:

Andes Energia is an oil and gas company focussed on onshore South America with a market capitalisation of circa £183m. The Company has operations in Argentina, Colombia, Brazil and Paraguay, representing three of the largest economies and three of the four largest oil producing nations in South America.

The Company has 20MMbbls of conventional 2P reserves in Argentina and certified resources of 600MMBoe, primarily in the Vaca Muerta unconventional formation in Argentina and 7.5 million acres across South America.

The Company has approximately 2 million net acres in unconventional plays including 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 the USA. Over 250 wells have already been drilled and fracked in the Vaca Muerta formation.

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

The Company currently produces 1,700 bbls per day in Argentina from 7 conventional fields, generating positive cash flow. Andes Energia, with its partner YPF, has 30 wells planned over the next 12 months, which are funded by the field production cash flow.

Note to Editors - IOX:

Interoil Exploration and Production ASA is a Norwegian based exploration and production company - listed on the Oslo Stock Exchange - with focus on Latin-America. The company operates four production and exploration licences in Colombia. Interoil currently employs approximately 95 people and is headquartered in Oslo.

For the year ended 31 December 2013 turnover excluding the Peruvian operations was US$43.6 million and with profit before tax excluding Peruvian operations of US$12.9 million. As at 31 December 2013 IOX had gross assets of US$85 million.