Spudding of Well

6 January 2014

Andes Energia plc

("Andes" or "the Company")

Spudding of Well

Spud in JV with YPF, of a multi-target exploration well in the unconventional Vaca Muerta and conventional Chachao and Agrio formations in the El Manzano West block in the Neuquén basin, Argentina

The Board of Andes (AIM: AEN; BCBA: AEN) is pleased to announce the commencement of drilling of the Las Varillas x-1 exploration well located in the El Manzano West block in the Neuquén basin, South Mendoza Province, Argentina. This new well is located 1.5 km from the successful Mirador del Valle x-1 well discovery announced on 13 November, which targeted the Neuquen Group formation producing an average flow rate of 535 bopd during testing with the potential for 15 million barrels of recoverable resource.

Las Varillas x-1

The objective of the Las Varillas x-1 well is to evaluate the unconventional potential of the Vaca Muerta formation, which lies approximately 1,000 metres below the Neuquén Group formation, as well as the conventional potential of the Chachao and Agrio formations.

The drilling plan includes taking an 18 metre core from the Agrio and Chachao formations and two additional cores from the Vaca Muerta formation. Geochemical data will be sampled at 2 metre intervals from the start of the Agrio formation to the total target well depth of 2,250 metres.

The well is being drilled by YPF as part of the farm-in agreement with Andes, under which Andes has a 100% working interest in all production from the Agrio formation and a 40% carried interest in the other formations including Vaca Muerta and Chachao. Andes is fully carried through drilling and testing of the well, which is expected to be completed by the end of January.

Alejandro Jotayan, CEO of the Company, commented: "The Manzano West block has already demonstrated significant conventional oil production potential following the drilling of the Mirador del Valle x-1 well in November 2013, which was sourced from the Vaca Muerta formation and has significantly de-risked this well. The Las Varillas x-1 well will investigate the complete stratigraphic column including the world class source rock Vaca Muerta as the main target, in an area located in the Northwest of the Neuquén basin where Andes has 170,000 net acres nearby. A successful program will provide Andes and YPF with the opportunity to develop a large and promising area with unconventional and conventional resources potential."

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Note to Editors:

Andes Energia is an oil and gas company focussed on onshore South America with a market capitalisation of circa £270m. 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, mainly in the Vaca Muerta unconventional formation in Argentina and 7.5million acres across South America.

The Company has approximately 2 million net acres in unconventional plays including 213,000 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. The Vaca Muerta formation already has over 200 wells drilled.

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

The Company currently produces 1,400 bbls per day in Argentina from 7 conventional fields, with positive cash flows generated. Andes Energia, with its partner YPF, has 30 wells planned over the next 12 months, all of which are fully funded.