Argentina’s Andes Energia Provides Chachahuen Operational Update

Andes Energia, the producer and explorer in Argentina and Colombia, has provided an update on current production, development and exploration operations in the Chachahuen block in the Province of Mendoza, Argentina based on the December 2015 sales and production reports, provided by YPF, the operator of the block.

Highlights:

•26 new successful development wells drilled since the end of June 2015 increasing production by approximately 1,469 bpd (293 bpd net to Andes)

•97 wells now on stream producing approximately 5,989pd (1,197 bpd net to Andes)

•Ongoing water flood project has increased the average rate of injection from 1,800 bpd to 3,600 bpd through 17 injection wells increasing the recovery rate

•Acquisition of 552 km² of 3D seismic and 267 km of 2D seismic

•Commencement of low cost LaOrx-1 exploration well

•Commencement of low cost CeMox-1 exploration well

•Three drilling and two workover rigs currently operating

•Licence extension granted for Chachahuen Norte block

License status

During 2015 the Province of Mendoza issued a resolution creating a new period of evaluation for the heavy crude oil prospect in the north part of the Chachahuen block, whilst the southern areas passed into the second period exploration and development phase.

As a consequence the Chachahuen block was divided into the following sub blocks:

Chachahuen Sur (Development block)

After the declaration of commerciality, in October 2013 the Mendoza province awarded an initial exploitation period of 25 years.

This development block covers an area of 72 km², in the south of the Chachahuen block that borders the energy-rich Neuquén Province.

Development and Delineation Drilling

As part of our ongoing development drilling program a total of 26 new development and appraisal wells have been drilled and completed since the end of June 2015, which are all producing wells.

During 2015 a total of 12 appraisal wells were drilled and completed successfully, which have extended the field limits.

The wells targeted the clastic member, cycle 2 and 3 of the Rayoso formation deposited during the early Cretaceous in an environment predominantly continental. These separate units are composed of a succession of fine sandstones, red mudstones, and minor evaporates.

Oil Production

A total of 97 wells are now on stream producing approximately 5,989 bpd (1,197 bpd net to Andes).

In all wells a progressing cavity pump artificial lift system has been installed which best suits the conditions of the wells and has long been proven to be efficient.

As part of the second stage of the infrastructure development a new oil pipeline was commissioned. The new pipeline has a diameter of 36 inches and this 10 km extension will reduce transportation costs.

Enhanced Oil Recovery - Water Flood Project

Since the end of June 2015, two injection wells were drilled, completed and tied to the injection network and six additional production wells were converted to injection wells increasing the average rate of injection from 1,800 bpd to 3,600 bpd through a total of 17 injection wells increasing the recovery rate.

Chachahuen Sur (Exploration block)

This exploration block covers an area of 478 km². A two and a half year extension has been granted to the JV, subject to the following commitments:

•Acquisition of 478 km² of 3D seismic

•Process and interpret acquired 3D seismic

•Drill four exploratory wells

Chachahuen Norte

In this zone a new oil play has been explored by drilling five shallow stratigraphic wells. This campaign targeted the sandstone pinch-out of the Neuquén group in the north part of the Chachahuen block. Several fresh oil shows and core samples soaked in heavy, viscous and biodegraded oil were recovered during the drilling stage.

A three year evaluation period has been granted to the JV to evaluate the potential of this zone, which covers an area of 1,480 km², subject to the following commitments:

•Completion of one previously drilled well

•Drill one stratigraphic well targeting the Neuquen group

•Implement a two well pilot project to test productivity

•Delineation of ten shallow well drilling program

Chachahuen Centro

This exploration block covers an area of 464 km². A two year extension has been granted to the JV, subject to the following commitments:

•Acquisition of 267 km of 2D seismic

•Drill one exploratory well

An area totalling approx. 460 km² of the original Chachahuen licence area has now been relinquished.

Exploratory Activities

The 3D and 2D seismic programs have been completed successfully, covering 552 km² on the Chachahuen Sur exploration block and the Chachahuen development block and 267 km of 2D seismic on the Chachahuen Centro block.

Computer processing of the 3D data is in progress and preliminary results have identified the "LaOrx-1" prospect targeting the Centenario , Mulichinco and deeper Tordillo formations. The low cost exploration well "LaOrx-1" is located approximately 17 km southeast of the discovery well "Chus x-2" on the Chachahuen Sur evaluation block. The completion program and analysis of results is due to be finished by the end of the month.

A second low cost exploration well "CeMo x-1" has been spudded on the "Chachuen Centro" block targeting Mulichinco, a Centenario formation. The well is located approximately 37 km northeast of the discovery well "Chus x-2"

Nicolas Mallo Huergo, Chairman, commented:

'Chachahuen has proven to be a high quality oil asset characterized by a significant ongoing development plan with excellent exploratory results to date with new prospects and leads identified encouraging us to continue with this exploration and development program. The excellent results to date are an important step towards understanding and untapping the overall potential and commerciality of the block.'