30 September 2015

ANDES ENERGIA PLC

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

UNAUDITED INTERIM RESULTS TO 30 JUNE 2015

Andes (AIM: AEN; BCBA: AEN), the Latin American E&P group, announces its unaudited interim results for the six month period ending 30 June 2015.

Operational Review

Period highlights

·              A 90% increase in average daily production from 1,700 boepd in 2014 to 3,226* boepd in the first six months of 2015

·              Average oil production of 1,816 bpd in Argentina; average net price received US$68.3/bbl

·              Average oil production of 930 bpd in Colombia; average net price received US$52.1/bbl

·              Average gas production of 480 boepd in Colombia; average price received US$18.6 peb

·              20 development wells drilled on the Chachahuen licence in Argentina, in partnership with YPF, all successfully brought into production

·              2 operated workovers on the El Manzano licence in Argentina to maintain production

·              Successful multi stage fracture and production test on the "Las Varillas x-1" exploratory well

·              Acquisition of 51% interest in Interoil and immediate organisational and financial restructure

·              New US$5.0 million debt facility with an affiliate of Mercuria Energy Asset Management BV, a shareholder of the Company

·              Revenues of US$32.5 million for the six months ending 30 June 2015 compared to US$20.4 million for the corresponding period last year; an increase of 59%

·              EBITDA of US$9.5 million for the six months ending 30 June 2015 compared to US$4.3 million for the corresponding period last year; an increase of 121%

·              Cash position of US$21.7 million as at 30 June 2015 compared to US$8.0 million as at 30 June 2014

Post period highlights

·              Successful US$9.0 million fund raise and US$10.0 million cancellation of part of an existing bond satisfied by the issue of shares

·              A further 15 development wells drilled on the Chachahuen licence

Alejandro Jotayan, CEO, commented:

"Andes continued growing through the development of its assets and acquisitions, taking advantage of market uncertainties. Our financial position and capital structure has improved and our short term prospects look encouraging with a planned 78 well program in Argentina over the next 12 months. This will allow us to increase significantly our production. Furthermore, the upcoming Argentinean Presidential elections could act as a catalyst for new and increased investment in the country, which will no doubt help drive value from our 250,000 net acres in the Vaca Muerta. "

*Includes 100% of Interoil's net production in which Andes holds a 51% interest

Enquiries:

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 £139m. 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 the USA, 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 3,226* boepd in Argentina and Colombia from 6 conventional fields in Argentina and 2 in Colombia, with positive cash flows generated.

*Includes 100% of Interoil's net reserves and production in which Andes holds a 51% interest

Chief Executive Officer's Review

Financial Highlights

* Before exceptional items of US$1.3 million

Revenue has increased to US$32.5 million for the first 6 month period of 2015 compared to US$20.4 million in the same period last year, including US$9.8 million from Interoil. This increase of 59% results primarily from the acquisition of the 51% interest in Interoil and an increase in production from Chachahuen. Operating profit before exceptional items increased to US$3.2 million for the first 6 month period of 2015, compared to US$2.7 million in the same period last year.

The Group's total assets have increased to US$318 million, at 30 June 2015, from US$264 million at 30 June 2014, reflecting the acquisition of Interoil offset by the impact of the devaluation of the Argentine Peso. The devaluation of the Argentine Peso resulted in US$11.5 million of exchange losses being recognised in the comprehensive loss for the period (comparable 6 month period of 2014: US$41.5 million loss).

At the period end, the Group had cash resources of US$21.7 million compared to US$8.0 million at 30 June 2014, of which US$10.7 million is restricted as security for stand by letters of credit to support guarantees in Colombia (US$5.4 million restricted at the Andes level). Whilst borrowings increased to US$109.9 million, at 30 June 2015, from US$62.5 million at 30 June 2014, US$44.4 million of the borrowings at the period end relate to Interoil, which is ring fenced from the rest of the Group and US$10.0 million of Andes's borrowings were cancelled after the period end in consideration for shares. Net current liabilities increased to US$8.9 million, at 30 June 2015, from US$1.1 million at 30 June 2014. However, this should be considered in the context of the successful fund raise of US$9.0 million after the period end and Mercuria's intention, subject to certain conditions, to extend the US$5.0 million debt facility for a further 12 months, to February 2017.

Oil and Gas Interests

Production

Andes now produces from 2 countries, from 8 oil fields from 150 wells.  Production in the period increased by 90% with average net daily production increasing from 1,700 boepd in 2014 to 3,226 boepd in the first half of 2015.  Argentina oil production averaged 1,816 bpd, with average net prices of US$68.3/bbl; Colombia oil production averaged 930 boepd, with average net prices of US$52.1/bbl; and Colombia gas production averaged 480 boepd, with average prices of US$18.6 peb.

Strategy

Andes has net 2P reserves of 25* MMbbls and certified resources of 640 MMboe mostly in the Vaca Muerta shale, where Andes holds 250,000 net acres in the oil window. We are making considerable progress in line with our stated strategy to develop our 2P reserve base to increase production, strengthen cash flows and the financial position of the company such that capital can be deployed to convert resources into cash generating reserves and continue developing our acreage in Vaca Muerta.  

*Includes 100% of Interoil's net reserves in which Andes holds a 51% interest

Argentina

Chachahuen

Development drilling

As part of our on-going development drilling program (2015-16), 20 development and appraisal wells were drilled and completed successfully during the first 6 months of 2015. These new wells have been brought online at an average daily rate of 60 bpd, giving the Company confidence that the current drilling program can increase production at Chachahuen by circa 27% over the next 12 months.

We plan to drill a total of 78 wells during the next 12 months. To fulfil the program, 3 drilling and 3 workovers rigs are operating currently. 15 successful development wells have been drilled in Chachahuen since June 2015.

Enhanced Oil Recovery -Water Flood project

According to the first stage of our plan, an average rate of 1,800 bpd was injected up to the end of June.

During 2015 we plan to convert 10 producing wells into injector wells and continue with the extension of the network of brine injection.

Each water flood pattern comprises 4 producing wells surrounding an injection well (an inverted five spot pattern).

Oil production

At the end of June 2015 a total of 71 wells were on stream, producing approximately 4,520 bpd (Andes has a 20% working interest equivalent to 904 bpd).

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

3D Seismic Survey

In June we commenced the shooting of a 550 km² 3D seismic survey to delineate further targets in the Chachahuen area. Andes's JV partner, YPF, has entered into a contract with Wellfield Services to carry out the 3D seismic program.

The program is expected to take approximately 6 months to complete.

Puesto Pozo Cercado and Chañares Herrados blocks - Mendoza

Interventions on wells CHH1014 and CHH1031 were performed to replace the sucker rod systems with electrical submersible pumps (ESPs) and as a result oil production increased on average by 22 bpd. Andes has a 49.92% working interest in these blocks.

El Manzano West - Mendoza

As part of the well reactivation program the Company successfully re-entered and tested wells "EM x-1" and  "EM-3", which are expected to enter into production after extended tests are performed and sucker rod pumps are installed. These wells will use existing facilities and infrastructure to evacuate the oil.

Andes anticipates that a further 2 existing abandoned wells could further add to oil production during 2015.

Workover operations were conducted, with the main target to test the Agrio formation.

Vega Grande - Mendoza

Well VG x-1 came on stream in December 2014, producing from an unfracked well under natural flow from the Vaca Muerta formation, with production stabilizing at an average rate of 26 bpd of gross production, with an associated water cut of 11% (net 23 bpd).

Average production from Vega Grande for the first 6 months of 2015 was 58 bpd.

Ñirihuau block - Chubut

A total of 160 km of 2D seismic was reprocessed and reinterpreted, which gave us an increased understanding of the structure of the block. As part of our commitments and to gain a better understanding of the static model, we plan to shoot 50 km of additional 2D seismic.

Colombia

On 20 January 2015 Andes acquired a 51% interest in Interoil Exploration and Production ASA ("Interoil"). Interoil operates production and exploration oil and gas licences in Colombia and has 9 years of operating experience in the country. At the time of the acquisition, the Colombian licences produced 1,571 boepd (1,040 bpd oil and 531 boepd gas), and have approximately 5.6 MM boe of net 2P reserves (3.4 MM bbls of oil and 12.4 BCF of gas). In addition Andes has 11 exploration licences, mainly in the Llanos basin.

Interoil - Puli field

Enhanced Oil Recovery -Water flood project

A comprehensive study was performed to gain a better understanding of the reservoir distribution, reservoir continuity and also the complexity of faults in order to design a water flood project.

After completing the static model, conceptual simulation will be conducted in order to provide a better understanding of the fluid behaviour to define the optimal water injection pattern in the pilot project.

Workovers campaign

As a result of a comprehensive review of petrophysical properties, new unperforated/behind-pipe oil-bearing intervals were identified in the prolific Chicoral formation.

A tender is in progress to workover 4 existing wells.

Andes - Exploration licences

Andes is currently conducting regional geological studies, petrophysical interpretation and reprocessing of existing seismic data on its exploration licences in Colombia.

Paraguay and Brazil

Whilst the Board's focus is, understandably, on the development of its operations in Colombia and Argentina, it is still pursuing analysis and exploration activities in Paraguay. In Paraguay, a geology field trip was performed and valuable data was gathered. As part of our commitments we plan to perform a geochemical survey during November.

We have previously indicated that Andes is considering its options with regards to its interests in Brazil.

Interoil acquisition

On 20 January 2015 Andes acquired a 51% interest in Interoil through a NOK 36.3 million (US$4.95 million) private placement. Under the conditions of the placement, bondholders of Interoil accepted a restructure of its NOK 310 million (US$42.2 million) corporate bond and the US$6.2 million debt due to a third party, Proseis AG. This debt was replaced with a new US$32.0 million bond issued by Interoil (the "New Bond"), denominated in US$ with a coupon of 6% per annum maturing in 2020 with the option to satisfy coupon payments in the first 2 years by issuing additional New Bonds to the equivalent value.

An analysis and review of Interoil's organisational and cost structure was carried out, which resulted in cost savings of over 30%.

Post period end

On 28 August 2015 the Company raised US$9.0 million (approximately £5.8 million) (gross) through the issue of 23,047,376 new ordinary shares, pursuant to a fundraising, at a placing price of 25 pence per share with existing and new investors. In connection with the fundraise, the Company issued a total of 6,584,960 warrants ("Warrants") each giving the right to subscribe for one share at 26 pence per ordinary share, over a term of four years, vesting immediately. Full exercise of the Warrants would raise an additional US$2.7 million for the Company.

The holders of an existing US$25 million bond, which with accrued interest totalled US$31 million, agreed to cancel US$10 million of the liabilities outstanding under the bond in consideration for the issue of 25,608,196 shares at a price of 25 pence per share. Warrants were not issued in connection with the shares to be issued as a result of the conversion.

Outlook

We have a solid, profitable and growing production base across 8 fields in 2 countries, with high oil prices in Argentina, and 78 new wells planned in the Chachahuen field over the next 12 months.  Our financial position has improved and we can look forward to Presidential elections in the next few weeks, which could be a catalyst for a new investment wave in the country, which will no doubt help drive value from our 250,000 net acres in the Vaca Muerta.  Your Board looks to the future with excitement and confidence.

Alejandro Jotayan

Chief Executive Officer

30 September 2015

Group income statement for the period ended 30 June 2015

Consolidated statement of comprehensive income for the period ended 30 June 2015

The loss on exchange results primarily from the revaluation of intangible assets that are carried in Argentine pesos. This resulted in a drop in the carrying value of these intangible assets but is not indicative of an impairment in value.

Consolidated statement of financial position as at 30 June 2015

Unaudited consolidated statement of changes in equity for the period ended 30 June 2015

Consolidated cash flow statement for the period ended 30 June 2015

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 2014. 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.         Finance costs

Only US$1.9 million of the finance costs were paid in cash during the period. The other finance costs were not due to be paid and relate primarily to convertible loans.

3.         Exceptional items

As a result of the acquisition of the interest in Interoil the Group recognised an exceptional gain of US$1.3 million arising from the difference between the consideration paid and the fair value of the net assets acquired following the restructure of the Interoil debt (see note 9).

4.         Loss per share

Basic loss per share is calculated by dividing the net loss for the period attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. The basic and diluted loss per share are the same as there are no instruments that have a dilutive effect on earnings. Adjusted basic and diluted loss per share are presented after adjustment of exceptional items.

5.         EBITDA

6.         Taxation

The tax charge for the period is unusually high due to the fact, that in Argentina, company losses can not be transferred and offset against profits generated by companies in the same group. Furthermore, tax losses can only be carried forward 5 years.

7.         Comprehensive income

The translation loss primarily arises as a result of the 7% devaluation of the AR$ against the US$ during the period. The carrying value of intangibles assets, other assets and liabilities in Argentina are held in AR$ and on consolidation translated to US$, the presentation currency. The resulting exchange gains and losses are classified as equity and transferred to the Group's translation reserve. This is not indicative of an impairment in the carrying value of these assets.

8.         Cash generated from operations

9.         Acquisition

On 20 January 2015 the Company acquired a 51% interest in Interoil. Interoil has an interest in two producing fields and two exploration fields in Colombia. The acquisition of Interoil increases the Group's reserves and production with producing assets in Colombia.

The interest was acquired through a NOK 36.3 million (US$4.95 million) private placement.

The acquisition costs were approximately US$1.6 million.

The results of Interoil are included in the consolidated income statement from the date of acquisition. Interoil's identifiable assets and liabilities are recognised in the consolidated statement of financial position at their fair value at the date of acquisition.

A profit of US$0.5 million in relation to the acquired activities has been recognised in the income statement for the period. Revenue for the Group for the period includes US$9.8 million of revenue from Interoil's operations.

10.      Other

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