The Board of Andes is pleased to announce the successful completion of the acquisition from local South American investors of 100% of the issued share capital of Ketsal S.A. ("Ketsal"), a private oil and gas investment company with interests in producing and exploration assets in Argentina.
This transaction is a further significant step in Andes's path to become a large operating company in terms of reserves and production and consolidates Andes as one of the largest holders of E&P acreage in Argentina (6,567,865 acres greater than the size of Wales), with interests in blocks in prolific hydrocarbon basins including; Neuquen; Golfo San Jorge; Northwest; and Nirihuau.
The combination of the Ketsal and Andes assets following the recent acquisition of the Kilwer assets, is strategically very valuable, further increasing and strengthening our position in 12 licences and bringing additional production.
Acquisition Terms
The interests in the above licences have been acquired through the acquisition of 100% of the issued share capital of Ketsal. The consideration for the acquisition has been satisfied through (i) the issue of 82,781,457 ordinary shares of 10 pence per share in Andes, to the vendors of Ketsal (the "New Ordinary Shares") and (ii) the issue of a US$56,000,000 bond with a term of 10 years and an interest rate of 8% per annum. The bond is convertible into new Ordinary Shares, at Andes's option, at the prevailing market price or 32p per share, whichever is the higher.
The New Ordinary Shares are subject to a lock-in period of 24 months, under which agreement the vendors may only sell up to 50% of their holdings in the final 6 month period of the lock-in period. This compares to the lock-in period of 18 months agreed with the vendors of the Kilwer assets under the terms of the Kilwer acquisition announced on 11 March 2013. Under that agreement, the Kilwer vendors may only sell up to 60% of their holdings in the final 6 months of the 18-month lock-in period.
Under the terms of the stock purchase agreement with the Ketsal vendors, Andes has agreed to assume responsibility for the vendors' advisers fees which may be satisfied, at Andes's option, in cash or by the issue of new Ordinary Shares at a price of 32 pence per share plus the grant of 2.3 million warrants at 40 pence, with a 7 year term and 2 year vesting period.
Independent Report
G&G Energy Consultants was engaged by Andes to carry out a technical and economic evaluation of the Ketsal's assets.
G&G Energy Consultants is one of the leading energy consulting firms for M&A transactions in the Republic of Argentina.
Nicolas Mallo Huergo, Chairman of the Company commented, "The acquisition of Ketsal consolidates Andes as an explorer, producer and operator, adds further net production and increases Andes's participation in a number of fields with conventional and unconventional potential that will have a significant positive impact on Andes in the short term."
Qualified Person Review
In accordance with the 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 20 years' of experience and is a member of the SPE (Society of Petroleum Engineers).
Application for Admission and Total Voting Rights
Application will be made for the 82,781,457 New Ordinary Shares to be admitted to AIM, which is expected to become effective on 17 April 2013.
Following admission of the 82,781,457 New Ordinary Shares, the total number of issued ordinary Shares will be 342,596,743 Ordinary Shares. The Company does not hold any Ordinary Shares in treasury. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Service Authority's Disclosure and Transparency Rules.
