The Board of Andes, the Latin American E&P group, is pleased to announce the acquisition of a 49.92% interest in a JV which operates two oil producing fields in the province of Mendoza and the agreement of a convertible loan facility from Mercuria Energy Asset Management B.V. ("Mercuria"). Andes will be the operator on one block.
Chanares Herrados and Puesto Pozo Cercado
Chanares Herrados and Puesto Pozo Cercado are two producing fields located in the Cuyana basin, province of Mendoza, Argentina, where the JV has gross proved reserves (P1) of 7.1 million bbls (as at 30 November 2012) and gross production of 2,181 bpd. Initial net production for Andes of 1,089 bpd and net proved reserves of 3.3 millions bbls. The Concession to exploit the fields runs until 2027.
Acquisition
The interests in the above fields are to be acquired through the acquisition of 100% of the issued share capital of MGM International S.R.L. (to be renamed "CHPPC Andes SRL"), a subsidiary of Mercuria.
Production from this block is expected to generate an annual EBITDA of US$9 million, net to Andes.
The initial consideration for the acquisition of Mercuria's subsidiary will be satisfied through the issuance of 29,533,333 new Andes ordinary shares ("Ordinary Shares"). Further consideration, up to a maximum of £9,450,666, will become payable if certain conditions are met, including the achievement of minimum production levels. Any additional consideration due will be paid in two tranches in June 2014 and June 2015 and will be satisfied through the issuance of Ordinary Shares at 32 pence, subject to adjustment in the event of a capital distribution, re-organisation or re-structure. Mercuria will have an initial right to appoint up to two directors to the board of Andes.
Convertible Facility Agreement
The Company has also entered into a US$10,000,000 convertible facility agreement ("CFA") with Mercuria. The loan carries interest at a rate of 11% per annum, which will be capitalised, with the loan principal and accrued interest repayable 5 years from the date of drawdown. Mercuria may, at any time, convert in whole or part, the loan including accrued interest, into Ordinary Shares at a price of 26 pence per share, subject to adjustment in the event of a capital distribution, re-organisation or re-structure.
Alejandro Jotayan, Chief Executive Officer of Andes, commented, "We are delighted to be undertaking this transaction, a very important step in our growth strategy. This will increase our proved reserves and production to 19 million bbls of net 2P reserves and net production of 1,700 bpd, balancing our portfolio. The assets provide positive cash flow, which will help us to unlock the high potential resource base of our portfolio in Argentina, and create synergies with our current operations in the Mendoza Province. The loan facility improves our funding position and will help us to develop our asset portfolio in, Colombia and Brazil."
Nicolas Mallo Huergo, Chairman of Andes, commented, "We are very happy to have Mercuria as an investor in Andes. Mercuria is a leading global commodities trading group, whose reputation, global network and experienced management can help Andes become a more relevant player in the industry."
Qualified Person Review
In accordance with 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 has been made for the 29,533,333 new ordinary shares to be admitted to AIM, which is expected to become effective on 5 June 2013
Following admission of the 29,533,333 ordinary shares, the total number of issued ordinary shares will be 506,321,655 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 Conduct Authority's Disclosure and Transparency Rules.
