Azabache Energy Inc.
TSX VENTURE : AZA

Azabache Energy Inc.

December 08, 2011 12:35 ET

Azabache Announces Decree Signature with New Distribution of Acreage for El Corte and Covunco Norte/Sur Blocks

New Decree by Province of Neuquén Authorities to Approve New Acreage Owned by Azabache Energy (Through its Subsidiary Argenta Energia)

CALGARY, ALBERTA--(Marketwire - Dec. 8, 2011) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Azabache Energy Inc. ("Azabache" or the "Company") (TSX VENTURE:AZA) announces that it has received regulatory approval for the renegotiation of its land position in the Covunco Norte-Sur and El Corte blocks in the Neuquén province in Argentina. As a result of the revisions, the Company notwithstanding relinquishment obligations under certain of its exploration permits in Argentina, been able to retain the majority of its potential for shale oil and gas and most of its exploration targets as follows:

  1. The Company was required by the relevant exploration permit to relinquish 23,450 hectares of the exploration permit area in the Covunco Norte-Sur block which had hydrocarbon potential but some of which was subject to environmental and other restrictions that prevented exploration or development.
  2. In exchange for an extension of the exploratory periods in the El Corte block and the incorporation into the El Corte block of an additional exploration surface of 18,800 hectares the Company and its partner (the provincially owned oil and gas company) have relinquished 14,390 hectares of the El Corte Block in areas the Company believes are less prospective then the areas being extended.
  3. A new Decree signed by the Governor of the Neuquén Province (the "Decree") gave effect to the above.

The gross acreage distribution of the new blocks is as follows (hectares) (the Company has a 90% working interest in the El Corte Block and a 100% interest in the Covunco Norte-Sur Block):

Acreage Acreage moved
Converted to from Covunco
Original Relinquished production Norte-Sur to El Current
Block acreage acreage Concession Corte Block Acreage
Covunco 57,000 23,450 1,700 0 31,840
Norte-Sur
El Corte 28,990 14,390 0 18,800 33,400

The Company is paying a success fee to a non related third party for assisting in the acquisition of the additional acreage in the El Corte block and certain additional ongoing services. This success fee supersedes an earlier success fee structured as a Net Profits Interest over the original El Corte acreage much of which was relinquished; this arrangement extinguishes that interest and has been renegotiated to the following:

  1. A payment of $1.2mm to be paid by January 2012 in respect of the original Net Profits Interest.
  2. A success fee for arranging the new 18,800 hectare acreage in the El Corte Block, based on a 1.5% gross overriding royalty over the new acreage in the El Corte Block. Until December 16, 2013, the Company has the right to acquire the 1.5% royalty for a payment of $2.36mm and if the Company does not exercise this right the holder can require the Company to purchase the royalty for $2.36mm for a period of 30 days from that date.
  3. Monthly consulting fees with a company related to the above third party of $35,000 per month for a 24 month period for logistical and other related services.

The acreage that was subject to the success fee is prospective for shale oil or shale gas opportunities. In total the Company now owns 33,400 hectares of land in the El Corte area that management believes is prospective for shale oil or shale gas opportunities and is working to assess these lands and how best to develop or realize value on this asset.

The Company has engaged consulting firms in Canada and Argentina to further explore the potential value of the blocks for unconventional plays.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful. The securities have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

This press release contains forward-looking statements. More particularly, this press release contains statements concerning the Company's exploration and development activities and its future operations. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Azabache. Although Azabache believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Azabache can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations. The forward-looking statements contained in this document are made as of the date hereof and Azabache undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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