Azabache Energy Inc.
TSX VENTURE : AZA

Azabache Energy Inc.

March 21, 2011 13:44 ET

Azabache Announces Execution of Letter Agreement to Acquire a 30% Working Interest in Antares Block, Upper Magdalena, Colombia

CALGARY, ALBERTA--(Marketwire - March 21, 2011) -

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

Azabache Energy Inc. ("Azabache" or the "Company") (TSX VENTURE:AZA) announces that it has signed a letter agreement (the "Letter Agreement") with Petróleos Del Mar ("Petromar") to farm into the Antares block, an exploration block strategically located in the Upper Magdalena Basin, Colombia (the "Antares Block" or "Block"). Petromar acquired its interest in the Antares Block pursuant to an exploration and production contract between Petromar and the National Hydrocarbon Agency of Columbia (the "E&P Contract").

In exchange for a thirty percent (30%) working interest in the Anatares Block and the E&P Contract, Azabache has agreed to:

  1. pay to Petromar US$1 million in cash;
  2. issue US$1.1 million of common shares of the Company ("Common Shares") to Petromar upon completion of drilling operations in the first of two exploratory wells in the Antares Block (the "Exploratory Wells");
  3. fund the drilling, completion and well testing of the Exploratory Wells, with an expected cost of US$5 million; and
  4. issue US$1 million of Common Shares to Petromar as a "success fee" upon commercial discovery in one of the Exploratory Wells. 

The transaction is subject to the completion of a due diligence process by each of Azabache and Petromar, the execution of a definitive agreement and the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange Inc. (the "TSXV"). The deemed price of the Common Shares issuable to Petromar under the Letter Agreement will be determined in accordance with the policies of the TSXV.

The Antares Block occupies an area of more than 41,731 gross acres (169 km2) and 12,500 net acres (50 km2), and surrounds the Andalucia field, which has proved recoverable reserves of more than 12 million barrels of oil. The Block is also positioned east of the prolific Neiva sub basin fields, which includes the Dina K, Cebu and Tello trend. Existing 2D seismic analysis together with 3D seismic cube acquired by Petromar identified two drill-ready, independent shallow prospects, as well as various leads which require additional seismic and technical analysis. Azabache anticipates an initial two well program for the Antares Block, with drilling and completion expected before the end of 2011 (subject to the timely receipt of environmental permits and completion of roads and site constructions). The Block will continue to be operated by Petromar.

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 expected acquisition of a working interest in the Antares block; the fulfillment of Azabache's obligations under the Letter Agreement; the receipt of regulatory approvals; exploration and development activities, its future operations and the completion of its drilling programs. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Azabache, including with respect to the anticipated timing for completion of drilling of the Exploratory Wells and the completion by Petromar of its obligations under the Letter Agreement. 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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