CALGARY, ALBERTA--(Marketwire - Nov. 7, 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 renegotiated the previously announced farm out agreement with Petróleos del Mar S.A ("Petromar") and executed an amendment (the "Amending Agreement") whereby Azabache will acquire a 50% working interest in the Antares block, an exploration block strategically located in the Upper Magdalena Basin, Colombia (the "Antares Block" or "Block" instead of the 30% originally agreed to by Petromar and the Company. Petromar had acquired its interest in the Antares Block pursuant to an exploration and production contract (the "E&P Contract") between Petromar and the Agencia Nacional de Hidrocarburos of Colombia ("ANH"). The Company entered into this amendment for the following reasons:

1. Petromar has encountered delays in obtaining the necessary environmental permits to drill the two exploratory wells required under Phases 4 and 5 (unified) of the E&P Contract.
   
   
2. On September 20, 2011 Petromar and the ANH executed an amendment to the E&P Contract to suspend the current period of the Phases 4 and 5 (unified) which originally ended on September 25, 2011, until the environmental authorities have resolved the permits to drill the Lemaya and La Mona exploratory wells.
   
   
3. Management desired an increased interest in the area in order to have more meaningful exposure to a prospect that, in its judgment, is attractive both from a geological and economic perspective. It is managements opinion success in this area is likely to be oil and would offer near term cash flow to the Company.
   
   
4. The farm out obligations have been split into 3 segments because environmental permits have not yet been received for the two initial wells and portions of the Block may not be released to the joint venture for drilling as part is being disputed as parkland.
   
   
5. While the Company has not yet received all the necessary permits to drill either the Lemaya exploratory well (the "Lemaya Well") or the La Mona exploratory well (the "La Mona Well") it is expected the Lemaya Well will be the first well to be drilled, likely in December.

The assignment of 50% working interest in the Antares Block and the E&P Contract (the "Assigned Interest") to Azabache remains subject to the approval of the ANH. Until approval of the ANH is obtained, the Company is entitled to the economic rights of Petromar in the Antares Block pursuant to the Amending Agreement. The key terms of the Amended Agreement are summarized as follows:

1. The Company has to date (as part of the acquisition of the 30% interest under the original farm out agreement): a) paid to Petromar US$260,000 as collateral for an existing letter of credit issued to ANH, b) reimbursed Petromar US$573,432 for existing escrowed funds for Phase 4 of the E&P Contract, c) deposited into escrow an amount equal to US$1,300,000 for Phase 5 of the E&P Contract; and d) reimbursed Petromar for insurance costs in the amount of US$10,000.
   
   
2. Upon Petromar obtaining the required permits and certain other conditions in respect of drilling the Lemaya Well, Azabache has agreed to pay Petromar US$1,500,000 million in cash and to pay the first US$2,400,000 of the costs of the well (using, in part, the escrowed funds above). Upon the completion of drilling operations on the Lemaya Well, Azabache shall, subject to TSXV approval, issue US$1,000,000 of common shares of the Company ("Common Shares") to Petromar.
   
   
3. Upon Petromar obtaining the required permits in respect of drilling the La Mona Well, Azabache has agreed to pay to Petromar US$1,500,000 in cash and to pay the first US$2,400,000 of the costs of drilling the La Mona Well. Upon completion of drilling operations on the La Mona Well the Company shall, subject to TSXV approval, issue US$800,000 of Common Shares to Petromar.
   
   
4. Within 30 days following notice by the Company to the ANH of a commercial discovery either the Lemaya Well or the La Mona Well, the Company shall pay Petromar a further US$500,000 in cash and, subject to TSVX approval, issue a further US$1,500,000 of Common Shares to Petromar as a success fee.
   
   
5. Upon Petromar obtaining the required permits, the Company has agreed to fund (to a maximum of US$4,000,000) a 3D seismic program on the Occidental Area of the Antares Block. In addition, Azabache has agreed to pay Petromar US$500,000 in cash and, on completion of the program, the Company will, subject to TSXV approval, issue US$800,000 in Common Shares to Petromar.
   
   
6. Petromar shall remain as operator under the joint operating agreement and the E&P Contract, but Azabache will have technical control during the work programs. The deemed price of the Common Shares issuable to Petromar under the Amending Agreement will be determined in accordance with the policies of the TSXV.

The Company's obligations are summarized as follows (amounts in U.S. dollars):

In connection with the Amending Agreement, the Company has entered into an agreement to lend Trayectoria Oil and Gas S.A. ("Trayectoria"), an affiliate of Petromar, US$1,000,000. This loan is due January 31, 2012, may be offset against any payments to be made by Azabache under the Amending Agreement and is secured by a 10% interest in the Antares Block.

Operational Update

Colombia

La Mona Block (not related to the La Mona well in the Antares Block) – On September 20, 2011, the ANH approved the Company's request to reverse the exploration programs for Phases 1 and 2 of that block's E&P Contract. Under the new terms, Phase 1 is expected to take fourteen months to drill an exploratory well (to be started before February 2012) and Phase 2 is expected to take an additional ten months to acquire and process 85 km of 2D seismic data.

On September 27, 2011 the Company deposited US$2,352,500 in trust with a Colombian bank in favor of the ANH to guarantee the completion of the modified Phase 1. In accordance with this phase exchange, the current Phase 1 ends on February 29, 2012. Due to current general delays in environmental permits in Colombia, the Company is planning to request an extension until the required environmental permit is granted.

Argentina

Covunco-El Corte Blocks– Due to recent developments in the Neuquén Basin regarding unconventional exploration for oil and gas, Azabache, through its subsidiary Argenta Energia, has engaged in further studies which have led to a change in direction regarding exploration targets. Management believes that the unconventional targets appear to be an order of magnitude larger than the conventional ones, so the company is planning on carrying out a workover and the drilling of an exploration well with targets in the Vaca Muerta Formation (unconventional) and Lajas/Tordillo Formation (conventional). This workover is expected to be performed during calendar Q1-2012 as part of the exploration program announced earlier this year. The Company's Matilde well will be drilled after July 2012, as the commitment deadline has been extended to 2014.

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 acquisition of a working interest in the Antares Block; the fulfillment of Azabache's obligations under the Amending 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 Amending 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.

Contributing Sources

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