Azabache Energy Inc. ("Azabache" or the "Company") (TSX VENTURE:AZA) announces that the Operator of the Antares Block (in which the Company has a 50% working interest) is completing the civil construction at the drilling location for the Lemaya well on the Antares Block, Colombia. This well will be drilled pursuant to the amended Farm out Agreement dated May 23, 2012 previously announced in a press release dated May 24, 2012. The well will reach a total depth of 3,100 ft and is targeting light oil from the Caballos Formation. The drilling rig is expected to move onto the drilling location in the next few days with an anticipated spud date by August 14^th, 2012.

Azabache continues to study cores of the recently drilled exploration well (CVOx-2) on the Covunco Norte Sur Block in Argentina. The company expects to perform a stimulation job on this well before the end of the year.

On July 25^th, 2012, the Argentinean Executive Power issued Decree# 1277/2012 the terms of which appear to directly affect both the upstream and downstream oil and gas industry in Argentina including as follows:

Amendment to certain of the laws concerning the free marketing of hydrocarbons established by previous governments in 1989.
Creation of a new commission under the Ministry of Economy with a mandate of:
1. Establishing and consolidating of a national investment plan for the oil and gas industry. An example of the new provisions is that operators of hydrocarbon blocks in the country will be required to submit an annual work plan that will be evaluated by this commission to determine whether such plan fits within the national plan.
2. Assuring reasonable prices for products in the industry.
3. Publishing reference prices for hydrocarbons and fuels products

The effects of this Decree on the Company's properties remain unclear, though as a result of the Decree discussions and negotiations with a potential joint venture partner in respect of its shale oil play in Argentina have been put on hold, pending greater clarity of the potential impact of this Decree. In the meantime the Company will continue to pursue other suitable farm out /joint venture opportunities for its shale oil properties with regional and international industry E&P companies.

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 operational activities as well as the potential effects of foreign government's actions on future exploration and developments plans of the Company. 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 conclude arrangements with joint venture partners to assess the viability of the Company's shale oil and gas assets, the failure to obtain other regulatory and governmental 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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