Azabache Energy : Maintains 90% Working Interest in Vaca Muerta Assets and Enters Into Loan Agreement

CALGARY, ALBERTA--(Marketwired - Aug. 1, 2014) -

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 entered into a Termination and Mutual Release Agreement ("Termination Agreement") and a loan agreement (the "Loan Agreement") with RIO BRAVO COMMERCIAL ENTERPRISES INC. ("RBE"), a private Panamanian corporation. Under the Termination Agreement, Azabache and RBE agree to the early termination of the previously announced Participation Agreement (the "PA"), under which RBE was to pay US$5,000,000 in exchange for earning a 23.76% working interest (directly or indirectly) in the Covunco Norte-Sur and the El Corte joint operating agreements and contracts in the Province of Neuquén (the "Contracts"). In consideration for the early termination, RBE has paid US$1,100,000 to the Company. RBE had previously advanced US$2,100,000 to the Company under the terms of the PA and its amendments.

Pursuant to the terms of the Loan Agreement, the entire amount paid by RBE under the PA and the Termination Agreement will be converted to an unsecured convertible loan from RBE to Azabache. Provisions of the Loan Agreement include:

• Principal amount - US$3,200,000
• Interest rate - 6% per annum
• Maturity date - July 25, 2015
• Pre-Payment - Azabache is entitled to pre-pay the principal amount plus accrued interest at any time. The Company agrees to pre-pay US$1,000,000 if it completes a financing that result in net proceeds in excess of US$15,000,000 or a farm-out of any assets which includes a cash payment in excess of US$5,000,000.
• Conversion Rights - subject to TSX Venture Exchange ("TSXV") and shareholder approval, if required, Azabache may convert the principal plus interest into Common Shares of the Company at any time after April 21, 2015.
• Conversion Price - the greater of the volume-weighted average trading price of the Common Shares for a 30 day period prior to conversion or the "Market Price" as defined in the policies of the TSXV.
• Loan Conversion - if required approvals of the TSXV or the Company's shareholders are not obtained within 6 months of the date of the notification of the conversion, Azabache has the option to repay the principal and interest in full or to convert the principal plus interest into a new loan maturing 2 years from the date of the notice of conversion with an interest rate of 10% per annum.

The Company intends to use the proceeds of the loan for working capital and general corporate purposes.

As a result of the early termination mentioned above, the Company recovers a 23.76% working interest in the El Corte and Covunco Norte-sur Blocks and maintains a total of 90% working interest in Vaca Muerta assets.

For further information on Azabache please visit the Company's website at www.azaenergy.com.

This press release contains forward-looking statements. More particularly, this press release contains statements concerning the terms of the termination and loan transactions and expected use of proceeds from the loan. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Azabache and its expected operations. 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 receive necessary regulatory approvals, or for any other reason, to complete the termination and loan transactions in a timely manner or at all, 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.

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.