CAMAC Reports 2010 Operational, Financial Results

CAMAC announced a net loss of $35.6 million, or $0.25 per diluted share for the quarter ended December 31, 2010. This includes estimated Oyo well #5 intervention expenses incurred in 2010 of $30.7 million, or $0.21 per diluted share. For the same period in 2009, CAMAC Energy reported a net loss of $3.8 million, or $0.09 per diluted share.

President and Chief Executive Officer Byron Dunn observed, "2010 was a very impactful year for CAMAC Energy as the Company transitioned from a development stage oil and gas company to an oil producing and revenue generating entity. The recent closure of the OML 120/121 transaction enables CAMAC Energy to move forward to the next phase of its corporate growth through development of the Miocene target in Oyo and the multiple known leads in the blocks. Over the coming weeks we will be reviewing the best way to accelerate monetization of 120 and 121 with our partner Nigerian Agip Exploration Limited, NAE, a subsidiary of the Italian oil company Eni, as we are eager to test the deeper and more prolific Miocene targets identified throughout these blocks."

Key highlights for the fourth quarter and fiscal year 2010 include

  • For the fourth quarter, Oyo Field produced 5,008 gross barrels of oil per day and 270 net barrels of oil per day on a fully carried basis
  • From the date of acquisition on April 7, 2010 through December 31, 2010, Oyo Field produced 7,283 gross barrels of oil per day and 396 net barrels of oil per day on a fully carried basis
  • Commenced Oyo well #5 intervention and completed in January 2011
  • Drilled discovery well in China and penetrated several gas bearing intervals on Zijinshan Asset
  • Recorded year-end net proved reserves of 5.3 million barrels of oil in Oyo Field
  • Ended the year with $28.9 million of cash liquidity

For the year ended December 31, 2010, CAMAC Energy reported a net loss of $230 million, or $1.95 per diluted share, which includes $186 million, or $1.30 per diluted share for the non-cash impairment charge which was previously reported in the third quarter.

Executive Vice President and Chief Financial Officer, Mr. Abiola Lawal, commented, “The fourth quarter results included a non-recurring accrued expense of $30.7 million related to the well intervention to reduce gas coning in Oyo #5. Without this expense, the fourth quarter loss would have been $4.9 million or $0.03 per diluted share.”

Operating revenues were $10.4 million for the fourth quarter of 2010 compared to $8.8 million for the third quarter. Fourth quarter revenues reflect a higher average oil price at $85 per barrel, but lower net daily production for the Oyo Field of 270 bopd due to shut in of the Oyo #5 well to allow well intervention starting in early December. Selling, general and administrative expenses were $3.8 million for the fourth quarter, which increased from the third quarter mainly due to stock-based compensation expense and expenses associated with the equity raise.

Update on Cash and Liquidity

Cash and cash equivalents at the end of the fourth quarter increased to $28.9 million as compared to $10.8 million at the end of the third quarter of 2010, primarily due to the equity raise in December, 2010. CAMAC Energy intends to utilize a term credit facility from its affiliate, Allied Energy Plc, of $25 million in order to meet the remainder of its obligation for the Oyo #5 intervention. "We believe we are well-funded to meet our short-term financial obligations and are pleased to be able to remove the immediate pressure for external capital," commented Executive Vice President and Chief Financial Officer Abiola Lawal.

Update on Proved Reserves

Estimated net proved reserves at the end of 2010 were approximately 5.3 million barrels of oil, almost unchanged from the June 2010 mid-year reserves. The Oyo Field accounted for 100% of the proved reserves.

Update on Zijinshan Asset

The ZJS-2 exploratory well in the Zijinshan asset was a discovery, penetrating a number of gas bearing intervals. Due to wellbore washout from the sidetrack and coring operations, no flow tests were conducted. However, information gleaned from the well will be used to re-interpret our seismic models and help the Company better understand the syncline portion of the structure. As a result, CAMAC Energy has charged the exploratory well costs of $0.7 million to expense in the fourth quarter.

The ZJS-3 well will be drilled at the structural high of the upthrown section of the block, and is expected to spud within a week to 10 days and be completed during the second quarter. We intend to flow test this well to determine commercial flow rates, well spacing and type decline curves.

Update on Oyo #5 Intervention

The Oyo #5 intervention was completed in January 2011 at an estimated cost of $55 million. This cost is expected to be fully recoverable as future cost oil in revenues in 2011, depending on production levels in the Oyo Field. CAMAC Energy intends to utilize a term credit facility from Allied in order to meet the remainder of its obligation for the Oyo #5 intervention, while recovering the expense from cost oil. While the intervention took longer than originally expected, it successfully reduced gas flow from Oyo #5 to below 37 million cubic standard feet per day compared to over 62 million standard cubic feet per day prior to the intervention. Concurrent with the substantial reduction in gas production to a sustainable level, oil production from Oyo #5 has increased over 10% from pre-intervention levels to approximately 3,300 barrels per day as our partner, NAE, slowly increases choke size and stage production ramps while monitoring well pressure transients. It is anticipated that choke increases and well production rates will be further increased over the next four months to a final rate which maximizes production while not producing pressure drops which can re-damage the producing formation.

Update on OML 120/121

In conjunction with the closing of the acquisition, CAMAC Energy has commissioned a resource estimate from Netherland Sewell & Associates (NSAI) to certify the resource potential in blocks OML 120/121. The Company plans to announce the NSAI estimates as soon as the results are finalized.

The OML 120 block is located directly east of OML 133, which contains the giant 500 million barrel Erha Field. OML 120 covers an area of 916.6 sq km in water depths ranging from 150 to 1000 meters, and contains the Oyo Field. The OML 121 block covers an area of 887 sq km in water depths ranging from 150 to 1,000 meters and is located directly south of OML 120. Based upon internal mapping and 3D seismic studies, over 12 prospects have been identified so far within the OML 120/121 blocks. During the coming weeks we will be reviewing the best way to accelerate monetization of 120 and 121 with our partner NAE, as we are eager to test the deeper and more prolific Miocene targets identified throughout these blocks

CAMAC has hired experienced exploration geologist James Otiocha. Mr. Otiocha was the manager of exploration geology for Allied Energy prior to the acquisition with a primary focus on OML 120/121. Prior to joining Allied, Mr. Otiocha had twenty years of experience as a geologist for Shell Oil Company in Nigeria.

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