CAMAC to Acquire Allied's Interest Offshore Nigeria

The Oyo Field
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CAMAC has entered into a binding Heads of Agreement with Allied Energy Resources Nigeria Limited and certain of its affiliates to acquire all of Allied's remaining interest in a Production Sharing Contract which relates to those certain Oil Mining Leases 120 and 121 granted to Allied by the Federal Republic of Nigeria with respect to oil and gas assets offshore of Nigeria . The Company previously acquired all of Allied's interest with respect to the Oyo Field, located in OML 120 (the “Oyo Contract Rights”) under the PSC in a transaction that closed in April 2010. Upon consummation of the transaction contemplated under the Agreement, the Company will have acquired Allied's full interest in the PSC and recombined the Oyo field within OML 120. The transaction is expected to close on or before November 30, 2010 and is subject to certain closing conditions.

The OML 120 block is located directly east of OML 133 (containing the giant Erha Field) and north of OML 121. It covers an area 916.6 sq. km in water depths ranging from 150m to 1000m. Covered by 3D seismic, this block has proven stacked oil and gas reserves in the shallow (Pliocene) part of the Oyo Field located within the OML 120 block, interests in which field the Company acquired from Allied in April 2010.

The OML 121 block is located directly south of the OML 120 block, and covers an area 887 sq. km in water depths ranging from 150m to 1000m. The OML 120 block has proven more than 90 feet of gas in the shallow (Pliocene) part of the Ebolibo-1 in the Ebolibo Field. The Ebolibo-1 well was drilled in late 2008. The deeper Miocene sequences in this block, where promising prospects have been identified nearby, are untested. Potential recoverable reserves in seismically defined prospects are estimated to be in excess of 100 million barrels. Identified crude oil reserves potentials for both OML 120 and the adjoining OML 121 are estimated at over 500 million bbls, with some exciting prospects having been identified in the deeper Miocene interval.

In exchange for the Non-Oyo Contract Rights, the Company has agreed to an option-based de-risking consideration structure, whereby it will pay $5 million in cash to Allied within 15 days of the closing of the transaction, and has the option to elect to retain these contract rights upon payment of additional consideration to Allied upon the occurrence of certain milestones as follows: (i) upon commencement of drilling of the first well outside of the Oyo Field under the PSC, the Company may elect to retain the Non-Oyo Contract Rights upon payment to Allied of $5 million, either in cash, or at Allied's option, in shares of Company Common Stock; (ii) upon discovery of hydrocarbons outside of the Oyo Field under the PSC in sufficient quantities to warrant the commercial development thereof, the Company may elect to retain the Non-Oyo Contract Rights upon payment to Allied of $5 million in cash or shares; (iii) upon the approval by the Management Committee of a Field Development Plan with respect to the development of non-Oyo Field areas under the PSC, the Company may elect to retain the Non-Oyo Contract Rights upon payment to Allied of $20 million in cash or shares; and (iv) upon commencement of commercial hydrocarbon production outside of the Oyo Field under the PSC, the Company may elect to retain the Non-Oyo Contract Rights upon payment to Allied, at Allied's option of (i) $25 million in shares, or (ii) $25 million in cash through payment of up to 50% of the Company's net cash flows received from non-Oyo Field production under the PSC. There are no further payments due to Allied after satisfaction of this milestone.

If any of the above milestones are reached and the Company elects not to retain the Non-Oyo Contract Rights at that time, then all of the Non-Oyo Contract Rights will automatically revert back to Allied without any compensation due to the Company and with Allied retaining all consideration paid by the Company to date.

Byron A. Dunn, President and Chief Executive Officer of the Company, said, "The signing of this agreement with the Allied group is the culmination of several months of effort by the Company's management and Board of Directors, working closely with Allied, to bring to the Company the first of many potential acquisition opportunities. This transaction will change the complexion of the Company's West African operations to include this exciting resource play in the Gulf of Guinea with prospects estimated at 500 million bbls of potential recoverable oil resources on these two blocks."

Mr. Dunn continued, "The acquisition of the PSC contract rights with respect to the OML 120 and OML 121 blocks represents significant potential value for the Company. These contract rights extend under and well beyond the limits of the currently producing Oyo Field and are equivalent in size to 77 blocks in the Gulf of Mexico. These blocks are in a proven hydrocarbon complex, have stacked reservoirs, including the prolific regional producing Miocene trend, and are completely covered by four recently acquired high resolution 3D seismic surveys.

"What is exciting about the OML 120 and OML 121 blocks is that the Oyo Field, which is located in the central portion of OML 120 block, has its main producing reservoirs in younger Pliocene aged, deep water sandstones that have not been found to exist in other nearby fields. The main production from the surrounding nearby giant fields, including the Erha field complex (Esso), the Bosi field (Esso), the Bonga field (Shell), and the Sonam field (Chevron), which collectively represent over 2.5 billion bbls of recoverable oil reserves and over 7 tcf of gas, are from resources found in Miocene aged reservoirs. In addition to production from Pliocene reservoirs, the OML 120 and OML 121 prospects have been identified in the Miocene trend. It is estimated that these Miocene prospects have over 500 million bbls of potential recoverable oil resources. Many of these prospects have been third party independently evaluated and confirmed."

Dr. Kase Lawal, Chairman of the Company, and Chairman and Chief Executive Officer of CAMAC International Corporation and a director of Allied, commented, "This agreement represents a further step in the relationship between CAMAC International Corporation, Allied, and CAMAC Energy, and demonstrates the continued commitment of CAMAC International Corporation and Allied to working with CAMAC Energy to offer it exciting exploration and production opportunities to expand its asset base. We look forward to continuing to participate in CAMAC Energy's existing and future energy projects, and continuing to be a strategic stakeholder in a company that is positioned for growth based on a sound business plan, responsible corporate governance, and high ethical standards."


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