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Camac Energy Incorporated - Camac First Quarter 2014

Release Date: 14/05/2014 07:10:00      Code(s): CME     
                                   
CAMAC Energy Incorporated
(Previously Pacific Asia Petroleum Inc.) 
(Incorporated and registered in Delaware, United States of America)
Share code on the NYSE MKT: CAK
Share code on the JSE: CME
ISIN: US1317451011
USA ISIN: US1317451011
(?Camac? or ?the company?)





                                  UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                                                              Washington, D.C. 20549


                                                                  FORM 10-Q
(Mark One)
- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                                   For the quarterly period ended March 31, 2014

                                                                             OR

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                            For the transition period from                       to

                                                           Commission File Number: 01-34525



                                           CAMAC ENERGY INC.
                             (Exact name of registrant as specified in its charter)


                                 Delaware                                                                      30-0349798
                         (State or Other jurisdiction of                                                      (I.R.S. Employer
                        incorporation or organization)                                                       Identification No.)

                        1330 Post Oak Blvd.,
                     Suite 2250, Houston, Texas                                                                   77056
                  (Address of principal executive offices)                                                      (Zip Code)

                                                                       (713) 797-2940
                                                      (Registrant?s telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ? No ?

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (? 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes ? No ?

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of ?large accelerated filer,? ?accelerated filer? and ?smaller reporting company? in Rule 12b-2 of the Exchange Act.

Large accelerated filer             -                                                                         Accelerated filer                      
Non-accelerated filer               - (Do not check if a smaller reporting company)                           Smaller reporting company              
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes -     No 

Indicate the number of shares outstanding of each of the issuer?s classes of common stock, as of the latest practicable date.

At May 6, 2014 there were 1,259,844,291 shares of common stock, par value $0.001 per share, outstanding.
PART I FINANCIAL INFORMATION
  Item 1. Financial Statements: .........................................................................................................................................................                3
                     Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013 (unaudited) ..........................................                                                       3
                     Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013 (unaudited) ..............                                                                 4
                     Consolidated Statements of Equity for the three months ended March 31, 2014 and 2013 (unaudited).....................                                                               5
                     Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (unaudited).............                                                                   6
                     Notes to Unaudited Consolidated Financial Statements ..............................................................................................                                 7
  Item 2. Management?s Discussion and Analysis of Financial Condition and Results of Operations ............................................                                                            14
  Item 3. Quantitative and Qualitative Disclosures about Market Risk ............................................................................................                                       19
  Item 4. Controls and Procedures ....................................................................................................................................................                  19
PART II OTHER INFORMATION
  Item 1. Legal Proceedings............................................................................................................................................................................ 21
  Item 1A.Risk Factors ................................................................................................................................................................................ 21
  Item 5. Other Information ........................................................................................................................................................................... 21
  Item 6. Exhibits..................................................................................................................................................................................... 21
Signatures............................................................................................................................................................................................. 23

Exhibits




                                                                                            Page 2 of 23
PART I. ? FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                                      CAMAC ENERGY INC.
                                              CONSOLIDATED BALANCE SHEETS
                                                             (Unaudited)
                                       (In thousands, except for share and per share amounts)

                                                                                                  March 31,              December 31,
                                                                                                     2014                   2013
ASSETS
Current assets:
   Cash and cash equivalents                                                                  $           36,235     $               163
   Accounts receivable                                                                                     4,154                   1,112
   Crude oil inventory                                                                                     8,927                   6,787
   Prepaids and other current assets                                                                       7,031                     856
      Total current assets                                                                                56,347                   8,918

Property, plant and equipment:
Oil and gas properties (successful efforts method of accounting), net                                    433,721               436,471
Other property, plant and equipment, net                                                                     955                   752
       Total property, plant and equipment, net                                                          434,676               437,223

Other assets                                                                                                  52                   52

      Total Assets                                                                            $          491,075     $         446,193

LIABILITIES AND EQUITY
Current liabilities:
   Accounts payable                                                                           $           35,475     $          31,668
   Accrued expenses                                                                                       10,999                 7,446
   Asset retirement obligations                                                                           12,751                12,479
   Note payable - related party                                                                           92,147                 6,496
      Total current liabilities                                                                          151,372                58,089

Asset retirement obligations                                                                               8,291                 8,122
Long-term note payable - related party                                                                    50,000                     -
Other long-term liabilities                                                                                   68                    67

      Total liabilities                                                                                  209,731                66,278

Equity:
   Preferred stock $0.001 par value - 50,000,000 shares
     authorized; zero issued and outstanding at March 31,
     2014 and December 31, 2013                                                                                 -                        -
   Common stock $0.001 par value - 2,500,000,000 shares
     authorized; 1,070,430,276 and 382,362,236 shares issued and
     outstanding as of March 31, 2014 and December 31, 2013                                                 1,070                  382
   Paid-in capital                                                                                        638,365              732,985
   Accumulated deficit                                                                                   (358,091)            (353,452)
      Total equity                                                                                        281,344              379,915

      Total liabilities and equity                                                            $          491,075     $         446,193
                                See accompanying notes to unaudited consolidated financial statements.
                                                             Page 3 of 23
                                                  CAMAC ENERGY INC.
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                                        (Unaudited)
                                          (In thousands, except per share amounts)

                                                                                                Three Months Ended March 31,
                                                                                                  2014                 2013
Revenues:
   Oil and gas revenue                                                                     $          19,894       $      22,006

Operating costs and expenses:
  Production costs                                                                                     12,678             19,658
  Exploratory expenses                                                                                  2,276              1,198
  Depreciation, depletion and amortization                                                              4,971              5,467
  General and administrative expenses                                                                   4,433              3,712
      Total operating costs and expenses                                                               24,358             30,035

Operating loss                                                                                           (4,464)          (8,029)

Other income (expense):
   Interest expense                                                                                       (185)               (4)
   Other, net                                                                                               10                 -
       Total other income (expense)                                                                       (175)               (4)

Loss before income taxes                                                                                 (4,639)          (8,033)
Income tax expense                                                                                            -                -

Net loss                                                                                   $             (4,639) $        (8,033)

Net (loss) income per common share:
   Basic                                                                                   $              (0.01) $         (0.02)
   Diluted                                                                                 $              (0.01) $         (0.02)
Weighted average common shares outstanding:
   Basic                                                                                                 676,927           379,880
   Diluted                                                                                               676,927           379,880




                              See accompanying notes to unaudited consolidated financial statements



                                                          Page 4 of 23
                                             CAMAC ENERGY INC.
                                     CONSOLIDATED STATEMENTS OF EQUITY
                                                 (Unaudited)
                                                (In thousands)


                                                                         Additional
                                                       Common             Paid-in       Accumulated        Total
                                                        Stock             Capital          Deficit         Equity
At December 31, 2013                               $            382    $      732,985 $      (353,452) $      379,915
Common stock issued                                             688           134,728                -        135,416
Stock-based employee compensation                                 -               507                -             507
Net loss                                                          -                 -           (4,639)         (4,639)
Allied acquisition                                                -          (229,855)               -        (229,855)
At March 31, 2014                                  $          1,070    $      638,365 $        (358,091) $      281,344




                            See accompanying notes to unaudited consolidated financial statements.


                                                        Page 5 of 23
                                                 CAMAC ENERGY INC.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                      (Unaudited)
                                                     (In thousands)

                                                                                                   Three Months Ended March 31,
                                                                                                     2014                 2013
Cash flows from operating activities
Net loss                                                                                      $             (4,639) $            (8,033)

Adjustments to reconcile net loss to cash used in operating activities:
   Depreciation, depletion and amortization                                                                  4,531               4,926
   Asset retirement obligation accretion                                                                       440                 541
   Stock-based compensation                                                                                    507                 338
   Acquisition adjustments                                                                                  (9,855)              1,591
   Other                                                                                                         -                   1
   Changes in operating assets and liabilities:
      (Increase) decrease in accounts receivable                                                          (3,042)                  (348)
      (Increase) decrease in inventories                                                                  (2,098)                (1,422)
      (Increase) decrease in other current assets                                                         (6,175)                    39
      Increase (decrease) in accounts payable and accrued liabilities                                      7,388                  1,245
          Net cash used in operating activities                                                          (12,943)                (1,122)

Cash flows from investing activities
Capital expenditures                                                                                      (2,050)                 (352)
Acquisition - related party                                                                              (85,000)                    -
          Net cash used in investing activities                                                          (87,050)                 (352)

Cash flows from financing activities
Proceeds from issuance of common stock                                                                   135,000                      -
Proceeds from note payable - related party                                                                   650                      -
Proceeds from exercise of stock options                                                                      415                      -
          Net cash provided by financing activities                                                      136,065                      -


Net increase (decrease) in cash and cash equivalents                                                      36,072                 (1,474)
Cash and cash equivalents at beginning of period                                                             163                  3,806
Cash and cash equivalents at end of period                                                    $           36,235      $           2,332

Supplemental disclosure of cash flow information
Cash paid for:
   Interest, net                                                                              $                 8     $              4




                                See accompanying notes to unaudited consolidated financial statements.


                                                               Page 6 of 23
                                            CAMAC ENERGY INC.
                          NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Company Description
CAMAC Energy, Inc. (NYSE MKT: CAK, JSE: CME) is an independent exploration and production company engaged in the
acquisition and development of energy resources in Africa. The Company?s asset portfolio consists of nine licenses in four countries
covering an area of approximately 43,000 square kilometers (approximately 10 million acres). The Company has producing properties
and conducts exploration activities in Nigeria, as well as explorations licenses with significant hydrocarbon potential onshore and
offshore Kenya, offshore The Gambia and offshore Ghana.

The Company?s corporate headquarters is located in Houston, Texas. In addition, the Company has offices in Nairobi, Kenya, Banjul,
The Gambia and Lagos, Nigeria.

The Company?s operating subsidiaries are CAMAC Energy Limited, CAMAC Petroleum Limited (?CPL?), CAMAC Energy
International Limited, CAMAC Energy Ghana Limited, CAMAC Energy Kenya Limited, CAMAC Energy Gambia A5 Limited and
CAMAC Energy Gambia A2 Limited. The terms ?we,? ?us,? ?our,? ?Company,? and ?our Company? refer to CAMAC and its
subsidiaries and affiliates.

The Company?s related parties include CAMAC Energy Holdings Limited (?CEHL?), CAMAC International Nigeria Limited,
CAMAC International Limited and Allied Energy Plc. (?Allied?).


2. Basis of Presentation and Recently Issued Accounting Standards

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned
direct and indirect subsidiaries and have been prepared in accordance with generally accepted accounting principles in the United
States (?U.S. GAAP?) and pursuant to the rules and regulations of the Securities and Exchange Commission (the ?SEC?). All
significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements
reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position
and results of operations for the indicated periods. All such adjustments are of a normal recurring nature. This Form 10-Q should be
read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2013.

In February 2014, the Company completed the acquisition of the remaining economic interests that it did not already own in the
Production Sharing Contract (?PSC?) covering Oil Mining Leases 120 and 121 (?OMLs 120 and 121?) offshore Nigeria, which
include the currently producing Oyo Field (the ?Allied Assets?), from Allied (the ?Allied Transaction?). Allied is a subsidiary of
CEHL, the Company?s majority shareholder and deemed to be under common control (transactions between subsidiaries of the same
parent). Accordingly, the net assets acquired from Allied were recorded at their respective carrying values as of the acquisition date.
The financial statements presented for all periods included herein are presented as though the transfer of the Allied assets had occurred
at the beginning of the first period presented.


Recently Issued Accounting Standards

In April 2014, the Financial Accounting Standards Board (?FASB?) issued updated guidance that changes the criteria for reporting
discontinued operations including enhanced disclosure requirements. Under the new guidance, only disposals representing a strategic
shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the
organization's operations and financial results. The standards update is effective for fiscal years beginning after December 15, 2014.
We will adopt this standards update, as required, beginning with the first quarter of 2015. The adoption of this standards update affects
presentation only and, as such, is not expected to have a material impact on our consolidated financial statements.




                                                              Page 7 of 23
3. Acquisitions

In February 2014, the Company completed the Allied Transaction thereby acquiring the Allied Assets. Pursuant to the terms of the
Transfer Agreement, the Company, as partial consideration for the Allied Assets, paid $85.0 million in cash to Allied, issued
497,454,857 shares of the Company?s common stock to Allied and delivered a $50.0 million Convertible Subordinated Note (the
?Convertible Subordinated Note?) to Allied under which $25.0 million was deemed to be advanced.

To fund the cash portion of the Allied Transaction and a portion of the anticipated capital expenditures for development of the Oyo
Field, the Company also entered into a Share Purchase Agreement (the ?Share Purchase Agreement?) with the Public Investment
Corporation (SOC) Limited, a state-owned company registered and duly incorporated in the Republic of South Africa (?PIC?), for an
aggregate cash investment of $270.0 million through a private placement of 376,884,422 shares of common stock (the ?Private
Placement?). The Share Purchase Agreement provides that the Private Placement will be completed in two installments. The first
installment of $135.0 million (the ?First Closing?) in exchange for 188,442,211 shares of the Company?s common stock was
completed at the closing of the Allied Transaction. The second installment (the ?Second Closing?) of $135.0 million in exchange for
188,442,211 shares of the Company?s common stock was completed in May 2014.

Following the Second Closing with the PIC, the Company was required to pay to Allied the additional $85.0 million in cash, and the
additional $25.0 million was deemed to be advanced to Allied under the Convertible Subordinated Note.

The contractual purchase consideration to be paid and the assets acquired and liabilities assumed are as follows (In thousands):


Cash consideration paid upon First Closing                                                                      $              85,000
Cash consideration to be paid upon Second Closing                                                                              85,000
CAMAC common stock                                                                                                                  -
Long-term convertible subordinated note payable - related party                                                                50,000

Total purchase price                                                                                            $             220,000

Asset acquired and liabilities assumed:
   Property, plant and equipment, net                                                                                         249,739
   Accounts payable                                                                                                           (25,429)
   Asset retirement obligations                                                                                               (20,890)
       Net assets acquired                                                                                                    203,420

Consideration in excess of carrying value acquired                                                              $              16,580




The Allied Transaction is being accounted for as a transfer of entities under common control, whereby the net assets acquired are
combined with the Company?s assets at their historical amounts. Since the cash and debt consideration exceeds the carrying cost of
the assets acquired, no value was assigned to the shares issued.




                                                             Page 8 of 23
4. Property and Equipment
Property, plant and equipment is comprised of the following:

                                                                                                    March 31,               December 31,
                                                                                                      2014                       2013
                                                                                                                (In thousands)
Wells and production facilities                                                                $          28,874 $                  28,874
Proved properties                                                                                        386,196                   386,196
Warehouse inventory                                                                                       25,429                    25,429
Work in progress                                                                                          63,958                    62,208
 Oilfield assets                                                                                         504,457                   502,707
 Accumulated depletion                                                                                   (78,976)                  (74,476)
   Oilfield assets, net                                                                                  425,481                   428,231
Unevaluated leaseholds                                                                                     8,240                     8,240
   Oil and gas properties, net                                                                           433,721                   436,471

Other property and equipment                                                                                 1,866                      1,590
 Accumulated depreciation                                                                                     (911)                      (838)
   Other property and equipment, net                                                                           955                        752

Total property, plant and equipment, net                                                       $         434,676        $          437,223


5. Suspended Exploratory Well Costs
In November 2013, the Company achieved both its primary and secondary drilling objectives for the Oyo-7 well. The primary drilling
objective was to establish production from the existing Pliocene reservoir. The secondary drilling objective confirmed the presence of
hydrocarbons in the Miocene formation. Hydrocarbons were encountered in three intervals totaling approximately 65 feet, as
interpreted by the logging while drilling (?LWD?) data. Management is making plans to further explore the Miocene formation. As of
March 31, 2014, the Company has capitalized $26.9 million for the costs related to the Miocene exploratory drilling activities.


6. Asset Retirement Obligations
The Company?s asset retirement obligations primarily represent the estimated fair value of the amounts that will be incurred to plug,
abandon and remediate our producing properties at the end of their productive lives. Significant inputs used in determining such
obligations include, but are not limited to, estimates of plugging and abandonment costs, estimated future inflation rates and changes
in property lives. The inputs are calculated based on historical data as well as current estimated costs. The following summarizes
changes in the Company?s asset retirement obligations during the three months ended March 31, 2014:

                                                                                                                               2014
                                                                                                                          (In thousands)
Carrying amount at January 1                                                                                            $          20,601
Accretion expense                                                                                                                     440
Carrying amount at March 31                                                                                             $          21,041


Accretion expense is recognized as a component of depreciation, depletion and amortization expense in the accompanying statements
of operations.


7. Debt
Note Payable ? Related Party
Promissory Note
In June 2011, CPL, a wholly owned subsidiary of the Company, executed a $25.0 million Promissory Note (the ?Promissory Note?) in
favor of Allied. Interest accrues on the outstanding principal under the Promissory Note at a rate of the 30 day London Interstate Bank

                                                               Page 9 of 23
Offered Rate (?LIBOR?) plus 2% per annum. The Promissory Note is set to mature and become due July 2014. In January 2014,
Allied agreed to amend the Promissory Note and extend the maturity date to July 2015 in the event the Company is not successful in
obtaining external financing by June 2014. The Company has guaranteed all of CPL?s obligations under the Promissory Note. As of
March 31, 2014, $7.1 million was outstanding under the Promissory Note.

Allied Transaction
Included in the note payable ? related party is $85.0 million due to Allied for the remaining cash consideration upon the Second
Closing of the Private Placement with PIC. See Note 3 ? Acquisitions, for details relating to the Allied Transaction.


Long-Term Note Payable ? Related Party
As partial consideration in connection with the February 2014 closing of the Allied Transaction, the Company issued the $50.0 million
Convertible Subordinated Note in favor of Allied. The principal of the Convertible Subordinated Note was deemed advanced in two
equal $25.0 million tranches at each of the First Closing and the Second Closing of the Private Placement. Interest on the Convertible
Subordinated Note accrues at a rate per annum of one-month LIBOR plus 5%, payable quarterly in cash until the maturity of the
Convertible Subordinated Note five years from the closing of the Allied Transaction. At the election of the holder, the Convertible
Subordinated Note will be convertible into shares of the Company?s common stock at an initial conversion price of $0.7164 per share,
subject to customary anti-dilution adjustments. The Convertible Subordinated Note is subordinated to the Company?s existing and
future senior indebtedness and is subject to acceleration upon an Event of Default (as defined in the Convertible Subordinated Note).
The Company may, at its option prepay the note, in whole or in part, at any time, without premium or penalty. The note is subject to
mandatory prepayment upon (i) the Company?s issuance of capital stock or incurrence of indebtedness, the proceeds of which the
Company does not apply to repayment of senior indebtedness or (ii) any capital markets debt issuance to the extent the net proceeds of
such issuance exceed $250.0 million. Allied may assign all or any part of its rights and obligations under the Convertible Subordinated
Note to any person upon written notice to the Company.


8. Share-Based Compensation
During the three months ended March 31, 2014, the Company issued 710,196 shares of common stock as a result of the vesting of
restricted stock awards. During the three months ended March 31, 2014, the Company granted employees a total of 3,670,735 shares
of restricted stock and options to purchase a total of 2,023,914 shares of common stock, with vesting periods from 24 months to 36
months.



9. Earnings (Loss) Per Common Share
Basic earnings (loss) per common share are computed by dividing net income (loss) available to common stockholders by the
weighted-average number of common shares outstanding for the period. The weighted average number of common shares outstanding
for computing basic and diluted earnings (loss) per common share for the three months ended March 31, 2014 and 2013 were as
follows:

                                                                                  Three Months Ended March 31,
                                                                                  2014                      2013
                                                                                           (In thousands)
                Basic                                                             676,927                  379,880
                Diluted                                                           676,927                  379,880

The number of stock options and restricted stock awards that were excluded from dilutive shares outstanding as these potentially
dilutive securities are anti-dilutive because the Company was in a loss position for the three months ended March 31, 2014 and 2013
were as follows:

                                                                                  Three Months Ended March 31,
                                                                                  2014                      2013
                                                                                           (In thousands)
                Stock options                                                     7,433                      353
                Nonvested restricted stock awards                                 7,500                    1,561
                                                                                 14,933                    1,914


                                                            Page 10 of 23
10. Financial Instruments and Fair Value Measurements
The carrying amounts of the Company?s financial instruments, which include cash and cash equivalents, trade receivables, inventory,
accounts payable, accrued expenses, other long-term liabilities and debt at floating interest rates approximate their fair values at
March 31, 2014, principally due to the short-term nature, maturities or nature of interest rates of the above listed items.


11. Commitments and Contingencies
Commitments
In January 2014, a long-term drilling contract was signed for the drillship Energy Searcher. The rig is expected to be delivered to the
Oyo Field in OML 120 in May 2014 to commence the planned Oyo Field development campaign. The agreement covers an initial
term of one year, with an option to extend the contract for an additional one year. The minimum commitment pursuant to the initial
term of the agreement is approximately $86.0 million.

In February 2014, a long-term contract was signed for the floating, production, storage, and offloading system (?FPSO?) Armada
Perdana, the vessel that is currently connected to the Company?s producing wells Oyo-5 and Oyo-6 in OML 120. The contract
provides for an initial term of seven years beginning January 1, 2014, with an automatic extension for an additional term of two years
unless terminated by the Company with prior notice. The FPSO can process up to 40,000 barrels of liquid per day, with a storage
capacity of approximately one million barrels. The annual minimum commitment per the terms of the agreement is approximately
$35.0 million in the first year and approximately $48.0 million thereafter.

The Company has substantial commitments related to four production sharing contracts with the Government of the Republic of
Kenya (the ?Kenya PSCs?) and two Petroleum Exploration, Development & Production Licenses with the Republic of The Gambia
(the ?Gambia Licenses?), in each case entered into by the Company through a wholly owned subsidiary. To maintain compliance and
ownership, the Company is and will be required to fulfill minimum work obligations and to make certain payments as stated in each of
the Kenya PSCs and The Gambia Licenses.

Legal Proceedings

From time to time we may be involved in various legal proceedings and claims in the ordinary course of our business. As of March 31,
2014, and through the filing date of this report, we do not believe the ultimate resolution of such actions or potential actions of which
we are currently aware will have a material effect on our consolidated financial position or our results of operations.




12. Related Party Transactions
The Company has transactions in the normal course of business with its shareholders, CEHL and their affiliates. The following table
summarizes related party transactions for the respective periods:

                                                                                     March 31,                     December 31,
                                                                                        2014                           2013
                                                                                                  (In thousands)
Accounts receivable                                                         $         4,154    $                       1,026
Other current assets                                                        $           624    $                         624
Accounts payable and accrued expenses                                       $        27,047    $                      25,721
Note payable-related party                                                  $        92,147    $                       6,496
Long-term note payable-related party                                        $        50,000    $                           -

The Company was owed $4.2 million and $1.0 million as of March 31, 2014 and December 31, 2013, respectively, for both crude oil
lifting receivables and billings under the Technical Services Agreement (?TSA?) signed with Allied in January 2013. Under the TSA,
the Company agreed to provide certain services related to the Oyo Field within OMLs 120 and 121, in exchange for payments from
Allied of $150,000 per month with effect from September 2012. The TSA was terminated as of the closing of the Allied Acquisition
in February, 2014 pursuant to the Transfer Agreement.

The company was owed $0.6 million as of March 31, 2014 and December 31, 2013, respectively, as a result of a prepayment made for
royalty and petroleum profit taxes in Nigeria under the PSC.
                                                             Page 11 of 23
As of March 31, 2014 and December 31, 2013, the Company owed $27.0 million and $25.7 million, respectively, to Allied as
reimbursement for costs incurred for the benefit of the Company.

As of March 31, 2014 and December 31, 2013, the Company had outstanding notes payable balances of $92.1 million and $6.5
million, respectively, owed to Allied. Included in the note payable balance at March 31, 2014 is an amount of $85.0 million due to
Allied for the remaining cash consideration upon the Second Closing of the Private Placement with PIC and the remaining principal
balance of the Promissory Note with Allied. See Note 3 ? Acquisitions, for details relating to the Allied Transaction, and Note 7 ?
Debt, for details relating to the Promissory Note.

As partial consideration in connection with the February 2014 closing of the Allied Acquisition, the Company issued a $50.0 million
Convertible Subordinated Note in favor of Allied. See Note 7, Debt for details relating to the Convertible Subordinated Note.



13. Segment Information
The Company?s operations are based in Nigeria, Kenya and The Gambia. Management reviews and evaluates the operations of each
geographic segment separately. Segments include exploration for and production of hydrocarbons where commercial reserves have
been found and developed. Revenues and expenditures are recognized at the relevant geographical location. The Company evaluates
each segment based on operating income (loss).
The Company did not previously report separate segment information because management reviewed and evaluated the operations of
the company as a whole. However, beginning in the first quarter 2014, pursuant to the Allied Transaction and the significant
exploration activities undertaken in several of our subsidiaries, management began to evaluate the operations of each geographic
segment separately.

Segment activity for the three months ended March 31, 2014 and 2013 are as follows:


                                                                                              Corporate and
                                      Nigeria             Kenya           The Gambia             Other                Total
Three months ended March 31,                                              (In thousands)

2014
Revenues                         $          19,894                   -                   -                  - $           19,894
Operating income (loss)          $           2,313              (1,992)               (268)            (4,517) $          (4,464)

2013
Revenues                         $          22,006                   -                   -                  - $           22,006
Operating income (loss)          $          (3,088)               (654)               (236)            (4,051) $          (8,029)


                                                                                              Corporate and
                                      Nigeria             Kenya           The Gambia             Other                Total
Total Assets                                                              (In thousands)

As of March 31, 2014             $         450,693               1,549                2,045            36,788   $        491,075
As of December 31, 2013          $         441,826               1,484                2,025               858   $        446,193




                                                          Page 12 of 23
14. Subsequent Events

In April 2014, the Company signed a Petroleum Agreement relating to the Expanded Shallow Water Tano block in Ghana. The
Company has been named technical operator and will hold a 30% interest in the block. The block contains three discovered fields,
and the work program requires the partners to determine, within nine months, the economic viability of developing the discovered
fields




                                                           Page 13 of 23
ITEM 2. MANAGEMENT?S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Our Business

CAMAC Energy Inc. is an independent exploration and production company engaged in the acquisition and development of energy
resources in Africa. The Company?s exploration, development and production activities are currently focused in Sub-Saharan Africa.
Our strategy is to acquire and develop high-potential exploration and production assets in Africa and to explore and develop those
assets through strategic partnerships with national oil companies, indigenous local partners and other independent oil companies. Our
shares are traded on the NYSE MKT under the symbol ?CAK? and, as of February 24, 2014, on the Johannesburg Stock Exchange
(?JSE?) under the symbol ?CME?.

The Company?s asset portfolio consists of nine licenses in four countries covering an area of approximately 43,000 square kilometers
(approximately 10 million acres). The Company has producing properties and conducts exploration activities in Nigeria, as well as
exploration licenses with significant hydrocarbon potential onshore and offshore Kenya, offshore The Gambia and offshore Ghana.

The Company?s operating subsidiaries are CAMAC Energy Limited, CAMAC Petroleum Limited, CAMAC Energy International
Limited, CAMAC Energy Ghana Limited, CAMAC Energy Kenya Limited, CAMAC Energy Gambia A5 Limited and CAMAC
Energy Gambia A2 Limited and the Company?s related parties include CAMAC Energy Holdings Limited, CAMAC International
Nigeria Limited, CAMAC International Limited and Allied Energy Plc. (?Allied?). The terms ?we,? ?us,? ?our,? ?Company,? and
?our Company? refer to CAMAC and its subsidiaries and affiliates.

In February 2014, the Company completed the acquisition of the remaining economic interests that it did not already own in the
Production Sharing Contract (?PSC?) covering Oil Mining Leases 120 and 121 (?OMLs 120 and 121?) offshore Nigeria, which
include the currently producing Oyo Field (the ?Allied Assets?), from Allied (the ?Allied Transaction?). Pursuant to the terms of the
Transfer Agreement, the Company, as partial consideration for the Allied Assets, paid $85.0 million in cash to Allied, issued
497,454,857 shares of the Company?s common stock to Allied and delivered a $50.0 million Convertible Subordinated Note (the
?Convertible Subordinated Note?) to Allied under which $25.0 million was deemed to be advanced.

To fund the cash portion of the Allied Transaction and a portion of the anticipated capital expenditures for development of the Oyo
Field, the Company also entered into a Share Purchase Agreement (the ?Share Purchase Agreement?) with the Public Investment
Corporation (SOC) Limited, a state-owned company registered and duly incorporated in the Republic of South Africa (?PIC?), for an
aggregate cash investment of $270.0 million through a private placement of 376,884,422 shares of common stock (the ?Private
Placement?). The Share Purchase Agreement provides that the Private Placement will be completed in two installments. The first
installment of $135.0 million (the ?First Closing?) in exchange for 188,442,211 shares of the Company?s common stock was
completed at the closing of the Allied Transaction. The second installment (the ?Second Closing?) of $135.0 million in exchange for
188,442,211 shares of the Company?s common stock was completed in May 2014.

Following the Second Closing with the PIC, the Company was required to pay to Allied the additional $85.0 million in cash, and the
additional $25.0 million was deemed to be advanced to Allied under the Convertible Subordinated Note.

Nigeria
The Company currently owns 100% of the economic interests under the PSC and related assets, contracts and rights pertaining to
OMLs 120 and 121 including the producing Oyo Field, which is located in deep-water offshore Nigeria.

From September 2013 to November 2013, the first phase of drilling operations was conducted on the Oyo-7 well in OML 120. Based
on logging while drilling (?LWD?) data, the well encountered gross oil pay of 133 feet (net oil pay of 115 feet) and gross gas pay of
103 feet (net gas pay of 93 feet) in the gas cap from the currently producing Pliocene reservoir, with excellent reservoir quality. As a
secondary objective, the Oyo-7 well confirmed the presence of hydrocarbons in the deeper Miocene formation. This marked the first
time a well had been successfully drilled into the Miocene formation of OML 120. Hydrocarbons were encountered in three intervals
totaling approximately 65 feet, as interpreted from the LWD data. Currently, the Oyo-7 well has been temporarily plugged and
suspended but is expected to be re-entered and completed in the Pliocene reservoir as an oil producer in late 2014.

In January 2014, a long-term drilling contract was signed for the drillship Energy Searcher. The rig is expected to be delivered to the
Oyo Field in OML 120 by May 2014 to commence the planned Oyo Field development campaign. The agreement covers an initial
term of one year, with an option to extend the contract for an additional one year. The minimum commitment pursuant to the initial
term of the agreement is approximately $86.0 million.


                                                             Page 14 of 23
In order to optimize drilling, completion, and production activities, current plans are to spud the Oyo-8 well by mid-2014, with well-
hookup and first production expected in late 2014. The drilling rig will then move to complete and hook-up the Oyo-7 well, with first
production expected in late 2014.

In addition to the development wells offshore Nigeria, the Company has identified ten exploration prospects and twelve leads, and is
in the process of maturing three prospects, each containing substantial prospective resources. The Company currently plans to drill at
least one of these prospects in 2015.

In February 2014, a long-term contract was signed for the floating, production, storage, and offloading system (?FPSO?) Armada
Perdana, the vessel that is currently connected to the Company?s producing wells Oyo-5 and Oyo-6 in OML 120. The contract
provides for an initial term of seven years beginning January 1, 2014, with an automatic extension for an additional term of two years
unless terminated by the Company with prior notice. The FPSO can process up to 40,000 barrels of liquid per day, with a storage
capacity of approximately one million barrels. The annual minimum commitment per the terms of the agreement is approximately
$35.0 million in the first year and approximately $48.0 million thereafter.

Kenya

In May 2012, the Company, through a wholly owned subsidiary, entered into four production sharing contracts with the Government
of the Republic of Kenya (the ?Kenya PSCs?), covering onshore exploration blocks L1B and L16, and new offshore exploration
blocks L27 and L28. For all blocks, the Company is the operator, with the Government having the right to participate up to 20%,
either directly or through an appointee, in any area subsequent to declaration of a commercial discovery. The Company is responsible
for all exploration expenditures.

The Kenya PSCs for blocks L1B and L16 each provide for an initial exploration period of two years with specified minimum work
obligations during that period. Prior to the end of the initial exploration period, the Company will conduct, for each block, a gravity
and magnetic survey and acquire, process and interpret 2D seismic data. The gravity and magnetic survey on blocks L1B and L16 was
completed in April 2013. The Company plans to apply for an additional two-year exploration period, so in December 2013, the
Company initiated an Environmental and Social Impact Assessment (?ESIA?) study in blocks L1B and L16. The ESIA study was
successfully completed in March 2014, and the reports were submitted for approval to the Kenya National Environment Management
Authority in order to obtain the license to carry out an additional 2D seismic survey in the two blocks. The Company has the right to
apply for up to two additional two-year exploration periods with specified additional minimum work obligations, including the
acquisition of 3D seismic data and the drilling of one exploratory well on each block during each such additional period for both
onshore blocks.

The Kenya PSCs for blocks L27 and L28 each provide for an initial exploration period of three years with specified minimum work
obligations during that period. Prior to the end of the initial exploration period, the Company will conduct, for each block, a regional
geological and geophysical study, acquire 2D seismic data and acquire, process and interpret 3D seismic data. The Company has the
right to apply for up to two additional two-year exploration periods with specified additional minimum work obligations, including the
drilling of one exploratory well on each block, during each such additional period. The Company participated in a multi-client
combined gravity / magnetic and 2D seismic survey covering blocks L27 and L28. The survey was successfully completed in March
2014, and data processing is underway. Also, in March 2014 the Company started the regional geophysical study for these two
blocks.

In addition to the minimum work obligations, each of the Kenya PSCs requires annual surface rental payments, training fund
payments and contributions to local community development projects.

The Gambia

In May 2012, the Company, through a wholly owned subsidiary, signed two Petroleum Exploration, Development & Production
Licenses with The Republic of The Gambia, for offshore exploration blocks A2 and A5. For both blocks, the Company is the operator,
with the Gambian National Petroleum Company (?GNPCo?) having the right to elect to participate up to a 15% interest, following
approval of a development and production plan. The Company is responsible for all expenditures prior to such approval even if the
GNPCo elects to participate.

The Gambia Licenses for both blocks provide for an initial exploration period of four years with specified minimum work obligations
during that period. Prior to the end of the initial exploration period, the Company will conduct, for each block, a regional geological
study, acquire, process and interpret seismic data, drill one exploration well and evaluate drilling results, with the first two work
obligations (regional geological study and 3D seismic data acquisition and processing) due prior to the end of the second year. The

                                                             Page 15 of 23
Company has the right to apply for up to two additional two-year exploration periods with specified additional minimum work
obligations, including the drilling of one exploration well during each additional period for each block.

In addition to the minimum work obligations, The Gambia Licenses require annual surface rental payments, training and community
fees.

Recent Developments

In April 2014, the Company signed a Petroleum Agreement relating to the Expanded Shallow Water Tano block in Ghana. The
Company has been named technical operator and will hold a 30% interest in the block. The block contains three discovered fields,
and the work program requires the partners to determine, within nine months, the economic viability of developing the discovered
fields.

The Company continues to pursue new energy ventures outside the U.S., directly and through joint ventures and other partnerships in
which it may participate.

Results of Operations

The following discussion pertains to the Company?s results of operations, financial condition, liquidity and capital resources and
should be read together with our unaudited consolidated financial statements and the notes thereto contained in this Quarterly Report
on Form 10-Q and our audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for
the year ended December 31, 2013.

Three months ended March 31, 2014, compared to the three months ended March 31, 2013:

Revenues

Revenue is recognized when a lifting (sale) occurs. Crude oil revenues for the three months ended March 31, 2014 were $19.9 million,
as compared to $22.0 million for the three months ended March 31, 2013. For the three months ended March 31, 2014, the Company
sold approximately 182,000 net barrels of oil at an average price of $109.11/Bbl. In the three months ended, March 31, 2013, the
Company sold approximately 203,000 net barrels of oil at an average price of $108.35/Bbl.

During the three months ended March 31, 2014, the average net daily production from the Oyo Field was approximately 1,700 BOPD,
as compared to approximately 2,000 BOPD for the three months ended March 31, 2013.

Operating Costs and Expenses

Production costs for the three months ended March 31, 2014 were $12.7 million, as compared to $19.7 million for the three months
ended March 31, 2013. The decrease in production expenses were primarily due to approximately $6.4 million in savings as a result
of reduced operating day rates for the FPSO in the quarter ended March 31, 2014. As part of the recently signed long term contract
with an effective date of January 1, 2014, the owner of the FPSO has agreed to reduced operating day rates for the first half of 2014.

During the three months ended March 31, 2014, the Company incurred $2.3 million of exploration expenses, including $2.0 million
spent in Kenya, and $0.3 million spent in The Gambia. During the three months ended March 31, 2013, the Company incurred $1.2
million of exploration expenses, including $0.5 million spent at the corporate level for exploration activities, $0.5 million in Kenya,
and $0.2 million in The Gambia.

Depreciation, depletion and amortization (?DD&A?) expenses for the three months ended March 31, 2014 were $5.0 million, as
compared to $5.5 million for the three months ended March 31, 2013. In the three months ended March 31, 2014, DD&A expenses
decreased as compared to the three months ended March 31, 2013 primarily due to both lower depletion rates and lower sales
volumes. The average depletion rate for the three months ended March 31, 2014 was $24.06/Bbl, as compared to $27.37/Bbl for the
three months ended March 31, 2013.

General and administrative expenses for the three months ended March 31, 2014 were $4.4 million, as compared to $3.7 million for
the three months ended March 31, 2013. The increase in general and administrative expenses for the three months ended March 31,
2014, as compared to the three months ended March 31, 2013, was primarily due to legal costs incurred in conjunction with the Allied
Transaction and the Private Placement. In addition, the Company incurred non-cash stock-based compensation expenses of $0.5
million and $0.3 million for the three months ended March 31, 2014 and 2013, respectively.


                                                            Page 16 of 23
Other Income (Expense)

Other expense for the three months ended March 31, 2014 was $0.2 million, primarily for interest accrued on the related party note
payable. Other expense was approximately $4,000 for the three months ended March 31, 2013.

Income Taxes
Income taxes were nil for the three months ended March 31, 2014 and 2013.

Headline Earnings

In February 2014, the Company?s common stock became listed on the JSE. The Company is required to publish all documents filed
with the SEC with the JSE. The JSE requires that we calculate Headline Earnings Per Share (?HEPS?) which, per the SEC, is
considered a non-GAAP measurement.

As defined in the Circular 3/2009 of The South African Institute of Chartered Accountants, headline earnings is an additional earnings
number that excludes certain separately identifiable remeasurements, net of related tax, and related non-controlling interest.

The number of shares used to calculate basic and diluted HEPS is the same as basic and diluted EPS. In the three months ended March
31, 2014 and 2013, there were no separate identifiable remeasurements required and headline earnings was the same as net loss per
share as disclosed on the unaudited consolidated statements of operations. Therefore, HEPS for the three months ended March 31,
2014 and 2013, were $(0.01) and $(0.02), respectively.

Liquidity and Capital Resources

As of March 31, 2014, the Company had current asset and current liability balances of $56.3 million and $151.4 million, respectively,
resulting in a net working capital deficit of $95.1 million. Included in the current liability balance of $151.4 million, was
approximately $118.0 million owed to Allied, a related party.

During the three months ended March 31, 2014, net cash used in operating activities was $12.9 million as compared to $1.1 million
for the three months ended March 31, 2013. The net increase in cash used in operating activities of $11.8 million was primarily due to
$3.4 million lower net loss, partially offset by $11.8 million decrease in non-cash adjustments to net income and $3.4 million negative
variance in changes in operating assets and liabilities.

During the three months ended March 31, 2014, net cash used in investing activities was $87.1 million, including $85.0 million paid to
Allied as partial consideration for the Allied Assets, and $2.1 million spent for additions to property, plant and equipment. During the
three months ended March 31, 2013, net cash used in investing activities were $0.4 million primarily for additions to property, plant
and equipment.

During the three months ended March 31, 2014, net cash provided by financing activities was $136.1 million, consisting of the $135.0
million investment from the PIC, $0.4 million for issuance of stock pursuant to employee stock option exercises, and $0.7 million
additional borrowings under the Promissory Note.

The Company has a $25.0 million borrowing facility under a Promissory Note with Allied. As of March 31, 2014, $7.1 million was
outstanding under the Promissory Note. The Promissory Note is set to mature and become due on July 15, 2014. In January 2014,
Allied agreed to amend the Promissory Note and extend the maturity date to July 15, 2015 in the event the Company is not successful
in obtaining external financing arrangements by June 30, 2014.

In February 2014, the Company completed the Allied Transaction and the First Closing of the Private Placement in accordance with
the terms of the Transfer Agreement and the Share Purchase Agreement, respectively. The Company received $135.0 million pursuant
to the Second Closing of the Private Placement in May 2014. Subsequently, the Company paid Allied the additional $85.0 million in
cash, resulting in a net $50.0 million available to the Company.

As partial consideration in connection with the February 2014 closing of the Allied Transaction, the Company issued the $50.0 million
Convertible Subordinated Note in favor of Allied. The principal of the Convertible Subordinated Note was deemed advanced in two
equal $25.0 million tranches at each of the First Closing and the Second Closing of the Private Placement. Interest on the Convertible
Subordinated Note accrues at a rate per annum of one-month LIBOR plus 5%, payable quarterly in cash until the maturity of the
Convertible Subordinated Note five years from the closing of the Allied Transaction. At the election of the holder, the Convertible
Subordinated Note will be convertible into shares of the Company?s common stock at an initial conversion price of $0.7164 per share,
subject to customary anti-dilution adjustments. The Convertible Subordinated Note is subordinated to the Company?s existing and
                                                             Page 17 of 23
future senior indebtedness and is subject to acceleration upon an Event of Default (as defined in the Convertible Subordinated Note).
The Company may, at its option prepay the note, in whole or in part, at any time, without premium or penalty. The note is subject to
mandatory prepayment upon (i) the Company?s issuance of capital stock or incurrence of indebtedness, the proceeds of which the
Company does not apply to repayment of senior indebtedness or (ii) any capital markets debt issuance to the extent the net proceeds of
such issuance exceed $250.0 million. Allied may assign all or any part of its rights and obligations under the Convertible Subordinated
Note to any person upon written notice to the Company.

Although there are no assurances that the Company?s plans will be realized, management believes that the Company will have
sufficient capital resources to meet projected cash flow requirements for the next twelve months from the date of filing this report.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, other than normal operating leases and employee contracts, that have or are likely to have
a current or future material effect on our financial condition, changes in financial condition, revenues, expenses, results of operations,
liquidity, capital expenditures or capital resources.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q, including without limitation
the statements under ?Management?s Discussion and Analysis of Financial Condition and Results of Operations? are, or may be
deemed to be, forward-looking statements. Such forward-looking statements involve assumptions, known and unknown risks,
uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking statements contained in
this Form 10-Q.

We may from time to time make written or oral forward-looking statements with respect to our long-term objectives or expectations
which may be included in our filings with the SEC, reports to stockholders and information provided on our website.

The words or phrases ?will likely,? ?are expected to,? ?is anticipated,? ?is predicted,? ?forecast,? ?estimate,? ?project,? ?plans to
continue,? ?believes,? or similar expressions identify ?forward-looking statements.? Such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently
anticipated or projected. We wish to caution you not to place undue reliance on any such forward-looking statements, which speak
only as of the date made. We are calling to your attention important factors that could affect our financial performance and could
cause actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in
any current statements.

The following list of important factors may not be all-inclusive, and we specifically decline to undertake an obligation to publicly
revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events. Among the factors that could have an impact on our ability to achieve
expected operating results and growth plan goals and/or affect the market price of our stock are:
      ?     Limited operating history, operating revenue or earnings history.
      ?     Ability to raise capital to fund our business plan, including participation in the Oyo Field development and other oil and
            gas leases we may participate in, on terms and conditions acceptable to the Company.
      ?     Ability to develop oil and gas reserves.
      ?     Dependence on key personnel, technical services and contractor support.
      ?     Fluctuation in quarterly operating results.
      ?     Possible significant influence over corporate affairs by significant stockholders.
      ?     Ability to enter into definitive agreements to formalize foreign energy ventures and secure necessary exploitation rights.
      ?     Ability to successfully integrate and operate acquired or newly formed entities and multiple foreign energy ventures and
            subsidiaries.
      ?     Competition from large petroleum and other energy interests.
      ?     Changes in laws and regulations that affect our operations and the energy industry in general.

                                                             Page 18 of 23
      ?     Risks and uncertainties associated with exploration, development and production of oil and gas, and drilling and
            production risks.
      ?     Expropriation and other risks associated with foreign operations.
      ?     Risks associated with anticipated and ongoing third party pipeline construction and transportation of oil and gas.
      ?     The lack of availability of oil and gas field goods and services.
      ?     Environmental risks and changing economic conditions.

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any
forward-looking statement, please see ?Risk Factors? in Item 1A of Part II of this Quarterly Report on Form 10-Q and in our Annual
Report on Form 10-K for the year ended December 31, 2013.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company may be exposed to certain market risks related to changes in foreign currency exchange, interest rates, and commodity
prices.

Foreign Currency Exchange Risk
In addition to the U.S. dollar, the Company pays some of its expenses in Nigeria, The Gambia, and Kenya in Naira, Dalasi, and
Shillings respectively. Therefore we are subject to foreign currency exchange risk on non-U.S. dollar denominated transactions on
cash flows.

To date the Company has not engaged in hedging activities to hedge our foreign currency exposure in Nigeria. In the future, the
Company may enter into hedging instruments to manage its foreign currency exchange risk or continue to be subject to exchange rate
risk.

Commodity Price Risk
As an independent oil producer, our revenue, other income and profitability, reserve values, access to capital and future rate of growth
are substantially dependent upon the prevailing prices of crude oil. Prevailing prices for such commodities are subject to wide
fluctuations in response to relatively minor changes in supply and demand and a variety of additional factors beyond our control.
Historically, prices received for oil production have been volatile and unpredictable, and such volatility is expected to continue.

Interest Rate Risk
We are exposed to changes in interest rates which affect the interest earned on our interest-bearing deposits and the interest paid on the
Promissory Note and the Convertible Subordinated Note. Currently, we do not use interest rate derivative instruments to manage
exposure to interest rate changes. At March 31, 2014, we had $7.1 million and $25.0 million principal and interest outstanding under
the Promissory Note and the Convertible Subordinated Note, respectively. Interest on the Promissory Note accrues at a rate per
annum equal to 2% plus LIBOR and interest on the Convertible Subordinated Note accrues at a rate per annum equal to 5% plus the
one-month LIBOR. The maturity date of the Promissory Note is July 15, 2014, subject to extension to July 15, 2015 in the event the
Company is not successful in obtaining external financing arrangements by June 30, 2014, and the maturity date for the Convertible
Subordinated Note is January 15, 2019.


ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the
Company?s reports under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the
SEC?s rules and forms, and that such information is accumulated and communicated to management, including its CEO and PFO, as
appropriate, to allow timely decisions regarding required disclosure.

Management of the Company, with the participation of its CEO and PFO, evaluated the effectiveness of the Company?s disclosure
controls and procedures. Based on their evaluation, as of the end of the period covered by this Form 10-Q, the Company?s CEO and

                                                              Page 19 of 23
PFO have concluded that the Company?s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) were effective.

(b) Changes in Internal Control Over Financial Reporting.

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.




                                                            Page 20 of 23
PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The disclosures required in this Item 1 are included in Note 11, Commitments and Contingencies, in the consolidated financial
statements included in Part I, Financial Information, Item 1, Financial Statements and incorporated herein by reference.

Item 1A. Risk Factors

There have not been any material changes to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-
K filed with the SEC on March 14, 2014 for the fiscal year ended December 31, 2013.

Item 5. Other Information

The Second Closing of the Private Placement was completed on May 6, 2014. Pursuant to the terms of the Share Purchase Agreement,
PIC paid $135.0 million to the Company in exchange for 188,442,211 shares of the Company?s common stock. On May 8, 2014, in
accordance with the terms of the Transfer Agreement, the Company paid to Allied the additional $85.0 million in cash, and the
additional $25.0 million was deemed to be advanced to Allied under the Convertible Subordinated Note.

The material terms of the Transfer Agreement and the Share Purchase Agreement were reported in Items 1.01, 2.03 and 3.02 of the
Company?s Current Report on Form 8-K filed with the Securities and Exchange Commission (the ?SEC?) on November 22, 2013, and
are incorporated herein by reference. The descriptions of the Transfer Agreement and Share Purchase Agreement above are
summaries only and are respectively qualified in their entirety by reference to the Transfer Agreement and the Share Purchase
Agreement, copies of which were attached as Exhibits 2.1 and 10.1, respectively, to the Company?s Current Report on Form 8-K filed
with the SEC on November 22, 2013, and are hereby incorporated herein by reference.

The material terms of the Convertible Subordinated Note were reported in Items 1.01, 2.03 and 3.02 of the Company?s Current Report
on Form 8-K filed with the SEC on February 27, 2014, and are incorporated herein by reference. The description of the Convertible
Subordinated Note above is a summary only and is qualified in its entirely by reference to the Convertible Subordinated Note, a copy
of which was attached as Exhibit 4.2 to the Company?s Current Report on Form 8-K filed with the SEC on February 27, 2014, and is
hereby incorporated herein by reference.

Item 6. Exhibits

The following exhibits are filed with this report:

  Exhibit
  Number                                                        Description
3.1       Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the
          Company?s Form 10-SB filed on August 16, 2007).
3.2       Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company (incorporated herein by
          reference to Exhibit 3.1 to the Company?s Current Report on Form 8-K filed on April 13, 2010).
3.3       Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company (incorporated herein by
          reference to Exhibit 3.1 to the Company?s Current Report on Form 8-K filed on February 19, 2014).
3.4       Amended and Restated Bylaws of the Company as of April 11, 2011 (incorporated by reference to Exhibit 3.1 of our
          Quarterly Report on Form 10-Q filed on May 3, 2011).
4.1       Registration Rights Agreement, dated February 21, 2014, by and between the Company and Allied Energy Plc.
          (incorporated by reference to Exhibit 4.1 to the Company?s Current Report on Form 8-K filed on February 27, 2014).
4.2       Convertible Subordinated Promissory Note, dated February 21, 2014, by the Company in favor of Allied Energy Plc.
          (incorporated by reference to Exhibit 4.2 to the Company?s Current Report on Form 8-K filed on February 27, 2014).
4.3       Registration Rights Agreement, dated February 21, 2014, by and between the Company and the Public Investment
          Corporation (SOC) Limited (incorporated by reference to Exhibit 4.3 to the Company?s Current Report on Form 8-K filed
          on February 27, 2014).
10.1      Assignment and Bill of Sale, dated February 21, 2014, by and among Allied Energy Plc, CAMAC International (Nigeria)
          Limited and CAMAC Petroleum Limited (incorporated by reference to Exhibit 10.1 to the Company?s Current Report on
          Form 8-K filed on February 27, 2014).
10.2      Right of First Refusal and Corporate Opportunities Agreement, dated February 21, 2014, by and among the Company,
          CAMAC Energy Holdings Limited, CAMAC International (Nigeria) Limited and Allied Energy Plc. (incorporated by
          reference to Exhibit 10.2 to the Company?s Current Report on Form 8-K filed on February 27, 2014)
                                                           Page 21 of 23
10.3     Contract for Bareboat Charterparty for FPSO Armada Perdana in the Oyo Field Development, dated February 17, 2014,
         by and between Armada Oyo Limited and CAMAC Petroleum Limited (as successor-in-interest to Oceanic Consultants
         Nigeria Limited).
10.4     Contract for Provision of Operational and Maintenance Services for FPSO Armada Perdana in the Oyo Field
         Development, dated February 17, 2014, by and between Bumi Armada (Singapore) Pte. Ltd. and CAMAC Petroleum
         Limited (as successor in interest to Oceanic).
10.5     Head International Daywork Drilling Contract ? Offshore, dated as of February 20, 2014, by and between Oceanic
         Consultants Nigeria Limited and CAMAC Petroleum Limited (as successor-in-interest to Allied Energy Plc.).
10.6     Deed of Novation, dated March 25 2014, by and among Armada Oyo Limited, Oceanic Consultants Nigeria Limited and
         CAMAC Petroleum Limited.
10.7     Deed of Novation, dated March 25, 2014, by and among Bumi Armada (Singapore) Pte. Ltd., Oceanic Consultants
         Nigeria Limited and CAMAC Petroleum Limited.
10.8     Deed of Novation, dated March 28, 2014, by and among Allied Energy Plc, Oceanic Consultants Nigeria Limited and
         CAMAC Petroleum Limited.
31.1     Certification of Chief Executive Officer Pursuant to 15 U.S.C. ? 7241, as Adopted Pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
31.2     Certification of Principal Financial Officer Pursuant to 15 U.S.C. ? 7241, as Adopted Pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
32.1     Certification of Chief Executive Officer Pursuant to 18 U.S.C. ? 1350, as Adopted Pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002.
32.2     Certification of Principal Financial Officer Pursuant to 18 U.S.C. ? 1350, as Adopted Pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002.
101. INS XBRL Instance Document.
101. SCH XBRL Schema Document.
101. CAL XBRL Calculation Linkbase Document.
101. DEF XBRL Taxonomy Extension Definition Linkbase Document
101. LAB XBRL Label Linkbase Document.
101. PRE XBRL Presentation Linkbase Document.




                                                        Page 22 of 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                      CAMAC Energy Inc.

Date: May 9, 2014

                                                                              /S/ Earl W. McNiel
                                                                              Earl W. McNiel
                                                                              Senior Vice President and Chief Financial Officer
                                                                              (Principal Financial Officer)

14 May 2014 

Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)




                                                          Page 23 of 23

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