Mr. Pierre-Henri Boutant reports

CANDAX ENERGY INC. ANNOUNCES YEAR-END FINANCIAL AND OPERATING RESULTS

Candax Energy Inc. has released financial and operating results for the year ended Dec. 31, 2014. The audited financial statements, notes, and management's discussion and analysis pertaining to the period are available on the System for Electronic Document Analysis and Retrieval and by visiting the Candax website. All monetary figures reported herein are U.S. dollars unless otherwise stated.

Selected operational and financial highlights:

• Production, net of royalties, increased in 2014 to an average of 502 barrels of oil per day from 437 bopd in 2013 as a result of the successful remedial workover campaign on Ezzaouia, resulting in all six producing wells being fully operational and the continued success of the gas cycling program on El Bibane.
• Revenue for the year was $17.1-million compared with $16.5-million in 2013. The increase in revenue mainly reflects the increase of production (more than 15 per cent). During 2014, three crude oil liftings took place, two of limited capacity after the leak in the oil storage tank. The company has sold 190,000 barrels at an average price of $90.10 per barrel for production, net of royalty, of 183,000 barrels.
• Lower oil prices have impacted field economic limits, and total proven plus probable net reserves (2P) of oil declined by 22 per cent from the previous year to 1.98 million barrels.
• The company reported a loss for the year ended Dec. 31, 2014, of $6.9-million (four cents per common share) compared with a loss of $41.0-million (four cents per common share) for 2013. The 2014 loss includes costs related to the rental of the heated barge following the leak in the oil storage tank of $1.4-million, an impairment charge of $1.4-million on decommissioning obligation of non-producing fields, and a writedown of material and supplies.
• As at Dec. 31, 2014, Candax held cash and cash equivalents of $8.9-million.
• As at Dec. 31, 2014, Candax had total loans and borrowings of $40.6-million, with a current portion of loans and borrowings of $6.1-million, including the compressor under lease contract.

"The company in 2014 has increased its production and has generated cash from its operating activities for a second consecutive year," said Pierre-Henri Boutant, chief financial officer of Candax. "The fall of oil prices, as well as the financial impact of the leak of the oil storage tank, forced the company to identify and examine any strategic and financial alternatives available to the company," said Benoit Debray, chairman and chief executive officer of Candax.

Going concern

During the year ended Dec. 31, 2014, the company had a net loss of $6.9-million, positive cash flow from its operations of $700,000 and positive working capital of $6.1-million. The positive working capital balance is mainly due to having a cash balance of $8.9-million despite a relatively low level of crude oil in inventory.

Historically, the company has had operating losses exacerbated by impairment losses on oil and gas properties, but has been generating cash from its operating activities for two consecutive years. Nevertheless, for the year ended Dec. 31, 2014, the cash generation was not sufficient to cover the company's $2.9-million of capital expenditure and $700,000 of debt reimbursement.

Management has prepared projected cash flow information for a period of 18 months ending June 30, 2016. Revenue has been estimated using Brent crude price assumptions of $60 per barrel for 2015 and $70 per bbl for 2016. The revenue from the company's production is estimated to be $13.4-million resulting in a cash inflow generated by its operations of only $500,000. The operating cash outflows include $500,000 of non-recurring costs to cover the rental of the heated barge for January and February, 2015.

The company will therefore finance its forecast capital and finance expenditures of $3.8-million and $1.9-million for 2015 and 2016, respectively, through its working capital. The capital expenditures include the exercise of the purchase option of the compressor for $1.6-million and some maintenance operations on the Ezzaouia surface facilities for $2.0-million, from which $800,000 relates to the oil storage tank repair.

Based on these forecasts, the company will face cash financing requirements (theoretical negative cash balance) in September, 2015, and March, 2016, prior to the receipt of proceeds from its coming scheduled lifting. The company is expecting to offset these shortfalls through prefinancing operations over its lifting or to reduce the quantity of oil lifted to advance lifting and thus anticipate the cash proceeds.

The projected cash flow of the company only includes the principal repayment on Jan. 31, 2015, of $500,000 of its contractual obligation from its major shareholder debt service of $4.0-million. The company has obtained from Geofinance NV (the lender) a waiver agreement not to seek any remedy under the facility agreement in respect of the $3.5-million amount until April 30, 2015.

Discussions are continuing with the lender as Candax will not be in a position to repay the remaining $3.5-million of debt in full as at April 30, 2015, based on current business assumptions.

The company's forecast is also highly sensitive to Brent crude price volatility and to the company's production programs. A 10-per-cent change in one of these business assumptions will have a financial impact of $1.3-million on cash flow over the 18-month period.

These uncertainties cast significant doubt upon the company's ability to continue as a going concern.

To address its financing obligations, the company is actively working, and discussions are continuing on financial alternatives, including, but not limited to, the sale of the company, some of its subsidiaries or all or a portion of its assets, a recapitalization, a joint venture, or any combination thereof. The outcome of this matter cannot be predicted at this time.

Review of key operations

Candax holds 100-per-cent equity in the El Bibane field, 100-per-cent equity in the Robbana field and 45-per-cent equity in the Ezzaouia field with ETAP, the Tunisian state oil and gas company, as sole partner. The streamlining of ownership interests has allowed the company to develop its fields according to its own vision of these assets' potential. El Bibane and Robbana are operated from Tunis by Ecumed, a 100-per-cent subsidiary of Candax. Ezzaouia is operated from Tunis by Maretap, a 50/50 joint venture between ETAP and Ecumed.

The company's target is to maintain corporate costs at a minimum and to behave as a local company focused on the operational development of its assets. The company is currently focusing on the development of its lower-risk assets in Tunisia to get a continuous increase in production. A process to identify, examine and potentially implement financial alternatives is under way as the company aims to diversify its risks over its three producing assets.

The company announced on Feb. 13, 2015, that it has completed most of the geology and geophysics review of its Tunisian assets, which was initiated in 2012. Management has made a decision to seek partners as the company is unable to provide the necessary financing for the development of its assets. A documented and updated technical review of the remaining potential of Candax producing assets and exploration upside potential is available for interested potential partners.

The company's revenue is exclusively generated through the export of produced crude transiting through the Zarzis terminal facilities. Following a leak detected on the main oil storage tank, Maretap was compelled to rent a heated storage barge since Sept. 15, 2014, to maintain the Ezzaouia field production and the partners' export capability during the repair of the tank.

As a consequence, the company had to reschedule the lifting planning, which was revised as follows:

• Sept. 10, 2014, 119,481 barrels, net to Candax of 66,480 bbl;
• Nov. 8, 2014, for a quantity of 72,574 bbl, net to Candax of 42,271 bbl;
• Feb. 10, 2015, 73,602 bbl, net to Candax of 36,002 bbl.

Considering the high daily rental cost of the heated barge in conjunction with the decrease of the crude oil price, Maretap decided to release the heated storage barge after the February lifting. As a consequence, Maretap and Ecumed have implemented a production reduction program, using internal storage facilities, until the full repair of the tank at the terminal, which is expected for the end of March, 2015. This curtailment program will impact the company's net production by approximatively 10,000 barrels.

Outlook

Candax is focused on the reactivation of mature fields. The company's team is supported by a board of directors with extensive industry experience and by active principal shareholders (Geofinance NV and the International Finance Corp.). Production levels for 2013 and 2014 have resulted in a stable cash flow, which was sufficient to sustain operations, corporate costs and limited development of Tunisian assets in the context of a higher oil price than is experienced today.

Ezzaouia and Robbana represent mature fields with potential development and limited risks. These fields were generating a sustainable cash flow for a 10-year development case. Some of the developments turned uneconomical with the drop in oil price and have created additional uncertainties on short-term liquidity and development of the company.

The company is undertaking cost-cutting plans to maintain its operating structure as an attractive operating platform for mature field exploitation.

The positive results of the gas-cycling pilot program at El Bibane encouraged the company to increase the gas compression capacity at the onshore central processing facilities and to contemplate a partial export of gas. Gas cycling is a low-risk and profitable type of production, which is generating enough cash to cover future decommissioning liabilities, even with downgraded Brent assumptions. The company has decided to exercise at the end of March, 2015, the purchase option of its compressor currently under leasing agreement.

Management is focusing on the potential gas value of its El Bibane field, including, but not limited to, gas sales and gas storage. Pending a confirmed commercial opportunity, the gas has not been valued in the company's 2014 certification report.

Year-end reserves

Candax also announced an update to its net reserves as at Dec. 31, 2014.

Total proven plus probable reserves (2P) of oil declined by 22 per cent from the previous year to 1.98 million bbl.

The net present value of the future cash flows (escalated price forecast, before tax and discounted at 10 per cent) attributable to the 2P reserves is valued at $19.8-million (compared with $57.1-million in 2013). This 65-per-cent decrease comes from the decrease in oil price assumptions, the revised flow rate of the producing wells on Ezzaouia field and, to some additional maintenance, capex on the terminal used to process the company's oil production.

Overall results were as follows:

• Its 1P reserves decreased 28 per cent from 1.24 million bbl to 890,000 bbl.
• Its 2P reserves decreased 22 per cent from 2.55 million bbl to 1.98 million bbl.
• Its 3P reserves (contingent reserves) decreased 21 per cent from 3.68 million bbl to 2.91 million bbl.

Field results were as follows:

• Ezzaouia 2P reserves decreased from 1.39 million bbl to 1.01 million bbl.
• Ezzaouia PV10 decreased from $42.9-million to $11.0-million.
• Robbana 2P reserves increased from 320,000 bbl to 340,000 bbl.
• Robbana PV10 decreased from $7.1-million to $1.4-million.
• El Bibane reserves decreased from 840,000 bbl to 630,000 bbl.
• El Bibane PV10 increased from $7.1-million to $7.3-million.

The company's Dec. 31, 2014, independent engineering report was prepared by Gaffney Cline & Associates in accordance with NI 51-101 guidelines, and additional disclosure on the reserves and valuations is included in Candax's annual information form, which is available on SEDAR.

We seek Safe Harbor.