For the three AND NINE months ended SEPTEMBER 30, 2013 and 2012

Calgary, Alberta, November 7, 2013 – Caracal Energy Inc. ("Caracal" or the "Group") (LSE: CRCL) today reported its operating and financial results for the three and nine months ended September 30, 2013 and provide an operational and reserve update.

Gary Guidry, Chief Executive Officer, said:

"The commencement of production, at the end of the third quarter, marked a significant milestone in Caracal's development into a cash flow generating entity. Future cash flow from production will be utilized to fund the development of the Group's properties and a high impact exploration program in 2014 and beyond. We are off to a great start with our first two exploration targets – the Mangara E sands and Krim well – resulting in two new discoveries. I would personally like to thank the staff for their hard work and commitment, and the Government of Chad and our joint venture partners, Glencore and SHT, for their continued support as the Group established operating momentum. "

Highlights

2013 Operational Highlights:

• Commenced first production from the Badila Field on September 30, 2013. As at November 6, 2013, Caracal was flowing oil from the Badila Field into the Export Pipeline at a rate of approximately 5,100 bbl/d (gross)
• Drilled and tested the Mangara-5 development well to a total depth of 3,339 meters. The initial flow test on the E sands achieved a maximum natural flow rate of 1,917 bbl/d at a flowing wellhead pressure of 160 psi with the C sands test achieving a natural flow rate of 3,200 bbl/d
• Spudded the Krim exploration target on August 6, 2013 and in September, drilled to a total depth of 3,332 meters. Initial testing of the E sands achieved a maximum natural flow rate of 2,580 bbl/d at a flowing wellhead pressure of 120 psi. Testing of the C & D sands is expected prior to year end
• Received delivery of a second drilling rig (Rig-96) in Chad and spudded Badila-4 on August 8, 2013
• Badila-4 well drilled to a depth of 2,272 metres and is currently being assessed
• Increased net entitlement proven reserves ("1P") to 16.8 million barrels of light oil, proven plus probable reserves ("2P") to 57.3 of million barrels of light oil and proven plus probable plus possible reserves ("3P") to 105.7 million barrels of light oil
• Increased the Net Present Value discounted at 10 percent of 2P reserves to \$1.5 billion

Corporate Highlights:

• Common shares admitted to the premium listing segment of the Official List of the Financial Conduct Authority and began trading on the London Stock Exchange's main market for listed securities on July 9, 2013
• Achieved a UK Classification by the FTSE Nationality Committee for purposes of Caracal's application to be included on the FTSE index series. Subsequently, Caracal became part of the FTSE All-Share UK Index Series
• Officially listed as a Supporting Company of the Extractive Industries Transparency Initiative (EITI)
• Signed the Transportation Agreements to gain access to the Export Pipeline
• Filed a final short form base shelf prospectus with the securities regulatory authorities in each of the provinces of Canada other than Quebec
• Convertible bonds admitted to the official list of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF market

Financial Highlights:

• Exited the third quarter with working capital of \$191.8 million, including cash and cash equivalents of \$45.3 million
• Capital spending of \$81.6 million in the third quarter
• Received \$75 million of the \$100 million second tranche of the Glencore farm-in
• Reduced net loss by 39 percent from the second quarter (16 percent excluding the non-recurring listing fees)

Outlook:

• Bitanda exploration well to spud in the fourth quarter of 2013
• Complete the testing of the Cretaceous C and D sands in Krim well
• Complete and commission the Southern Processing Terminal ("SPT"), adjacent to the Badila field which will initially process oil production from the Badila-4 and Badila-5 wells
• Complete the Mangara to Badila Pipeline
• Complete and commission the Central Processing Facility ("CPF")
• Complete and commission the blending and shipping facilities

Operations/Asset Overview

OPERATIONS REVIEW

Badila Field

Production

Caracal commenced first production from the Badila Field on September 30, 2013. As at November 6, 2013, Caracal was flowing oil from the Badila Field into the Export Pipeline at a rate of approximately 5,100 bbl/d (gross) (2,550 bbl/d working interest). As at November 6, 2013, approximately 45,900 bbls (gross) had been flowed into the Export Pipeline, and the Group expects to complete the line fill in December 2013. Between October 11 – 24, 2013, the Group's production was stopped to make modifications to computer software necessary for the precise measurement of the crude oil flowed into the Export Pipeline. The redesigned software is now operating as required. In addition, each of the three pumps designed to ship Caracal's crude

oil through to the Export Pipeline have been affected by mechanical malfunction, with the consequence that they are not currently operating at full capacity.

The Group expects to undertake the repairs necessary to restore these pumps to full working order during November 2013. The Group has also arranged delivery of three additional pumps to provide spare flow capacity during November 2013.

Drilling

The Group drilled the Badila-4 well during the third quarter, which it expects to develop prior to yearend. Additionally, Caracal spudded the Badila-5 well on October 12, 2013 which is expected to take 25-30 days to drill.

Mangara Field

Drilling

The Mangara-5 well was drilled to a depth of 3,339 metres in July 2013 and completed as lower Cretaceous C and D sands production well. The initial flow test on the E sands achieved a maximum natural flow rate of 1,917 bbl/d at a flowing wellhead pressure of 160 psi. The initial flow test, conducted over a 53 hour period, yielded a total oil volume greater than 1,450 bbl at varying rates. Field sampling estimates indicate oil gravity of 35°-39° API and a producing gas-oil ratio of approximately 100 scf/stb. The Group estimates that, using an ESP for artificial lift, a stable production rate of 1,500 to 2,500 bbl/d is achievable from the E interval. More recently, testing of the C interval achieved a maximum natural flow rate of 3,200 bbl/d.
Caracal intends to spud the Mangara-6 well during November. The Mangara-6 well will test the aerial extent of the E sands on the western side of the Mangara field.

Facilities

Construction continued on the central processing facilities, southern processing terminal, blending facilities and Mangara sales pipeline. All of these facilities, except for the southern processing terminal, are expected to be mechanically complete and operational in the second quarter of 2014. The southern processing terminal is expected to be commissioned in the fourth quarter of 2013.

Exploration

DOB/DOI PSC

Krim-1 Exploration Well

• The Krim-1 well, the Group's first exploration well, was spudded on August 5, 2013 and drilled to a depth of 3,332 metres. Initial testing of the E sands has achieved a maximum natural flow rate of 2,580 bbl/d at a flowing wellhead pressure of 120 psi. Field sampling suggests oil gravity of 34°-37° API and a producing gas-oil ratio of approximately 100 scf/stb. The Group estimates that, using an ESP for artificial lift, a stable production rate of 3,000 to 4,500 bbl/d is achievable.

Bitanda Exploration Well

• During the third quarter, Caracal completed the lease construction for the Bitanda prospect. The Bitanda prospect is scheduled to spud in Q4 2013 targeting unrisked mean prospective resources of 277 million bbls as per the Group's resources evaluation dated effective June 30, 2013 from McDaniel & Associates Consultants Ltd. ("McDaniel")

Seismic

• As part of the planned 2D seismic shoot there will be 250 lineal kms. of seismic acquired to mature leads and prospects on the DOB /DOI blocks

Doseo/Borogop PSC

The Group has scheduled the following key work streams relating to the development of the Doseo/ Borogop PSC to be undertaken during the fourth quarter of 2013 and the 2014 calendar year:

Drilling

one appraisal well and seven exploration well are planned to be drilled
Seismic:
a 455 km2 3-D seismic programme covering the Kibea Field and adjacent exploration prospects
a 253 km2 3-D seismic programme covering the Maku Field
1,250 lineal km2 of 2D seismic be acquired impacting maturation of leads and drill ready prospects

Facilities and Civil

the Doseo/Borogop Pipeline Engineering Study
land acquisition in relation to the Doseo/ Borogop Pipeline route
a facility feasibility study; and
road and infrastructure upgrades.

During the third quarter Caracal evaluated the commercial and technical aspects of the bids for the seismic, pipeline study and additional drilling rigs. The Group expects to award the requisite contracts in the fourth quarter of 2013.

DOH PSC

During the third quarter, Caracal continued to reprocess existing 2-D seismic with the intent of drilling two exploration wells in 2014.

London Stock Exchange and FTSE Inclusion

The Group's common shares were admitted to listing on the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities on July 9, 2013 (the "Introduction"). The Introduction has increased Caracal's global profile and better positioned it in the London market, which has numerous listed oil and gas companies that are focused on Africa.

Caracal's common shares were admitted to the FTSE UK Index Series on September 23, 2013. FTSE's indices are used by market participants for investment analysis, performance measurement, asset allocation and portfolio hedging. Many pension funds, asset managers and other institutional investors use FTSE's indices to create index tracking funds, structured products and index derivatives.

EITI

During the third quarter, the Group was officially listed as a Supporting Company of the Extractive Industries Transparency Initiative ("EITI"). The EITI is a global standard that promotes revenue transparency and provides a robust methodology for monitoring and reconciling Group payments and government revenues at the country level. Each implementing country creates its own EITI process, which is overseen by participants from the government, companies and national civil society. The international EITI Board and the International Secretariat are the guardians of the EITI methodology internationally. More information can be found on the website: http://eiti.org.

Transportation Agreements

Subsequent to the end of the third quarter, Caracal entered into Transportation Agreements with the operator of the Export Pipeline. The Transportation Agreements govern the terms of use of the Export Pipeline for the transport of oil produced in the Badila and Mangara Fields, including the order of priority for access and the applicable fees payable for use of the Export Pipeline. The Transportation Agreements incorporate a set of general terms (the "General Transportation Terms") applicable to all new shippers and a set of other terms specific to the Group. The General Transportation Terms include general terms of use of the Export Pipeline, including the order of priority for access. The fees reflected in the Transportation Agreements include payments in respect of a fixed and variable throughput charge, operating expenditure, capital expenditure and a utility rate of return for use of the Export Pipeline. Transit fees are also payable to the Government of Cameroon in respect of oil transported through the Cameroonian portion of the Export Pipeline. Based on the Transportation Agreements, the Group expects the aggregate transportation fees to range between \$6.00 and \$8.00 per barrel shipped.

Base Shelf Prospectus

Subsequent to the end of the third quarter the Group filed a final short form base shelf prospectus (the "Final Base Shelf Prospectus") with the securities regulatory authorities in each of the Provinces of Canada, other than the Province of Quebec.

The Final Base Shelf Prospectus allows the Group to offer common shares, subscription receipts, warrants and debt securities (collectively, the "Securities") or any combination thereof up to an aggregate offering price of US\$1,000,000,000 during a 25-month period that a base shelf prospectus remains effective. Securities may be offered separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of sale and set forth in an accompanying supplement that would also be provided with the Final Base Shelf Prospectus to investors.

Caracal filed a Final Base Shelf Prospectus to maintain financial flexibility and to have the ability to offer the Securities on an accelerated basis, once a supplement is filed over the 25-month time frame. There is no certainty that any offering of Securities will occur within the 25-month period.

A copy of the Final Base Shelf Prospectus will be available on SEDAR (www.sedar.com).

Summary of Reserves and Resources

The tables below summarize certain information contained in the independent reserves and resources reports prepared by McDaniel & Associates Consultants Ltd. ('McDaniel") as at September 30, 2013 and June 30, 2013 (collectively, the "McDaniel Reports" or the "Reports"). A statement of the Reserves and Resources consistent with an NI 51-101F1 (defined below) can be found at www.caracalenergy.com or www.sedar.com, under Caracal's profile.

The McDaniel Reports were prepared in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE") and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101").

The Net Present Values included in the table below were based on oil price forecasts, effective October 1, 2013, provided by McDaniel.

SUMMARY OF CRUDE OIL RESERVES as at September 30, 2013

FORECAST PRICES AND COSTS

		Light & Medium Crude Oil(1)
Reserves Category	Gross Lease(2)(5)	Participating Interest(3)(5)	Group's Net Entitlement(4)(5)
	(Mbbl)	(Mbbl)	(Mbbl)
Proved
Mangara	23,836	11,918	10,062
Badila	18,445	9,222	5,851
Kibea	–	–	–
Krim	2,234	1,117	895
Total Proved	44,515	22,258	16,809
Probable
Mangara	54,838	27,419	15,796
Badila	23,276	11,638	5,674
Kibea	45,916	22,958	17,635
Krim	3,803	1,901	1,401
Total Probable	127,833	63,916	40,506
Total Proved plus Probable	172,348	86,174	57,315
Possible
Mangara	87,492	43,746	21,659
Badila	51,331	25,665	10,792
Kibea	59,127	29,564	14,893
Krim	4,025	2,012	1,082
Total Possible	201,975	100,988	48,426
Total Proved plus Probable plus Possible	374,323	187,162	105,741

Notes:

(3) The Government of Chad has elected to acquire a 25 percent participating interest in the Badila and Mangara EXAs and McDaniel has assumed, for the purposes of estimating the Group's participating interest in any future EXAs which may be granted under each PSC, that the Government of Chad will continue to elect to acquire a 25 percent participating interest in each EXA. Accordingly, the Group's participating interests have been assumed to be 50 percent of the gross lease interests.

(4) Net reserves are the Group's share of Cost Oil recovery and Profit Oil. Under the COGE Handbook, using the economic interest method, "Net" as depicted above is equivalent to "Group net" and, in the particular case of the Group's PSCs, "Group gross".

(5) Columns may not add due to rounding.

⁽¹⁾ All of the Group's proved, probable and possible reserves have been classified as light and medium crude oil. The Group has no heavy crude oil. Based on current market conditions in Chad, neither reserves or values have been attributed to gas or natural gas liquid volumes. However, the Group has rights to monetize gas volumes and is currently discussing and assessing this market potential for the future.

⁽²⁾ Gross lease are the total marketable reserves assigned to the Group's concessions.

SUMMARY OF NET PRESENT VALUE OF FUTURE NET REVENUE (US\$)

AS AT September 30, 2013 - FORECAST PRICES AND COSTS

Reserves Category			Before and After Income Tax(1)(2)(3) Discounted at (\$MM)			Unit Value Before Deducting Income Taxes Discounted at 10%/year
Before and After Taxes	0%	5%	10%	15%	20%	(\$/boe)
Proved
Mangara	429	347	284	236	199	28.26
Badila	336	310	288	269	253	49.22
Kibea	–	–	–	–	–	–
Krim	27	23	19	16	13	20.96
Total Proved	792	679	591	522	465	35.17
Probable
Mangara	774	591	468	380	316	29.61
Badila	289	240	203	174	152	35.76
Kibea	504	309	186	106	52	10.56
Krim	44	36	29	25	21	21.02
Total Probable	1,612	1,177	886	685	541	21.88
Total Proved Plus Probable	2,404	1,856	1,477	1,207	1,006	25.78
Possible
Mangara	1,224	799	552	401	303	25.50
Badila	705	535	420	338	279	38.92
Kibea	863	524	333	218	144	22.36
Krim	56	45	37	30	25	33.81
Total Possible(3)	2,849	1,903	1,342	987	751	27.71
Total Proved plus Probable plus
Possible(3)	5,252	3,759	2,819	2,194	1,758	26.66

Notes:

(1) The Government of Chad has elected to acquire a 25 percent participating interest in the Badila and Mangara EXAs and McDaniel has assumed, for the purposes of estimating the Group's participating interest in any future EXAs which may be granted under each PSC, that the Government of Chad will continue to elect to acquire a 25 percent participating interest in each EXA. Accordingly, the Group's participating interests have been assumed to be 50 percent of the gross lease interests.

(2) Pursuant to the terms of the DOB/DOI PSC and the Doseo/Borogop PSC, the Government of Chad's Profit Oil allocation is inclusive of income tax.

(3) Columns may not add due to rounding.

SUMMARY OF CRUDE OIL RESERVES

as at september 30, 2013

Summary of Undeveloped Reserves (in MMB) (1)

			Gross (100%)(2)(5)		Participating Interest(3)(5)	Group's Net			Group's Net Entitlement(4)(5)
	1P	2P	3P	1P	2P	3P	1P	2P	3P
Asset
Mangara Field	18.9	61.9	131.0	9.5	31.0	65.5	8.1	21.7	38.1
Badila Field	15.8	45.5	85.0	7.9	22.7	42.5	4.7	11.4	19.3
Kibea Field	–	45.9	105.0	–	23.0	52.5	–	17.5	32.5
Total Reserves	34.7	153.3	321.0	17.4	76.7	160.5	12.9	50.6	89.8

Notes:

(1) All of the Group's proved, probable and possible reserves have been classified as light and medium crude oil. The Group has no heavy crude oil. Based on current market conditions in Chad, neither reserves or values have been attributed to gas or natural gas liquid volumes. However, the Group has rights to monetise gas volumes and is currently discussing and assessing this market potential for the future.

(2) Gross is the total marketable reserves assigned to the Group's concessions.

(4) Net reserves are the Group's share Cost Oil recovery and Profit Oil. Under the COGE Handbook, using the economic interest method, "Net" as depicted above is equivalent to "Group net" and, in the particular case of the Group's PSCs, "Group gross".

(5) Columns may not add due to rounding.

Finance Review

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A copy of Caracal's third quarter financial statements and Management Discussion and Analysis ("MD&A") can be found at www.caracalenergy.com or www.sedar.com, under Caracal's profile

Revenues

The Group did not generate any operating revenues during the period ended September 30, 2013. Production commenced from the Badila field on September 30, 2013, however, this production was directed to Caracal's portion of the required line fill.

Net Loss

The Group incurred a net loss of \$19.5 million during the third quarter, a 39 percent decrease from the net loss incurred in prior quarter. The decrease in the net loss is predominately due to non- recurring listing costs expensed in the second quarter of 2013.

Liquidity

Caracal's available cash resources as at September 30, 2013 and 2012 were \$45.3 million and \$212.0 million respectively. The Group exited the third quarter with working capital of \$191.8 million. Caracal entered into the Glencore Farm-in agreement in 2012 which closed in June 2013. This transaction provided approximately \$330.8 million in liquidity and reduces future capital requirements by reducing Caracal's working interest in the PSCs.

Historically, the Group financed its capital resource needs through the sale of its common shares, convertible bonds and farm-outs with the objective of the acquiring prospective oil and gas assets and maximizing long-term financial returns to its shareholders. Caracal anticipates developing its assets in the Republic of Chad utilizing a combination of existing capital resources, the financial commitments of Glencore pursuant to the farm-in agreement, anticipated future revenues and, if necessary, funds raised the issuance of debt and/or equity securities, if available and on reasonable terms. First production commenced on September 30, 2013, and accordingly the Group expects to generate internal funds to further expand and develop its asset base. In order to maintain or adjust its capital structure in future periods, Caracal may pay dividends, return capital to shareholders, enter into joint venture agreements with third parties, incur short- or long-term debt, issue new securities, sell assets, or execute a combination of the aforementioned items.

Commitments

Under the terms of its PSCs, the Group has committed to various work programmes. The agreed- upon minimum work requirement amounts to \$76.7 million, net to the Group, for the three PSCs over five years. As at September 30, 2013, \$45.1 million is yet to be spent with three more years remaining in the term of the agreements.

Other commitments consist of training of Chadian Nationals and employees of the Energy Ministry as well as office lease commitments in N'Djamena, Chad and Calgary, Alberta.

Strategy

Having commenced first production from the Badila Field in September 2013, Caracal's business strategy is to increase shareholder value through sustained growth in production, cash flow and reserves. The Group intends to lead the development and control of infrastructure in the regions in which it operates. Caracal believes that the PSCs offer significant near-term production and long-term exploration opportunities with substantial resource potential and that the combination of its existing asset base and experienced technical management team will contribute significantly to the Group's objectives of being a leading independent international oil company while delivering growth in net asset value per common share.

Outlook

Caracal continued its momentum from the first half of the year into the third quarter. The Group has progressed on a number of fronts specifically production, development drilling and exploration. Caracal is in a position to develop its existing world class asset base while pursing accretive opportunities.

Cautionary Statement

Certain information contained in this press release constitutes forward-looking information or statements including, without limitation, information and statements respecting: drilling operations, infrastructure development, future production, anticipated cash flow and revenues and future investment and potential financing objectives. Statements relating to "reserves" and "resources" are forward-looking information as they involve the implied assessment, based on certain estimates and assumptions that, among others, the reserves and resources described exist in the quantities predicted or estimated. Forward-looking information and statements are often, but not always, identified by the use of words such as "anticipate", "seek", "believe", "expect", "hope", "plan", "intend", "forecast", "target", "project", "guidance", "may", " might", "will", "should", "could", "estimate", "predict" or similar words or expressions suggesting future outcomes or language suggesting an outlook. By their very nature, forward-looking information and statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information and statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to vary materially

from the forward-looking information or statements. These factors include, but are not limited to: the volatility of oil and gas prices; production and development costs; capital expenditures; the imprecision of reserve and resource estimates and estimates of recoverable quantities of oil, natural gas and liquids; the Group's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions or dispositions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; compliance with environmental laws and regulations; changes in tax and royalty laws; the Group's ability to access external sources of debt and equity capital; and the Group's ability to obtain equipment in a timely manner to carry out development activities. Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on these forward-looking statements to make decisions with respect to the Group, investors and others should also carefully consider information set forth in the section "Forward-Looking Statements" of the Group's prospectuses respecting the assumptions upon which the Group bases certain forward-looking information and the uncertainties inherent in such assumptions. Financial outlook information contained in this report about the Group's prospective cash flows and financial position is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that any such financial outlook information contained herein should not be used for purposes other than for which it is disclosed herein. The Group does not assume responsibility for the accuracy and completeness of the forward-looking information or statements and such information and statements should not be taken as guarantees of future outcomes. Subject to applicable securities laws, the Group does not undertake any obligation to revise this forward-looking information or these forward-looking statements to reflect subsequent events or circumstances. This cautionary statement expressly qualifies the forwardlooking information and statements contained in this press release.

Well-flow test results are not necessarily indicative of long-term performance or ultimate recovery.

[ Expressed in US\$ thousands, unless otherwise stated ]

BASIS OF PRESENTATION

1 2

The following Management's Discussion and Analysis (the "MD&A") dated 7 November 2013 is a review of the results of operations and the liquidity and capital resources of Caracal Energy Inc. (the "Group" or "Caracal") for the nine months ended September 30, 2013 and 2012. The discussion and analysis is a review of the financial results of the Group based upon accounting principles prepared in accordance with International Financial Reporting Standards ("IFRS"). This MD&A should be read in conjunction with the Group's September 30, 2013 interim financial statements, the 2012 annual MD&A and the audited consolidated financial statements for the years ended December 31, 2012, 2011 and 2010. The reporting and functional currency of the Group is the United States dollar ("US\$"). All financial references in this MD&A are in United States Dollars unless otherwise noted.

Readers should also read the "Forward-Looking Statements" section at the end of this document which provides further information on statements throughout this report that are not historical facts and may be considered "forward-looking statements".

Use of Estimates and Critical Accounting Policies

The preparation of the interim consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates and affect the results reported in these interim consolidated financial statements.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the interim consolidated financial statements are as follows:

The calculation of deferred income tax assets and liabilities is based on management's interpretation of applicable laws, regulations and relevant court decisions, and in the case of deferred income tax assets, projections of future earnings to be applied against loss carry forward positions.
The recoverability of property, plant and equipment and intangible exploration and evaluation assets is based on numerous assumptions including estimated reserves, forward commodity price forecasts, development plans, political and social uncertainties, discount rates and various other factors. The recoverability of the intangible exploration and evaluation assets is also impacted by the policy election permitted under IFRS as to the level exploration and evaluation assets are tested for impairment.
A number of the Group's accounting policies and disclosures require the determination of fair value, both for financial and non-financial assets and liabilities.
When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
The fair value of share-based compensation is based on estimates relating to option life, volatility, share price and the outcome of performance conditions.

Caracal's BUSINESS, STRATEGY AND OUTLOOK

Caracal's Business

The Group is an independent oil and gas exploration, appraisal and development company with exclusive rights, along with its Joint Venture Partner ("Partner") to explore and develop oil and gas reserves and resources over an area of approximately 26,103 square kilometres (6.4 million acres) in southern Chad. This area is comprised of three Contractual Zones, the rights to which were granted to the Group in 2011 pursuant to production sharing contracts (each, a "PSC") that it entered into with the Government of Chad.

DOB/DOI Contractual Zone (DOB/DOI PSC)

The DOB/DOI Contractual Zone covers an area of approximately 2,865 square kilometres. It contains two discoveries of commercial interest that the Group is currently developing: the Badila Field and the Mangara Field.
Exclusive exploitation authorisations (each, an "EXA") to develop and produce from the Badila and Mangara Fields were granted to the Group by the Government of Chad in August 2012 and June 2012, respectively, and cover a combined area of 100 square kilometres. The Group commenced production from the Badila field on September 30, 2013. Having prioritised pre-production development of the Badila Field, the Group is targeting commencement of first production from the Mangara Field in the first half of 2014.

Doseo/Borogop Contractual Zone (Doseo/Borogop PSC)

The Doseo/Borogop Contractual Zone covers an area of approximately 22,414 square kilometres and contains four discoveries of commercial interest that the Group has identified as development priorities: the Kibea, Maku, Tega and North Sako Fields.
The Group had an EXA application for the Kibea Field deemed conditionally approved in May 2013, pending approval of an environmental impact assessment.
The Group is currently undertaking feasibility studies on the Maku, Tega and North Sako Fields. The Group expects to submit an EXA application for the Maku Field in the second half of 2014.

DOH Contractual Zone (DOH PSC)

The DOH Contractual Zone covers an area of approximately 824 square kilometres.
The DOH Contractual Zone is subject to further exploration. The two wellbores existing within the DOH Contractual Zone, drilled by previous operators, have evidence of oil, but not in quantities of commercial interest that the Group would intend to develop. The Group intends to drill two exploration wells in the DOH Contractual Zones during 2014.

Strategy

The strategy of the Group is to increase shareholder value through sustained growth in production, cash flow and reserves. The Group intends to lead the development and control of infrastructure in the regions in which it operates. The Group believes that the PSCs offer significant near-term production and long-term exploration opportunities with substantial resource potential. The Group believes that the combination of the Group's existing asset base and technical management team will contribute significantly to the Group's growth and aim of being a leading independent international oil company, while delivering growth in net asset value per common share.

[ Expressed in US\$ thousands, unless otherwise stated ]

RESULTS OF OPERATIONS

Operating Segments

The Group has one operating segment: oil and gas exploration, development and production activities in the Republic of Chad.

Revenues

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The Group did not generate any operating revenues during the periods ended September 30, 2013 and 2012. Production commenced from the Badila field on September 30, 2013, however, this production was directed to the Group's portion of the required line fill.

Expenses

A summary of the expenses incurred by the Group for the periods ended September 30, 2013 and 2012 is presented in the table below:

		Three months ended September 30		Nine months ended September 30
	2013	2012	2013	2012
Expenses
Salaries and benefits	2,426	3,221	12,933	9,050
Share-based compensation	2,716	1,973	7,455	6,488
Depreciation	431	294	1,315	754
General and administrative	4,986	3,312	14,885	24,970
Travel	1,519	1,638	5,996	4,654
Listing fees	129	–	9,162	–
Finance expense (income)	6,369	920	21,582	837
Foreign exchange loss (gain)	842	(206)	1,713	(246)
Net loss before tax	19,490	11,152	75,041	46,507
Deferred tax reduction	–	(5,381)	–	(5,381)
Net and comprehensive loss	\$ 19,490	\$ 5,771	\$ 75,041	\$ 41,126

Salaries and benefits

Salaries and benefits decreased \$0.8 million for the three months ended September 30, 2013 and increased \$3.9 million for the nine months ended September 30, 2013. During 2013, the Group progressed from planning, development engineering, and procurement to operating two drilling rigs, one service rig and constructing a variety of facilities and infrastructure. With the anticipated high level of activity throughout 2013 and beyond, the Group undertook an aggressive recruiting campaign to attract and retain needed professionals, increasing its headcount from approximately 100 employees at the end of September 30, 2012 to approximately 250 employees at the end of September 30, 2013. Upon closing of the Farm-In Agreement in June 2013, the Group's carrying interest in costs directly attributable to the exploration, appraisal and development of oil & gas assets in the republic of Chad has decreased. As a result of the decrease in carrying interest, salaries and benefits have decreased by \$0.8 million for the three months ended September 30, 2013, compared to the three months ended September 30, 2012. During the quarter and the period, the Group capitalized \$5.0 million (2012 - \$0.8 million) and \$10.6 million (2012 – \$2.1 million) of salaries and benefits respectively.

Share-based compensation

Share-based compensation for the three and nine months ended September 30, 2013 increased \$0.7 million and \$1.0 million respectively. The increase relates to stock options granted to employees as well as the creation of the Long Term Incentive Plan (the "Plan") for officers and other key executives of the Group. A total of 1.1 million performance units were granted under the Plan in the first quarter of 2013. The Plan was introduced to retain, attract and motivate key executives responsible for executing the Group's long term business strategy. A participant in the Plan is awarded a notional number of units based on a multiple of salary. Upon vesting, a participant can, at their option, receive common shares or a cash payment of equivalent value. The performance units vest after a three-year period based on time and specific performance targets. The performance targets are as follows:

i) 37.5% of the units will be subject to targets relating to the Total Shareholder Return ("TSR") of the Group against a group of peer companies;
ii) 37.5% of the award will be subject to targets relating to net asset value of the Group per share based on proven and probable reserves discounted at 10%;
iii) The remaining 25% vest at the end of three years (subject to the participant being employed by the Group at the time of vesting).

The Group is required to account for the performance unit plan as a liability based award whereby the estimated fair value of grants made under the plan is recorded as a liability each period based on the outstanding vested performance units. The change in the fair value of the liability each period is recorded as share based compensation in the statement of operations.

The fair value of a performance unit is based on the following:

a) 25% with no performance conditions fair value is based on the underlying value of the Group's common stock.
b) 75% with performance conditions fair value is based on the underlying value of the Group's common stock adjusted for the probability of satisfying the market and non-market performance conditions.

During the nine months ended September 30, 2013, the Group purchased 917,782 common shares at C\$6.25 per share for a total consideration of \$5.7 million. These shares are held in a trust settled by a third party trustee with the sole purpose of administering the Plan. The shares held in the trust have been granted to participants but not yet vested.

General and administrative

General and administrative costs increased by \$1.7 million for three months ended September 30, 2013 and decreased \$10.1 million for the nine months September 30, 2013. During the period ended September 30, 2012, the Group accrued \$9.5 million to provide for potential penalties and fines to an issue that was resolved in the first quarter of 2013.These expenses are considered to be non-recurring and therefore, after consideration for these, general and administrative costs for the three and nine months ended September 30, 2013 are relatively unchanged from the comparative periods.

Travel

The increase in travel during the nine months ended September 30, 2013 is primarily due to increased personnel traveling to Chad commensurate with the increase in activity. The Group's share of travel for the three months ended September 30, 2013 compared to the three months ended September 30, 2012 decreased due to the change in the carrying interest of the Group.

Listing fees

On July 9, 2013, the common shares of Caracal were admitted to listing on the premium listing segment of the Official List and to trading on the London Stock Exchange under the symbol: CRCL. Caracal paid \$9.2 million to legal, financial and accounting advisors in conjunction with the listing. As Caracal did not raise any capital, all fees were expensed.

Finance expense

On September 13, 2012, Caracal completed a financing through the issuance of \$173.6 million unsecured convertible bonds (the "Bonds") with a maturity date of September 30, 2017. Finance expense increased \$20.7 million from the prior period due to interest owing on the Bonds. Interest on the Bonds, initially at a rate of 12 percent per annum, is accrued quarterly and compounded and capitalized semi-annually. See note 9 of the interim consolidated financial statements for further detail.

CAPITAL EXPENDITURES

1 6

Additions to exploration and evaluation assets and property and equipment were as follows:

		Three months ended September 30		Nine months ended September 30
	2013	2012	2013	2012
Studies and Seismic	(344)	474	15,342	6,657
Drilling and Workovers	23,934	8,006	72,846	18,721
Facilities	48,343	24,956	178,723	60,390
Infrastructure, Camps and Land Acquisitions	6,624	7,659	30,266	17,860
Corporate Assets	3,435	868	11,550	4,090
Total Cash Capital Expenditures	81,992	41,963	308,727	107,718
Asset Disposal	(426)	–	(247,784)	–
Net Capital Dispositions	81,566	41,963	60,943	107,718
Decommissioning Liability	101	256	760	640
Depreciation	(415)	(275)	(1,257)	(697)
Capitalized Share Based Compensation	790	529	2,181	1,285
Total	\$ 82,042	\$ 42,473	\$ 62,627	\$ 108,946

During the nine months ended September 30, 2013 the Group completed a 320 square kilometer 3D seismic program encompassing the Badila EXA lands as well as additional exploration targets. Other studies and seismic work is ongoing as the Group continues to analyze pre-existing 2D seismic over all its lands, and prepares to commence another 3D seismic program over the Kibea and Maku discoveries and adjacent prospects in Q4 2013 and the first half of 2014. The Group completed a 3D program over the Mangara EXA lands in 2012 covering about half the size of the land of the Badila EXA shoot.

During the nine months ended September 30, 2013, the Group continued to advance its development drilling program:

drilled and completed Badila-2 and Badila-3, drilled Mangara-4, Mangara-5, and Badila-4, and completed a workover on Mangara-2 and Badila-1.
Badila-5 was spud on October 12, 2013.

In September, the Group drilled its first exploration well, Krim. Drilling of Krim is complete, and completion of the wellbore is scheduled for November 2013.

Also included in drilling and workovers are the costs associated with the preparation of future well leases, construction of well pads, and the purchasing of long lead drilling consumables. These costs increased from the previous period due to an increase in activity.

During the nine months ended September 30, 2013, the Group completed the early production facilities, the 16km-12 inch oil sales pipeline, the lease automatic custody transfer unit, hot tap into the third-party-owned and operated pipeline, and the two field camps. Construction continued on the central processing facilities (80% complete), southern processing terminal (82% complete), blending facilities (82% complete) and Mangara sales pipeline (75% complete).

On June 13, 2013, the Group closed the farm-in agreement with Glencore, pursuant to which the Group transferred a one third participating interest in each of its PSCs and a 25% participating interest in the Badila and Mangara EXAs to Glencore. The transaction had an effective date of July 1, 2012 with Glencore being responsible to pay their working share of expenditures from that date upon closing. The following is a reconciliation of the consideration and the value of the assets disposed of:

		Amount
Cash consideration	(i)	257,458
Future farm-in commitment	(ii)	195,547
Decommissioning obligation		1,016
Transaction costs		(9,674)
Disposition of Exploration and Evaluation assets	(iii)	\$ 444,347

i. Concurrently with the closing, the Group immediately repaid an advance of \$150.0 million to Glencore.

ii. As per the farm-in agreement, Glencore will reimburse up to \$100 million of the Group's share of expenditures on certain of the Group's assets from July 1, 2013 to June 30, 2014 and up to an additional \$100 million from July 1, 2014 to June 30, 2016.
iii. The Group has elected not to record gains/losses on properties in the exploration and evaluation stage. As such, this gain on disposition reduces the carrying value of the exploration and evaluation assets.

LIQUIDITY AND CAPITAL RESOURCES

The Group does not currently have any revenue from operations and is reliant on its ability to raise funds through the capital markets and/or generating cash flow from its operations in Chad. There can be no assurance that the Group will be successful in raising funds in the future.

Share Capital

The following table summarizes the outstanding common shares, performance warrants, options, performance units and convertible bonds as at September 30, 2013 and 2012.

	2013	2012
Common shares – basic	115,657	112,761
Liquidity warrants	–	2,084
Agent options	–	1,980
Performance warrants	5,967	6,148
Stock options	8,233	4,490
Performance share plan units	1,094	–
Restricted share units	136	–
Convertible bonds	28,600	28,600
	159,687	156,063

As at the date of this MD&A, there have been no significant changes to the number of outstanding equity instruments since September 30, 2013.

[ Expressed in US\$ thousands, unless otherwise stated ]

Available Cash Resources

Historically, the Group has financed its capital resource needs through the sale of its common shares, convertible bonds and farm-outs with the objective of the acquiring prospective oil and gas assets and maximizing long-term financial returns to its shareholders. The Group anticipates developing its assets in the Republic of Chad utilizing a combination of existing capital resources, the financial commitments of Glencore pursuant to the farm-in agreement, anticipated future revenues and, if necessary, funds raised from debt and/or equity, if available and on reasonable terms. First production commenced on September 30, 2013, and accordingly the Group expects to generate internal funds to further expand and develop its asset base. In order to maintain or adjust its capital structure in future periods, the Group may pay dividends, return capital to shareholders, enter into joint venture agreements with third parties, incur long-term debt, issue new shares, sell assets, or execute a combination of the aforementioned items.

The Group's available cash resources as at September 30, 2013 and 2012 were \$45.3 million and \$212.0 million respectively. Pursuant to the Glencore farm-in agreement, approximately \$330.8 million was provided in liquidity, which reduces future capital requirements by reducing the Group's working interest in the PSCs.

The Group has set an aggressive development plan, however, the development plan is highly discretionary and can be accelerated or decelerated to match funds available to the Group. While there are minimum spending requirements under each of the PSCs, as discussed below, the Group has sufficient resources available to fund those minimum capital commitments.

Cash resources at September 30, 2013, combined with the financial commitments of Glencore pursuant to the farm-in agreement and anticipated cash flow from operations, are estimated to be sufficient to fund the Group's planned work program. Should situations arise that reduce the capital available to the Group, the work program can be modified accordingly.

FUTURE COMMITMENTS AND CONTINGENCIES

Pursuant to PSCs in the Republic of Chad, the Group and its joint venture partner are required to perform certain minimum exploration activities by the expiry of the terms associated with each of the Group's PSCs, all of which are within the next three years:

Concession Name	Expiry Date	Original Minimum Work Requirement	Remaining Minimum Work Requirement as at September 30, 2013
Doseo/Borogop PSC	January 26, 2016	33,335	25,713
Mangara/Badila PSC	April 24, 2016	33,335	10,271
DOH PSC	August 2, 2016	10,000	9,136
Total		\$ 76,670	\$ 45,120

Pursuant to PSCs in the Republic of Chad ("State"), the Group is required to pay certain prescribed amounts relating to the training of Chadian nationals and employees of the Chadian Energy Ministry, audits of the State, and the presentation of annual reports to the State. These prescribed amounts under the terms of the PSCs are approximately \$2.5 million per annum, net to the group.

The Group has office lease commitments in N'Djamena, Chad, and Calgary, Alberta. Non-cancellable future operating lease rentals from 2013 to 2015 are approximately \$1.2 million per annum, net to the group.

SELECTED UNAUDITED QUARTERLY FINANCIAL INFORMATION

Below is a summary of selected financial data covering the prior eight quarters.

Three months ended (unaudited)	Sep 30 2013	June 30 2013	Mar 31 2013	Dec 31 2012	Sep 30 2012	Jun 30 2012	Mar 31 2012	Dec 31 2011
Income statements:
Revenues	–	–	–	–	–	–	–	–
Expenses	19,490	32,185	23,367	22,887	5,771	14,451	20,903	9,796
Net loss and comprehensive loss	19,490	32,185	23,367	22,887	5,771	14,451	20,903	9,796
Per common share data:
Basic and diluted net loss per share	0.17	0.28	0.21	0.20	0.06	0.14	0.22	0.18
Weighted average number of shares outstanding – basic and diluted	115,657	115,636	115,624	112,761	112,761	112,754	95,462	88,009
Cash flows:
Operating activities	24,181	(91,361)	23,112	(8,645)	(25,152)	(11,726)	(9,663)	(6,842)
Investing activities	(52,570)	86,404	(61,799)	(83,902)	(30,391)	(40,760)	(6,246)	(10,320)
Financing activities	(2,933)	(2,389)	3,899	(91)	167,083	(44)	117,167	995
Statement of financial position:
Current assets	206,926	220,069	97,424	132,121	216,860	102,765	154,664	52,909
Non-current assets	153,487	178,220	407,687	299,383	218,492	176,294	129,072	110,243
Total assets	360,413	398,289	505,111	431,504	435,352	279,059	283,736	163,152
Current liabilities	15,148	41,860	24,493	42,741	33,509	36,275	29,045	7,471
Non-current liabilities	162,320	153,706	246,076	137,590	130,182	2,037	2,015	1,995
Total liabilities	177,468	195,566	270,569	180,331	163,691	38,312	31,060	9,466
Total shareholders' equity	182,945	202,723	234,542	251,173	271,661	240,747	252,676	153,686

[ Expressed in US\$ thousands, unless otherwise stated ]

recent accounting pronouncements

On January 1, 2013, the Group adopted new standards with respect to consolidations (IFRS 10), joint arrangements (IFRS 11), disclosure of interests in other entities (IFRS 12), fair value measurements (IFRS 13) and amendments to financial instrument disclosures (IFRS 7). The adoption of these standards had no impact on the amounts recorded in the consolidated financial statements as at January 1, 2013 or on the comparative periods.

Financial Instruments

The financial instruments entered into by the Group consist predominately of cash, convertible bonds and accounts receivable. The majority of the Group`s cash is held outside of Chad in a major international financial institution.

forward-looking Statements

Certain statements contained in this MD&A, including any information as to the Group's strategy, market position, plans or future financial or operating performance, constitute forward-looking statements or forward-looking information. Readers are cautioned that forward-looking statements are not guarantees of future performance. Forward-looking statements may, and often do, differ materially from actual results. Forward-looking statements or information typically contain statements with words such as "anticipate", "will", "showed", "target", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this MD&A include, but are not limited to, statements or information with respect to: business strategy and objectives; the development potential of the Group's assets; development plans; exploration plans; acquisition and disposition plans and the timing thereof; future production levels; capital expenditures; net revenue; operating and other costs; royalty rates and taxes.

Forward-looking statements or information are based on a number of factors and assumptions that have been used to develop such statements and information but may prove to be incorrect. Although the Group believes that the expectations reflected in such forwardlooking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Group can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions that may be identified in this MD&A, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in the Republic of Chad ("Chad"); the timely receipt of any required regulatory approvals; the ability of the Group to obtain qualified staff, equipment and services in a timely and cost-efficient manner; the ability of the Group to operate the field in a safe, efficient and effective manner; the ability of the Group to obtain financing on acceptable terms, if any; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Group to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in Chad; sanctity of the production sharing contracts the Group has with the Government; and the ability of the Group to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions that may have been used.

Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by the Group and described in the forwardlooking statements or information. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. The risks and uncertainties that may cause actual results to differ materially from the forward-looking statements or information include, among other things: the ability of Management to execute its business plan; general economic and business conditions; the risk of war or instability affecting Chad; the risks of the oil and natural gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas; market demand; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; risks and uncertainties involving geology of oil and natural gas deposits; the uncertainty of reserves estimates and reserves life; the ability of the Group to add production and reserves through acquisition, development and exploration activities; the Group's ability to enter into or renew production sharing concession; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to production (including decline rates), costs and expenses; fluctuations in oil and natural gas prices, foreign currency, exchange, and interest rates; risks inherent in the Group's marketing operations, including credit risk; uncertainty in amounts and timing of oil revenue payments; health, safety and environmental risks; risks associated with existing and potential future law suits and regulatory actions against the Group; uncertainties as to the availability and cost of financing; and financial risks affecting the value of the Group's investments. Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties.

Interim Consolidated Statements of Financial Position (unaudited) 2 2

a s at SE P TEM B ER 30, 2013 and d ecem b er 31, 2012

(Expressed in US\$ thousands, unless otherwise stated)	Notes	September 30 2013	December 31 2012
Assets
Current:
Cash and cash equivalents		\$ 45,341	\$ 119,881
Accounts receivable	4	161,585	12,240
		206,926	132,121
Intangible exploration and evaluation assets	5	71,277	295,747
Property, plant and equipment	6	82,210	3,636
		\$ 360,413	\$ 431,504
Liabilities and Shareholders' Equity
Current:
Accounts payable and accrued liabilities		\$ 15,148	\$ 42,741
Long term liabilities:
Convertible bonds	9	158,343	135,511
Decommissioning obligations		1,948	2,079
Share-based compensation liability		2,029	–
		177,468	180,331
Shareholders' Equity:
Share capital	7	334,940	328,230
Warrants and agent options	7	8,405	12,683
Equity component of convertible bonds	9	29,395	29,395
Other equity accounts	8	7,686	3,305
Deficit		(197,481)	(122,440)
		182,945	251,173
Commitments	12
		\$ 360,413	\$ 431,504

The notes are an integral part of these interim consolidated financial statements.

Interim Consolidated Statements of Operations (unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 and 2012

	Three months ended			Nine months ended September 30
(Expressed in US\$ thousands unless otherwise stated)	Notes	2013	September 30 2012	2013	2012
Expenses:
Salaries and benefits		\$ 2,426	\$ 3,221	\$ 12,933	\$ 9,050
Share–based compensation	8	2,716	1,973	7,455	6,488
Depreciation		431	294	1,315	754
General and administrative		4,986	3,312	14,885	24,970
Travel		1,591	1,638	5,996	4,654
Listing fees		129	–	9,162	–
Finance expense		6,369	920	21,582	837
Foreign exchange loss (gain)		842	(206)	1,713	(246)
Net loss before tax		\$ 19,490	\$ 11,152	\$ 75,041	\$ 46,507
Deferred tax reduction		–	(5,381)	–	(5,381)
Net and comprehensive loss		\$ 19,490	\$ 5,771	\$ 75,041	\$ 41,126
Loss per share:
Basic and diluted		\$ 0.17	\$ 0.06	\$ 0.65	\$ 0.38

The notes are an integral part of these interim consolidated financial statements.

Interim Consolidated Statements of Financial Position (unaudited) Changes in Shareholders' Equity (unaudited)

F OR THE NIN E MO N THS E N D E D S e p tem b er 30, 2013 and 2012

(Expressed in US\$ thousands, unless otherwise stated)	Notes	2013	2012

Share Capital	7
Balance, beginning of period		\$ 328,230	\$ 204,666
Share issuance, net of costs		–	122,043
Exercise of stock options – cash		164	–
Exercise of stock options – contributed surplus		92	–
Conversion of liquidity warrants into shares		1,255	2,775
Interest on share purchase loans		46	73
Agency options converted to shares		5,153	–
Value ascribed to liquidity warrants		–	(1,255)
Balance, end of period		334,940	328,302
Warrants and Agent Options	7
Balance, beginning of period		12,683	11,693
Conversion of liquidity warrants into shares		(1,255)	(2,775)
Value ascribed to liquidity warrants		–	1,255
Value ascribed to performance warrants		235	–
Agency options converted to shares		(1,282)	–
Agency options expired		(1,976)	–
Share-based compensation for performance warrants		–	1,762
Balance, end of period		8,405	11,935

Equity Component of Convertible Bonds
Balance, beginning of period	9	29,395	–
Issue of convertible bonds		–	41,440
Deferred tax impact		–	(10,360)
Convertible bond issue costs allocated to equity		–	(1,556)
Balance, end of period		29,395	29,524

Other Equity Items	8
Balance, beginning of period		3,305	(4,245)
Share-based compensation		5,191	4,726
Share-based compensation - capitalized		2,181	1,285
Exercise of stock options		(92)	–
Agency options expired		1,976	–
Treasury stock	8	(5,537)	–
Interest on loans		(46)	(73)
Interest received on loans		77	77
Foreign exchange		631	(316)
Balance, end of period		7,686	1,454
Deficit
Balance, beginning of period		(122,440)	(58,428)
Net loss for period		(75,041)	(41,126)
Balance, end of period		(197,481)	(99,554)
Total Shareholders' Equity		\$ 182,945	\$ 271,661

The notes are an integral part of these interim consolidated financial statements.

Interim Consolidated Statements of Cash Flows (unaudited)

F OR THE NIN E MO N THS E N D E D S e p tem b er 30, 2013 and 2012

Notes (Expressed in US\$ thousands, unless otherwise stated)	2013	2012
Operating Activities
Net loss	\$ (75,041)	\$ (41,126)
Adjustments for:
Depreciation	1,315	754
Accretion of decommissioning liability obligation	68	63
Share–based compensation	7,455	6,488
Interest on convertible bonds	22,832	943
Foreign exchange loss	1,712	(70)
Deferred tax reduction	–	(5,381)
Accretion of accounts receivable	(1,271)	–
Operating cash flow before working capital movements	(42,930)	(38,329)
Changes in non–cash working capital 11	(1,137)	(8,212)
	(44,067)	(46,541)
Investing Activities
Advance proceeds 10	150,000	–
Advance repayment 10	(150,000)	–
Intangible exploration and evaluation additions	(265,686)	(105,702)
Intangible exploration and evaluation disposals, net of costs 5	247,784	–
Property, plant and equipment additions 6	(43,041)	(2,016)
Changes in non–cash working capital 11	32,975	30,321
	(27,968)	(77,397)
Financing Activities
Net proceeds from issuance of shares and warrants	4,035	117,064
Share repurchase 8	(5,537)	–
Interest received on share purchase loans	77	77
Issue of convertible bond	–	173,600
Convertible bond isue costs	–	(6,535)
	(1,425)	284,206
Effect of exchange rate changes on cash and cash equivalents	(1,080)	(246)
(Decrease) Increase in cash and cash equivalents	(74,540)	160,022
Cash and cash equivalents, beginning of period	119,881	52,023
Cash and cash equivalents, end of period	\$ 45,341	\$ 212,045

The notes are an integral part of these interim consolidated financial statements.

For the THREE AND NIN E mo n ths e nd e d september 30, 2013 and 2012

¹ Reporting Entity

2 6

Caracal Energy Inc. (the "Group" or "Caracal") was incorporated pursuant to the Canada Business Corporations Act. The Group is engaged in oil and gas exploration, development and production activities in the Republic of Chad, which is located in central Africa.

² Basis of preparation

The interim consolidated financial statements of the Group have been prepared using accounting policies in accordance with International Accounting Standard ("IAS") 34: Interim Financial Reporting.

These interim consolidated financial statements are approved by the Board of Directors on 7 November 2013.

The interim consolidated financial statements should be read in conjunction with the Group's annual audited financial statements for the years ended December 31, 2012 and December 31, 2011 which are prepared in accordance with the International Financial Reporting Standards and interpretations (collectively referred to as "IFRS") as issued by the International Accounting Standards Board ("IASB").

All amounts are express in US\$ thousands unless otherwise stated.

³ Determination of Fair Values

A number of the Group's accounting policies and disclosures require the determination of fair value, both for financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

The different levels of financial instrument valuation methods have been defined as follows:

Level 1 Fair value measurements are based on unadjusted quoted market prices. Level 2 Fair value measurements are based on valuation models and techniques where the significant inputs are derived from quoted indices. Level 3 Fair Value Measurements are based on unobservable information.

The carrying value of cash and cash equivalents, current accounts receivables, and accounts payable and accrued liabilities included in the consolidated statements of financial position approximate fair value due to the short term nature of those instruments. The fair value of the long-term portion of the accounts receivable relating to the Farm-in Agreement approximates its carrying value as the discount rate applied to the balance approximates the current market rate applicable to the counter party. The fair value of the liability component of the convertible bonds approximate their fair carrying value as interest rates and the credit spread have not altered significantly since the issue date.

⁴ Accounts Receivable

	September 30 2013	December 31 2012
Short–term:
Trade accounts receivable	\$ –	\$ 242
Prepaid expenses	111	11,500
Advances and deposits	4,227	350
Joint venture receivable	35,703	–
Farm–in Agreement receivable - 2013 carry	24,991	–
Farm–in Agreement receivable - 2014 carry	96,086	–
Other	467	148
Balance, end of period	\$ 161,585	\$ 12,240

In June 2013, as a result of the farm in transaction (Note 10), the Group recorded a receivable of \$195.5 million from its Joint Venture Partner ("Partner"), comprising of \$100 million to be received between July 1, 2013 and June 30, 2014, and \$100 million to be received subsequent to June 30, 2014. The intent of this receivable, pursuant to the farm-in agreement, is to cover the Group's future expenditures and is in addition to any joint venture billings received from the Partner for its working interest share of expenditures. As at September 30, 2013, the Group had a remaining receivable from the farm-in agreement of \$25 million, to be received prior to June 30, 2014.

The \$100 million expected to be received subsequent to June 30, 2014 is discounted at four percent as the Group does not expect to start receiving in for nine months. The receivable is secured by a parental guarantee from Glencore AG. As at September 30, 2013, the Group recorded \$1.3 million of accretion income related to the receivable.

In addition, as at September 30, 2013 the Group had a receivable from its Partner of \$35.7 million relating to the Partner's working interest share of expenditures incurred.

⁵ Intangible Exploration and Evaluation Assets

Notes	September 30 2013	December 31 2012
Balance, beginning of period	\$ 295,747	\$ 108,557
Additions	268,684	187,265
Disposals 10	(456,307)	–
Transfers out to Property, Plant & Equipment 6	(36,790)	–
Changes in decommissioning obligations	(57)	(75)
Balance, end of period	\$ 71,277	\$ 295,747

Notes to the Consolidated Interim Financial Statements (unaudited)

For the THREE AND NIN E mo n ths e nd e d september 30, 2013 and 2012

⁶ Property, Plant and Equipment

	Notes	Oil and gas properties	Other fixed assets	Total
Cost:
Balance, beginning of period		\$ –	\$ 4,755	\$ 4,755
Additions		42,427	614	43,041
Transfer from intangible E&E assets	5	36,790	–	36,790
Balance, end of period		79,217	5,369	84,586
Depreciation:
Balance, beginning of period		\$ –	\$ 1,119	\$ 1,119
Additions		–	1,257	1,257
Balance, end of periods		–	2,376	2,376
Net book value, beginning of period		\$ –	\$ 3,636	\$ 3,636
Net book value, end of period		\$ 79,217	\$ 2,993	\$ 82,210

The Group will depreciate its oil and gas properties when production commences.

⁷ Share Capital

(a) Issued and outstanding common shares

	Notes	Shares issued (000's)	Amount
Balance, beginning of period		112,761	\$ 328,230
Conversion of liquidity warrants into shares	(i)	2,084	1,255
Agency options converted into shares	(ii)	779	5,153
Exercise of stock options		33	256
Interest on shareholder loans		–	46
Balance, end of period		115,657	\$ 334,940

(i) In connection with the private placement on March 14, 2012, a total of 2.1 million liquidity warrants were issued, which were converted to common shares at no additional consideration as a liquidity event did not occur prior to March 14, 2013. The fair value ascribed to the liquidity warrants of \$1.3 million has been reclassified to share capital.

(ii) In connection with the private placement dated February 25, 2011 and March 3, 2011, the Group issued 2.0 million options to the agents which entitled the holder to acquire one common share at a price of C\$5.00 per common share. The agent options vested on the date of grant and expired 24 months after such date. The fair value ascribed to agent options was \$3.3 million. As at September 30, 2013, 0.8 million agent options had been exercised, and the remaining agent options have expired.

(b) Warrants

		Number of Warrants
	Notes	(000's)	Amount
Balance, beginning of period		10,181	\$ 12,683
Liquidity warrants exercised	7a (i)	(2,084)	(1,255)
Agency options converted into shares	7a (ii)	(779)	(1,282)
Agency options expired	7a (ii)	(1,201)	(1,976)
Employee performance warrants		–	235
Employee performance warrants forfeited		(150)	–
Balance, end of period		5,967	\$ 8,405

⁸ Share–based compensation and other equity accounts

a) Other equity accounts

	Contributed surplus	Other equity items	Total
Balance, beginning of period	\$ 13,233	\$ (9,928)	\$ 3,305
Share based compensation	5,191	–	5,191
Share based compensation – capitalized	2,181	–	2,181
Exercise of stock options	(92)	–	(92)
Agency options expired	1,976	–	1,976
Shares held in trust	–	(5,537)	(5,537)
Interest on loans	–	(46)	(46)
Interest received on loans	–	77	77
Foreign exchange	–	631	631
Balance, end of period	\$ 22,489	\$ (14,803)	\$ 7,686

(b) Performance units

On January 9, 2013 the Board of Directors approved a new Long Term Incentive Plan (the "Plan") for officers and other key executives of the Group. A total of 1.1 million performance units were granted under the Plan in the first quarter. The Plan was introduced to retain, attract and motivate key executives responsible for executing the long term business strategy. A participant in the Plan is awarded a notional number of units based on a multiple of salary. Upon vesting, a participant can, at their option, receive common shares or a cash payment of equivalent value. The performance units vest after a three-year period based on specific performance targets. The performance targets are as follows:

(i) 37.5% of the units will be subject to targets relating to the Total Shareholder Return ("TSR") of the Group against a group of peer companies;
(ii) 37.5% of the award will be subject to targets relating to net asset value of the Group per share based on proven and probable reserves discounted at 10%;
(iii) The remaining 25% vest at the end of three years (subject to the participant being employed by the Group at the time of vesting).

For the THREE AND NIN E mo n ths e nd e d september 30, 2013 and 2012

The Group is required to account for the performance unit plan as a liability based award whereby the estimated fair value of grants made under the plan is recorded as a liability each period based on the outstanding vested performance units. The change in the fair value of the liability each period is recorded as stock based compensation in the statement of operations.

The fair value of a performance unit is based on the following:

a) 25% with no performance conditions fair value is based on the underlying value of the Group's common stock.
b) 75% with performance conditions fair value is based on the underlying value of the Group's common stock adjusted for the probability of satisfying the market and non–market performance conditions.

c) Stock options

	Number of Options (000's)	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price (C\$)
Outstanding, beginning of the period	5,982	4.24	5.67
Granted	2,546	4.58	6.15
Exercised	(33)	3.17	5.00
Expired or forfeited	(261)	3.98	5.56
Outstanding, end of period	8,234	3.83	5.83
Number exercisable, end of period	1,851	3.16	5.42

⁹ Convertible Bonds

	Debt Component	Equity Component
Balance, beginning of period	\$ 135,511	\$ 29,395
Interest accrued during the period	16,605	–
Non–cash accretion expense	6,227	–
Balance, end of period	\$ 158,343	\$ 29,395

On September 13, 2012, the Group completed a financing through the issuance of \$173.6 million unsecured pre-IPO convertible bonds (the "Bonds") with a maturity date of September 30, 2017. A summary of certain key terms of the Bonds is set out below.

• The Bonds are convertible at any time up to 14 days prior to the maturity date (or 14 days prior to any earlier date fixed for redemption of the Bonds) at an initial conversion price of \$6.07 per common share. The conversion price of the Bonds will be subject to adjustment on or following the occurrence of certain corporate events relating to the share capital of the Group.

• Interest on the Bonds, initially at a rate of 12 percent per annum, is accrued quarterly and compounded and capitalized semi-annually prior to a Qualifying Public Offering (a "QPO"). As at September 30, 2013 the Group has accrued \$16.6 million of cash interest payable Following the QPO such accrued but unpaid interest will become payable at the option of each bondholder either in cash or common shares. For the purpose of the Bonds, a QPO is defined as an offering of the Group's common shares which meets certain liquidity conditions and that results in a listing and admission to trading of the common shares on either (i) the regulated market of the London Stock Exchange (premium or standard listing on the Official List of the UK Listing Authority) or (ii) the Alternative Investment Market (AIM) operated by the London Stock Exchange. Effective September 30, 2013, interest will be accrued quarterly and compounded semi-annually at 12 percent plus a 50 basis point increase every six months until a QPO. However, if the QPO has not occurred prior to September 30, 2015, the Group shall make payment on that date of all compounded and capitalized interest in cash. Following the earlier of a QPO and September 30 2015, any further interest on the outstanding Bonds will be paid only in cash (without compounding) at the then prevailing rate. On July 9, 2013 the Group's common shares were admitted to listing on the premium listing segment of the Official List and to trading on the London Stock Exchange (CRCL); however, no new common shares were offered as part of such process and therefore, the QPO as defined above was not satisfied. The Bonds are redeemable by the Group from three months following a QPO at a redemption price equal to the principal amount plus accrued but unpaid interest, provided that the volume weighted average price of the common shares for 20 out of 30 consecutive dealing days ending not earlier than seven days prior to the date on which notice of redemption is provided is not less than 150 percent of the conversion price. If neither a QPO nor a change of control in relation to the Group has occurred prior to September 30, 2017, the Bonds which remain outstanding at the maturity date will be redeemed at 153.5 percent of their principal amount, together with accrued but unpaid interest.

¹⁰ Farm-in and Advance Agreements

On March 1, 2013, the Group entered into an Advance Agreement (the "Advance") whereby the Group received \$100 million, a portion of the amount due to the Group pursuant to the Farm-in Agreement on closing.

On May 29, 2013, the Group amended the Advance Agreement to increase the amount of the Advance from \$100 million to \$150 million.

On June 13, 2013, the Group closed the farm in agreement with Glencore, Pursuant to which the Group transferred a one third participating interest in each of its PSC's and a 25% participating interest in the Badila and Mangara EXAs to Glencore. The transaction had an effective date of July 1, 2012 with Glencore being responsible to pay their working share of expenditures from that date upon closing. The following is a reconciliation of the consideration and the value of the assets disposed of:

		Amount
Cash consideration	(i)	\$ 257,458
Future farm-in commitment	(ii)	195,547
Decommissioning obligation		1,016
Transaction costs		(9,674)
Disposition of Exploration and Evaluation assets	(iii)	\$ 444,347

i. Concurrently with the closing, the Group immediately repaid an advance of \$150 million to Glencore.

ii. As per the farm-in agreement, Glencore will reimburse up to \$100 million of the Group's share of expenditures on certain of the Group's assets from July 1, 2013 to June 30, 2014 and up to an additional \$100 million from July 1, 2014 to June 30, 2016.
iii. The Group has elected not to record gains/losses on properties in the exploration and evaluation stage. As such, this gain on disposition reduces the carrying value of the exploration and evaluation assets.

Notes to the Consolidated Interim Financial Statements (unaudited)

For the THREE AND NIN E mo n ths e nd e d september 30, 2013 and 2012

¹¹ Supplementary Cash Flow Information

	September 30, 2013	September 30, 2012
Non-cash changes in working capital:
Accounts receivable	\$ 59,431	\$ (3,929)
Accounts payable	(27,593)	26,038
	31,838	22,109
Allocated to:
Operating activities	(1,137) \$	\$ (8,212)
Investing activities	32,975	30,321
	31,838	22,109

¹² Commitments

Pursuant to PSCs agreements in the Republic of Chad, the Group and its' joint venture partner are required to perform certain minimum exploration activities by the expiry of the Initial Exploration Terms associated with each of the Group's PSCs, all of which are within the next three years:

Concession Name	Expiry Date	Original Minimum Work Requirement	Remaining Minimum Work Requirement as at September 30, 2013
Doseo/Borogop PSC	January 26, 2016	33,335	25,713
Mangara/Badila PSC	April 24, 2016	33,335	10,271
DOH PSC	August 2, 2016	10,000	9,136
Total		\$ 76,670	\$ 45,120

Pursuant to PSCs agreements in the Republic of Chad ("State"), the Group is required to pay certain prescribed amounts relating to the training of Chadian Nationals and employees of the Energy Ministry, audits of the State, and the presentation of annual reports to the State. These prescribed amounts under the terms of the PSCs agreements are approximately \$2.5 million per annum, net to the Group.

Executive Officers

Gary Guidry P.Eng

President and Chief Executive Officer and Director

J. Dean Tucker P.Eng Chief Operating Officer

Trevor Peters Chief Financial Officer

Tina Antony Vice President, Legal and General Counsel

Ryan Ellson ca Vice President, Finance

Jim Evans CGA Vice President, Corporate Services & Compliance

Nicholas J. Hands P.Eng Vice President, Asset Management

Hervé Manouan Vice President, Chad General Manager

William (Joe) Taylor P.Eng Vice President, Engineering and Project Management

Lawrence W. West P.geol Vice President, Exploration

BOARD OF DIRECTORS

Robert B. Hodgins CA Chairman

Carol Bell Director

John Bentley Director

Peter Dey Director

Gary Guidry P.ENG Director

Ronald W. Royal P.ENG Director

Brooke Wade CA Director

Auditors KPMG LLP Calgary, Alberta, Canada

Office Locations

Canada

Suite 2100 555 – 4 Avenue SW Calgary, Alberta Canada T2P 3E7 Telephone: +(403) 724-7200 Fax: +(403) 262-7534

Chad 107, Rue Kaltouma Nguembang (3050), Klepmat BP 2929 N'Djaména, Tchad

INDEPENDENT PETROLEUM ENGINEERING CONSULTANTS TO THE Group

McDaniel & Associates Consultants Limited Calgary, Alberta, Canada

[email protected] www.Caracalenergy.com

About Caracal Energy Inc.

xxx xxxxxxxxx xxxxxxxx xxxxx Caracal Energy Inc. is an international exploration and development company focused on oil and gas exploration, development and production activities in the Republic of Chad, Africa. In 2011, the Group entered into three PSCs with the government of the Republic of Chad. These PSCs provide exclusive rights to explore and develop reserves and resources over a combined area of 26,103 km2 in southern Chad. The PSCs cover two world-class oil basins with development opportunity, oil discoveries, and numerous exploration prospects.

AI assistant

Energy SpA — Interim / Quarterly Report 2013

4100_10-q_2013-09-30_e3bd1363-b7d7-483c-86c6-5446fc956b11.pdf

For the three AND NINE months ended SEPTEMBER 30, 2013 and 2012

Gary Guidry, Chief Executive Officer, said:

Highlights

2013 Operational Highlights:

Corporate Highlights:

Financial Highlights:

Outlook:

Operations/Asset Overview

OPERATIONS REVIEW

Badila Field

Production

Drilling

Mangara Field

Drilling

Facilities

Exploration

DOB/DOI PSC

Krim-1 Exploration Well

Bitanda Exploration Well

Seismic

Doseo/Borogop PSC

Drilling

Facilities and Civil

DOH PSC

London Stock Exchange and FTSE Inclusion

EITI

Transportation Agreements

Base Shelf Prospectus

Summary of Reserves and Resources

SUMMARY OF CRUDE OIL RESERVES as at September 30, 2013

SUMMARY OF NET PRESENT VALUE OF FUTURE NET REVENUE (US\$)

SUMMARY OF CRUDE OIL RESERVES

as at september 30, 2013

Notes:

Finance Review

Revenues

Net Loss

Liquidity

Commitments

Strategy

Outlook

Cautionary Statement

BASIS OF PRESENTATION

Use of Estimates and Critical Accounting Policies

Caracal's BUSINESS, STRATEGY AND OUTLOOK

Caracal's Business

DOB/DOI Contractual Zone (DOB/DOI PSC)

Doseo/Borogop Contractual Zone (Doseo/Borogop PSC)

DOH Contractual Zone (DOH PSC)

Strategy

RESULTS OF OPERATIONS

Operating Segments

Revenues

Expenses

Salaries and benefits

Share-based compensation

General and administrative

Travel

Listing fees

Finance expense

CAPITAL EXPENDITURES

LIQUIDITY AND CAPITAL RESOURCES

Share Capital

Available Cash Resources

FUTURE COMMITMENTS AND CONTINGENCIES

SELECTED UNAUDITED QUARTERLY FINANCIAL INFORMATION

recent accounting pronouncements

Financial Instruments

forward-looking Statements

Interim Consolidated Statements of Financial Position (unaudited) 2 2

Interim Consolidated Statements of Operations (unaudited)

Interim Consolidated Statements of Financial Position (unaudited) Changes in Shareholders' Equity (unaudited)

Interim Consolidated Statements of Cash Flows (unaudited)

1 Reporting Entity

2 Basis of preparation

3 Determination of Fair Values

4 Accounts Receivable

Energy SpA Interim / Quarterly Report 2013

¹ Reporting Entity

² Basis of preparation

³ Determination of Fair Values

⁴ Accounts Receivable

⁵ Intangible Exploration and Evaluation Assets

⁶ Property, Plant and Equipment

⁷ Share Capital

⁸ Share–based compensation and other equity accounts

⁹ Convertible Bonds

¹⁰ Farm-in and Advance Agreements

¹¹ Supplementary Cash Flow Information

¹² Commitments