UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC20549

FORM 10-K

Mark One:

[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the fiscal year ended December 31, 2013; or

[   ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________.

Commission File No. 0-18956

AMERICAN NATURAL ENERGY CORPORATION
(Name of Small Business Issuer in its Charter)

6100 South Yale, Suite2010, Tulsa, Oklahoma74136
(Address of Principal Executive Offices) (Zip Code)

918-481-1440
(Issuer’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

Securities Registered Pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
(Title of Each Class)

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [   ]

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past twelve (12) months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes      [   ] No

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K in this form, and no disclosure will be contained, to the best of Issuer’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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

Large accelerated filer [   ]           Accelerated filer [   ]           Non-accelerated filer [   ]           Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ]      No [X]

State Issuer’s revenues for its most recent fiscal year: $3,321,670.

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of June 30, 2013:$156,253.(Non-affiliates have been determined on the basis of holdings set forth in Item 12 of this Annual Report on Form 10-K.)

The number of shares outstanding of each of the Issuer’s classes of common equity, as of March 31, 2014, was 26,405,085 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

None

Table of Contents

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PART I

Item 1 - Description of Business:

            American Natural Energy Corporation is engaged in the acquisition, development, exploitation and production of oil and natural gas.

Our Oil and Natural Gas Interests

            Unless the context otherwise requires, references to us in this Annual Report includes American Natural Energy Corporation, an Oklahoma corporation, and our wholly-owned subsidiary, Gothic Resources Inc., a corporation organized under the Canada Business Corporation Act. References to Gothic refer exclusively to our wholly-owned subsidiary, Gothic Resources Inc. and references to ANEC refer exclusively to our parent corporation, American Natural Energy Corporation, organized under the laws of Oklahoma. Through December 2001, our activities were conducted through Gothic, and Gothic may be deemed a predecessor of ANEC.

            Through our ownership we hold interests in approximately 1,320 acres of land in St. Charles Parish, Louisiana. This acreage is the Bayou Couba leases in which we hold a 97.25% working interest in the leasehold and 97.25% working interest in all but 7 producing wells. The ownership results from our acquisition on December 31, 2001, of the assets and outstanding stock of Couba Operating Company (“Couba”) and consolidation of other working interests in the field during 2009. We continue to need and seek material amounts of additional capital to further our oil and natural gas development and exploitation activities.

            Since 2002 through December 31, 2013, we returned to production 5 (4.86 net) well bores drilled by the prior owners on the Couba properties we acquired. Our drilling activities commenced in February 2003 and as of December 31, 2013, we had drilled and completed 9 (6.11 net) wells. For the year ended December 31, 2013, our combined production from all our producing wells (14 gross, 10.97 net) averaged approximately 126(84net) barrels of oil equivalent per day. Production from our existing wells is subject to fluctuation from time to time based upon the zones of the wells where we are obtaining production.

            Our Couba Properties. Couba, organized in 1993, was primarily engaged in the production of oil from properties located in St. Charles Parish, Louisiana. Couba’s principal acreage is the Bayou Couba Lease under which Couba owned a 72% working interest in 1,320 gross acres. Production from the wells commenced in 1941 and only oil and non-commercial quantities of natural gas were produced. Natural gas had never been produced in commercial quantities, and all gas production wells from the original development of the property were plugged.

            The principal asset of Couba that we acquired was the Bayou Couba Lease. The lessor is ExxonMobil and the lease is held by production of oil and gas on the property. The additional Couba assets we acquired include a gathering system covering approximately 25 miles located on the Bayou Couba Lease, used solely as a production collection system among the wells on the leased property leading to a product distribution point, and various production facilities, geological data, well logs and production information. The information includes 3-D seismic information completed in 1997. The seismic information relates to an area of approximately 23.5 square miles that includes the Bayou Couba Lease, among other acreage. The gathering system we acquired was initially not in operable condition. Subsequently, as part of approximately $1.1 million we expended to restore existing wells to production, we refurbished and upgraded the system so as to be usable. At present, the system, which consists of flow lines, connections and related facilities, is used to transport our production of oil and gas to points where it is trans-shipped and sold.

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Oil and Gas Reserves

Reserves Estimation 
We engaged a third-party engineering firm to prepare our reserve estimates comprising all of our estimated proved reserves (by volume) at December 31, 2013. Our Manager of Operations is the person primarily responsible for overseeing the preparation of the company’s reserve estimates. His qualifications include the following:

• 36 years of practical experience in geology, petroleum engineering and reserve evaluation
• Bachelor of Science degree in Geology

We maintain internal controls such as the following to ensure the reliability of reserves estimations:

• No employee’s compensation is tied to the amount of reserves booked.
• We follow comprehensive SEC-compliant internal policies to determine and report proved reserves. Reserves estimates are made by experienced third-party reservoir engineers.
• The Manager of Operations reviews all the company’s reported proved reserves at the close of each quarter.
• Each quarter, the Manager of Operations and the Chief Executive Officer review all significant reserve changes and all new proved undeveloped reserves additions.

The tables below set forth information as of December 31, 2013 with respect to our estimated proved reserves, our estimated future net revenue therefrom and the present value thereof at such date based on the report of Collarini Associates. This report is included as Exhibit 99.1 to this Annual Report on Form 10-K. The qualifications of the technical persons at this firm primarily responsible for overseeing his firm’s preparation of the company’s reserve estimates are set forth below.

• Bachelor of Science Degree in Petroleum Engineering
• Over 30years of practical experience in petroleum engineering and are members of the Society of Petroleum Evaluation Engineers (SPEE), Society of Petroleum Engineers (SPE) and the American Association of Petroleum geologists (AAPG).
• A registered Professional Engineer in the State of Texas

            The calculations which Collarini Associates used in preparation of such report were prepared using geological and engineering methods generally accepted by the petroleum industry and in accordance with Securities and Exchange Commission (“SEC”) guidelines. All estimates were prepared based upon a review of production histories and other geologic, economic, ownership and engineering data we believe to be accurate. The present value of estimated future net revenue shown is not intended to represent the current market value of the estimated oil and gas reserves we own.

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_______________________

(a) Estimated future net revenue represents estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices and costs in effect at December 31, 2013. The amounts shown do not give effect to non-property related expenses, such as general and administrative expenses, debt service and future income tax expense or to depreciation, depletion and amortization, but do give effect to net profits obligations arising out of agreements we made to acquire the Couba assets in the plan of reorganization. The prices used in these estimates were $107.96per barrel of oil and $3.67per mcf of gas.
(b) Present value of future net revenues represents estimated future net revenues discounted using an annual discount rate of 10%. The present value of future net revenue is equivalent to the standardized measure of discounted future net cash flows at December 31, 2013 as there is no future income tax provision.

            The future net revenue attributable to our estimated proved undeveloped reserves is calculated to be $33.2million at December 31, 2013, with the present value thereof to be $25.7million, based on us expending approximately $3.1million during 2014and an additional $3.8 million in future periods to develop these reserves. The amount and timing of these expenditures will depend on a number of factors, including actual drilling results, product prices and the availability of capital to us. At December 31, 2013, the capital necessary to develop these additional reserves was unavailable to us. Through December 31, 2013, we had expended approximately $20.4million in exploration and development of the Bayou Couba properties.

            No estimates of proved reserves comparable to those included herein have been included in reports to any federal agency other than the SEC.

            Our ownership interest used in calculating proved reserves and the estimated future net revenue there from was determined after giving effect to the assumed maximum participation by other parties to our farm-out and participation agreements. There can be no assurance that all of the estimated proved reserves will be produced and sold at the assumed prices or that existing contracts will be honored or judicially enforced.

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            There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures, including many factors beyond our control. Reserve engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, estimates made by different engineers often vary. In addition, results of drilling, testing and production subsequent to the date of an estimate may justify revision of such estimates, and such revisions may be material. Accordingly, reserve estimates are often different from the actual quantities of oil and gas that are ultimately recovered. Furthermore, the estimated future net revenue from proved reserves and the present value thereof are based upon certain assumptions, including prices, future production levels and costs that may not prove correct. Fluctuations in commodities prices will impact the economic viability of the production of oil and gas. Predictions about prices and future production levels are subject to great uncertainty, and the foregoing uncertainties are particularly true as to proved undeveloped reserves, which are inherently less certain than proved developed reserves. Accordingly, our existing claimed reserves and any reserves we may discover in the future are and will be subject to these uncertainties.

            The primary area of our operations is St. Charles Parish, Louisiana. As of December 31, 2013, all of our operations and reserves are located in that area.

Drilling Activity

            The following table sets forth information as to the wells we completed during the periods indicated. In the table, “gross” refers to the total wells in which we have a working interest and “net” refers to gross wells multiplied by our working interest therein.

Past Drilling and Development Activities

            In July 2002, we completed the restoration activities on the Bayou Couba Lease and brought the operation into compliance with applicable regulatory requirements. We also completed reprocessing the 1997 3-D seismic information we acquired as part of the Couba transaction and we are continuing to review that data. We also were able to get five well bores on the Bayou Couba lease that had been drilled by the former owners into a producing condition.

            Our activities in 2002 also included refurbishing the gathering line connected to the wells. This gathering line delivers our current production of natural gas to the Transco pipeline for further delivery to an interstate pipeline.

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            In February 2003, we commenced drilling on the Bayou Couba Lease and by December 31, 2003, we had drilled and completed 6 (2.19 net) wells on the property. One well drilled during 2003 was unsuccessful and was plugged.

            During 2005, we restored to production 1(.81 net) well that had been acquired as part of the original Bayou Couba acquisition. We also drilled and completed 3 (.61 net) development wells.

            During 2006, we drilled and completed 2 (.05 net) development wells.

            During 2009 we acquired all of the working interest of Dune Energy as well as other small interest owners in the field. The acquisitions effectively added an additional 6.56 net wells to our ownership interest.

            For the year ended December 31, 2010, combined production from all our producing wells on the property averaged approximately 162(92 net) barrels of oil equivalents per day.

            For the year ended December 31, 2011, combined production from all our producing wells on the property averaged approximately 84 (51 net) barrels of oil equivalents per day.

            For the year ended December 31, 2012, we drilled and completed 1 (1 net) development well. Combined production from all our producing wells on the property averaged approximately 84 (52 net) barrels of oil equivalents per day.

            For the year ended December 31, 2013, combined production from all our producing wells on the property averaged approximately 126 (84 net) barrels of oil equivalents per day. Production from our existing wells is subject to fluctuation from time to time based upon the zones of the wells where we are obtaining production.

Production Volumes, Revenue, Prices and Production Costs

            The following table sets forth certain information regarding the production volumes, revenue, average prices received and average production costs associated with our sale of oil and natural gas for the years ended December 31, 2013 and 2012. All of our production was from our properties located in St. Charles Parish, Louisiana.

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⁽¹⁾ Includes only production owned by us and produced to our interest, less royalties and production due others. 361and 357barrels of oil were produced in December 2013 and 2012 but not sold until January 2014 and 2013, respectively, and are included in inventory at December 31, 2013 and 2012 at the lower of production cost and DD&A, or market.

Development, Exploration and Acquisition Expenditures

            The following table sets forth certain information regarding the costs we incurred in our development, exploration and acquisition activities during the periods indicated:

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Acreage

            The following table sets forth as of December 31, 2013, the gross and net acres of both developed and undeveloped oil and natural gas leases which we hold. “Gross” acres are the total number of acres in which we own a working interest. “Net” acres refer to gross acres multiplied by our fractional working interest.

            ⁽¹⁾ Net acreage assumes that we maintain our existing working interest percentage in all future development.

Marketing

            Our oil production is sold under market sensitive or spot price contracts. Our natural gas production is sold to purchasers under varying percentage-of-proceeds and percentage-of-index contracts or by direct marketing to end users or aggregators. By the terms of the percentage-of-proceeds contracts, we receive a percentage of the resale price received by the purchaser for sales of residue gas and natural gas liquids recovered after gathering and processing our gas. The residue gas and natural gas liquids sold by these purchasers are sold primarily based on spot market prices. The revenue we received from the sale of natural gas liquids is included in natural gas sales. During 2013, our oil sales to Sunoco, Inc of $3,260,958 accounted for 99.73% of our total oil and gas sales. We believe we are not materially dependent upon Sunoco for our sales as we believe there are numerous other purchasers for our oil and gas production at competitive prices. We believe that the loss of this customer would not have a material adverse effect on our results of operations or our financial position.

            We have no obligations to provide fixed or determinable quantities of oil or natural gas in the future under existing contracts or agreements.

Hedging Activities

            We have not utilized hedging strategies to hedge the price of our future oil and gas production or to manage our fixed interest rate exposure.

Competition

            The oil and natural gas industry is highly competitive in all of its phases. We are not a significant factor in the overall production of oil and natural gas. We encounter competition from other oil and natural gas companies in all areas of our operations, including the marketing of oil and natural gas and the acquisition of producing properties. Most all of these companies possess greater financial and other resources than we do. Because gathering systems are the only practical method for the intermediate transportation of natural gas, competition, as it relates to market access, is presented by other pipelines and gas gathering systems. Because oil and natural gas is sold as a commodity, pricing is not a factor in our competition. Competition may also be presented by alternative fuel sources, including heating oil and other fossil fuels. Because the primary markets for natural gas liquids are refineries, petrochemical plants and fuel distributors, prices are generally set by or in competition with the prices for refined products in the petrochemical, fuel and motor gasoline markets.

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Regulation

            General

            Numerous departments and agencies, federal, state and local, issue rules and regulations binding on the oil and gas industry, some of which carry substantial penalties for failure to comply. The regulatory burden on the oil and gas industry increases our cost of doing business and, consequently, affects our profitability. At December 31, 2013, we are unable to estimate the costs to be incurred for compliance with environmental laws over the next twelve months; however, management believes all such costs will be those ordinarily and customarily incurred in the development and production of oil and gas and that no unusual costs will be encountered.

            Exploration and Production

            Our operations are subject to various types of regulation at the federal, state and local levels. Such regulation includes requiring permits for the drilling of wells, maintaining bonding requirements in order to drill or operate wells and regulating the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, the plugging and abandoning of wells and the disposal of fluids used or obtained in connection with operations. Our operations are also subject to various conservation regulations. These include the regulation of the size of drilling and spacing units and the density of wells which may be drilled and the unitization or pooling of oil and gas properties. In this regard, some states (such as Oklahoma) allow the forced pooling or integration of tracts to facilitate exploration while other states (including Louisiana) rely on voluntary pooling of lands and leases. In areas where pooling is voluntary, it may be more difficult to form units and, therefore, more difficult to develop a prospect if the operator owns less than 100% of the leasehold. In addition, certain state conservation laws may establish maximum rates of production from oil and gas wells generally prohibit the venting or flaring of gas and impose certain requirements regarding the ratability of production. The effect of these regulations is to limit the amount of oil and gas we can produce from our wells and to limit the number of wells or the locations at which we can drill. The extent of any impact on us of such restrictions cannot be predicted.

            Environmental and Occupational Regulation

            General. Our activities are subject to existing federal, state and local laws and regulations governing environmental quality and pollution control. It is anticipated that, absent the occurrence of an extraordinary event, compliance with existing federal, state and local laws, rules and regulations concerning the protection of the environment and human health will not have a material effect upon our operations, capital expenditures, earnings or competitive position. We cannot predict what effect additional regulation or legislation, enforcement policies thereunder and claims for damages for injuries to property, employees, other persons and the environment resulting from our operations could have on our activities.

            Our activities with respect to exploration, development and production of oil and natural gas are subject to stringent environmental regulation by state and federal authorities including the United States Environmental Protection Agency (“EPA”). Such regulation has increased the cost of planning, designing, drilling, operating and in some instances, abandoning wells. In most instances, the regulatory requirements relate to the handling and disposal of drilling and production waste products and waste created by water and air pollution control procedures. Although we believe that compliance with environmental regulations will not have a material adverse effect on our operations or earnings, risks of substantial costs and liabilities are inherent in oil and gas operations, and there can be no assurance that significant costs and liabilities, including criminal penalties, will not be incurred. Moreover, it is possible that other developments, such as stricter environmental laws and regulations, and claims for damages for injuries to property or persons resulting from our operations could result in substantial costs and liabilities.

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            Waste Disposal. We currently own or lease, and have owned or leased, numerous properties that for many years have been used for the exploration and production of oil and gas. Although we believe operating and disposal practices that were standard in the industry at the time were utilized, hydrocarbons or other wastes may have been disposed of or released on or under the properties we owned or leased or on or under other locations where such wastes have been taken for disposal. In addition, these properties may have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes was not under our control. State and federal laws applicable to oil and natural gas wastes and properties have gradually become stricter. Under such laws, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators) or property contamination (including groundwater contamination) or to perform remedial plugging operations to prevent future contamination.

            We generate wastes, including hazardous wastes, that are subject to the Federal Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes. The EPA and various state agencies have limited the disposal options for certain hazardous and non-hazardous wastes and are considering the adoption of stricter disposal standards for non-hazardous wastes. Furthermore, certain wastes generated by our oil and natural gas operations that are currently exempt from treatment as hazardous wastes may in the future be designated as hazardous wastes, and therefore be subject to considerably more rigorous and costly operating and disposal requirements.

            Superfund. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), also known as the “Superfund” law, imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons with respect to the release of a “hazardous substance” into the environment. These persons include the owner and operator of a site and persons that disposed of or arranged for the disposal of the hazardous substances found at a site. CERCLA also authorizes the EPA and, in some cases, third parties to take actions in response to threats to the public health or the environment and to seek to recover from responsible classes of persons the costs of such action. In the course of our operations, we may generate wastes that fall within CERCLA's definition of “hazardous substances”. We may also be an owner of sites on which “hazardous substances” have been released. We may be responsible under CERCLA for all or part of the costs to clean up sites at which such wastes have been released. To date, however, we have not and, to our knowledge, our predecessors or successors have not been named a potentially responsible party under CERCLA or similar state superfund laws affecting property we owned or leased.

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            Air Emissions. Our operations are subject to local, state and federal regulations for the control of emissions of air pollution. Legal and regulatory requirements in this area are increasing, and there can be no assurance that significant costs and liabilities will not be incurred in the future as a result of new regulatory developments. In particular, regulations promulgated under the Clean Air Act Amendments of 1990 may impose additional compliance requirements that could affect our operations. However, it is impossible to predict accurately the effect, if any, of the Clean Air Act Amendments on us at this time. We may in the future be subject to civil or administrative enforcement actions for failure to comply strictly with air regulations or permits.

            These enforcement actions are generally resolved by payment of monetary fines and correction of any identified deficiencies. Alternatively, regulatory agencies could require us to forego construction or operation of certain air emission sources.

            OSHA. We are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes. The OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and similar state statutes require us to organize information about hazardous materials used, released or produced in our operations. Certain of this information must be provided to employees, state and local governmental authorities and local citizens. We are also subject to the requirements and reporting set forth in OSHA workplace standards.

            OPA and Clean Water Act. Federal regulations require certain owners or operators of facilities that store or otherwise handle oil, such as us, to prepare and implement spill prevention control plans, countermeasure plans and facilities response plans relating to the possible discharge of oil into surface waters. The Oil Pollution Act of 1990 (“OPA”) amends certain provisions of the federal Water Pollution Control Act of 1972, commonly referred to as the Clean Water Act (“CWA”), and other statutes as they pertain to the prevention of and response to oil spills into navigable waters. The OPA subjects owners of facilities to strict joint and several liability for all containment and cleanup costs and certain other damages arising from a spill, including, but not limited to, the costs of responding to a release of oil to surface waters. The CWA provides penalties for any discharges of petroleum products in reportable quantities and imposes substantial liability for the costs of removing a spill. State laws for the control of water pollution also provide varying civil and criminal penalties and liabilities in the case of releases of petroleum or its derivatives into surface waters or into the ground. Regulations are currently being developed under OPA and state laws concerning oil pollution prevention and other matters that may impose additional regulatory burdens on us. In addition, the CWA and analogous state laws require permits to be obtained to authorize discharges into surface waters or to construct facilities in wetland areas. The EPA has adopted regulations concerning discharges of storm water runoff. This program requires covered facilities to obtain individual permits, participate in a group permit or seek coverage under an EPA general permit. We believe that we are in material compliance with all permits we are required to obtain and obtaining such permits in the future will not have a material adverse impact on our operations in the future. With respect to our future operations, we believe we will be able to obtain, or be included under, such permits, where necessary. Compliance with such permits is not expected to have a material adverse effect on us.

            NORM. Oil and gas exploration and production activities have been identified as generators of concentrations of low-level naturally-occurring radioactive materials (“NORM”). NORM regulations have been adopted in several states. We are unable to estimate the effect of these regulations, although based upon our preliminary analysis to date, we do not believe that our compliance with such regulations will have a material adverse effect on our operations or financial condition.

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            Safe Drinking Water Act. Our operations may involve the disposal of produced saltwater and other non-hazardous oilfield wastes by re-injection into the subsurface. Under the Safe Drinking Water Act (“SDWA”), oil and gas operators, such as us, must obtain a permit for the construction and operation of underground Class II injection wells. To protect against contamination of drinking water, periodic mechanical integrity tests are often required to be performed by the well operator. While we expect to be able to obtain all such permits as are required, there can be no assurance that these requirements may not cause us to incur additional expenses.

            Toxic Substances Control Act. The Toxic Substances Control Act (“TSCA”) was enacted to control the adverse effects of newly manufactured and existing chemical substances. Under the TSCA, the EPA has issued specific rules and regulations governing the use, labeling, maintenance, removal from service and disposal of PCB items, such as transformers and capacitors used by oil and gas companies. We may own such PCB items but do not believe compliance with TSCA will have a material adverse effect on our operations or financial condition.

Title To Properties

            Title to oil and gas properties is subject to royalty, overriding royalty, carried, net profits, working and other similar interests and contractual arrangements customary in the industry, to liens for current taxes not yet due and to other encumbrances. As is customary in the industry in the case of undeveloped properties, only cursory investigation of record title is made at the time of acquisition. Drilling title opinions are usually prepared before commencement of drilling operations. Although we have no basis to believe that such will occur, there can be no assurance that our title to oil and gas properties may not be challenged through legal proceedings.

Operating Hazards and Insurance

            The oil and gas business involves a variety of operating risks, including the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards such as oil spills, gas leaks, ruptures or discharges of toxic gases, the occurrence of any of which could result in substantial losses to us due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties and suspension of operations.

            We maintain comprehensive general liability policies with coverage considered adequate by management. While we believe our policies are customary in the industry, they do not provide complete coverage against all operating risks.

Employees

            As of December 31, 2013, we employed six persons, of whom two were executive officers and three were operations personnel and one was accounting staff. We do not employ a significant number of temporary employees. None of our employees is represented by a labor union, and we believe our relationship with our employees is good.

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Organization

            We are an Oklahoma corporation organized in January 2001. In June 2001, we became a wholly-owned subsidiary of Gothic Resources Inc., a British Columbia corporation. In January 2002, as a result of an arrangement under Section 192 of the Canada Business Corporations Act and an order of the Supreme Court of British Columbia, we became the parent corporation of Gothic and the holders of Gothic shares exchanged their shares for our shares. Gothic may be deemed to be our predecessor.

            Prior to our acquisition of Couba, it had commenced in March 2000, an involuntary Chapter 7 Bankruptcy proceeding which was converted to a Chapter 11 debtor in possession proceeding the following month. In early 2000, Couba had depleted its borrowing availability under a bank line of credit and had insufficient capital to continue in operations. During the pendency of the proceeding, Couba maintained nominal production from four wells on the Bayou Couba Lease in order to maintain in effect the lease to the property. On May 1, 2001, we joined with Couba in submitting to the Bankruptcy Court a plan of reorganization whereby we would acquire substantially all the assets and capital stock of Couba. Couba’s only assets at the time were its physical oil and gas facilities and it had no other business activities, employees, customers or rights. The plan was finally confirmed by the Court on November 16, 2001.

Office

            Our principal office is located at 6100 South Yale, Suite2010, Tulsa, Oklahoma74136. Our leased premises include approximately 5,062 square feet and are leased for various terms expiring in 2014. The annual aggregate rental is $113,000. The facilities are considered adequate for our present activities.

Item 1A – Risk Factors:

            An investment in shares of our common stock involves a high degree of risk. You should consider the following factors, in addition to the other information contained in this annual report, in evaluating our business and proposed activities before you purchase any shares of our common stock. You should also see the “Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995” regarding risks and uncertainties relating to us and to forward looking statements in this annual report.

Risks Relating to Us and the Oil and Gas Industry

Our Ability to Continue as a Going Concern is Uncertain.

            Our consolidated financial statements have been prepared on a going concern basis which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We recorded a net loss of $3,146,517 and $3,318,462 in 2013 and 2012, respectively. We had a working capital deficiency at December 31, 2013 of approximately $13.7million. Our revenue has not been sufficient to fund our operations. At December 31, 2013, our current assets are $327,000 compared with current liabilities of $14.0millionwhich include accounts payable, revenues payable, notes payable, and other current obligations. We have substantial needs for funds to pay our outstanding payables and debt due during 2014. All the foregoing lead to questions concerning our ability to meet our obligations as they come due. We also have a need for substantial funds to develop our oil and gas properties. We have financed our activities using private debt and equity financings. As a result of the losses incurred and current negative working capital and other matters described above, there is no assurance that the carrying amounts of our assets will be realized or that liabilities will be liquidated or settled for the amounts recorded. Our ability to continue as a going concern is dependent upon adequate sources of capital and the ability to sustain positive results of operations and cash flows sufficient to pay our current liabilities and to continue to explore for and develop our oil and gas reserves.

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            The independent registered public accounting firm’s report on our consolidated financial statements as of and for the year ended December 31, 2013 includes an explanatory paragraph which states that we have sustained a substantial loss in 2013 and have a working capital deficiency and an accumulated deficit at December 31, 2013 that raise substantial doubt about our ability to continue as a going concern.

Our Current Liabilities as of December 31, 2013 Exceed Our Current Assets by $13.7Million.

            As of December 31, 2013, our current assets were approximately $327,000 and our current liabilities were approximately $14.0 million. In order to meet our current obligations, we will need to raise additional capital. Without additional capital to meet these obligations, our continued operations cannot be assured. There can be no assurance that we will be successful in raising additional capital or that the terms on which such additional capital can be raised may not be disadvantageous to the holders of our common stock or result in material dilution. Our inability to reduce our current liabilities relative to our current assets could lead creditors to refuse to extend us further credit which could materially adversely affect our operations.

Oil and Gas Prices Fluctuate Widely and Low Oil and Gas Prices Could Adversely Affect Our Financial Results.

            Our revenues, operating results, cash flow and future rate of growth depend substantially upon prevailing prices for oil and gas. Historically, oil and gas prices and markets have been volatile, and they are likely to continue to be volatile in the future. A significant decrease in oil and gas prices, such as that experienced in 1998 and the first half of 1999, could have a material adverse effect on our cash flow and profitability and would adversely affect our financial condition and the results of our operations.

            Prices for oil and gas fluctuate in response to relatively minor changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors that are beyond our control, including:

• political conditions in oil producing regions, including the Middle East;

• the domestic and foreign supply of oil and gas;

• the level of consumer demand;

• weather conditions;

• domestic and foreign government regulations;

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• the price and availability of alternative fuels;

• overall economic conditions; and

• international political conditions.

In addition, various factors may adversely affect our ability to market our oil and gas production, including:

• the capacity and availability of oil and gas gathering systems and pipelines;

• our ability to produce oil and gas in commercial quantities and to enhance and maintain production from existing wells and wells proposed to be drilled;

• the effect of federal and state regulation of production and transportation;

• general economic conditions;

• changes in supply due to drilling by other producers;

• the availability of drilling rigs and related crews; and

• changes in demand.

Lower Oil and Gas Prices May Adversely Affect Our Level of Capital Expenditures, Reserve Estimates, Borrowing Capacity and Ability to Repay Notes Payable.

            In the ordinary course of business and in order to pursue successfully our business plan, we must make substantial capital expenditures for the exploration and development of oil and natural gas reserves. In the past, we have financed our capital expenditures, debt service and working capital requirements out of our cash flow, through increases in vendor payables and notes payable and with the proceeds of debt and equity offerings of our securities. Our cash flow from operations is sensitive to the prices we receive for our oil and natural gas. A reduction in capital spending or an extended decline in oil and natural gas prices could result in less than anticipated cash flow from operations and a lessened ability to repay outstanding notes payable, raise additional capital or refinance our debt with current lenders or new lenders, which would likely have a further material adverse effect on us.

            Lower oil and gas prices have various other adverse effects on our business. A smaller capital expenditure program resulting from reduced cash flows will adversely affect our ability to increase or maintain our oil and natural gas reserves and production levels. Lower prices may also result in reduced oil and natural gas reserve estimates, the write-off of impaired assets and decreased earnings or losses due to lower oil and natural gas revenues and higher depreciation, depletion and amortization expense.

            Lower oil and gas prices could adversely affect our ability to borrow funds in other ways. Lower commodities prices for oil and natural gas adversely affects the valuations of our oil and natural gas reserves which in turn adversely affects the amounts lenders may loan to us secured by those oil and natural gas reserves. Furthermore, reduction in such prices could impede our ability to fund future potential acquisitions.

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Additional Secured Indebtedness We May Incur In the Future May Increase Our Exposure to Risks Associated With Higher Debt Levels and Possible Defaults.

            We intend to seek to refinance our existing indebtedness. The issuance of material amounts of indebtedness would expose us to significant risks including, among others, the following:

• a portion of our cash flow from operations would be utilized for the payment of principal and interest on our indebtedness and would not be available for financing capital expenditures or other purposes;

• our level of indebtedness and the covenants governing our indebtedness could limit our flexibility in planning for, or reacting to, changes in our business because certain financing options may be limited or prohibited under the terms of our agreements relating to such indebtedness;

• our level of indebtedness may make us more vulnerable to defaults during periods of low oil and gas prices or in the event of a downturn in our business because of our fixed debt service obligations; and

• the terms of our agreements may require us to make interest and principal payments and to remain in compliance with stated financial covenants and ratios. If the requirements of these agreements are not satisfied, the lenders would be entitled to accelerate the payment of all outstanding indebtedness and foreclose on the collateral securing payment of that indebtedness. In such event, we cannot assure you that we would have sufficient funds available or could obtain the financing required to meet our obligations, including the repayment of the outstanding principal and interest on this indebtedness.

            In addition to the risks described above, these risks may impose limits on our ability to develop our oil and gas properties and restrict our ability to replenish our reserves of oil and gas as they are depleted.

Our Existing Reserves of Oil and Natural Gas Will Be Depleted Over Time by Production and Therefore Our Future Ability to Earn Revenues and Meet Our Expenses And Repay Our Indebtedness Depends Upon Our Ability to Find or Acquire Additional Oil and Natural Gas Reserves That Are Economically Recoverable and Result in Revenues to Us.

            Unless we successfully replace the oil and natural gas reserves that we produce, our reserves will decline, resulting eventually in a decrease in the quantities of oil and natural gas we are able to produce and lower revenues and cash flow from operations. We seek to replace reserves through exploitation, development and exploration, as well as through acquisitions. We may not be able to continue to replace reserves from our exploitation, development and exploration activities at acceptable costs. Lower prices of oil and gas may further limit the kinds of reserves that can be developed at an acceptable cost. Lower prices also decrease our cash flow and may cause us to decrease capital expenditures. The business of exploring for, developing or acquiring reserves is capital intensive. We may not be able to make the necessary capital investment to maintain or expand our oil and gas reserves if cash flow from operations is reduced and external sources of capital become limited or unavailable. In addition, exploitation, development and exploration involve numerous risks that may result in dry holes, the failure to produce oil and gas in commercial quantities, the inability to fully produce discovered reserves and the inability to enhance production from existing wells.

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Any future acquisitions of oil and gas properties where we believe commercially recoverable quantities of oil and natural gas exist carry unknown risks, including potential unsuccessful drilling activities or environmental problems.

            We expect to continue to evaluate and pursue acquisition opportunities available on terms we consider favorable in order to replace and increase our reserves. Successful acquisition of producing properties generally requires accurate assessments of recoverable reserves, future oil and gas prices, operating costs, potential environmental and other liabilities and other factors. Such assessments are necessarily inexact, and as estimates, their accuracy is inherently uncertain. We cannot assure you that we will successfully consummate any acquisition, that we will be able to acquire producing oil and gas properties that contain economically recoverable reserves or that any acquisition will be profitably integrated into our operations. Our inability to achieve these objectives will restrict our growth and the development of our oil and gas reserves. In addition, acquiring producing oil and gas properties may increase our potential exposure to liabilities and costs for environmental and other problems existing on such properties. Although we perform a review of the acquired properties that we believe is consistent with industry practice, such reviews are inherently incomplete and inexact.

Estimating Reserves and Future Net Revenues Involves Uncertainties and Oil and Gas Price Declines May Lead to Impairment of Oil and Gas Assets.

            At December 31, 2013, based on the report of Collarini Associates, we claimed total estimated proved reserves of 482 Mbbl of oil and 2,370Mmcf of natural gas (887 Mbble). Through December 31, 2013, we were able to return to production 5 (4.86 net) well bores drilled by prior owners on the Couba properties we acquired, and we had successfully completed 9 (6.11 net) wells. As of that time, our combined production from all our producing wells was approximately 126 (84 net) barrels of oil equivalent per day. Production from our existing wells is subject to fluctuation from time to time based upon the zones of the wells where we are obtaining production. There can be no assurance that we will be successful in our development activities or that as a consequence we will claim any material amounts of additional proven reserves as a result of these and further drilling activities. In any event, there are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond our control.

            Reserve information provided in this Annual Report and that we may provide in the future will represent estimates based on reports prepared by our independent petroleum engineers, as well as internally generated reports. Petroleum engineering is not an exact science. Information relating to proved oil and gas reserves is based upon engineering estimates derived after analysis of information we furnish or furnished to us by the operator of the property. Estimates of economically recoverable oil and gas reserves and of future net cash flows necessarily depend upon a number of variable factors and assumptions, such as historical production from the area compared with production from other producing areas, the assumed effects of regulations by governmental agencies and assumptions concerning future oil and gas prices, future operating costs, severance and excise taxes, capital expenditures and workover and remedial costs, all of which may in fact vary considerably from actual results. Oil and gas prices, which fluctuate over time, may also affect proved reserve estimates. For these reasons, estimates of the economically recoverable quantities of oil and gas attributable to any particular group of properties, classifications of such reserves based on risk of recovery and estimates of the future net cash flows expected there from prepared by different engineers or by the same engineers at different times may vary substantially. Actual production, revenues and expenditures with respect to our reserves will likely vary from estimates, and such variances may be material. Either inaccuracies in estimates of proved undeveloped reserves or the inability to fund development could result in substantially reduced reserves. In addition, the timing of receipt of estimated future net revenues from proved undeveloped reserves will be dependent upon the timing and implementation of drilling and development activities estimated by us for purposes of the reserve report.

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            Quantities of proved reserves are estimated based on economic conditions in existence in the period of assessment. Lower oil and gas prices may have the impact of shortening the economic lives on certain fields because it becomes uneconomic to produce all recoverable reserves on such fields, thus reducing proved property reserve estimates. If such revisions in the estimated quantities of proved reserves occur, it will have the effect of increasing the rates of depreciation, depletion and amortization on the affected properties, which would decrease earnings or result in losses through higher depreciation, depletion and amortization expense. The revisions may also be sufficient to trigger impairment losses on certain properties that would result in a further non-cash charge to earnings.

Our Reliance On a Limited Number of Key Management Personnel Imposes Risks On Us That We Will Have Insufficient Management Personnel Available If Their Services Are Unavailable.

            We are dependent upon the services of our President and Chief Executive Officer, Michael K. Paulk, and Vice President, Finance and Chief Financial Officer, Steven P. Ensz. The loss of either of their services could have a material adverse effect upon us. The loss of the services of such persons would, in all likelihood, require us to seek the services of one or more other persons who would be less familiar with our oil and gas properties, our business objectives and methods and would increase the risk that our activities would be unsuccessful. We currently do not have employment agreements with either of such persons.

Drilling For Oil and Natural Gas and Operating Oil and Natural Gas Fields Involves Material Risks Including the Risk That No Commercially Productive Reservoirs Will Be Encountered; We Have Uninsured Risks.

            Drilling activities are subject to many risks, including the risk that no commercially productive reservoirs will be encountered. There can be no assurance that new wells drilled by us will be productive or that we will recover all or any portion of our investment. Drilling for oil and gas may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. The cost of drilling, completing and operating wells is often uncertain. Our drilling operations may be curtailed, delayed or canceled as a result of numerous factors, many of which are beyond our control, including economic conditions, mechanical problems, title problems, weather conditions, compliance with governmental requirements and shortages or delays of equipment and services. Our future drilling activities may not be successful and, if unsuccessful, such failure may have a material adverse effect on our future results of operations or financial condition.

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            In addition to the substantial risk that wells drilled will not be productive, hazards such as unusual or unexpected geologic formations, pressures, downhole fires, mechanical failures, blowouts, cratering, explosions, uncontrollable flows of natural gas, oil or well fluids, pollution and other physical and environmental risks are inherent in oil and gas exploration and production. These hazards could result in substantial losses to us due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses, as is common in the oil and natural gas industry. We do not fully insure against all risks associated with our business either because such insurance is not available or because the cost thereof is considered prohibitive. The occurrence of an event that is not covered, or not fully covered, by insurance could have a material adverse effect on our financial condition and results of operations.

Shortages of Oil Field Equipment, Services and Qualified Personnel Could Adversely Affect Our Results Of Operations.

            The demand for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers and other professionals in the natural gas and oil industry can fluctuate significantly, often in correlation with natural gas and oil prices, causing periodic shortages. There have also been shortages of drilling rigs and other equipment, as demand for rigs and equipment has increased along with the number of wells being drilled. These factors also cause significant increases in costs for equipment, services and personnel. Higher natural gas and oil prices generally stimulate increased demand and result in increased prices for drilling rigs, crews and associated supplies, equipment and services. We cannot be certain when we will experience shortages or price increases, which could adversely affect our profit margin, cash flow and operating results or restrict our ability to drill wells and conduct ordinary operations.

Risks Relating to the Market for Our Securities

Absence of a Public Market for Our Common Shares.

            Our common shares presently have no trading market in the United States, and there can be no assurance as to the liquidity of any markets that may develop in the future for the common shares, the ability of the holders of common shares to sell their common shares in the United States or Canada or the price at which holders would be able to sell their common shares. Future trading prices of the common shares will depend on many factors, including, among others, our operating results and the market for similar securities.

A single beneficial owner of our common stock, Paul Alexander Ross, has the ability to obtain ownership of a significant percentage of our common stock and effect a change in control, which will allow him to control substantially all matters requiring shareholder approval.

            Paul Alexander Ross is the sole stockholder and president of Arkoma Natural Gas Company, Inc., which is the record holder of 3,400,000 shares, or 12.9%, of our outstanding common stock as of the date of this report, and the sole member and manager of Palo Verde, which is the holder of debentures and warrants that may be converted and exercised, respectively, for up to 60,000,000 shares of our common stock, which effectively provide Mr. Ross with the potential control of up to 73.4% of our outstanding shares of common stock assuming we do not issue any additional shares of common stock. Pursuant to the Palo Verde Purchase Agreement, we agreed to allow Palo Verde to designate three directors to serve on our board of directors, which constitutes a majority of our directors. Accordingly, Mr. Ross, through his ownership of Palo Verde, can control us through board representation. In addition, Mr. Ross has the ability to acquire a majority of our outstanding shares of common stock which would allow him to exert control of us through his ability to determine the outcome of the election of our directors, amend our certificate of incorporation and bylaws and to take other actions requiring the vote or consent of shareholders, including mergers, going private transactions and other extraordinary transactions, and the terms of these transactions. His potential ownership position may have the effect of delaying, deferring or preventing a change in control or a change in the composition of our board of directors. Mr. Ross may use his potentially large ownership position to address his own interests, which may be different from the interests of our other shareholders.

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We do not anticipate paying any dividends on our common stock in the foreseeable future. As a result, you will need to sell your shares of common stock to receive any income or realize a return on your investment.

            We do not anticipate paying any dividends on our common stock in the foreseeable future. Any declaration and payment of future dividends to holders of our common stock may be limited by the provisions of the Oklahoma General Corporation Act and certain restrictive covenants in our senior secured credit facility and the indentures governing our senior unsecured notes. The future payment of dividends will be at the sole discretion of our board of directors and will depend on many factors, including our earnings, capital requirements, financial condition and other considerations that our board of directors deem relevant. As a result, to receive any income or realize a return on your investment, you will need to sell your shares of common stock. You may not be able to sell your shares of common stock at or above the price you paid for them.

The issuance of preferred stock could adversely affect the rights of the holders of common stock.

            Our board of directors has the authority to issue up to 5,000,000 shares of preferred stock in one or more series, to fix the number of shares constituting any such series, and to fix the rights and preferences of the shares constituting any series, without any further vote or action by the shareholders. The issuance of preferred stock by the board of directors could adversely affect the rights of the holders of our common stock. For example, such issuance could result in a class of securities outstanding that would have preferences with respect to voting rights and dividends and in liquidation over the common stock, and could (upon conversion or otherwise) enjoy all of the rights appurtenant to common stock. The board’s authority to issue preferred stock could discourage potential takeover attempts and could delay or prevent a change in control of the Company through merger, tender offer, proxy contest or otherwise by making such attempts more difficult to achieve or more costly. There are no issued and outstanding shares of preferred stock, there are no agreements or understandings for the issuance of preferred stock, and the board of directors has no present intention to issue preferred stock.

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Shareholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares of our common stock.

            Our board of directors may attempt to use non-cash consideration to satisfy our obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock or securities that are convertible into shares of our common stock. Our board of directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares of common stock. In addition, we may attempt to raise capital by selling shares of our common stock (either restricted shares in private placements or registered shares), possibly at a discount to market in the future. These actions will result in dilution of the ownership interests of existing shareholders and may further dilute common stock book value, which dilution may be material.

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFEHARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996

            With the exception of historical matters, the matters we discussed below and elsewhere in this Annual Report are “forward-looking statements” as defined under the Securities Exchange Act of 1934, as amended that involve risks and uncertainties. The forward-looking statements appear in various places including under the headings Item 1. Description of Business and Item 6. Management’s Discussion and Analysis or Plan of Operation. These risks and uncertainties relate to our ability to raise capital and fund our oil and gas well drilling and development plans, our ability to fund the repayment of our current liabilities, our ability to attain and maintain profitability and cash flow and continue as a going concern, our ability to increase our reserves of oil and gas through successful drilling activities and acquisitions, our ability to enhance and maintain production from existing wells and successfully develop additional producing wells, our access to debt and equity capital and the availability of joint venture development arrangements, our ability to remain in compliance with the terms of any agreements pursuant to which we borrow money and to repay the principal and interest when due, our estimates as to our needs for additional capital and the times at which additional capital will be required, our expectations as to our sources for this capital and funds, our ability to successfully implement our business strategy, our ability to identify, acquire and integrate successfully any additional producing oil and gas properties we acquire and operate such properties profitably, our ability to maintain compliance with covenants of our loan documents and other agreements pursuant to which we issue securities or borrow funds and to obtain waivers and amendments when and as required, our ability to borrow funds or maintain levels of borrowing availability under our borrowing arrangements, our ability to meet our intended capital expenditures, our statements about quantities of production of oil and gas as it implies continuing production rates of those levels, proved reserves or borrowing availability based on proved reserves and our future net cash flows and their present value.

            Readers are cautioned that the risk factors and uncertainties referred to above, as well as the risk factors described elsewhere in this Annual Report, in some cases have affected, and in the future could affect, our actual results and could cause our actual consolidated results during 2013 and beyond, to differ materially from those expressed in any forward-looking statements made by or on our behalf.

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Item 1B – Unresolved Staff Comments:

            As of December 31, 2013, we did not have any unresolved comments from the SEC staff that were received 180 or more days prior to year-end.

Item 2 - Properties:

            A description of our properties appears in Item 1 of this Annual Report on Form 10-K.

Item 3 -Legal Proceedings:

            A company has filed suit and made a claim for payment of unpaid royalties which are recorded as liabilities at the balance sheet date in the amount of $3.04 million. To date and through initial discovery in the case the company asserting the claim has not provided proof of ownership. We believe this claim will be resolved for an amount less than the liability amount currently reflected in the financial statements.

            A company has filed suit and made a claim seeking a total of $22,000 plus costs, fees and interest in two separate actions related to services provided. The claims are subject to arbitration to be scheduled. The amounts are recorded as liabilities in the financial statements.

            An individual has filed suit making a claim that monies advanced for purchase of shares in a private placement were a loan as opposed to a purchase of common stock. We believe the complaint is not supported by the facts and we intend to aggressively defend our position.

            A company has filed a suit for breach of contract seeking $35,000 plus interest and attorney’s fees. We have recorded the amount as liabilities in the financial statements.

Item 4 – Submission of Matters to a Vote of Security Holders:

            No matter was submitted during the fourth quarter of the year ended December 31, 2013 to a vote of security holders through the solicitation of proxies or otherwise.

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PART II

Item 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities:

            Our common shares are traded on the TSX Venture Exchange, Inc. under the symbol ANR.U. Our common shares are not currently traded on any United States stock exchange or in the over-the-counter market in the United States, and, accordingly, there is currently no public market for our common shares in the United States.

            The following table sets forth the reported high and low sales prices, reported in United States dollars, for shares of our common stock as reported by the TSX Venture Exchange, for the periods indicated.

            As of May 9, 2014, we had 2,805 stockholders of record.

            We intend to seek to have a trading market for our common shares develop in the United States. There can be no assurance that we will be successful in this regard. We do not meet the requirements to have our common shares included in any NASDAQ trading system or listed on any national securities exchange. However, we do intend to seek to have our shares quoted on the OTC Bulletin Board®. In order to do so, a broker-dealer in securities in the United States may be required to file with the National Association of Securities Dealers, Inc. a notice that will enable the broker-dealer to enter quotations for our common shares on the OTC Bulletin Board®. There can be no assurance that a broker-dealer will file such a notice or, if filed, that quotations will be accepted on the OTC Bulletin Board®. Further, there can be no assurance that if a broker-dealer commences to enter bid and asked quotations for our common shares in the OTC Bulletin Board® that a viable and active trading market will develop.

Dividend Policy

            We do not intend to pay any dividends on our Common Stock for the foreseeable future. Any determination as to the payment of dividends on our Common Stock in the future will be made by our Board of Directors and will depend on a number of factors, including future earnings, capital requirements, financial condition and future prospects as well as such other factors as our Board of Directors may deem relevant.

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Issuer Purchases of Equity Securities

            No purchases of shares of our Common Stock, par value $.001 per share, were made by us or on our behalf or by any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the U.S. Securities Exchange Act of 1934, as amended, during the year ended December 31, 2012.

Item 6 – Selected Financial Data:

            As a smaller reporting company, we are not required to respond to this Item.

Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations:

General

            We are engaged in the acquisition, development, exploitation and production of oil and natural gas. Our revenues and profitability can be expected to be dependent, to a significant extent, upon prevailing spot market prices for oil and natural gas and upon the quantities of oil and natural gas we produce and sell. Prices for oil and natural gas are subject to wide fluctuations in response to changes in supply of and demand for oil and natural gas, market uncertainty and a variety of additional factors that are beyond our control. Such factors include political conditions, weather conditions, government regulations, the price and availability of alternative fuels and overall economic conditions.

            Our consolidated financial statements have been prepared on a going concern basis which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We recorded a net loss of $3,146,517 and $3,318,462 in 2013 and 2012, respectively. We had a working capital deficiency at December 31, 2013 of approximately $13.7 million and an accumulated deficit at December 31, 2013 which leads to questions concerning our ability to meet our obligations as they come due. We have a need for substantial funds to pay current liabilities and to develop our oil and gas properties. We have financed our activities using debt and equity financings and drilling participations. Our cash flow from operations is sensitive to the prices we receive for our oil and natural gas in addition to the quantities of oil and natural gas we sell. A reduction in planned capital spending or an extended decline in oil and gas prices could result in less than anticipated cash flow from operations and a lessened ability to sell more of our common stock or refinance our debt with current lenders or new lenders, which would likely have a further material adverse effect on us. The uncertainty as to whether or not we can raise additional capital in the future is likely to have an effect on our future revenues and operations if we are unable to raise that additional capital.

            As a result of the losses incurred and current negative working capital and other matters described above, there is no assurance that the carrying amounts of our assets will be realized or that liabilities will be liquidated or settled for the amounts recorded. Our ability to continue as a going concern is dependent upon adequate sources of capital and the ability to sustain positive results of operations and cash flows sufficient to continue to explore for and develop our oil and gas reserves. See the discussion under the caption “How We Have Financed Our Activities”.

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            The independent registered public accounting firm’s report on our consolidated financial statements as of and for the year ended December 31, 2013 includes an explanatory paragraph which states that we have sustained a substantial loss in 2013 and have a working capital deficiency and an accumulated deficit at December 31, 2013 that raise substantial doubt about our ability to continue as a going concern.

Statements of Operations

A Comparison of Operating Results for the Years Ended December 31, 2013 and December 31, 2012

            We recorded a net loss of $3,146,517 during the year ended December 31, 2013 compared to a net loss of $3,318,462 during the year ended December 31, 2012. During the year ended December 31, 2013, our revenues were composed of oil and gas sales totaling $3,270,000 compared with oil and gas sales of $2,043,000 during the same period of 2012. Our oil sales for the twelve months ended December 31, 2013 were 56% higher than the same period of 2012. Our net average daily production for the twelve month period ended December 31, 2013 was higher than the same period of the prior year, from 84 (52 net) barrels of oil equivalent per day to 126 (84 net) barrels of oil equivalent per day. Oil prices were consistent at $106.82 and $107.17 for the twelve month period ended December 31, 2013 and December 31, 2012 respectively. Production from our existing wells is subject to fluctuation based upon which zones of wells are in production and normal declines resulting as the reservoirs are depleted.

            We had operating expenses of $4,307,000 for the year ended December 31, 2013 compared to operating expenses of $4,169,000 for the year ended December 31, 2012. Our general and administrative expenses were $1,943,000 for the twelve months ended December 31, 2013 compared to $1,986,000 for the twelve months ended December 31, 2012. General and administrative expenses were higher for the twelve months end December 31, 2012 primarily due to increased compensation expense related to the issuance of stock.

            Lease operating expenses of $895,000, production taxes of $323,000 and depletion, depreciation, accretion and amortization of $1,178,000 during the year ended December 31, 2013 changed from $1,004,000, $112,000, and $749,000, respectively, during the year ended December 31, 2012. Lease operating expenses were lower for the twelve months ended December 31, 2013 compared to the same period of 2012 due to decreased field maintenance. Production taxes increased for the twelve months ended December 31, 2013 compared to the same period of 2012 as a result of increased production and changes in tax classifications on some producing wells. The increase in depletion, depreciation and amortization for the twelve months ended December 31, 2013 is a result of increased production.

            Interest and financing costs increased for the twelve months ended December 31, 2013 compared to the same period in 2012 at $2,122,000 and $1,328,000 respectively. Interest and financing costs were higher in 2013 due to higher debt and the amortization of note discounts and deferred financing costs.

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            During the year ended December 31, 2013 we also extended the repayment terms and rights on a related party note which qualified as debt extinguishment. The additional rights were valued at $39,953 and were recorded as a loss on debt extinguishment. We recorded a gain of $85,000 for the year ended December 31, 2012 related to the favorable settlement of our note payable with Dune Energy and accounts payable.

            During the twelve months ended December 31, 2013, we had a foreign exchange gain of $33,000 compared to a $318,000 foreign exchange loss for the twelve months ended December 31, 2012. Our foreign exchange gains and losses arise out of an inter-company indebtedness we owe to our wholly-owned subsidiary, Gothic, which is payable in Canadian dollars, in addition to a note owed to a third party denominated in Canadian dollars. The foreign exchange gain for the twelve months ended December 31, 2013 was caused by the strengthening of the US dollar against the Canadian dollar. The gain related to the note denominated in Canadian dollars was $33,000 for the twelve months ended December 31, 2013.

Liquidity and Capital Resources

General

            At December 31, 2013 our current assets are $327,000 compared with current liabilities of $14.0 million which includes accounts payable, revenues payable, notes payable, and other current obligations. We have substantial needs for funds to pay our outstanding payables and debt due during 2013.

            We have substantial need for capital to develop our oil and gas prospects. Since 2001, we have funded our capital expenditures and operating activities through a series of debt and equity capital-raising transactions, drilling participations and through an increase in notes payable. We expect additional funding will be funded from the sale of drilling participations and equity capital. It is our intention to raise additional capital through the sale of interests in our drilling activities or other strategic transactions; however, we currently have no firm commitment from any potential investors and such additional capital may not be available to us in the future.

Years Ended December 31, 2013 and December 31, 2012

            Our net cash used by operating activities was $64,000 for the twelve months ended December 31, 2013 as compared to net cash used in operating activities of $1,302,000 for the twelve months ended December 31, 2012, a decrease of $1,238,000. The decrease in net cash used in operating activities for the twelve months ended December 31, 2013 was primarily due to a decrease in net loss of $172,000 an increase in noncash items of $509,000 and an increase in working capital of $558,000. Changes in working capital items had the effect of increasing cash flows from operating activities by $376,000 during the twelve months ended December 31, 2013 mainly due to a net increase in accounts payable and other accrued liabilities of $258,000 and a decrease in accounts receivable and other current assets of $118,000. Changes in working capital items had the effect of decreasing cash flows from operating activities by $182,000 during the twelve months ended December 31, 2012 mainly due to a decrease in accounts payable and accrued liabilities of $102,000 and an increase in accounts receivable and other current assets of $81,000.

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            We used $57,000 of net cash in investing activities during the twelve months ended December 31, 2013 compared to net cash used of $2,650,000 in 2012. The cash used in investing in 2013 and 2012 was for the purchase and development of oil and gas properties.

            Our net cash provided by financing activities was $171,000 for the twelve months ended December 31, 2013 compared to net cash provided of $3,983,000 for the same period in 2012. For the twelve months ended December 31, 2013, net cash inflows from financing activities were a result of the issuance of notes, net of fees, of $2,203,000, of which $505,000 was to related parties, offset by payments against outstanding notes of $1,982,000, of which $74,000 was to related parties, and payments of deferred financing costs of $50,000. Our net cash provided by financing activities was $3,983,000 for the twelve months ended December 31, 2012 compared. For the twelve months ended December 31, 2012, net cash inflows from financing activities were a result of the issuance of notes, net of fees, of $5,730,000, of which $2,750,000 was to related parties, offset by payments against outstanding notes of $2,001,000, of which $56,000 was to related parties, and payments of deferred financing costs of $165,000. Proceeds of $420,000 were received during the second quarter of 2012 for the issuance of 7,000,000 shares of common stock at $0.06 per share in a private placement.

            We have no other commitments to expend additional funds for drilling activities for the rest of 2013.

            Additional information regarding liquidity and capital resources is included under the caption “Future Capital Requirements and Resources.”

How We Have Financed Our Activities

            Our activities since 2002 have been financed primarily from sales of debt and equity securities and drilling participations. These transactions during this period of time included the following, among other previously reported financing transactions we entered into during the period:

            We entered into a financing agreement with TCA Global Credit Master Fund, LP during the first quarter of 2012. Proceeds of the financing were used for the drilling and completion of wells included in the Company’s inventory of proved undeveloped reserves (“PUD”). We have a commitment for a total amount of $3.0 million, before fees and expenses, through the issuance of a series of $1.0 million debentures. The debenture is secured by a first priority, perfected security interest and mortgage in oil and gas leases and properties. At no time shall the investor funds advanced exceed 65% of the drilling and completion cost of the PUD’s with the balance provided by our generated funds. During the year ended December 31, 2012, three tranches of TCA debt totaling $3 million were issued. The total note principal balance of TCA debts and related unamortized debt discounts on December 31, 2012 are $1,608,973 and $186,791, respectively.

            In March 2013, the fourth tranche TCA debt of $1 million was issued. The debt is due on March 1, 2014 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Out of $1 million debt proceeds, $500,000 was withheld for the future development of wells, $55,550 was paid to TCA for various fees, and net proceeds of $944,450 were received by the Company. In July 2013 an additional tranche of $750,000 was drawn by the Company under the same terms with net proceeds of $705,825 received by the Company after the payment of fees.

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            The Company will also pay TCA $100,000 in cash in lieu of a stock bonus related to the issuance of the note. Fees paid and to be paid in cash totaling $155,550 to TCA Global Credit Master Fund, LP were recorded as a debt discount.

            In July 2013, the fifth tranche TCA debt of $750,000 was issued. The debt is due on August 1, 2014 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Fees totaling $44,175 were paid with net proceeds of $705,825 received by the Company. Along with the issuance of the fifth tranche TCA debt, the Company combined all the outstanding TCA debts into one debt by entering into an amended debt agreement with TCA. The amended debt has a principal of $2,290,548, accrues interest at 5% per annum, and is due on August 1, 2014. From August 1, 2013 through November we paid the amended TCA debt in monthly installments of $230,451.

            On January 29, 2014, we entered into the Sixth Amendment to the Securities Purchase Agreement with TCA Global Credit Master Fund LP. The amendment provides for interest only payments pursuant to existing amended and restated debenture for the month of December 2013, that all previous outstanding principal and accrued and unpaid interest, an accommodation fee $200,000 for entering into this sixth Amendment and all outstanding Redemption Premium fees will comprise the agree upon outstanding amount of $2,196,609. Principal and interest in the amount of $371,459 is due monthly, inclusive of all fees and redemption amounts. Principal payments of $100,000 each for the months of March, April and May 2014 along with accrued interest have been made.

            On July 31, 2012, we received final approval from the TSX Venture Exchange for the issuance of 7,000,000 shares of our common stock in a private placement. All such shares were sold at $0.06 in the private placement, resulting in gross proceeds of $420,000.

            On August 13, 2012, we entered into a Securities Purchase Agreement with Palo Verde Acquisitions, LLC (“Palo Verde”), pursuant to which we sold to Palo Verde (1) a $2,000,000 12% unsecured Convertible Debenture due August 13, 2014 (the “First Palo Verde Debenture”) and (2) warrants to purchase up to 20,000,000 shares of our common stock at a purchase price of $0.23 per share and expiring on August 13, 2014. The aggregate consideration received by us from Palo Verde for the First Palo Verde Debenture and the 20 million warrants was $2,000,000.

            On December 31, 2012, we sold to Palo Verde (1) a $1,000,000 12% unsecured Convertible Debenture due December 31, 2014 (the “Second Palo Verde Debenture”) and (2) warrants to purchase up to 10,000,000 shares of our common stock at a purchase price of $0.23 per share and expiring on December 31, 2014. The aggregate consideration received by us from Palo Verde for the Second Palo Verde Debenture and the 10 million warrants was $1,000,000.

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Future Capital Requirements and Resources

            At December 31, 2013, our current assets are $327,000 compared with current liabilities of $14.0 million which includes accounts payable, revenues payable and notes payable. We have substantial needs for funds to pay our outstanding payables and debt due during 2014. In addition, we have substantial need for capital to develop our oil and gas prospects.

            Since 2001, we have funded our capital expenditures and operating activities through a series of debt and equity capital-raising transactions, drilling participations, and through an increase in notes payable. We expect additional funding will be funded from the sale of drilling participations and equity capital. It is our intention to raise additional capital through the sale of interests in our drilling activities or other strategic transactions.

            Our business strategy requires us to obtain additional financing and our failure to do so can be expected to adversely affect our ability to further grow our revenues, oil and gas reserves and achieve and maintain a significant level of revenues and profitability. There can be no assurance we will obtain this additional funding. Such funding may be obtained through the sale of drilling participations, joint ventures, equity securities or by incurring additional indebtedness. Without such funding, our revenues will continue to be limited and it can be expected that our operations will not be profitable. In addition, any additional equity funding that we obtain may result in material dilution to the current holders of our common stock.

            Critical Accounting Policies

Oil and Gas Properties

            We account for our oil and gas exploration and development activities using the full cost method of accounting prescribed by the SEC. Accordingly, all our productive and non-productive costs incurred in connection with the acquisition, exploration and development of oil and natural gas reserves are capitalized and depleted using the units-of-production method based on proved oil and gas reserves. We capitalize our costs including salaries and related fringe benefits of employees directly engaged in the acquisition, exploration and development of oil and natural gas properties, asset retirement costs, as well as other directly identifiable general and administrative costs associated with these activities. These costs do not include any costs related to production, general corporate overhead, or similar activities. Our oil and natural gas reserves will be estimated annually by independent petroleum engineers. Our calculation of depreciation, depletion and amortization (“DD&A”) includes estimated future expenditures that we believe we will incur in developing our proved reserves and the estimated dismantlement and abandonment costs, net of salvage values. Quarterly, we will perform a review of the carrying costs of our oil and gas properties to assess whether such costs are fully recoverable from future cash flows. In the event the unamortized cost of the oil and natural gas properties we are amortizing exceeds the full cost ceiling as defined by the SEC, we will charge the amount of the excess to expense in the period during which the excess occurs. The full cost ceiling is based principally on the estimated future discounted net cash flows from our oil and natural gas properties. Changes in our estimates or declines in prevailing oil and natural gas prices could cause us to reduce in the near term our carrying value of our oil and natural gas properties. A write-down arising out of these conditions is referred to throughout our industry as a full cost ceiling write-down.

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            We evaluate oil and natural gas reserve acquisition opportunities in light of many factors only a portion of which may be reflected in the amount of proved oil and natural gas reserves that we propose to acquire. In determining the purchase price to be offered, we do not solely rely on proved oil and gas reserves or the value of such reserves determined in accordance with Rule 4-10 of Regulation S-X adopted by the SEC. Factors we consider include the probable reserves of the interests intended to be acquired, anticipated efficiencies and cost reductions that we believe can be made in us operating the producing properties, the additional reserves that we believe can be proven relatively inexpensively based on our knowledge of the area where the interests are located and existing producing properties we may own. We may also consider other factors if appropriate. We may conclude that an acquisition is favorable, even if there may be a subsequent full cost ceiling write-down associated with it, based on other factors we believe are important. We do not perform a ceiling test for specific properties acquired because the ceiling test is performed at each quarter and at year end for all of our properties included in our cost center and is based on prices for oil and natural gas as of that date which may be higher or lower than the prices used when evaluating potential acquisitions. We review the transaction in the light of proved and probable reserves, historic and seasonal fluctuations in the prices of oil and natural gas, anticipated future prices for oil and natural gas, the factors described above as well as other factors that may relate to the specific properties under review.

Revenue Recognition

            Our profitability and revenues are and will be dependent, to a significant extent, upon prevailing spot market prices for oil and natural gas. Oil and natural gas prices and markets have been volatile. Prices are subject to wide fluctuations in response to changes in supply of and demand for oil and natural gas, market uncertainty and a variety of additional factors that are beyond our control. Such factors include political conditions, weather conditions, government regulations, the price and availability of alternative fuels and overall economic conditions. Oil prices have fluctuated significantly over the past twelve months.

            We use the sales method for recording natural gas sales. Our oil and condensate production is sold, title passed, and revenue recognized at or near our wells under short-term purchase contracts at prevailing prices in accordance with arrangements, which are customary in our industry. Our gas sales are recorded as revenues when the gas is metered and title transferred pursuant to the gas sales contracts. During such times as our sales of gas exceed our pro rata ownership in a well, such sales will be recorded as revenues unless total sales from the well have exceeded our share of estimated total gas reserves underlying the property at which time the excess will be recorded as a gas balancing liability.

Income taxes

            As part of the process of preparing the consolidated financial statements, we are required to estimate the federal and state income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciation, depletion and amortization, and certain accrued liabilities for tax and accounting purposes. These differences and the net operating loss (“NOL”) carryforwards result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess, using all available positive and negative evidence, the likelihood that the deferred tax assets will be recovered from future taxable income. If we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase or decrease this allowance in a period, we must include an expense or reduction of expense within the tax provisions in the consolidated statement of operations.

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            Under FASB ASC 740, Accounting for Income Taxes, an enterprise must use judgment in considering the relative impact of negative and positive evidence. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. The more negative evidence that exists (a) the more positive evidence is necessary and (b) the more difficult it is to support a conclusion that a valuation allowance is not needed for some portion, or all of the deferred tax asset. Among the more significant types of evidence that we consider are:

• taxable income projections in future years,
• whether the carryforward period is so brief that it would limit realization of tax benefits,
• future sales and operating cost projections that will produce more than enough taxable income to realize the deferred tax asset based on existing sales prices and cost structures, and
• our earnings history exclusive of the loss that created the future deductible amount coupled with evidence indicating that the loss is an aberration rather than a continuing condition.

            Since we have no earnings history to determine the likelihood of realizing the benefits of the deferred tax assets, we are unable to determine our ability to realize our NOL carryforwards prior to their expiration. Accordingly, we are required to provide a valuation allowance against our deferred tax asset. As of December 31, 2013and 2012, we have a deferred tax asset of approximately 9.6million and $8.1 million for which we have recognized a $9.6million and $8.1 million valuation allowance, respectively.

Notes payable and long-term debt

            We account for notes payable and long-term debt by recording the face amount of the debt instrument adjusted for any premium or discount realized on the issuance of the instrument. The premium or discount is amortized to expense utilizing the effective interest rate method for debt instruments with scheduled repayment terms. Any un-amortized premium or discount remaining at early retirements of a debt instrument is recorded as a gain or loss as applicable.

Asset Retirement Obligation

            Effective January 1, 2003, we adopted FASB ASC 410-20, Accounting for Asset Retirement Obligations (“ASC 410-20”). This statement applies to obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction and development of the assets.

            Under ASC 410-20 we recognize the fair value of a liability for a retirement obligation in the period in which the liability is incurred. For oil and gas properties, this is the period in which an oil or gas well is acquired or drilled. The asset retirement obligation is capitalized as part of the carrying amount of the asset at its discounted fair value. The liability is then accreted each period until the liability is settled or the asset is sold, at which time the liability is reversed.

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Stock-based Compensation

        Accounting Standards Codification (“ASC”) 718, “Accounting for Stock-Based Compensation" established financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value based method of accounting for an employee stock option or similar equity instrument. We account for compensation cost for share based payments to employees in accordance with ASC 718. Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. Additionally, share-based awards to non-employees are expensed over the period in which the related services are rendered at their fair value. We account for share based payments to non-employees in accordance with ASC 505-50 “Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.

Off-Balance Sheet Arrangements

            We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

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Item 7A – Quantitative and Qualitative Disclosures About Market Risk:

            As a smaller reporting company, we are not required to respond to this Item.

Item 8–Consolidated Financial Statements and Supplementary Data:

            The response to this Item is included in a separate section of this report. See page F-1.

Item 9A(T) – Controls and Procedures

            (a) Management’s Annual Report on Internal Control Over Financial Reporting

            Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act, as amended, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

            Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. In order to evaluate the effectiveness of our internal control over financial reporting as of December 31, 2013, as required by Sections 404 of the Sarbanes-Oxley Act of 2002, our management commenced an assessment, based on the criteria set forth in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework “). A material weakness is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. In assessing the effectiveness of our internal control over financial reporting, our management, including the chief executive officer and chief financial officer, identified the following material weaknesses: (1) Deficiencies in Segregation of Duties. The Chief Executive Officer and the Chief Financial Officer are actively involved in the preparation of the consolidated financial statements, and therefore cannot provide an independent review and quality assurance function within the accounting and financial reporting group. The limited number of qualified accounting personnel discussed above results in an inability to have independent review and approval of financial accounting entries. Furthermore, management and financial accounting personnel have wide-spread access to create and post entries in our financial accounting system. There is a risk that a material misstatement of the consolidated financial statements could be caused, or at least not be detected in a timely manner, due to insufficient segregation of duties, and (2)Our financial statement closing process did not identify all the journal entries that needed to be recorded as part of the closing process for certain complex and non-routine transactions. As part of the audit, our independent registered public accounting firm proposed certain entries that should have been recorded as part of the normal closing process. Our internal control over financial reporting did not detect such matters and, therefore, was not effective in detecting misstatements in the consolidated financial statements.

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            To address the material weakness, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented. The absence of the ability to conclude as to the sufficiency of internal controls is a material weakness. This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal controls were not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only managements report in this annual report.

            (b) Changes in Internal Control Over Financial Reporting

            There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonable likely to materially affect, our internal controls over financial reporting.

            This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report is not at this time subject to attestation by our registered public accounting firm pursuant to temporary rules and amendments thereto of the SEC that permit us to provide only management's report in this annual report.

            Despite the internal control deficiencies, we believe that our consolidated financial statements contained in this Form 10-K filed with the SEC fairly present our financial position, results of operations and cash flows for the fiscal year ending December 31, 2013 in all material respects.

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Item 9B – Other Information

            No information is required to be disclosed in response to this Item.

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PART III

Item 10 – Directors, Executive Officers and Corporate Governance:

Directors, Executive Officers and Significant Employees

            The following table contains information concerning the current Directors, executive officers and significant employees of the Company:

            Each Director of our company has been elected to serve until our next annual meeting of stockholders and until his successor has been elected and qualified.

            Michael K. Paulk. Mr. Paulk was elected as a director and appointed the President and Chief Executive Officer of the Company in July 2001. Mr. Paulk previously served as President and a director of Gothic Energy Corporation, a company then engaged in the acquisition, development, exploration and production of natural gas and oil, from October 1994 to January 2001, when it was acquired by Chesapeake Energy Corporation. Mr. Paulk has been involved in the oil and gas industry for more than 30 years.

            Steven P. Ensz. Mr. Ensz has been Vice-President, Finance and Chief Financial Officer and Secretary and a director of the Company since July 2001. He is a certified public accountant and is responsible for all of the Company’s financial disclosure and reporting. From March 1998 to January 2001, he held a similar position with Gothic Energy Corporation, and from July 1991 to February 1998, he was Vice-President, Finance of Anglo-Suisse, Inc., an oil and natural gas exploration and production company. Mr. Ensz has held various positions within the energy industry, including President of Waterford Energy, an independent oil and gas producer, for more than 25 years.

            James L. Ferraro. Mr. Ferraro has served as a director of the Company since August 13, 2012. Mr. Ferraro obtained his Bachelor of Business Administration in 1978 and Master of Science in Accounting in 1979 from the University of Miami. In 1983, he earned his Juris Doctor from the University of Miami School of Law. He became a Certified Public Accountant in 1980. Following his law school graduation, Mr. Ferraro represented athletes and worked for a civil litigation defense firm. In 1985, he launched his own mass tort and wrongful death litigation practice. In 1997, he opened another law firm, Kelley & Ferraro, with partner Michael V. Kelley in Cleveland, Ohio. Mr. Ferraro has focused his law practices in the areas of asbestos litigation, products liability, catastrophic personal injury and wrongful death, environmental disasters, toxic torts, defective drugs, medical malpractice, family law, white-collar criminal defense, False Claims Act qui tam matters and tax whistle-blower claims. Mr. Ferraro’s firms now handle nearly 50,000 asbestos cases, and are known for their environmental toxic tort practice. In 1996, Mr. Ferraro successfully went to trial against DuPont in the first case ever prosecuted against a chemical company for causing a birth defect. Because of that case, Mr. Ferraro was named one of the national finalists for Trial Lawyer of the Year in 1997. He is a member of the Ohio, New York, Florida and Massachusetts Bar Associations.

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            Douglas B. MacGregor. Mr. MacGregor has served as a director of the Company since August 13, 2012. For the past five years, Mr. MacGregor has been retired from full time work and has focused on his personal investments and business portfolio. From 2002 until 2006, Mr. MacGregor was a partner in the Eyes of Texas Partners. From 1999 until 2001, he was a Fellow in the Harvard Leadership Initiative, an arm of the Harvard Business School. Prior to his Harvard Fellowship, he worked from 1993 until 1999 as vice president and general manager of five different divisions of Austin-based Dell Computer Corporation. While at Dell Computer Corporation, Mr. MacGregor spent two years as a member of the 15-member Executive Committee that managed operations. From 1992 until 1993, Mr. MacGregor was Vice President of Hardware of Data General Corporation. In 1986, Mr. MacGregor founded Solbourne Computer Incorporated, a Japanese-based company that partnered with Matsushita Electric Industrial Co., and in 1987 Solbourne Computer Incorporated relocated to the United States in Colorado and started the clone market for UNIX workstations in America. Mr. MacGregor received his doctorate in Information Science at Kyoto University in Japan after completing a five-year term as a microprocessor designer at Austin-based Motorola, Inc. He completed his master’s degree in computer science at the University Illinois in 1980 after obtaining his Bachelor of Arts in history from the University of Maryland in 1977. Mr. MacGregor has also established The MacGregor Foundation, a non-profit organization committed to support 12-step based drug and alcohol. In 1999, Mr. MacGregor endowed the Muroga-Faiman Professorship at the University of Illinois and has been a member of the United Way Alexis de Tocqueville Society. He is currently a Foundation Board member for Western Colorado State University.

            William Yuan. Mr. Yuan has served as a director of the Company since August 13, 2012. Since 2006, Mr. Yuan has been the Chairman of Fortress Holdings Group, an Asia-based mixed-staged venture capital and investment holding company, and Co-Chairman of Auga Group, as well as its subsidiary, Guangzhou Kingstar Culture Media Investment Co Ltd. Since 2005, he has also been Chairman of the merchant banking business of overseas Virgo Capital Holdings, which specializes in China’s cable industry. Mr. Yuan began his finance career at Goldman Sachs as an investment banker in mergers & acquisitions, after attending Cornell University, where he received his B.S. degree in Economics & Marketing in 1983. Mr. Yuan also earned a Baker Scholar of achievement in econometrics as a Mason Fellow from Harvard University’s JFK School of Economics and Government in 1983. He then served from 1988 until 1993 as a senior-vice president and co-manager at Morgan Stanley Smith Barney’s Portfolio Management Corporation with dual functions as co-head of the Capital Markets Derivative team, and Chairman of the Technology Investment Management and Executive Policy Committee. In 1993, Mr. Yuan then became founder and managing director of the Corporate Institutional Services Group at Merrill Lynch Asset Management. From 1994 until 1997, he was the President and Head of Merrill Lynch Asset Management Asia, and Chairman of Merrill Lynch Global Asset Allocation Committee, which had $488 billion under management. From 1995 until 1996, Mr. Yuan was the Chief Investment Officer and Portfolio Manager of the $1.2 Billion AmerAsia Hedge Fund domiciled in Asia with special emphasis on technology, media and entertainment and telecom. Mr. Yuan also serves on the board of directors of Tech Venture Alliance (a privately-held technology venture investment company) and Terra Nostra Resources Corp. (a privately-held steel and copper manufacturer), and has previously served the boards of Gumtech International which became Matrixx Initiatives (a Nasdaq-listed branded consumer products company specializing in pharmaceutical drug delivery systems), Swedish Match (a public consumer products and research & development company in Sweden, specializing in development of pharmaceutical drugs for oncology industry), IPG Group (a public company based in Toronto specializing in next generation commercial real estate and ecommerce platforms) and Digital Island Technologies (a publicly-traded technology, commercial ISP and data management company).

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            Our Board of Directors has not adopted procedures by which security holders may recommend nominees to our Board of Directors.

Significant Employees:

            Richard O. Mulford: Mr. Mulford has been Manager of Operations since June 2001. From April 1995 to November 1998, he was employed as Operations Manager of GEC and from November 1998 to January 2001 he was employed as Vice President of Operations of GEC. He has been employed in the oil and natural gas industry since 1978.

            Robert G. Snead: Mr. Snead has been our Exploitation Manager since June 2001 and served in the same position with GEC on a full-time consulting basis from April 1997 to January 2001. Between early 1994 and April 1997, he was employed as an independent geologist and from 1985 to 1994 was the Senior Vice-President and Exploration Manager of LOGO, Inc., an oil and natural gas well operating company.

            Messrs. Paulk and Ensz, as the founders of American Natural Energy Corporation, may be deemed our founders.

Audit Committee and Audit Committee Financial Expert:

            As of December 31, 2013, the members of our Audit Committee of our Board of Directors are Messrs. Ferraro, MacGregor (Chairman) and Yuan. Mr. Ferraro, Mr. MacGregor and Mr. Yuan were added during 2012. Our securities are not listed on any national securities exchange or listed on an automated inter-dealer quotation system.

            Our Board of Directors has adopted an Audit Committee Charter. Our Audit Committee Charter, as adopted on April 22, 2004, was attached as Annex A to our Proxy Statement dated June 14, 2004.Under our Audit Committee Charter, our Audit Committee’s responsibilities include, among other responsibilities, the appointment, compensation and oversight of the work performed by our independent auditor, the adoption and assurance of compliance with a pre-approval policy with respect to services provided by the independent auditor, at least annually, obtain and review a report by our independent auditor as to relationships between the independent auditor and our company so as to assure the independence of the independent auditor, review the annual audited and quarterly consolidated financial statements with our management and the independent auditor, and discuss with the independent auditor their required disclosure relating to the conduct of the audit.

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            Our Board of Directors has determined that we do not have an Audit Committee Financial Expert serving on our Audit Committee. We do not have an Audit Committee Financial Expert serving on our Audit Committee because at this time the limited magnitude of our revenues and operations does not, in the view of our Board of Directors, justify or require that we obtain the services of a person having the attributes required to be an Audit Committee Financial Expert on our Board of Directors and Audit Committee. The Board of Directors may in the future determine that a member elected to the Board in the future has the attributes to be determined to be an Audit Committee Financial Expert.

Code of Ethics:

            We have adopted a Code of Ethics that applies to our principal executive officer and principal financial and accounting officer. A copy of our Code of Ethics was filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2003.

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Item 11 - Executive Compensation:

            The following table sets forth the compensation of our principal executive officer and all of our other executive officers for the two fiscal years ended December 31, 2013who received total compensation exceeding $100,000 for the year ended December 31, 2013and who served in such capacities at December 31, 2013.

SUMMARY COMPENSATION TABLE
Annual Compensation

            We do not have any employment contracts with any of our executive officers or other significant employees.

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Outstanding Equity Awards at December 31, 2013

            The following table provides information with respect to our named executive officers above regarding outstanding equity awards held at December 31, 2013.

Director Compensation

            None of our directors received any compensation, including equity awards, during the year ended December 31, 2013.

            Our Directors do not receive any cash compensation for serving in that capacity; however, they are reimbursed for their out-of-pocket expenses in attending meetings. Pursuant to the terms of our 2001 Stock Incentive Plan, each non-employee Director who is first elected or appointed after February 1, 2002 automatically receives an option grant for 5,000 shares on the date such person joins the Board. In addition, on the date of each annual stockholder meeting, provided such person has served as a non-employee Director for at least six months, each non-employee Board member who is to continue to serve as a non-employee Board member will automatically be granted an option to purchase 500 shares. Each such option has a term of ten years, subject to earlier termination following such person's cessation of Board service, and is subject to certain vesting provisions.

Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters:

            The following table sets forth certain information regarding beneficial ownership of our common stock as of March31, 2014 (a) by each person who is known by us to own beneficially more than five percent (5%) of our common shares, (b) by each of our Directors and officers, and (c) by all Directors and officers as a group. As of March31, 2014, we had 26,405,085common shares outstanding.

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________________
⁽¹⁾             This tabular information is intended to conform with Rule 13d-3 promulgated under the Exchange Act relating to the determination of beneficial ownership of securities. The tabular information gives effect to the exercise of warrants or options exercisable within 60 days of the date of this table owned in each case by the person or group whose percentage ownership is set forth opposite the respective percentage and is based on the assumption that no other person or group exercise their option.
⁽²⁾             Unless otherwise indicated, the address for each of the above is c/o American Natural Energy Corporation, 6100 South Yale, Suite 2010, Tulsa, Oklahoma74136.
⁽³⁾             Includes 150,000 shares issuable at an exercise price of $0.90 on exercise of an option and 660,000 shares issuable at an exercise price of $0.30 on exercise of an option.
⁽⁴⁾             Includes 150,000 shares issuable at an exercise price of $0.90 on exercise of an option and 660,000 shares issuable at an exercise price of $0.30 on exercise of an option.
⁽⁵⁾             Includes 3,400,000 shares held of record by Arkoma Natural Gas Company, Inc., a corporation of which Mr. Ross is the sole shareholder and president, and 60,000,000 shares issuable to Palo Verde, a limited liability company of which Mr. Ross is the sole member and manager, pursuant to the conversion of debentures and/or exercise of the warrants.
⁽⁶⁾             Includes 500,000 shares issuable at an exercise price of $0.10 per share upon the exercise of common stock purchase warrants, 96,000 shares issuable at an exercise price of $0.25 per share upon the exercise of common stock purchase warrants, and 217,391 shares issuable at an exercise price of $0.23 per share upon the exercise of common stock purchase warrants. Charles J. Moore is the principal and CEO of Crucible Capital Group, Inc. As such, he may be deemed to control Crucible Capital Group, Inc. and be the beneficial owner of such shares.

            By virtue of its ownership of convertible debentures and warrants, Palo Verde has the ability, upon the conversion of such debentures and/or exercise of such warrants, to effect a change in control of our company.

Securities Authorized for Issuance Under Equity Compensation Plans

            We have one equity compensation plan for our employees, Directors and consultants pursuant to which options, rights or shares may be granted or issued. It is referred to as our 2001 Stock Incentive Plan. See Note 8to the Notes to Consolidated Financial Statements for further information on the material terms of this plan.

            The following table provides information as of December 31, 2013 with respect to our compensation plans (including individual compensation arrangements), under which securities are authorized for issuance aggregated as to (i) compensation plans previously approved by stockholders, and (ii) compensation plans not previously approved by stockholders:

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Equity Compensation Plan Information

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Item 13 - Certain Relationships and Related Transactions:

            During 2011 the Company entered into a $500,000 unsecured short-term note with interest at the rate of 10% per annum with Mike Paulk, an officer of the Company. All accrued interest is payable monthly and the maturity date of the loan has been extended to February 17, 2014. Proceeds from the note were used to pay the outstanding obligation to Bank of Oklahoma and the balance for working capital. The Company paid Mike Paulk $74,444 in principal payments and $38,000 for interest on the loan during 2013. The Company paid Mike Paulk $55,556 in principal payments and $56,000 for interest on the loan during 2012. The Company also received $5,000 during the year ended December 31, 2013. On February 17, 2014 the note was extended to February 17, 2015.

            On March 31, 2011, with an effective date of January 1, 2011, the Company purchased the working interests from TPC Energy for $300,000 through the issuance of a note payable in the same amount. Principal payments of $12,500 and interest at the rate of 10% per annum are due monthly. During the effective date through the closing date of March 31, 2011, revenues of $95,662 were recorded as a net purchase price adjustment that lowered the note payable balance to $204,338 and during 2011 cash payments totaling $40,155 were also applied to the note which left a remaining balance due of $164,183. No principal payments were made on this note in 2013 and 2012. On March 31, 2014 the note was extended to March 31, 2015.

            During the first quarter of 2012 TPC Energy advanced an additional $250,000 to the Company with repayment of the loan due one year from the date of advancement and with interest payable monthly. The note carries an interest rate of 5.5% per annum. The original due date of the note was March 11, 3013. In addition to the additional $250,000, the Company assigned 50% of its interest in its share of the Liquidation Agents account distributions to TPC Energy for the life of the note. The rights were valued at $39,619 and were recorded as a discount on the note, which is being amortized over the life of the note using the effective interest method. The TPC note is included in Notes Payable – Related Parties on the balance sheet as of December 31, 2013. The Company paid TPC Energy $24,000 for interest on all the outstanding loans. On March 11, 2013, the Company extended the due date of the note to March 11, 2014. On March 11, 2014, the Company extended the note to March 11, 2015.

            On August 13, 2012, the Company entered into a Securities Purchase Agreement with Palo Verde Acquisitions, LLC, pursuant to which the Company sold to Palo Verde (1) a $2,000,000 12% unsecured, convertible Debenture due August 13, 2014 (the "Palo Verde Debenture") and (2) warrants to purchase up to 20,000,000 shares of common stock of the Company at an exercise price of US$0.23 per share and expiring on August 13, 2014 (the "Warrants"). The aggregate consideration paid to the Company by Palo Verde for the Palo Verde Debenture and the Warrants was $2,000,000.

             Effective December 31, 2012, Palo Verde exercised its option under the Palo Verde Purchase Agreement to purchase from the Company (1) an additional $1,000,000 12% convertible debenture due December 31, 2014 (the “$1,000,000 Debenture” and, together with the $2,000,000 Debenture, the “Debentures”), which is convertible into shares of our common stock at a conversion rate of $0.10 per share of common stock, and (2) additional warrants to purchase up to 10,000,000 shares of our common stock at an exercise price of $0.23 per share and expiring on December 31, 2014. At December 31, 2012, we received aggregate consideration of $500,000 from Palo Verde for the $1,000,000 Debenture and Warrants, with the remaining $500,000 collected in January 2013.

45

Item 14. Principal Accountant Fees and Services

            The following sets forth fees we incurred for services provided by MaloneBailey, LLP for the years ended December 31, 2013 and 2012, our independent registered public accountants at those year ends.

            Our Board of Directors believes that the provision of the services during the years ended December 31, 2013 and December 31, 2012 is compatible with maintaining the independence of MaloneBailey, LLP. Our Audit Committee approves before the engagement the rendering of all audit and non-audit services provided to our company by our independent auditor. Engagements to render services are not entered into pursuant to any pre-approval policies and procedures adopted by the Audit Committee. The services provided by MaloneBailey, LLP included under the caption Audit Fees include services rendered for the audit of our annual consolidated financial statements, the review of our quarterly financial reports, the issuance of consents, and assistance with review of documents filed with the Securities and Exchange Commission.

Item 15– Exhibits:

46

⁽¹⁾Filed as an Exhibit to the Registrant’s registration statement on Form 10-SB filed on August 12, 2002 and amended on July 29, 2003. (File No. 0-18956).
⁽²⁾ Filed as an Exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2003. (File No. 0-18956).
⁽³⁾ Filed with Amendment No. 1 to Registration Statement on Form SB-2 filed February 6, 2004 (File No. 333-111244).
⁽⁴⁾ Filed with the Registrant’s Annual Report on Form 10-KSB for the year ended December 31, 2003.
⁽⁵⁾ Filed as an Exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2005.
⁽⁶⁾ Filed as an Exhibit to the Registrant’s Current Report on Form 8-K for June 29, 2005.
⁽⁷⁾ Filed as an Exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2005.
⁽⁸⁾ Filed as an Exhibit to the Registrant’s Current Report on Form 8-K for October 19, 2005.

47

⁽⁹⁾ Filed as an Exhibit to the Registrant’s Current Report on Form 8-K for March 8, 2006.
⁽¹⁰⁾ Filed with this Annual Report on Form 10-KSB for the year ended December 31, 2005.
⁽¹¹⁾Filed with this Annual Report on Form 10-K for the year ended December 31, 2013

48

American Natural Energy Corporation

Consolidated Financial Statements
December 31, 2013 and 2012

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of American Natural Energy Corporation
Tulsa, Oklahoma

We have audited the accompanying consolidated balance sheets of American Natural Energy Corporation and its subsidiaries (collectively, the “Company”) as of December 31, 2013 and 2012 and the related consolidated statements of operations and other comprehensive income, stockholders’ equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Natural Energy Corporation and its subsidiaries at December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America..

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 of the consolidated financial statements, the Company incurred a net loss in 2013 and has a working capital deficiency and an accumulated deficit at December 31, 2013. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ MaloneBailey, LLP
Houston, Texas
www.malonebailey.com
May 14, 2014

F-2

AMERICAN NATURAL ENERGY CORPORATION
Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements.
F-3

AMERICAN NATURAL ENERGY CORPORATION
Consolidated Statements of Operations and Other Comprehensive Income (Loss)

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

F-4

AMERICAN NATURAL ENERGY CORPORATION
Consolidated Statements of Changes in Stockholders’ Equity

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

F-5

AMERICAN NATURAL ENERGY CORPORATION
Consolidated Statements of Cash Flows

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

F-6

AMERICAN NATURAL ENERGY CORPORATION
Consolidated Statements of Cash Flows (continued)

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

F-7

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

F-8

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

Oil and natural gas properties

The Company follows the full cost method of accounting for oil and natural gas properties. The Company defers the costs of exploring for and developing oil and natural gas reserves until such time as proved reserves are attributed to the properties. At that time, the deferred costs are amortized on a unit-of-production basis. Such costs include land acquisition costs, geological and geophysical costs, costs of drilling wells, asset retirement costs, interest costs on major development projects and overhead charges directly related to acquisition, exploration and development activities.

The net book value of all capitalized oil and natural gas properties within a cost center, less related deferred income taxes, is subject to a full cost ceiling limitation which is calculated quarterly. Under the ceiling limitation, costs may not exceed an aggregate of the present value of future net revenues attributable to proved oil and natural gas reserves discounted at 10 percent using current prices, plus the lower of cost or market value of unproved properties included in the amortization base, plus the cost of unevaluated properties, less any associated tax effects. Any excess of the net book value, less related deferred tax benefits, over the ceiling is written off as expense. Impairment expense recorded in one period may not be reversed in a subsequent period even though higher oil and gas prices may have increased the ceiling applicable to the subsequent period. Based on the results of the ceiling limitation test, no impairment was recorded in the years ended December 31, 2013 and 2012.

In certain instances, the Company may capitalize interest on the cost of unevaluated oil and natural gas properties excluded from amortization, based on the Company's weighted average cost of borrowings used to finance the expenditures. For the years ended December 31, 2013 and 2012, the Company did not capitalize any interest to its unevaluated properties.

Unevaluated oil and natural gas properties are reviewed on an annual basis for impairment.

Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in the relationship between costs and the value of proved reserves or the underlying value of unproved properties, in which case a gain or loss is recognized.

The Company is in the process of exploring its unproved oil and natural gas properties and has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of amounts shown for oil and natural gas properties is dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s interest in the underlying oil and gas leases, the ability of the Company to obtain necessary financing to complete their exploration and development and future profitable production or sufficient proceeds from the disposition thereof. The Company is, therefore, unable to estimate when these costs will be included in the amortization computation.

Equipment and other fixed assets

Equipment and other fixed assets are stated at cost less accumulated depreciation. Depreciation expense is determined using a straight-line method over the estimated useful lives of the assets. The ranges of estimated useful lives for financial reporting are as follows:

F-9

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in income for the period. Maintenance and repairs are charged to expense as incurred.

Foreign exchange and currency translation

The Company's functional and reporting currency is the U.S. dollar. Transactions denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect on the date of the transactions. Exchange gains or losses on transactions are included in earnings. For Gothic, whose functional currency is the Canadian dollar, the results of operations are translated from local currencies into U.S. dollars using average exchange rates during each period; assets and liabilities are translated using exchange rates at the end of each period. Adjustments resulting from the translation process are reported in a separate component of other comprehensive income and are not included in the determination of the results of operations.

Revenue recognition

Revenues from the sale of oil produced are recognized upon the passage of title, net of royalties and net profits interests. Revenues from natural gas production are recorded using the sales method, net of royalties and net profits interests, which may result in more or less than the Company's share of pro-rata production from certain wells. When natural gas sales volumes exceed the Company's entitled share and the overproduced balance exceeds the Company's share of the remaining estimated proved natural gas reserves for a given property, the Company will record a liability. Imbalances at December 31, 2013 and 2012 were insignificant. The Company's policy is to expense the pro-rata share of lease operating costs from all wells as incurred.

The Company’s oil production is sold under market sensitive or spot price contracts. Oil sales to Sunoco, Inc (formerly Texon L.P.) of $3,260,958 and $2,034,070 in 2013 and 2012, respectively, accounted for 99% total oil and gas sales for both years. The Company’s accounts receivable are primarily due from exploration and production companies which own an interest in the properties the Company operates and from purchasers of oil and natural gas. The industry concentration has the potential to impact the Company’s exposure to credit risk because such companies may be similarly affected by changes in economic and industry conditions.

Operations income represents charges billed to non-operator working interest owners who own a working interest in the wells in which the Company serves as operator. The income is recognized in the month in which oil and gas is produced.

F-10

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

Asset retirement obligations

Effective January 1, 2003, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 410-20, Accounting for Asset Retirement Obligations. This statement applies to obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction and development of the assets. ASC 410-20 requires that the fair value of a liability for a retirement obligation be recognized in the period in which the liability is incurred. For oil and gas properties, this is the period in which an oil or gas well is acquired or drilled. The asset retirement obligation is capitalized as part of the carrying amount of our oil and gas properties at its discounted fair value. The liability is then accreted each period until the liability is settled or the well is sold, at which time the liability is reversed.

Income taxes

The Company accounts for income taxes under FASB ASC 740, Accounting for Income Taxes. Deferred tax assets and liabilities are determined based on the differences between the tax bases of assets and liabilities and those reported in the consolidated financial statements. The deferred tax assets or liabilities are calculated using the enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are recognized to the extent that they are considered more likely than not to be realized. Income taxes and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or income tax returns.

Use of estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant areas requiring the use of estimates are assessing the recoverability of capitalized oil and natural gas property costs, oil and gas reserve estimates, asset retirement obligations and recoverability of deferred tax assets. Actual results could differ from those estimates.

Earnings (loss) per share

Basic earnings (loss) per share are computed by dividing net income or loss (the numerator) by the weighted average number of shares outstanding during the period (the denominator). The computation of diluted earnings per share is the same as for basic earnings per share except the denominator is increased to include the weighted average additional number of shares that would have been outstanding if previously granted stock options had been exercised, unless they are anti-dilutive.

Comprehensive income (loss)

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to report net income (loss) as a component of comprehensive income (loss) in the consolidated financial statements. Comprehensive income (loss) is defined as the change in equity of a business enterprise arising from non-owner sources. The Company had other comprehensive income of $0 and $284,235 for 2013 and 2012 respectively as a result of foreign exchange translation gains and losses. As of December 31, 2013 and 2012, accumulated other comprehensive income (loss) was composed solely of foreign currency translation gains and losses.

F-11

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

F-12

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

F-13

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

On September 10, 2009, the Company entered into a $500,000 unsecured short-term note with Citizens Bank of Oklahoma. The balance of the note was $422,464 and accrued interest at 10% per annum on December 31, 2011. On January 31, 2012, the loan was modified with a new interest rate of 12% and a maturity date of July 31, 2012. On July 31, 2012, the loan was further modified to extend the maturity date to September 30, 2013. On September 30, 2013, the loan was modified to extend the maturity date to February 28, 2014. All accrued interest is payable monthly. Proceeds of $475,500 from the note were paid to the Company and the remaining proceeds of $24,500 were used to pay off a prior note with Citizens Bank of Oklahoma. Net payments of $130,000and $226,543 were made during the twelve months ended December 31, 2013 and 2012. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded that the revised terms constituted a debt modification, rather than a debt extinguishment or a troubled debt restructuring.

F-14

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

As of December 31, 2013 and December 31, 2012, the Company had an outstanding note to TPC Energy with a principal balance of $164,183. On March 31, 2013, the due date of the note was extended to March 31, 2014. Other terms of the note remain unchanged. The company evaluated the extension under FASB ASC 470-50 and FASB ASC 470-60 and concluded the revised term constituted a debt modification, rather than a debt extinguishment or a troubled debt restructuring.

During the first quarter of 2012, TPC Energy advanced $250,000 to the Company with repayment of the loan due one year from the date of advancement and with interest payable monthly. In addition to the $250,000, the Company assigned 50% of its interest in its share of the Liquidation Agents account distributions to TPC Energy for the life of the note. The rights were valued at $39,619 and were recorded as a discount on the note, which is being amortized over the life of the note using the effective interest method. During the year ended December 31, 2012, $29,626 of the discount was amortized to interest expense. On March 11, 2013, the due date of the note was extended to March 11, 2014 and TPC Energy will continue to receive the 50% of the company’s interests in its share of the Liquidation Agents account distributions for an extra year until March 11, 2014. The Company evaluated the extension under FASB ASC 470-50 and determined that the modification was substantial and qualified as a debt extinguishment. The additional rights were valued at $39,953 and were recorded as a loss on debt extinguishment. The remaining $9,994debt discount was also amortized during the three months ended March 31, 2013. The TPC note is included in Notes Payable – Related Parties on the balance sheet as of December 31, 2013.

On February 17, 2011, the Company entered into a $500,000 note payable with Mike Paulk and Steven Ensz, directors of the Company, with an annual interest rate of 10%. The note, initially due February 15, 2012 has been renewed and extended until February 17, 2014. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded that the revised terms constituted a debt modification rather than a debt extinguishment or a troubled debt restructuring. The Company received an additional $5,000 during the year ended December 31, 2013. Payments totaling $74,444 and $55,556 were made during the years ended December 31, 2013 and 2012.

The Company entered into a financing agreement with TCA Global Credit Master Fund, LP during the first quarter of 2012. Proceeds of the financing are to be used for the drilling and completion of wells included in the Company’s inventory of Proved Undeveloped reserves (“PUD”). The Company has a commitment for a total amount of $3 million, before fees and expenses, through the issuance of a series of $1 million debentures. The debenture is secured by a first priority, perfected security interest and mortgage in oil and gas leases and properties. At no time shall the investor funds exceed 65% of the drilling and completion cost of the PUD’s with the balance provided by the Company’s generated funds.

In January 2012, the first tranche TCA debt of $1 million was issued. The debt was due on December 29, 2012 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Fees paid in cash and common stock to TCA Global Credit Master Fund, LP of $195,440 were recorded as a debt discount. As of December 31, 2012 the first tranche TCA debt was paid in full and the debt discount was fully amortized.

F-15

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

In connection with the issuance of first tranche TCA debt, the Company paid cash fees and issued shares and warrants to other third parties valued at $273,833. These cash fees, common shares and warrants were recorded as deferred financing costs, which were fully amortized as of December 31, 2012.

In August 2012, the second tranche TCA debt of $1 million was issued. The debt is due on August 31, 2013 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Out of $1 million debt proceed, $333,333 was used to pay off the remaining principal balance of the first tranche TCA debt, $497,000 was kept in escrow account to pay off two legal settlements, and net proceeds of $111,167 was received by the Company. As of December 31, 2012, the two legal cases were settled by paying the plaintiffs $374,767, and the remaining debt proceed of $122,233 in the escrow account was released and received by the Company. Fees paid and to be paid in cash totaling $157,500 to TCA Global Credit Master Fund, LP were recorded as a debt discount. As of December 31, 2012, $81,849 of debt discount had been amortized.

In connection with the issuance of second tranche TCA debenture, the Company paid cash fees and issued shares and warrants to other third parties valued at $117,489. These cash fees, common shares and warrants were recorded as deferred financing costs, of which $61,570 have been amortized as of December 31, 2012.

In October 2012, the third tranche TCA debt of $1 million was issued. The debt is due on October 31, 2013 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Out of $1 million debt proceeds, $187,882 was used as advanced payments for the first two payments due on the third tranche and net proceeds of $757,968 was received by the Company. Fees paid and to be paid in cash totaling $154,150 to TCA Global Credit Master Fund, LP were recorded as a debt discount. As of December 31,2012, $43,010 of debt discount has been amortized.

In connection with the issuance of third tranche TCA debenture, the Company paid cash fees to other third parties valued at $50,000.These cash fees were recorded as deferred financing costs, of which $14,363 have been amortized as of December 31, 2012.

In October 2012, the Company issued an additional $150,000 note to TCA. The debt is due on August 31, 2013 and is payable monthly with no interest rate. Payments totaling $50,000 have been made as of December 31, 2012.

In March 2013, the fourth tranche TCA debt of $1 million was issued. The debt is due on March 1, 2014 and is payable monthly with a mandatory redemption fee equal to 10% and interest of 5%. Out of $1 million debt proceeds, $55,550 was paid to TCA for various fees, and net proceeds of $944,450 were received by the Company. The Company will also pay TCA $100,000 in cash in lieu of a stock bonus related to the issuance of the note. Fees paid and to be paid in cash totaling $155,550 to TCA Global Credit Master Fund, LP were recorded as a debt discount.

In connection with the issuance of fourth tranche TCA debenture, the Company paid cash fees to other third parties valued at $50,000. These cash fees were recorded as deferred financing costs.

F-16

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

F-17

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

On August 13, 2012, the Company entered into a Securities Purchase Agreement with Palo Verde Acquisitions, LLC, pursuant to which the Company sold to Palo Verde (1) a $2,000,000 12% unsecured, convertible Debenture due August 13, 2014 (the "Palo Verde Debenture") and (2) warrants to purchase up to 20,000,000 shares of common stock of the Company at an exercise price of US$0.23 per share and expiring on August 13, 2014 (the "Warrants"). The aggregate consideration paid to the Company by Palo Verde for the Palo Verde Debenture and the Warrants was $2,000,000.

Interest on the outstanding principal amount of the Palo Verde Debenture will accrue at a rate of 12% per annum, and is payable by the Company on a quarterly basis. At the Company's election, interest may be payable by the Company in shares of common stock of the Company in lieu of cash. The entire principal amount of the Palo Verde Debenture is due on August 13, 2014. The Company may not prepay any portion of the principal amount of the Palo Verde Debenture without the prior written consent of Palo Verde.

At any time prior to the payment of the Palo Verde Debenture in full, Palo Verde may elect, in its sole discretion, to convert all or part of the principal amount of the Palo Verde Debenture into shares of common stock of the Company at a conversion rate of US$0.10 per share of common stock. Notwithstanding the foregoing, Palo Verde may not convert any principal amount of the Palo Verde Debenture into common shares of the Company if, following such conversion, Palo Verde and its affiliates would own more than 19.9% of the number of shares of common stock of the Company then outstanding (the "Beneficial Ownership Limitation"), unless approved by the shareholders. The same Beneficial Ownership Limitation applies to the exercise by Palo Verde of any Warrants. The Palo Verde Debenture contains customary adjustment provisions for certain corporate events, such as the payment of stock dividends and stock splits. The Palo Verde Debenture also contains customary events of default.

The Company analyzed the convertible debt and the warrants issued for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable.

The Company further analyzed the convertible debt for a beneficial conversion feature under ASC 470-20 on the date of the note and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $179,066 and was recorded as a debt discount.

In addition, the relative fair value of the warrants was measured using the Black-Scholes Option Pricing Model (see Note 9). The relative fair value was determined to be $779,066.

The total value of the beneficial conversion feature and the relative fair value of the warrants is $958,131, which was recorded as a debt discount. During the years ended December 31, 2013 and 2012, $451,564and $124,214 of the debt discount has been amortized.

Effective December 31, 2012, Palo Verde exercised its option under the Palo Verde Purchase Agreement to purchase from the Company (1) an additional $1,000,000 12% convertible debenture due December 31, 2014 (the “$1,000,000 Debenture” and, together with the $2,000,000 Debenture, the “Debentures”), which is convertible into shares of our common stock at a conversion rate of $0.10 per share of common stock, and (2) additional warrants to purchase up to 10,000,000 shares of our common stock at an exercise price of $0.23 per share and expiring on December 31, 2014. As of December 31, 2012, we received aggregate consideration of $500,000 from Palo Verde for the $1,000,000 Debenture and Warrants, with the remaining $500,000 collected in January 2013.

F-18

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

F-19

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

In connection with the closing of the $1 million second tranche in August 2012, the Company issued finder’s fees consisting of the following: 476,190 shares of common stock of the Corporation, 217,391 warrants to purchase the common stock of the Corporation at an exercise price of $0.23 per share with a contractual term of two years. The fair values of the shares of $50,000 and the warrants of $17,489 were recorded as deferred financing costs and are being amortized over the life of the note using the effective interest method. The warrants were valued using the Black-Scholes valuation model with the following assumptions: term of 2 years, risk-free interest rate of 0.25%, expected volatility of 324.72% and no expected dividends.

On February 17, 2012, the Company issued 1.5 million Restricted Shares each to Mike Paulk and Steven Ensz as compensation for personal guarantees provided in connection with various outstanding financings. The fair value of these shares of $249,000 was recorded as stock based compensation expense in the first quarter of 2012.

On June 8, 2012, the Company completed a private placement of 7 million shares of common stock issued at $0.06 per share for a total of $420,000.

In connection with the closing of the $2 million Palo Verde Acquisition LLC convertible debt, the Company issued 20 million warrants (see Note 6). The fair value of the beneficial conversion feature and relative fair value of the warrants totaling $958,131 was recorded as a debt discount and an addition to additional paid-in capital. The warrants were valued using the Black-Scholes valuation model with the following assumptions: term of 2 years, risk-free interest rate of 0.27%, expected volatility of 276.44% and no expected dividends.

In connection with the closing of the $1 million Palo Verde Acquisition LLC convertible debt, the Company issued 10 million warrants (see Note 6). The relative fair value of the warrants of $351,651 was recorded as a debt discount and an addition to additional paid-in capital. The warrants were valued using the Black-Scholes valuation model with the following assumptions: term of 2 years, risk-free interest rate of 0.25%, expected volatility of 275.55% and no expected dividends.

Treasury Stock

During 2013 the Company completed a repurchase of 1,730,706 shares previously issued to TCA Global Credit Master Fund LP as bonus shares in conjunction with the 2012 financing. The shares were repurchased at an agreed price of $150,000 and are being held in treasury.

F-20

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

Stock option activity for the years ended December 31, 2013 and 2012 is as follows:

At December 31, 2013 and 2012, 2,380,000 and 2,505,000 options have vested and are exercisable at a weighted average exercise price of $0.41 and $0.41, respectively. The weighted average remaining contractual life of options granted at December 31, 2013 and 2012 is 21 months and 33 months, respectively. There is no intrinsic value for the exercisable stock options at December 31, 2013.

On January 1, 2006, the Company adopted ASC 718 which requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair value of the 2,515,000 stock options granted during 2010 and 2009 totaled $944,617. The stock options granted to employees and directors in 2010 vest at 25% immediately and 12.5% per quarter thereafter and expire five years after the date of grant.

F-21

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

At December 31, 2013 and 2012, 30,813,391warrants have vested and are exercisable at a weighted average exercise price of $0.23. The weighted average remaining contractual life of warrants granted at December 31, 2013 and 2012 is 10 months and 22 months, respectively. There is no intrinsic value for the exercisable warrants at December 31, 2013.

The Company granted a total of 596,000 warrants on February 17, 2012 and 217,391 warrants on September 27, 2012 with exercise prices ranging from of $0.10 to $0.25 as a finders’ fee for the TCA Global Credit Master Fund financing. The warrants vested immediately and expire on the five year and two year anniversary of the grant date respectively. The fair value of the warrants was measured using the Black-Scholes Option Pricing Model and recorded as a deferred financing cost. The fair value of the 596,000 was fully amortized during the year using the effective interest method. The fair value of the 217,391 warrants is being amortized over the life of the debt using the effective interest method. The total deferred financing cost recorded related to these warrants was $68,046.

F-22

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

The Company granted 20,000,000 warrants on August 13, 2012 and 10,000,000 warrants on December 31, 2012 with an exercise price of $0.23 as investor warrants for the convertible debentures issued to Palo Verde. The warrants vested immediately and expire on the two year anniversary of the grant date. The relative fair value of these warrants was recorded as a debt discount and is being amortized over the life of the debts using the effective interest method.

F-23

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

During the first quarter of 2012 TPC Energy advanced an additional $250,000 to the Company with repayment of the loan due one year from the date of advancement and with interest payable monthly. The note carries an interest rate of 5.5% per annum. The due date of the note was extended to March 11, 2014 in March 2013. The Company evaluated the extension under FASB ASC 470-50 and determined that the modification was substantial and qualified as a debt extinguishment. In addition to the additional $250,000, the Company assigned 50% of its interest in its share of the Liquidation Agents account distributions to TPC Energy for the life of the note. The rights were valued at $39,619 and were recorded as a discount on the note, which is being amortized over the life of the note using the effective interest method. The TPC note is included in Notes Payable – Related Parties on the balance sheet as of December 31, 2012. The Company paid TPC Energy $24,000 and $31,000 for interest on all the outstanding TPC Energy loans during 2013 and 2012 respectively. On March 11, 2013, the Company extended the due date of the note to March 11, 2014. On March 11, 2014, the Company extended the note to March 11, 2015. On August 13, 2012, the Company entered into a Securities Purchase Agreement with Palo Verde Acquisitions, LLC, pursuant to which the Company sold to Palo Verde (1) a $2,000,000 12% unsecured, convertible Debenture due August 13, 2014 (the "Palo Verde Debenture") and (2) warrants to purchase up to 20,000,000 shares of common stock of the Company at an exercise price of US$0.23 per share and expiring on August 13, 2014 (the "Warrants"). The aggregate consideration paid to the Company by Palo Verde for the Palo Verde Debenture and the Warrants was $2,000,000.

F-24

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

The provision for income taxes is different than the amounts computed using the applicable statutory federal income tax rate. The differences for the years ended December 31, 2013 and 2012 are summarized as follows:

F-25

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

F-26

Unproved Property Costs

The following summarizes the capitalized unproved property costs excluded from amortization as of December 31, 2013 and 2012. All costs represent investment in unproved property in Louisiana and will be evaluated over several years as the properties are explored.

F-27

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

Costs Incurred in Oil and Gas Acquisition, Exploration and Development

Results of Operations from Oil and Gas Producing Activities

The Company’s results of operations from oil and gas producing activities are presented below for the years 2013 and 2012. The following table includes revenues and expenses associated directly with the Company’s oil and gas producing activities. It does not include any general and administrative costs or any interest costs.

Oil and Gas Reserve Quantities (unaudited)

The reserve information presented below is based on reports prepared by independent petroleum engineers Collarini Associates.

The information is presented in accordance with regulations prescribed by the Securities and Exchange Commission. Reserve estimates are inherently imprecise. These estimates were generally based upon extrapolation of historical production trends, analogy to similar properties and volumetric calculations. Accordingly, these estimates are expected to change, and such change could be material and occur in the near term as future information becomes available.

Proved oil and gas reserves represent the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under current economic and operating conditions. Proved developed oil and gas reserves are those expected to be recovered through existing equipment and operating methods. All of the Company’s oil and natural gas producing activities are located in the United States of America.

F-28

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

December 31, 2013

December 31, 2012

The Company recognized revisions in the years ended December 31, 2013 and December 31, 2012. The revisions of (307.05) Mbble in 2013 and (890.64)Mbble in 2012 were due to both quantity and price revisions.

F-29

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

Standardized Measure of Discounted Future Net Cash Flows (unaudited)

FASB ASC 932, Disclosures About Oil and Gas Producing Activities, (“ASC 932”) prescribes guidelines for computing the standardized measure of future net cash flows and changes therein relating to estimated proved reserves. The Company has followed these guidelines which are briefly discussed below.

Future cash inflows from oil and gas reserves use the unweighted arithmetic average of the price on the first day of each month within the 12-month period prior to the end of the reporting period adjusted by differentials to account for product quality, transportation and marketing. Future production and development costs are determined by applying year-end prices and costs to the estimated quantities of oil and gas to be produced. The prices used at December 31, 2013 and December 31, 2012 were $107.96 and $105.76 per barrel for oil, respectively and $3.67 and $2.76 per mcf for gas at December 31, 2013 and 2012 respectively. Estimates are made of quantities of proved reserves and the future periods during which they are expected to be produced based on year-end economic conditions. Estimated future income taxes are computed using current statutory income tax rates including consideration for current tax basis of properties and related carryforwards, giving effect to permanent differences and tax credits. The resulting future net cash flows are reduced to present value amounts by applying a 10% annual discount factor.

The assumptions used to compute the standardized measure are those prescribed by the Financial Accounting Standards Board and, as such, do not necessarily reflect our expectations of actual revenue to be derived from those reserves nor their present worth. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these estimates are the basis for the valuation process.

The following sets forth our future net cash flows relating to proved oil and gas reserves based on the standardized measure prescribed in ASC 932:

F-30

American Natural Energy Corporation
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

The principal sources of change in the standardized measure of discounted future net cash flows are as follows:

F-31

SIGNATURES

            Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

            Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.