Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended: December 31, 2014

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

Commission file number 001-35432

ZaZa Energy Corporation

(Exact name of registrant as specified in its charter)

ZaZa Energy Corporation
1301 McKinney St Suite 2800
Houston, Texas 77010

(Address of principal executive office)

Registrant’s telephone number, including area code: 713-595-1900

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o    No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x

Indicate by check mark whether the Registrant (i) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days.  Yes x  No o

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’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.  o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

As of February 28, 2015, there were 13,291,714 shares of common stock, par value $0.01 per share, outstanding.

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates, computed by reference to the closing sales price of such stock, as of June 30, 2014 was $36.3 million.  (For purposes of determination of the aggregate market value, only directors, executive officers and 10% or greater stockholders have been deemed affiliates.)

Table of Contents

ZAZA ENERGY CORPORATION

TABLE OF CONTENTS

1

Table of Contents

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  All statements, other than statements of historical fact, including without limitation, statements and projections regarding the Company’s future financial position, operations, performance, business strategy, returns, budgets, reserves, levels of production and costs, statements regarding future commodity prices and statements regarding the plans and objectives of the Company’s management for future operations, are forward-looking statements.  The Company’s forward looking statements are typically preceded by, followed by or include words such as “will,” “may,” “could,” “would,” “should,” “likely,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “goal,” “project,” “plan,” “intend” and similar words or expressions.  The Company’s forward-looking statements are not guarantees of future performance and are only predictions and statements of the Company’s beliefs based on assumptions that may prove to be inaccurate.  Forward-looking statements involve known, unknown or currently unforeseen risks and uncertainties that may be outside of the Company’s control and may cause the Company’s actual results and future developments to differ materially from those projected in, and contemplated by, such forward-looking statements.  Risks, uncertainties and other factors that could cause the Company’s actual results to materially differ from the expectations reflected in the Company’s forward-looking statements include, without limitation, the following:

·                                      our registered public accounting firm for the year ended December 31, 2014 expressing doubt about our ability to continue as a going concern and our ability to maintain sufficient liquidity and continue as a going concern;

·                                      requirements to repurchase our 10.00% Senior Secured Notes due 2017 or our 9.00% Convertible Senior Notes due 2017;

·                                      our substantial level of indebtedness;

·                                      the impact of our current financial condition on our business operations and prospects;

·                                      fluctuations in the prices for, and demand for, oil, natural gas and natural gas liquids;

·                                      our ability to raise necessary capital in the future;

·                                      problems with our joint ventures or joint venture partners;

·                                      exploratory risks associated with new or emerging oil and gas formations;

·                                      risks associated with drilling and operating wells;

·                                      inaccuracies and limitations inherent in estimates of oil and gas reserves;

·                                      our ability to replace oil and gas reserves;

·                                      our concentration in a single geographic area;

·                                      uninsured losses from oil and gas operating risks;

·                                      legislation and governmental regulations, including federal or state regulation of hydraulic fracturing;

·                                      our dependency upon third-party gathering, transportation and processing facilities;

·                                      our size relative to our peers;

·                                      our ability to use net operating loss carryforwards;

·                                      failures in our acquisition strategy or integration of our acquisitions;

·                                      hurricanes and natural disasters;

·                                      access to water to conduct hydraulic fracturing;

·                                      payments for hedging activities, if undertaken, that are not offset by production sales; and

·                                      our ability to assume a greater operational role with respect to our assets in the future.

In addition to these factors, important factors that could cause actual results to differ materially from our expectations, and specific risks involved with investing in our common stock, are disclosed under “Risk Factors” included under Item 1A of this Annual Report and are incorporated by reference herein.

Any forward-looking statements made by the Company in this Annual Report are based only on information currently available to the Company and speak only as of the date on which they are made.  The Company undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future developments or otherwise.  Accordingly, you should not place any undue reliance on any of our forward-looking statements.

2

Table of Contents

PART I

ITEMS 1 AND 2 - BUSINESS AND PROPERTIES

ZaZa Energy Corporation is an independent oil and gas company focused on the exploration and production of unconventional and conventional oil and gas assets.  Unless the context requires otherwise, references in this Annual Report on Form 10-K to “ZaZa,” “Company,” “we,” “us,” and “our” are to ZaZa Energy Corporation and its consolidated subsidiaries.  See the “Glossary of Oil and Gas Terms” above for the definitions of certain terms in this Annual Report.

We currently operate primarily through joint ventures in the Eagle Ford East trend in East Texas and the Eagle Ford trend in South Texas.  As of December 31, 2014, we held (i) approximately 45,000 net acres in our areas of operations; and (ii) proved reserves of approximately 1,011 MBoe having a standardized measure of approximately $14.5 million.  Our common stock is traded on the NASDAQ Capital Market (“NASDAQ”) under the trading symbol ZAZA.

Strategy

Our strategy is to enhance shareholder value through consistent growth in cash flows by focusing on the organic development of our existing assets within our core areas.  We also look for opportunities to diversify and build upon our current portfolio through the acquisition of additional unconventional and conventional assets with a focus on Texas.  Key components of our business strategy include the following:

Obtain Strategic and Operational Advantages by Being a “First Mover.”  We seek to be one of the first oil and gas companies to identify new unconventional shale trends.  ZaZa has established a track record of identifying successful emerging plays, including those in DeWitt, Lavaca, Gonzalez and Fayette counties in South Texas and the Eagle Ford East trend in East Texas.  Being one of the first enterprises to acquire substantial properties in a new oil and gas play offers several operational and strategic advantages.  Specifically, being a “First Mover” decreases our acreage acquisition costs, increases our ability to acquire contiguous acreage, limits opportunities for our competitors and increases our attractiveness as a joint venture partner.  Our management intends to continue to acquire working interests in both prospective acreage and producing wells when the opportunity arises and to do so at attractive valuations.

Reduce Operational Costs and Risk Through Joint Ventures.  We have been able to control operational and capital costs by entering into joint ventures for the operation of our properties with larger petroleum exploration and production companies.  Such joint venture partners have the capital resources to advance the unconventional drilling programs that are necessary to develop shale plays.  Additionally, joint ventures allow for a lower proportionate risk of loss to our shareholders in the event of an unsuccessful well.  While the Company intends to assume a greater operational role with respect to our assets, the use of joint ventures increases our ability to deploy capital on the evaluation and acquisition of new projects.

Low-Cost Operator.  ZaZa has served as the operator of 30 wells, and its experienced technical team has worked closely with Hess and EOG in the drilling of our wells operated by those companies.  Collectively, ZaZa’s technical team has participated in the drilling of thousands of wells over the course of their careers.  The Company expects to leverage this experience by maintaining more operational control in its new ventures.  In doing so, ZaZa’s engineering team is focused on reducing well costs and being a low-cost, highly efficient operator of its new wells.

Maintain Financial Flexibility.  We continue to take proactive steps to streamline and strengthen the Company’s balance sheet to maintain the financial flexibility needed to provide consistent reserves growth.  We have utilized capital markets to successfully complete debt and equity transactions and realized shareholder value by monetizing assets.

2015 Outlook

Beginning in 2015, ZaZa has the right to propose new development wells in specific locations and maintain its desired minimum drilling pace.  Following its technical evaluation and an internal acreage high-grading campaign focused on vertical commingled development (Buda-Rose “stack and fracs”), the Company has identified approximately 800 well locations on the basis of 80-acre spacing. During the first quarter of 2015, the Company proposed the first two Buda-Rose vertical wells in a 16-well vertical commingled development program to be located in Madison and Walker Counties.  Each proposed well is estimated to cost approximately $3.5 million and estimated to deliver an internal rate of return of approximately 40% at February 2015 commodity prices.  ZaZa expects the production results of the newly proposed wells to be similar to those achieved by the Company’s previous Toby #1V (cumulative one-year production of approximately 181 Mboe), Grisham #1V (cumulative one-year production of approximately 191 Mboe), and Laura Unit #1V (cumulative one-year production of approximately 136 Mboe) wells. Depending on our joint-venture partners’ elections to participate in these two proposals, our capital expenditures to complete these two wells would range between approximately $4 million and $7 million.

ZaZa’s ability to fund its drilling program, operations, and lease maintenance costs, however, is dependent upon our liquidity, which has uncertain prospects for 2015 unless we can secure additional financing in the near future.  We are currently attempting to refinance $13.9 million 10% Senior Secured Notes due 2017 (the “Senior Secured Notes”) as each holder of this debt has an option, beginning on March 23, 2015, to elect to require us to repurchase that holder’s Senior Secured Notes within 30 days of making such an election.  We do not currently have sufficient cash on hand to fund this repurchase, and even without considering the repurchase, we do not anticipate having sufficient cash and cash equivalents to continue as a going concern through May 2015 without an asset sale or additional cash

3

Table of Contents

financing.  Our board of directors and management are seeking to restructure our debt and obtain additional cash funding for the 2015 drilling program.  We have thus far been unable to find a solution to our liquidity challenges and we can offer no assurance that a solution will be found.  ZaZa has also retained an advisor and initiated a process to evaluate broader transactions, such as new partnerships and joint ventures.

More details regarding our balance sheet initiatives and liquidity can be found under the caption “Balance Sheet Initiatives and Other Transactions” and under “Item 1A. Risk Factors” and “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Areas of Operations

ZaZa owns producing and non-producing oil and gas acreage in proven or prospective basins that are located in South Texas and East Texas.  Almost all of our assets, including long-lived assets, are located within the United States.  Except for an immaterial amount of cash held by our foreign subsidiary, which we are in the process of dissolving, we have no assets or operations outside of the United States.  The following is a summary of our major operating areas.

East Texas — Eagle Ford East Trend

Our acreage in East Texas falls within an eastern extension of the Eagle Ford and Woodbine that we refer to as the Eagle Ford East trend.  As of December 31, 2014, ZaZa owned approximately 41,000 net acres in East Texas.  Our use of “East Texas” refers to Houston, Leon, Madison, Grimes, Walker, Trinity and Montgomery counties and the surrounding region. Our East Texas acreage is divided into two Development Areas, both of which are described in more detail below under the caption “Joint Venture — East Texas Joint Venture with Quantum.”

South Texas — Eagle Ford Trend

Our acreage in South Texas is located principally in DeWitt and Lavaca counties and falls within the Eagle Ford trend.  As of December 31, 2014, ZaZa owned approximately 3,700 net acres in South Texas.  Our use of “South Texas” refers to DeWitt and Lavaca counties and the surrounding region.

Joint Ventures

East Texas Joint Venture with EOG

On March 21, 2013, we entered into a Joint Exploration and Development Agreement (the “JEDA”) with EOG Resources, Inc. (“our counterparty” or “EOG”) for the joint development of certain of our East Texas properties located in Walker, Grimes, Madison, Trinity, and Montgomery Counties, Texas.  As of December 31, 2014, approximately 147,000 net acres of the joint venture in East Texas were subject to this agreement and its subsequent amendments.  Our counterparty acts as the operator, has paid us certain cash amounts, has borne 100% of the drilling and completion costs of certain specified wells, and has paid a portion of our share of any additional seismic or well costs in order to earn its interest in these properties per the JEDA terms.  Initially, ZaZa has retained a 25% working interest and our counterparty has earned a 75% working interest in the acreage.  This joint development was divided into three phases.

The first phase commenced on April 2, 2013 and has been completed. In this phase, we transferred approximately 20,000 net acres to our counterparty in exchange for a cash payment by our counterparty to us of $10 million and an obligation of our counterparty to drill and pay 100% of the drilling and completion costs of three wells, the last of which was completed on December 20, 2013.

On September 25, 2013, ZaZa and its counterparty amended and restated the JEDA, which resulted in the following transactions being closed on October 15, 2013:

·                  Phase II Acceleration.  Our counterparty accelerated Phase II of the joint venture, and we assigned approximately 20,000 net acres to our counterparty in exchange for (i) cash consideration of $17 million and (ii) approximately $3 million of interests (based on an independent reserves report) in 15 producing wells of our counterparty located outside of the Area of Mutual Interest or “AMI” (established by the JEDA). Also, during Phase II, our counterparty agreed to drill two horizontal wells and one vertical well in the parties’ AMI, carry ZaZa’s interests in those wells and provide a miscellaneous work and land carry of up to $1.25 million. On August 7, 2014, we announced that our counterparty had completed drilling the second well that was required to be drilled as part of Phase II of the joint development program.  The third and final Phase II well has reached target depth and is in the process of being recompleted.

·                  Phase III Acceleration. ZaZa assigned approximately 7,800 net acres from the former Phase III acreage for which ZaZa received approximately $11 million of interests (based on an independent reserves report) in the 15 producing wells of

4

Table of Contents

our counterparty (part of Phase II and referenced above). In addition, our counterparty was given the option, until January 31, 2014, to acquire an interest in the remaining approximately 12,300 former Phase III net acres from ZaZa. As described below, our counterparty elected to acquire an interest in all of the remaining Phase III net acres.

·                  Exchange of Leases and Wells.  Our counterparty acquired approximately 19,000 additional net acres and interests in related wells in the parties’ Area of Mutual Interest, and assigned to ZaZa a 25% interest in the interests acquired by the counterparty in these leases and wells. In consideration for ZaZa’s participation in our counterparty’s leases and producing wells, ZaZa assigned to our counterparty approximately 13,875 additional net acres and paid approximately $700,000 in cash.

On March 7, 2014, ZaZa entered into a further amendment to the JEDA pursuant to which we agreed to assign to the counterparty approximately 9,600 net acres, which represents a 75% working interest in our remaining Phase III acreage, in exchange for cash consideration of approximately $4.7 million and the carry by the counterparty of our share of future drilling and completion costs in an aggregate amount up to approximately $9.2 million.  As of December 31, 2014, the $9.2 million of carried costs have been fully deployed.

Also pursuant to the amendment and effective March 7, 2014, we and our counterparty agreed to terminate that certain Participation Agreement, effective as of March 1, 2012, by and between the Company and Range Texas Production, LLC (“Range”) (such agreement, as amended, the “Range Agreement”).  Range’s rights and obligations under the Range Agreement were assigned to, and assumed by, the counterparty pursuant to that certain Quitclaim Assignment and Bill of Sale, effective as of December 1, 2013, by and between Range and the counterparty.

In December 2014, EOG satisfied the last of its drilling obligations under the JEDA.  While selected JEDA provisions survive, the joint venture is now principally governed by the Joint Operating Agreement among EOG, ZaZa, and an affiliate of Quantum Energy Partners.  Pursuant to its terms, ZaZa now has the right to propose new development wells and maintain its desired minimum drilling pace.

East Texas Joint Venture with Quantum

On September 18, 2014, ZaZa and an affiliate of Quantum Energy Partners (“Quantum”) closed the Purchase and Sale Agreement originally entered into on August 21, 2014 (the “Quantum Purchase and Sale Agreement”). The Quantum Purchase and Sale Agreement was amended by Amendment No. 1 to Quantum Purchase and Sale Agreement, dated September 16, 2014 (“Quantum Amendment No.1”), to allow Quantum to assign its rights under the Purchase and Sale Agreement to a different affiliate and to address other technical matters. The Company also entered into an East Texas Development Agreement, dated September 18, 2014, by and between ZaZa and Quantum (the “Quantum Development Agreement”).  The Quantum Development Agreement establishes an area of mutual interest for future acreage acquisitions in Walker, Grimes, Madison, Trinity and Houston counties in Texas. The Quantum Purchase and Sale Agreement, Quantum Amendment No.1 and the Quantum Development Agreement are collectively referred to as the “Quantum Agreements”. Pursuant to the terms of the Quantum Agreements:

·                  ZaZa assigned to Quantum an approximately 4 percent working interest (6,000 of ZaZa’s net acres) in undeveloped leases within ZaZa’s East Texas joint venture with EOG.  ZaZa retained its interest in all existing wells in the East Texas joint venture and is reserving the right to participate with respect to Quantum’s working interest in the next 15 East Texas joint venture wells that are spudded, drilled and completed after the closing of the Quantum transaction, as long as those wells are spudded, drilled and completed on or before the second anniversary of the closing of the transaction (the “Reserved Wells”).

·                  ZaZa received $11 million in cash as initial consideration and the right to receive Quantum’s interest in certain of the Reserve Wells.

·                  ZaZa will receive ongoing G&A and cost reimbursements from Quantum for providing services related to their jointly owned assets in Walker, Grimes, Madison, Trinity, and Houston counties.

·                  Quantum has the right to cause ZaZa to purchase Quantum’s interest in the jointly owned assets on an all or nothing basis for a cash price based on Quantum’s initial consideration paid of $11 million plus any out-of-pocket cost of acquiring and renewing leases under the Quantum Agreements on September 17, 2016 (the “Quantum Put Option”).

Following the closing of these Quantum Agreements, ZaZa’s East Texas acreage holdings comprise two separate development areas, each with different operators and ownership structures:

·                  Madison, Walker, and Grimes Counties. The Madison-Walker-Grimes development area comprises approximately 147,000 gross acres of the East Texas joint venture and is operated by EOG. ZaZa holds an approximately 21% working

5

Table of Contents

interest, or approximately 31,000 net acres and Quantum holds an approximately 4% working interest, or 6,000 net acres in this area. During the next two years, ZaZa has the option to participate for both its and Quantum’s working interest—for a total of a 25% working interest to ZaZa—in the next 15 wells drilled within the area. ZaZa also retained its full 25% working interest in all wells spudded prior to the closing of the Quantum Agreements.  Following its technical evaluation and an internal acreage high-grading campaign focused on vertical commingled development (Buda-Rose “stack and fracs”), the Company has identified approximately 800 well locations on the basis of 80-acre spacing.  During the first quarter of 2015, ZaZa proposed the first two Buda-Rose vertical wells in a 16-well vertical commingled development program to be located in Madison and Walker Counties.

·                  Houston, Trinity, and Leon Counties. The Houston-Trinity-Leon development area comprises approximately 10,000 net acres and is operated and owned 100% by ZaZa. This acreage is not subject to the Quantum Agreements. ZaZa is preparing the acreage block in Houston and Trinity counties to be drill ready from a unit formation perspective, and the Company’s leasing is now focused on contiguous acreage additions.

South Texas Joint Venture with Sabine

On September 17, 2013, ZaZa entered into an agreement with Sabine South Texas LLC (“Sabine”), a subsidiary of Sabine Oil & Gas Corporation, for the joint development of a prospect in the Eagle Ford shale formation located in Lavaca and DeWitt Counties, Texas.  Under this agreement, Sabine agreed to jointly develop with us up to approximately 7,600 gross acres that we owned and that comprised a portion of our interest in South Texas.  Sabine agreed to bear 100% of the drilling and completion costs of two commitment wells and up to $750,000 of construction costs related to gathering and infrastructure in order to earn a 75% working interest in 7,600 acres in the “Sweet Home Prospect,” which is in DeWitt and Lavaca Counties, and a well that we refer to as the “Boening well.”  Sabine also agreed to carry up to $300,000 of ZaZa’s expenses related to the extension and renewal of certain leases in the Sweet Home Prospect.

Sabine completed the first commitment well on February 14, 2014 and ZaZa transferred to Sabine a 75% working interest in approximately 3,200 net acres and the Boening well.  Sabine completed the second commitment well on March 11, 2014, and ZaZa transferred to Sabine a 75% working interest in the remaining net acres.  Sabine carried us for the $300,000 of expenses related to extension and renewal of leases in connection with drilling of the second well.  Participating interests in any additional wells drilled or lease acreage acquired in the Sweet Home prospect will be shared 75% by Sabine and 25% by ZaZa under an area of mutual interest that will expire on September 15, 2015 (assuming affirmative elections to participate in such lease acreage acquisition(s)).

Balance Sheet Initiatives and Other Transactions

Balance Sheet Initiatives

Senior Secured Notes with a current principal amount of $13.9 million were issued under the Securities Purchase Agreement, dated February 21, 2012 (as amended, the “Securities Purchase Agreement”) and will mature on February 21, 2017 (subject to earlier call provisions as discussed below). On February 24, 2015, the Company entered into Amendment No. 7 to the Securities Purchase Agreement. Prior to Amendment No. 7, the Securities Purchase Agreement provided that each holder of Senior Secured Notes had the right, beginning on February 21, 2015, to give notice to the Company, requiring the Company to repurchase up to 100% of such holder’s Senior Secured Notes at par plus accrued and unpaid interest (the “Senior Secured Notes Put Option”). The Company would have had 60 days after such notice to repurchase any such Senior Secured Notes.  Amendment No. 7 amended the Securities Purchase Agreement to delay the earliest date that any noteholder could exercise the Senior Secured Notes Put Option by 30 days (from February 21, 2015 to March 23, 2015).  Amendment No. 7 also contains a corresponding decrease from 60 days to 30 days of the time period afforded to the Company to complete the repurchase of the Senior Secured Notes of any holder that exercises its rights in accordance with the terms of the Senior Secured Notes Put Option.  As of March 31, 2015, we had entered into discussions with the holders of our Senior Secured Notes for an Amendment No. 8 to the Securities Purchase Agreement that would again delay the earliest date that any noteholder could exercise the Senior Secured Notes Put Option by 30 days (from March 23, 2015 to April 22, 2015).  As of March 31, 2015, the holders of a majority of the principal amount of the Senior Secured Notes at the time outstanding had agreed to the additional 30-day delay contained in Amendment No. 8.  However, for Amendment No. 8 to become effective, it must be approved by all holders of the Senior Secured Notes.  Prior to the discussions with the noteholders about Amendment No. 8, one noteholder appears to have attempted to exercise the put, but did not comply with the Securities Purchase Agreement in doing so.  That noteholder has orally indicated that it is willing to agree to the amendment but has not yet delivered its signature page.  The Company is continuing to work to get approval of Amendment No. 8 from all holders, but there can be no assurance that the Company will be successful in doing so.  In anticipation of our independent registered public accounting firm for the year ended December 31, 2014 including in their report an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern as described in “Note 2 — Going Concern”, the Company also obtained in Amendment No. 7 relief from the “going concern” requirements for the Company’s 2014 consolidated financial statements.

Our board of directors and management are continuing to pursue further restructuring of our debt and additional cash funding for the 2015 drilling program.  On February 24, 2015, we initiated a process to evaluate broader transactions, such as new partnerships and joint ventures. ZaZa has retained Seaport Global Securities LLC (who merged with Global Hunter Securities LLC) as financial advisor to assist in evaluating such broader alternatives.

6

Table of Contents

On February 24, 2014, the Company entered into the Exchange Agreements (the “Exchange Agreements”) to exchange an aggregate of $47.3 million in 8.00% Subordinated Notes due 2017 for a combination of shares of common stock of the Company and shares of a new series of preferred stock of the Company. The Exchange Agreements were amended and superseded by the Subordinated Note Modification Agreements with each of the Subordinated Note Holders (the “Modification Agreements”) on January 19, 2015.  The Modification Agreements provide that, instead of exchanging the Subordinated Notes for common stock and preferred stock of the Company, all interest payments to the Subordinated Note Holders will be paid in kind.

Simultaneously with the execution of the Modification Agreements, each Subordinated Note Holder surrendered his or its Subordinated Note effective as of January 19, 2015 in exchange for a replacement subordinated note (each, a “First Amended and Restated Subordinated Note”).  The First Amended and Restated Subordinated Notes provide that interest payments will be paid in kind as additional principal beginning with the first interest payment due with respect to interest that accrues beginning January 1, 2015, and the payment-in-kind interest will continue as long as those notes remain outstanding.  Interest will continue to accrue at a rate of 8.00% per annum, and the maturity date will remain August 21, 2017.

In order to facilitate a refinancing of the Senior Secured Notes, the Subordinated Note Holders have also agreed in the Modification Agreements to negotiate in good faith any inter-creditor agreement that may be requested by any senior lender in connection with the refinancing of the Senior Secured Notes or a deferral of the put right.  Also, the First Amended and Restated Subordinated Note (a) establishes as an event of default thereunder any acceleration of the indebtedness associated with the Senior Secured Notes or other senior indebtedness and (b) eliminated the Company’s obligation to use 20% of the proceeds from equity financing after February 21, 2015, or 20% of the proceeds from subordinated debt financing at any time, to prepay a portion of the Subordinated Notes.  However exercise of the Senior Secured Notes Put Option does not constitute an event of default.

On July 21, 2014, we closed a capital markets transaction for $4.5 million net proceeds in exchange for ZaZa common stock of $8.30 per share and 0.6 warrants for every share of ZaZa common stock with a strike price of $11.20 per share (the “2019 Warrants”). On November 18, 2014, the Company and the investor entered into an agreement to resolve their disagreement regarding the number of shares issuable upon exchange of the warrants.  Pursuant to its terms, the Company issued 1 million shares of common stock in the fourth quarter of 2014 in exchange for the warrants.

Early Release of Hess Escrow

To effect the dissolution of the joint ventures with Hess described below under the caption “Corporate History”, ZaZa and its wholly owned subsidiaries ZaZa Energy France, ZaZa International Holdings, LLC, and ZaZa France SAS entered into a Paris Basin Purchase and Sale Agreement (the “Paris PSA”), dated July 25, 2012, with Hess and Hess Oil France SAS.  Additionally, on November 13, 2012, the Company, through its wholly owned subsidiary ZaZa France SAS, entered into a share purchase agreement with Vermillion REP SAS (“Vermillion”), a wholly-owned subsidiary of Vermillion Energy Inc., pursuant to which the Company sold to Vermillion all of its shares in ZaZa Energy France (the “Vermillion Transaction”).  Total proceeds from the Vermillion Transaction were approximately $76.0 million in cash, as adjusted under the share purchase agreement with Vermillion, but the Paris PSA required that $15.0 million of such sales proceeds be held in escrow until ZaZa successfully transferred all exploration permits for the Paris Basin to Hess.

On February 6, 2014, we agreed with Hess to an early release of the $15.0 million held in escrow.  This release was part of a broader transaction that also included:  (i) termination of the Company’s overriding royalty interests in certain assets in the Paris Basin; (ii) Hess’s release of an interest in the Company’s litigation against certain third parties; and (iii) the payment of $3.5 million of the escrowed funds to Hess.  The remaining $11.5 million was released to ZaZa, and these proceeds, combined with approximately $1.1 million of cash on hand, were used to reduce outstanding aggregate principal amount of our Senior Secured Notes from $26.8 million to $15.0 million at the time.

Sale of Moulton acreage

On April 5, 2013 the Company closed a purchase and sale agreement and sold certain of its properties in the Eagle Ford trend located in Fayette, Gonzalez and Lavaca Counties, Texas, which we refer to as our Moulton acreage, for approximately $9.2 million.  Net proceeds from the sale, after closing purchase price adjustments and expenses were approximately $8.8 million.  We used approximately $4.6 million of the proceeds to pay down our Senior Secured Notes.

We also entered into an agreement on June 27, 2013 to sell approximately 10,000 net acres of our properties in the Eagle Ford trend located in Fayette, Gonzalez and Lavaca Counties, Texas, including interests in seven producing wells located on the Moulton acreage, for approximately $28.8 million.  We closed this transaction on July 26, 2013 and received cash proceeds of $29.3 million.  We used approximately $1.8 million of the proceeds to pay down our Senior Secured Notes.

7

Table of Contents

Production, Average Sales Prices and Production Costs

The following tables present our production data, average sales prices and average production costs for the referenced geographic areas for the periods indicated:

Capital Expenditures

The following table summarizes information regarding ZaZa’s cash capital expenditures for the periods indicated:

8

Table of Contents

Productive Wells and Acreage

The following table sets forth our interest in undeveloped acreage, developed acreage and productive wells in which we own a working interest as of December 31, 2014 (including Quantum’s net acres). “Gross” represents the total number of acres or wells in which we own a working interest. “Net” represents our proportionate working interest resulting from our ownership in the gross acres or wells. Productive wells are wells in which we have a working interest and that are capable of producing oil or gas.

The following table sets forth our interest in undeveloped acreage as of December 31, 2014 that is subject to expiration in 2015, 2016, 2017 and thereafter (including Quantum’s net acres):

Drilling Activity

The following table sets forth the number of gross exploratory and development wells ZaZa drilled or in which we participated during 2014, 2013, and 2012. The table below excludes wells acquired during the year. Productive wells are either producing wells or wells capable of production.

The following table sets forth the number of net exploratory and net development wells drilled by ZaZa during 2014 and 2013 based on its proportionate working interest in such wells.

As of March 15, 2015, 1 gross (0.25 net) exploratory well is in the process of being completed.

9

Table of Contents

Reserves

The following table sets forth information about ZaZa’s estimated net proved reserves at December 31, 2014, 2013, and 2012 for all of our properties.  We prepared the estimate of standardized measure of proved reserves in accordance with FASB ASC 932, “Extractive Activities-Oil and Gas.”  No reserve reports have been provided to any governmental agencies.

Our proved reserves at December 31, 2014, 2013, and 2012 were located in the Eagle Ford East trend in East Texas and the Eagle Ford trend in South Texas.

Proved Undeveloped Reserves

Classification of an undrilled location as part of our proved undeveloped reserves, or “PUDs”, requires that we have adequate liquidity to drill the location within five years.  Because of our liquidity challenges, we are reasonably only able to classify five out of 80 possible drilling locations as PUDs.  Our five PUDs locations totaled 92 Mbbl of crude oil, 112 Mbbl of natural gas liquids and 738 Mmcf of natural gas, totaling 327 Mboe and a PV10 of $3.1 million. As of December 31, 2014, PUDs represented approximately 33% of our total proved reserves. We did not record any PUDs as of December 31, 2013.

All our PUDs as of December 31, 2014 were in our Madison-Walker-Grimes Development Area in East Texas.  As of December 31, 2014, all PUDs are expected to be developed within five years of initial disclosure of these reserves.

Third-Party Reserves Preparation

All our proved reserves, future production, and income attributable to certain leasehold interests as of December 31, 2014 were estimated by Ryder Scott Company, L.P. (“Ryder Scott”).

Ryder Scott evaluates oil and gas properties and independently certifies petroleum reserves quantities in the U.S. and internationally.  Founded in 1937, Ryder Scott is one of the largest, oldest and most respected reservoir-evaluation consulting firms in the industry.  The firm performs several hundred consulting studies a year for a variety of clients.  With 90 professional petroleum engineers and geoscientists, the firm conducts reserves evaluations, geoscience/geology studies, field development and EOR design, reservoir simulation, economic analysis, management consulting and expert witness testimony.

Ryder Scott determined that the estimates of reserves for ZaZa conform to the guidelines of the SEC, including the criteria of “reasonable certainty,” as it pertains to expectations about the recoverability of reserves in future years, under existing economic and operating conditions, consistent with the definition in the amended Rule 4-10(a) of Regulation S-X.  Their report is attached to this Annual Report on Form 10-K as Exhibits 99.1.

10

Table of Contents

Internal Controls Over Reserves Estimates

Our policies regarding internal controls over the recording of reserves estimates require reserves to be in compliance with the SEC definitions and guidance and be prepared in accordance with generally accepted petroleum engineering principles.  We engage a third-party petroleum consulting firm to prepare all of our proved reserves as described in “Third-Party Reserves Preparation”.  Responsibility for compliance in reserves bookings and review of the third-party reserve preparations are delegated to a licensed professional geoscientist in the state of Texas.  The geoscientist and his team provide input to the third-party petroleum consulting firm and review the proved reserves estimates.  Data used in these integrated assessments include information obtained directly from the subsurface via wellbores such as well logs, reservoir cores, fluid samples, static and dynamic information, production test data and production history.  Other types of data used may include 2D and 3D seismic data that has been recently reprocessed and calibrated to available well control.  The tools used to interpret the data include decline curve analyses and data analysis packages and may include reservoir modeling and simulation.

Corporate History

ZaZa is a Delaware corporation formed on August 4, 2011 that began its operations on February 21, 2012 through a combination (the “Combination”) of ZaZa Energy, LLC, a privately held Texas limited liability company (“ZaZa LLC”), with Toreador Resources Corporation, a publicly held Delaware corporation previously listed on the NASDAQ Global Market (“Toreador”), pursuant to an Agreement and Plan of Merger and Contribution, dated August 9, 2011 (as amended, the “Merger Agreement”).  Pursuant to the Merger Agreement, (i) a wholly-owned subsidiary of ZaZa merged with and into Toreador (the “Merger”), with Toreador continuing as a surviving entity, (ii) the three former members of ZaZa LLC (the “ZaZa LLC Members”), holding 100% of the limited liability company interests in ZaZa LLC, directly and indirectly contributed all of such interests to ZaZa (the “Contribution”), and (iii) the holders of certain profits interests in ZaZa LLC contributed 100% of such interests to ZaZa. Upon the consummation of the Combination, Toreador and ZaZa LLC became our wholly-owned subsidiaries.

The Contribution occurred simultaneously with the consummation of the Merger pursuant to that Contribution Agreement dated August 9, 2011, among the ZaZa LLC Members and ZaZa (the “Contribution Agreement”).  As consideration for the Contribution, the ZaZa LLC Members received (i) a number of shares of our common stock that, in the aggregate, represented 75% of the issued and outstanding shares of our common stock immediately after the consummation of the Combination (but without giving effect to the shares of common stock issuable upon exercise of the Warrants as discussed below), and (ii) subordinated notes in an aggregate amount of $38.25 million issued to the ZaZa LLC Members (which were in respect of the ZaZa LLC Members rolling forward their cash distribution rights in order to allow ZaZa LLC to acquire the East Texas block that is now the Company’s primary asset). In addition, as required under the terms of the Merger Agreement and the Contribution Agreement, we issued subordinated notes in an aggregate amount of $9.08 million to the individuals who own and control the ZaZa LLC Members — Todd A. Brooks (our President and Chief Executive Officer and a director), Gaston L. Kearby (a director) and John E. Hearn, Jr. (a director) (together, the “ZaZa Founders”) — in respect of certain unpaid compensation amounts owing to the ZaZa Founders by ZaZa LLC.  We refer to the subordinated notes issued to both the ZaZa LLC Members and the ZaZa Founders as the “Subordinated Notes,” and as of December 31, 2014, there was $47.3 million in Subordinated Notes outstanding.

ZaZa LLC’s operations were focused on the exploration and development of unconventional oil and gas resources in Texas, including the Eagle Ford and Eagle Ford East trends, and its activities were undertaken primarily through a joint venture with the Hess Corporation (“Hess”).  Toreador operated solely in the Paris Basin of France and its operations consisted of (i) a joint venture with Hess in the Paris Basin focused on unconventional resources and (ii) conventional Paris Basin assets.  In July 2012, following announcements by Hess to pursue a slower drilling program with respect to its joint venture in South Texas and regulatory difficulties with operations in France, ZaZa, as the controlling parent of both ZaZa LLC and Toreador, divested of most of its assets in France and dissolved all joint ventures with Hess.  ZaZa’s only remaining exploration and production asset in France in 2014 was a royalty interest, which was relinquished in February 2014 as part of a final resolution of all matters pertaining to the dissolved ZaZa and Hess joint ventures.

Title to Properties

ZaZa believes it has satisfactory title to all of its producing properties in accordance with standards generally accepted in the oil and gas industry.  As is customary in the oil and gas industry, ZaZa makes title investigations and receives title opinions of local counsel not upon acquisition but only before it commences drilling operations.  ZaZa believes that it has satisfactory title to all of its other assets. During title due diligence by multiple third parties, no material title issues have emerged.  ZaZa’s properties are subject to customary royalty interests, liens incident to operating agreements, liens for current taxes and other burdens, including other mineral encumbrances and restrictions.  Although title to its properties is subject to encumbrances in certain cases, ZaZa believes that none of these burdens will materially detract from the value of ZaZa’s properties or from its interest therein or will materially interfere with its use of the properties in the operation of its business.

11

Table of Contents

Insurance Matters

As is common in the oil and gas industry, we do not insure fully against all risks associated with our business either because such insurance is unavailable or because premium costs are considered prohibitive.  A material loss not fully covered by insurance could have material adverse effect on our financial position, results of operations or cash flows.  We maintain insurance at levels we believe to be customary in the industry to limit our financial exposure in the event of a substantial environmental claim resulting from sudden, unanticipated and accidental discharges of certain prohibited substances into the environment.  Such insurance might not cover the complete amount of such a claim and would not cover fines or penalties for a violation of an environmental law.

Office Leases

We occupy 21,509 square feet of office space at 1301 McKinney Street, Houston, Texas 77010 and 2,000 square feet of office at 176 Hwy 19, Huntsville, Texas 77340.  The total rental expense for 2014 was approximately $0.9 million.

Employees

ZaZa had 20 full-time employees, none of whom are represented by unions or are covered by collective bargaining agreements as of December 31, 2014.  To date, ZaZa has not experienced any strikes or work stoppages due to labor problems, and believes that it has good relations with its employees.  In addition, ZaZa directly engages approximately 12 independent contractors.

Seasonal Nature of Business

Generally, but not always, the demand for gas decreases during the summer months and increases during the winter months.  Seasonal anomalies such as mild winters or abnormally hot summers sometimes lessen this fluctuation.  In addition, certain gas users utilize gas storage facilities and purchase some of their anticipated winter requirements during the summer.  This can also lessen seasonal demand fluctuations.  Seasonal weather conditions and lease stipulations can limit drilling and production activities and other oil and gas operations in certain areas.  These seasonal anomalies can increase competition for equipment, supplies and personnel.

Marketing and Customers

The market for oil and gas that will be produced from our properties depends on factors beyond our control, including the extent of domestic production and imports of oil and gas, the proximity and capacity of natural gas pipelines and other transportation facilities, demand for oil and gas, the marketing of competitive fuels and the effects of state and federal regulation.  The oil and gas industry also competes with other industries in supplying the energy of consumers.  Our oil production is sold at prices primarily tied to the spot oil markets for West Texas Intermediate (“WTI”).  Our natural gas production is expected to be sold under short-term contracts and priced based on first of the month index prices or on daily spot market prices.  We have elected for our joint venture operating partners to market and sell our production.  We can elect to receive our share of oil and gas production in kind at any time.  The loss of any single operator could have a material adverse effect on our company as a whole.  During the year ended December 31, 2014 EOG and Sabine accounted for approximately 81% and 12%, respectively, of our total cash receipts.  During the year ended December 31, 2013, Gulfmark Energy, Inc., Texla Energy Management, Inc. and Southern Bay Oil & Gas LP accounted for approximately 52%, 15%, and 13% of our total cash receipts.

Competition

The oil and gas industry is highly competitive, particularly with respect to acquiring prospective oil and gas properties and oil and gas reserves.  We encounter strong competition from other independent operators and from major oil companies in acquiring properties.  We also compete for people, including experienced geologists, geophysicists, engineers, and other professionals.  Many of these competitors have substantially greater financial, managerial, technological and other resources than we do.  Many of these companies not only engage in the acquisition of oil and gas properties but also have integrated exploration, development, production, drilling, marketing and refining operations.  Because of our relatively small size and capital constraints, we may find it increasingly difficult to effectively compete in our markets.

Regulations

Oil and Gas

Exploration and production operations are subject to various types of regulation at the federal, state and local levels.  These statutes, rules and regulations undergo constant review and often are amended, expanded and reinterpreted, commonly resulting in more stringent requirements applicable to our business.  The regulatory environment in which we operate increases the cost of doing business and, consequently, affects profitability.  These laws regulate many aspects of our business, including requiring permits to drill wells, maintaining bonding requirements to drill or operate wells, and regulating the location of wells, the method of drilling and

12

Table of Contents

casing wells, surface operations and flaring, the surface use and restoration of properties on which wells are drilled, and the plugging and abandoning of wells.  We may face fines, penalties or operational interruptions if we or a joint venture party operator fails to comply with applicable requirements.  Our operations are also subject to various conservation laws and regulations.  These include the regulation of the size of drilling and spacing units or proration units, the density of wells that may be drilled in a given field and the unitization or pooling of oil and gas properties.  Although a compulsory pooling statute exists in Texas, almost all pooling results from voluntary action by oil and gas lessees exercising the authority to pool granted in the oil and gas lease. In Texas, the forced pooling of unleased mineral owners, or of lessors where a right to pool is not provided for in the lease, requires application to, and approval by, the Texas Railroad Commission, and the statutorily mandated burden of proof on the party seeking to force pool is difficult to satisfy.  The absence of availability of compulsory pooling may make it more difficult to form units and therefore, more difficult to fully develop a project if the operator owns or controls less than 100% of the leasehold.

Environmental and Safety Regulations

General.  Our agreements with our joint venture partners require us to bear our proportionate cost of compliance and liabilities with respect to the extensive federal, state and local laws and regulations relating to the protection of the environment and the generation, storage, handling, emission, transportation and discharge of hazardous materials into the environment.  Additionally, we could be responsible for the full costs and liabilities associated with such laws and regulations to the extent we operate and own 100% of a property.  Government regulations can increase the cost and timing of planning, designing, installing and operating oil and gas wells and other facilities.  Additionally, certain environmental permits are required for oil and gas operations.  These permits can be revoked, modified or renewed by issuing authorities.  Governmental authorities can enforce compliance with their regulations through fines, injunctions or both.  Although we believe that compliance with the current environmental regulations applicable to our operations will not have a material adverse effect on us, it is possible that other developments, such as stricter environmental laws and regulations, and claims for damages to property or persons resulting from oil and gas production could result in substantial costs and liabilities to us.

U.S. laws and regulations applicable to our operations include those controlling the discharge of hazardous materials into the environment, requiring removal and cleanup of materials that may harm the environment or otherwise relating to the protection of the environment.

Solid and Hazardous Waste.  We currently own or lease, and have in the past owned or leased, numerous properties that were used for the production of oil and gas for many years.  Although operating and disposal practices that were standard in the industry at the time may have been utilized, it is possible that hydrocarbons or other wastes may have been disposed of or released on or under the properties currently owned or leased by us or our joint ventures.  State and federal laws applicable to oil and gas wastes and properties have become stricter over time.  Under these increasingly stringent requirements, we or our joint ventures could be required to remove or remediate previously disposed wastes (including wastes disposed or released by prior owners and operators) or clean up property contamination (including groundwater contamination by prior owners or operators) or to perform plugging operations to prevent future contamination.

Our operations generate some hazardous wastes that are already subject to the Federal Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes.  The Environmental Protection Agency (“EPA”) has limited the disposal options for certain hazardous wastes.  It is possible that certain wastes currently exempt from treatment as hazardous wastes may in the future be designated as hazardous wastes under RCRA or other applicable statutes.  Our operations could, therefore, be subject to more rigorous and costly disposal requirements in the future than we encounter today.

Superfund.  The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the “Superfund” law, and comparable state laws and regulations impose liability, without regard to fault or the legality of the original conduct, on certain persons with respect to the release of hazardous substances into the environment.  These persons include the current and past owners and operators of a site where the release occurred and any party that treated or disposed of or arranged for the treatment or disposal of hazardous substances found at a site.  Under CERCLA, such persons may be subject to joint and several strict liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies.  CERCLA also authorizes the EPA, and in some cases, private parties, to undertake actions to clean up such hazardous substances, or to recover the costs of such actions from the responsible parties.  In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.  In the course of business, we and our joint ventures have used materials and generated wastes and will continue to use materials and generate wastes that may fall within CERCLA’s definition of hazardous substances.  We may also be an owner or operator of sites on which hazardous substances have been released.  As a result, we or our joint ventures may be responsible under CERCLA for all or part of the costs to clean up sites where such substances have been released.

Oil Pollution Act.  The Federal Oil Pollution Act of 1990 (“OPA”) and resulting regulations impose a variety of obligations on responsible parties related to the prevention of oil spills and liability for damages resulting from such spills in waters of the United

13

Table of Contents

States.  The term “waters of the United States” has been broadly defined to include inland water bodies, including wetlands and intermittent streams.  The OPA assigns joint and several strict liability to each responsible party for oil removal costs and a variety of public and private damages.  The OPA also imposes ongoing requirements on operators, including the preparation of oil spill response plans and proof of financial responsibility to cover environmental cleanup and restoration costs that could be incurred in connection with an oil spill.  We believe that we and our joint ventures substantially comply with the Oil Pollution Act and related federal regulations, but we do not serve as the operator under our joint ventures and cannot control all aspects of compliance with the OPA on our properties.

Endangered Species Act.  The Endangered Species Act (“ESA”) restricts activities that may affect endangered or threatened species or their habitats.  While some of our operations may be located in areas that are designated as habitats for endangered or threatened species, we believe that our operations are in substantial compliance with the ESA and we are not aware of any proposed listings that would affect such operations.  However, the designation of previously unidentified endangered or threatened species could cause us to incur additional costs or become subject to operating restrictions or bans in the affected states.

Clean Water Act.  The Federal Water Pollution Control Act (“Clean Water Act”) and resulting regulations, which are primarily implemented through a system of permits, also govern the discharge of certain contaminants into waters of the United States.  Sanctions for failure to comply strictly with the Clean Water Act are generally resolved by payment of fines and correction of any identified deficiencies.  However, regulatory agencies could require us to cease construction or operation of certain facilities or to cease hauling wastewaters to facilities owned by others that are the source of water discharges.  We believe that we and our joint ventures substantially comply with the Clean Water Act and related federal and state regulations, but as we do not operate all of our properties, we cannot be in complete control of Clean Water Act compliance.

Clean Air Act.  Our operations are subject to the Federal Clean Air Act and comparable local and state laws and regulations to control emissions from sources of air pollution.  Federal and state laws require new and modified sources of air pollutants to obtain permits prior to commencing construction.  Major sources of air pollutants are subject to more stringent, federally imposed requirements including additional permits.  Federal and state laws designed to control toxic air pollutants and newly enacted New Source Performance Standards and emerging regulations on greenhouse gas emissions could require installation of additional controls or subject us to more stringent and burdensome monitoring and reporting obligations.  Payment of fines and correction of any identified deficiencies generally resolve the failure to comply strictly with air regulations or permits.  Regulatory agencies could also require us or our joint ventures to cease construction or operation of certain facilities or to install additional controls on certain facilities that are air emission sources.  We believe that our operations substantially comply with our current permits and applicable emission standards under local, state, and federal laws and regulations.

Safe Drinking Water Act.  The Safe Drinking Water Act (“SDWA”) and comparable local and state provisions restrict the disposal, treatment or release of water produced or used during oil and gas development.  Subsurface emplacement of fluids (including disposal wells or enhanced oil recovery) is governed by federal or state regulatory authorities that, in some cases, includes the state oil and gas regulatory authority or the state’s environmental authority.  These regulations may increase the costs of compliance for some facilities that are part of our operations.

Hydraulic Fracturing.  Many of the exploration and production operations on our properties depend on the use of hydraulic fracturing to enhance production from oil and gas wells.  This technology involves the injection of fluids—usually consisting mostly of water but typically including small amounts of several chemical additives—as well as sand into a well under high pressure in order to create fractures in the rock that allow oil or natural gas to flow more freely to the wellbore.  We engage third parties to provide hydraulic fracturing or other well stimulation services to us in connection with several wells or proposed wells for which we are the operator.  Our joint venture partners who operate properties under our joint venture agreements may engage in hydraulic fracturing directly or through third parties.  Most of the wells on our properties would not be economical without the use of hydraulic fracturing to stimulate production from the well.  Due to concerns raised relating to potential impacts of hydraulic fracturing on groundwater quality, regulations have been enacted at the federal level and legislative and regulatory efforts in some states have been initiated or implemented to render permitting, disclosure and compliance requirements more stringent for hydraulic fracturing or prohibit the activity altogether.  For example, the Railroad Commission of Texas adopted rules in December 2011 requiring the disclosure of certain details regarding chemicals and compounds used in the hydraulic fracturing process for wells drilled in Texas.  Such efforts could have an adverse effect on our oil and gas production activities.  For additional information about hydraulic fracturing and related environmental matters, please read “Risk Factors—Federal and state legislation and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays and inability to book future reserves” in Item 1A.

Greenhouse Gas.  In response to recent studies suggesting that emissions of carbon dioxide and certain other gases may be contributing to global climate change, the United States Congress has considered legislation to reduce emissions of greenhouse gases from sources within the United States between 2012 and 2050.  In addition, almost one-half of the states have already taken legal measures to reduce emissions of greenhouse gases, primarily through the planned development of greenhouse gas emission

14

Table of Contents

inventories and/or regional greenhouse gas cap and trade programs.  The EPA has also begun to regulate carbon dioxide and other greenhouse gas emissions under existing provisions of the Clean Air Act.

OSHA and Other Laws and Regulations.  Our operations are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”), and comparable state laws.  The OSHA hazard communication standard, the EPA community right-to-know regulations under the Title III of CERCLA and similar state laws require that we or our joint ventures organize and/or disclose information about hazardous materials used or produced in our operations.  Also, pursuant to OSHA, the Occupational Safety and Health Administration has established a variety of standards related to workplace exposure to hazardous substances and employee health and safety.

Information About Us

Our principal executive office is located at 1301 McKinney St., Suite 2800, Houston, Texas 77010 and our telephone number is (713) 595-1900.

We make available free of charge on our website at www.zazaenergy.com our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.  From time to time, we also post announcements, updates, events, investor information and presentations on our website in addition to copies of all recent news releases.

15

Table of Contents

ITEM 1A — RISK FACTORS

Risks Related to Our Industry and Our Business

We do not have sufficient cash to continue as a going concern through May 2015, and our independent registered public accounting firm expressed substantial doubt regarding our ability to continue as a going concern in its audit opinion for our December 31, 2014 consolidated financial statements.

Our consolidated financial statements for the year ended December 31, 2014 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued their report dated March 31, 2015, in connection with the audit of our financial statements for the year ended December 31, 2014 that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern due to our liquidity.  The fact that we have received this going concern qualification from our independent registered public accounting firm will likely make it more difficult for us to raise capital on favorable terms and could hinder, to some extent, our operations. Additionally, our actual prospectus for adequate liquidity in 2015 are uncertain, especially in light of the fact that beginning on March 23, 2015, any holder of the $13.9 million in aggregate principal amount of our Senior Secured Notes may elect to require us to repurchase that holder’s Senior Secured Notes within 30 days of making such an election.  Although we are discussing with the holders of the Senior Secured Notes a 30-day extension (until April 22, 2015) of the earliest date that the holder of any of the Senior Secured Notes can exercise this right of repurchase, there is no assurance that we will be successful in being given such an extension.  Even without considering the repurchase of any of the Senior Secured Notes, we do not anticipate having sufficient cash and cash equivalents to continue as a going concern through May 2015 without additional cash funding.  If we are not able to continue as a going concern, we may have to declare, or be forced into bankruptcy and our stockholders will likely lose part or all of their investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The holders of our Senior Secured Notes currently possess a contractual right to require us to purchase all or a portion of the Senior Secured Notes and we do not have sufficient capital to purchase the Senior Secured Notes if such right is exercised.

Beginning on March 23, 2015, the holders of the Senior Secured Notes may be able to exercise the Senior Secured Notes Put Option and require us to purchase all or a portion of the 10% Senior Secured Notes due 2017 at a price equal to the principal amount of the Senior Secured Notes to be purchased, plus any accrued and unpaid interest on such notes.  If any of the holders of the Senior Secured Notes were to exercise their rights under the Senior Secured Notes Put Option, we would have 30 days to purchase those Senior Secured Notes.  If the holders of the Senior Secured Notes exercise the Senior Secured Notes Put Option, we will not be able to fund our commitments without access to additional liquidity and we will be in default under the Senior Secured Notes.  If the default under the Senior Secured Notes is in excess of $10 million, we would also be in default under the indenture that governs the Convertible Senior Notes.  Although we are discussing with the holders of the Senior Secured Notes a 30-day extension (until April 22, 2015) of the earliest date that the holder of any of the Senior Secured Notes can exercise the Senior Secured Notes Put Option, there is no assurance that we will be successful in being given such an extension.  If a default occurs under the Senior Secured Notes or the Convertible Senior Notes, the holders of such debt could accelerate the indebtedness, demand immediate payment and use a variety of legal remedies to enforce their claims.  If any of these defaults and the acceleration of any of our debt were to occur, it is unlikely that we would be able to continue as a going concern and we may have to declare, or be forced into bankruptcy.

Our substantial indebtedness, or debt we may incur in the future, could materially adversely affect our financial condition.

As of December 31, 2014, we had approximately $13.9 million outstanding in aggregate principal under our Senior Secured Notes, $40 million outstanding in aggregate principal under our 9% Convertible Senior Notes due 2017, and $47.3 million outstanding in aggregate principal under our Subordinated Notes, and we may incur additional indebtedness in the future.  Our level of indebtedness has, or could have, important consequences to our business, because:

·                              a substantial portion of our cash flows from operations will have to be dedicated to interest and principal payments and may not be available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;

·                              it may impair our ability to obtain additional financing in the future for acquisitions, capital expenditures or general corporate purposes;

·                              it may limit our flexibility in planning for, or reacting to, changes in our business and industry;

·                              even if we are able to refinance or modify our existing indebtedness, any such transactions may result in significant changes to the Company’s capital structure, the disposition of material assets and adjustments to its balance sheet, and these changes may adversely affect the holders of ZaZa common stock through dilution or loss in value; and

·                              we may be substantially more leveraged than some of our competitors, which may place us at a relative competitive disadvantage and make us more vulnerable to downturns in our business, our industry or the economy in general.

In addition, the terms of our Senior Secured Notes and our Convertible Senior Notes restrict, and the terms of any future indebtedness, including any future credit facility, may restrict our ability to incur additional indebtedness and grant liens because of

16

Table of Contents

debt or financial covenants we are, or may be, required to meet.  Thus, we may not be able to obtain sufficient capital to grow our business or implement our business strategy and may lose opportunities to acquire interests in oil properties or related businesses because of our inability to fund such growth.

Our ability to comply with restrictions and covenants, including those in our Senior Secured Notes, Convertible Senior Notes or in any future debt agreement, is uncertain and will be affected by the levels of cash flow from our operations and events or circumstances beyond our control.  Our Senior Secured Notes also contain restrictions on the operation of our business, such as limitations on the sale and acquisition of assets, limitations on entering into joint ventures, limitations on restricted payments, limitations on mergers and consolidations, limitations on loans and investments, and limitations on the lines of business in which we may engage, which may limit our activities.  Our Convertible Senior Notes contain certain of the foregoing restrictions as well.  We must obtain consent from the holders of a majority of the Senior Secured Notes for certain transactions involving oil and gas properties, with certain carveouts and requirements to apply a portion of net sales proceeds to pay down the principal amount of the Senior Secured Notes and with certain carveouts to enter into our joint ventures.  Thus, we may not be able to manage our cash flow in a manner that maximizes our business opportunities.  Our failure to comply with any of the restrictions and covenants could result in a default, which could permit the holders of our Senior Secured Notes and our Convertible Senior Notes to accelerate repayments and foreclose on the collateral securing the indebtedness.

Our current financial condition has adversely affected our business operations and our business prospects.

Our current financial condition and resulting uncertainty have been disruptive to our business. Management has devoted substantial time and attention to improving our financial condition, thereby reducing its focus on operating the business.  We may also lose employees as a result of uncertainties related to our financial condition.  Further, our current financial condition and resulting uncertainty may cause operating partners to terminate their relationships with us or to tighten credit. These developments could have a material adverse effect on our business, operations, financial condition and cash flows.  Moreover, if we are unable to raise a sufficient amount of cash to pay for our portion of costs associated with drilling programs initiated by our operating partners, we would be subject to customary non-consent penalties on an individual well by well basis with respect to any wells in which we are unable to participate, which would result in the loss of a significant portion of any future revenue derived from those non-consent wells.  Similarly, if the Company is unable to fund renewals of expiring leases, it could lose portions of its acreage.

Our asset carrying values have been impaired based, in part, on oil and gas prices as of December 31, 2014 and they may be further impaired if oil and gas prices continue to decline from prices in effect as of that date.

Oil prices have declined from a price of approximately $105 per barrel in June 2014 to approximately $50 per barrel as of March 1, 2015.  This substantial decline in oil and gas prices has impacted our estimated net cash flows from our oil and gas reserves, which estimates are used to determine impairments of our oil and gas properties. As a result of the decline in oil and gas prices, we have revised our estimated reserves downward and have significantly reduced our estimated future cash flows. Based in part on our 2014 year-end estimates of proved reserves, we recorded an impairment charge of $3.9 million in the fourth quarter of 2014. We may be required to recognize additional impairment charges in future reporting periods if market prices for oil or natural gas continue to decline or based on other factors, including our ability to fund capital expenditures required to maintain our oil and gas reserves.

A substantial or extended decline in crude oil and/or natural gas prices could have a material adverse effect on us.

Prices for crude oil and gas (including prices for NGLs and condensate) fluctuate widely.  Moreover, oil and gas prices depend on factors that are outside of our control, including:

·                              the level of consumer demand;

·                              domestic and worldwide supplies of crude oil, NGLs and natural gas;

·                              the price and quantity of imported and exported crude oil, NGLs and natural gas;

·                              weather conditions and changes in weather patterns;

·                              domestic and international drilling activity;

·                              the availability, proximity and capacity of appropriate transportation facilities, gathering, processing and compression facilities and refining facilities;

·                              worldwide economic and political conditions, including political instability or armed conflict in oil and gas producing regions;

·                              the price and availability of, and demand for, competing energy sources, including alternative energy sources;

·                              the nature and extent of governmental regulation, including environmental regulation, regulation of derivatives transactions and hedging activities, regulations that restrict the ability of banking entities to (x) engage in proprietary trading, or (y) invest in or sponsor certain types of ‘covered fund’ entities, tax laws and regulations and laws and regulations with respect to the import and export of crude oil, natural gas and related commodities;

·                              the level and effect of trading in commodity futures markets, including trading by commodity price speculators and others; and

17

Table of Contents

·                              the effect of worldwide energy conservation measures.

If oil and gas prices continue to decline or remain at current levels, it will have a substantial negative impact on our business.  Our cash flows and results of operations depend to a great extent on the prevailing prices for crude oil and gas.  Prolonged or substantial declines in crude oil and/or natural gas prices may materially and adversely affect our liquidity, the amount of cash flows we have available for our capital expenditures and other operating expenses, our ability to access the credit and capital markets and our results of operations.

We require significant capital expenditures to conduct our business and we may have difficulty in obtaining such capital.

Our exploration, development, and acquisition activities require substantial capital expenditures.  We have sold assets and incurred indebtedness in order to provide capital to carry out our activities.  For example, we sold the Moulton acreage during the second and third quarter of 2013.  Currently, our major source of income is from our joint ventures’ carried interest and production.  Our cash flow from operations and access to capital are subject to a number of variables that may or may not be within our control, including:

·                              the level of oil and gas that is produced from existing wells on our properties;

·                              the prices at which our oil and gas production is sold;

·                              the operators in our joint venture’s ability to develop the proved and unproved reserves;

·                              our ability to acquire, locate and produce new economically recoverable reserves;

·                              global credit and securities markets; and

·                              the ability and willingness of lenders and investors to provide capital and the cost of that capital.

We will need to raise capital to purchase new oil and gas leases and to fully explore and analyze leases that we have already purchased.  We intend to pursue various strategies to raise capital, including asset sales, debt or equity financing, and joint ventures.  For example, in September 2014, we sold 6,000 net acres of undeveloped leases in our East Texas JV to an affiliate of Quantum Energy Partners for approximately $11 million in cash and the Company’s right to receive Quantum’s interest in certain future wells.  If we are unable to sell assets or if financing and joint venture partnerships are not available on acceptable terms or at all, we may have limited ability to obtain the capital necessary to sustain our operations at current levels or to implement our strategy, including expanding our existing portfolio.  There can be no assurance as to our ability to sell assets or as to the availability or terms of any joint ventures or other financing.

Failure to obtain the capital to fully explore our properties could lead to possible write-downs in the carrying value of our properties, a material decline in our oil and gas reserves as well as our revenues and results of operations.  The failure to obtain additional capital could also materially adversely affect our operations and prospects, including potentially resulting in the reversion of certain portions of our acreage to lessors under our oil and gas leases.

Substantially all of our current operations are conducted through joint ventures, so problems with our joint ventures or our joint venture partners could have a material adverse effect on us.

We conduct substantially all of our operations through joint ventures with third parties, and as a result, the continuation of such joint ventures is vital to our continued success.  We may also enter into other joint venture arrangements in the future.  In many instances we depend on these third parties for elements of these arrangements that are important to the success of the joint venture, such as agreed payments of substantial development costs pertaining to the joint venture and their share of other costs of the joint venture.  The performance of these third party obligations or the ability of third parties to meet their obligations under these arrangements is outside our control.  If these parties do not meet or satisfy their obligations under these arrangements, the performance and success of these arrangements, and their value to us, may be adversely affected.  If our current or future joint venture partners are unable to meet their obligations, we may be forced to undertake the obligations ourselves and/or incur additional expenses in order to have some other party perform such obligations.  In such cases we may also be required to enforce our rights, which may cause disputes among our joint venture partners and us.  If any of these events occur, they may adversely impact us, our financial performance and results of operations, these joint ventures and/or our ability to enter into future joint ventures.

Such joint venture arrangements may involve risks not otherwise present when exploring and developing properties directly, including, for example:

·                              our joint venture partners may share certain approval rights over major decisions, such as proceeding with subsequent phases of the development of our acreage subject to the joint venture;

·                              disputes between us and our joint venture partners may result in litigation or arbitration that would increase our expenses, delay or terminate projects and prevent our officers and directors from focusing their time and effort on our business;

18

Table of Contents

·                              our joint venture partners might become insolvent or bankrupt, leaving us liable for their shares of joint venture liabilities;

·                              we may incur liabilities as a result of an action taken by our joint venture partners;

·                              our joint venture partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives;

·                              certain joint venture arrangements may prevent either joint venture partner from controlling the venture, and an impasse could be reached which might have a negative influence on our investment in the joint venture; and

·                              our joint venture partners may decide to terminate their relationship with us in any joint venture or sell their interest in any of these joint ventures and we may be unable to replace such joint venture partner or raise the necessary financing to purchase such joint venture partner’s interest.

Additionally, almost all of our properties are operated by our joint venture partners.  We have limited ability to influence or control the operation or future development of our non-operated properties, including the timing of drilling and other activities, compliance with environmental, safety and other regulations, or the amount of capital expenditures that we are required to fund with respect to such properties after exhaustion of our carried interests.  Thus, we may experience a reduction in revenues or higher costs as a result of certain decisions made by our joint venture partners.

Our business is focused on new or emerging formations, which may be subject to more uncertainties than areas that are more developed or have a longer history of established production.

The results of our drilling in new or emerging formations, such as the Eagle Ford and Eagle Ford East trends, are more uncertain initially than drilling results in areas that are developed and have established production.  Because new or emerging formations have limited or no production history, we are less able to use past drilling results in those areas to help predict future drilling results.  Further, part of the strategy of our joint ventures in the Eagle Ford and Eagle Ford East trends involve the use of horizontal drilling and completion techniques that have been successful in other shale formations.  Although we and our joint venture partners have experience with horizontal drilling in these areas, the oil and gas industry’s drilling and production history is limited when compared to conventional techniques.  The ultimate success of these drilling and completion techniques will be better evaluated over time as more wells are drilled and production profiles are better established.

If the drilling results of our operations are less than anticipated or are impacted by capital constraints of us or our joint venture partners, lease expirations, and/or a decline of natural gas and oil prices, our investment in these areas may not be as attractive as we anticipate and we could incur material impairments of undeveloped properties and the value of our undeveloped acreage could decline in the future, which could have a material adverse effect on our business and results of operations.

Drilling for and producing oil and gas are high-risk activities with many uncertainties that we cannot control.

Our success will depend on the results of the exploration, development and production activities on our properties, and the properties that we may acquire.  Oil and gas exploration, development and production activities are subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable oil or gas production.  Decisions to purchase, explore, develop or otherwise exploit prospects or properties will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data, and engineering studies, the results of which are often inconclusive or inaccurate or subject to varying interpretations or uncertainty.  Costs of drilling, completing and operating wells are often uncertain before drilling commences.  Overruns in budgeted expenditures are common risks that can make a particular project uneconomical.  Furthermore, many factors may curtail, delay or cancel drilling, and such work stoppage may not be covered by our insurance, including:

·                              unexpected drilling conditions;

·                              pressure or irregularities in geological formations;

·                              equipment failures or accidents;

·                              title problems;

·                              shortages of or delays in obtaining drilling equipment, services and supplies and qualified personnel;

·                              compliance with, or changes in, laws and regulations; and

·                              the availability and timely issuance of required permits and licenses.

Additionally, because substantially all of our operations are conducted through joint venture partners, we exercise little to no control over decisions and actions that could abate such risks.  Increases in the costs of the drilling operations on our properties due to any of the above factors or other factors, may materially and adversely affect our business, financial condition and results of operations.

19

Table of Contents

Our estimates of oil and gas reserves involve inherent uncertainty, which could materially affect the quantity and value of our reported reserves and our financial condition.

There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and cash flows attributable to such reserves, including factors beyond our engineers’ control (or the third party preparing the reserve report).  Reserve engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact manner.  The accuracy of an estimate of quantities of reserves, or of cash flows attributable to such reserves, is a function of the available data, assumptions regarding future oil and gas prices, expenditures for future development and exploration activities, engineering and geological interpretation and judgment.  In addition, accurately estimating reserves in shale formations such as ours can be even more difficult than estimating reserves in more traditional hydrocarbon bearing formations given the complexities of the projected decline curves and economics of shale gas wells.  Additionally, “probable” and “possible” reserve estimates are estimates of unproved reserves and may be misunderstood or seen as misleading to investors that are not experts in the oil or natural gas industry.

As such, investors should not place undue reliance on these estimates.  Reserves and future cash flows may be subject to material downward or upward revisions, based upon production history, development and exploration activities and prices of oil and gas.  In addition, different reserve engineers may make different estimates of reserves and cash flows based on the same available data.  Because of our smaller volume of reserves compared to our competitors, revisions in reserve estimate and future cash flows have a greater chance of being material to us.

The present value of future net revenues from our proved reserves referred to in any reserve report will not necessarily be the actual current market value of our estimated oil and gas reserves at such time.  In accordance with SEC requirements, we base the estimated discounted future net cash flows from its proved reserves using the un-weighted arithmetic average of the first day of the month for each month within a twelve month period.

We may be unable to acquire or develop additional reserves, which would reduce our revenues and access to capital.

Producing oil and gas reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors.  Decline rates are typically greatest early in the productive life of a well.  Estimates of the decline rate of an oil or gas wells, and those in shale formations, in particular, are inherently imprecise, and are less precise with respect to new or emerging oil and gas formations with limited production histories than for more developed formations with established production histories.  Production on our properties and the reserves that may be recovered from wells on our properties will change if production from existing wells on our properties declines in a different manner than we or our joint venture parties have estimated.  Thus, our future oil and gas reserves and production and, therefore, our future cash flow and results of operations, are highly dependent upon the success in efficiently developing and exploiting our current properties and economically finding or acquiring additional recoverable reserves.  We may not be able to find or acquire additional reserves or future production at acceptable costs.  If we are unable to replace our current or future production, our cash flows and the value of our reserves may decrease, and have a material adverse effect on our business, financial condition and results of operations.

We may not have the ability to raise the funds necessary to purchase the Senior Secured Notes and the Convertible Senior Notes upon a fundamental change.

Holders of the Senior Secured Notes and the Convertible Senior Notes will have the right to require us to purchase the notes upon the occurrence of a fundamental change at 101% and 100%, respectively, of their principal amount plus accrued and unpaid interest.  However, we may not have enough available cash or be able to obtain financing at the time we are required to make purchases of tendered Senior Secured Notes or Convertible Senior Notes.  In addition, our ability to purchase the Senior Secured Notes and Convertible Senior Notes may be limited by law, by regulatory authority or by the agreements governing our then current and future indebtedness.  Our failure to purchase tendered Senior Secured Notes and Convertible Senior Notes at a time when the purchase is required by the terms of the Senior Secured Notes or Convertible Senior Notes would constitute a default under those notes.  A default under those notes or the fundamental change itself could also lead to a default or require a prepayment under, or result in the acceleration of the maturity or purchase of, our existing or future other indebtedness.  The requirement that we offer to purchase the Senior Secured Notes and Convertible Senior Notes upon a fundamental change is limited to the transactions specified in the definition of a fundamental change, which definition may differ from the definition of a fundamental change or change of control in the agreements governing our existing or future other indebtedness.  If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and purchase the Senior Secured Notes and the Convertible Senior Notes.

We are concentrated in one geographic area, which increases our exposure to many of the risks enumerated herein.

Currently, ZaZa’s operations are highly concentrated in Texas.  This concentration increases the potential impact that many of the risks stated herein may have upon our ability to perform.  For example, we have greater exposure to regulatory actions impacting Texas, natural disasters in the geographic area, competition for equipment, services and materials available in the area and access to infrastructure and markets.

20

Table of Contents

Drilling is a high-risk activity that could result in substantial losses for us, including liabilities under environmental laws, for which we may not be insured.

Oil and gas exploration, drilling and production activities are subject to numerous operating risks, including the possibility of:

·                              blowouts, fires and explosions;

·                              personal injuries and death;

·                              uninsured or underinsured losses;

·                              unanticipated, abnormally pressured formations;

·                              uncontrollable flows of oil, gas or well fluids;

·                              mechanical difficulties, such as stuck oil field drilling and service tools and casing collapses; and

·                              environmental hazards, such as uncontrollable flows of oil, gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination.

Any of these operating hazards could cause damage to properties, serious injuries, fatalities, oil spills, discharge of hazardous materials, remediation and clean-up costs, and other environmental damages, which could expose us to liabilities, including strict liability, either directly or proportionately through our joint ventures.  Even in the ordinary course, our operations result in the use, generation, handling and disposal of regulated wastes, petroleum hydrocarbons and other potentially hazardous materials.  There is a risk of our incurring environmental costs and liabilities, or a proportionate share of such liabilities in our joint venture operations, due to the environmental risks inherent in oil and gas drilling and production activities.  The payment of any of these liabilities could reduce, or even eliminate, the funds available for exploration, development, and acquisition or could result in a loss of our properties.

We are not fully insured against all risks, including development and completion risks that are generally not recoverable from third parties or insurance.  In addition, our insurance policies provide limited coverage for losses or liabilities relating to sudden and accidental pollution, but not for other types of pollution.  Our insurance might be inadequate to cover our liabilities.  Our energy package is written on reasonably standard terms and conditions that are generally available to the exploration and production industry.  The insurance market in general and the energy insurance market in particular have been difficult markets over the past several years.  Insurance costs could increase in the future as the insurance industry adjusts to difficult exposures and we may decrease coverage and retain more risk to mitigate future cost increases.  If we incur substantial liability and the damages are not covered by insurance or are in excess of policy limits, or if we incur a liability for a risk at a time when we do not have liability insurance, then our business, financial position, results of operations and cash flows could be materially adversely affected.

Potential legislative and regulatory actions affecting our industry could increase our costs, reduce revenues from natural gas and oil sales, reduce our liquidity or otherwise alter the way we conduct our business.

The activities of exploration and production companies operating in the U.S. are subject to extensive regulation at the federal, state and local levels. Many laws and regulations require permits for the operation of various facilities, and these permits are subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with their regulations, and violations could subject us to fines, injunctions or both. These laws and regulations have increased the costs of planning, designing, drilling, installing and operating natural gas and oil facilities.  The environmental laws and regulations that govern our operations have become increasingly more stringent and now cover a broader range of our operations.  Increased scrutiny of our industry by federal, state and local environmental authorities, as well as more stringent regulations, have the potential to materially increase our costs of doing business or subject us or our joint venture partners to potentially significant fines and penalties for non-compliance. Changes to all such existing laws and regulations or new laws and regulations such as those described below could, if adopted, have an adverse effect on our business.

Taxation of Independent Producers

Recently, the President and certain members of Congress have proposed changes in the Internal Revenue Code to eliminate certain U.S. federal income tax deductions and credits currently available to oil and gas exploration and production companies.  Such proposed changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and gas wells; (ii) the elimination of current deductions for intangible drilling and development costs; (iii) the elimination of the deduction against income derived from the production of oil and gas for certain domestic production activities; and (iv) an extension of the amortization period for certain geological and geophysical expenditures.  These proposals would potentially increase and accelerate the payment of federal income taxes of independent producers of natural gas and oil.

21

Table of Contents

OTC Derivatives Regulation

In July 2010, the U.S. Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which contains measures aimed at migrating over-the-counter (“OTC”) derivative markets to exchange-traded markets and central clearinghouses. Certain companies that use derivatives to hedge commercial risk, referred to as end-users, are permitted to continue to use OTC derivatives under newly adopted regulations. We have not historically entered into hedging transactions.  If we choose to do so, we will be required to comply with certain reporting, recordkeeping, clearing and trade execution requirements (or to take steps to qualify for exemptions, as applicable, to such requirements) that are set forth in the new legislation and the regulations promulgated thereunder.  Such new regulatory requirements may increase our costs associated with hedging and decrease our profitability.  Moreover, our counterparties may be required to comply with minimum capital requirements as well as reporting, recordkeeping and a number of other business conduct requirements, which could result in additional costs being passed on to us, thereby negatively affecting our business, results of operations and financial condition.  Other aspects of the Dodd-Frank Act still remain to be finalized, and the Commodities Futures Trading Commission (“CFTC”) has temporarily delayed the compliance dates for a number of the regulations already finalized.  As a result, at this time it is not possible to predict with certainty the full effects of the Dodd-Frank Act and the related CFTC rules on us and the timing of such effects.

Climate Change

Various governmental authorities and regional organizations have enacted, or are considering enacting new legislation and promulgating new regulations governing or restricting the emission of greenhouse gases from stationary sources such as our equipment and operations. At the federal level, the EPA has already made findings and issued regulations that require some oil and gas exploration and production companies to establish and report an inventory of greenhouse gas emissions and they continue to propose more stringent or more broadly applicable requirements in this regard.  Other legislative and regulatory proposals for restricting greenhouse gas emissions or otherwise addressing climate change could require us to incur additional operating costs and could adversely affect demand for the natural gas and oil sold from our properties. The potential increase in our operating costs could result from new or increased costs to obtain permits, operate and maintain equipment and facilities, install new emission controls on equipment and facilities, acquire allowances to authorize greenhouse gas emissions, pay taxes related to greenhouse gas emissions and administer and manage a greenhouse gas emissions program. Even without federal legislation or regulation of greenhouse gas emissions, states may pursue the issue either directly or indirectly. Restrictions on emissions of methane or carbon dioxide that may be imposed could adversely affect the oil and gas industry. Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for natural gas and oil.  In addition, scientific studies suggest that stronger storms may occur in areas where we operate in the future due to changing climate patterns.  Adverse weather events have the potential to disrupt operations and cause physical damage to our assets and operations.

Federal and state legislation and regulatory initiatives relating to oil and gas extraction, including hydraulic fracturing, could result in increased costs and additional operating restrictions or delays and inability to book future reserves.

Hydraulic fracturing impacts and practices have been the subject of a number of governmental and private studies.  The EPA is conducting an investigation of hydraulic fracturing practices and expects to issue its draft report in the near future.  In April 2012, the Department of Interior, the Department of Energy and the Environmental Protection Agency issued a memorandum outlining the multi-agency collaboration on unconventional oil and gas research in response to the White House Blueprint for a Secure Energy Future and the recommendation of the Secretary of Energy Advisory Board Subcommittee on Natural Gas.  The Department of Interior finalized new regulations governing hydraulic fracturing on federal and Indian lands on March 20, 2015.  These ongoing studies and the newly enacted federal and Indian lands rules could lead to initiatives to further regulate hydraulic fracturing done on private lands.  Additional requirements could be imposed, including permitting requirements, financial assurances, public disclosure obligations, more stringent well installation requirements, monitoring and reporting requirements.  New requirements could increase operating costs and any disclosure requirements could increase the possibility of third-party or governmental legal challenges to hydraulic fracturing.

The EPA has also begun to assert regulatory authority over certain aspects of hydraulic fracturing.  Recently, the EPA asserted federal regulatory authority over hydraulic fracturing involving diesel additives under the SDWA’s Underground Injection Control Program (“UIC”), and has proposed UIC permitting guidance for hydraulic fracturing activities that use diesel fuel in fracturing fluids.  In addition, the EPA has issued new emission standards to reduce VOC emissions from oil and gas exploration and production operations including specific limitations for emissions associated with hydraulic fracturing.  In particular, hydraulically fractured gas wells must comply with reduced emission completion (“REC”) techniques by January 1, 2015.  Further, the agency has announced that one of its enforcement initiatives for its 2011 to 2013 fiscal years would be to focus on environmental compliance by the energy extraction sector.  Finally, on October 20, 2011, the EPA announced its plan to propose pretreatment standards for wastewater generated during the hydraulic fracturing process and is also contemplating updated water quality criteria (planned for summer of 2014) for chlorides.  These governmental studies of hydraulic fracturing impacts and practices and the EPA’s regulatory and enforcement initiatives could make it more difficult to perform hydraulic fracturing and increase our costs of compliance and doing business.  Congress has also considered bills which, if enacted, would repeal an exemption in the federal Safe Drinking Water Act for the underground injection of hydraulic fracturing fluids near drinking water sources and could result in additional regulatory

22

Table of Contents

burdens, such as permitting, construction, financial assurance, monitoring, recordkeeping and plugging and abandonment requirements.

If extraction procedures, including hydraulic fracturing, become increasingly regulated at the federal level as a result of additional federal legislation or regulatory initiatives by the EPA, our operations could become subject to additional permitting and operational requirements and also to attendant permitting delays and potential increases in costs.  If such permitting requirements delays drilling activity on our properties, our ability to present reserves, and once presented, book reserves, will be delayed as well.

In addition, some states have adopted, and other states are considering adopting, regulations that could impose more stringent permitting, disclosure and well construction requirements on hydraulic fracturing operations as well as possible restrictions on certain air pollutants, such as methane.  For example, Pennsylvania, Colorado, and Wyoming have each adopted a variety of well construction, set back, and disclosure regulations limiting how fracturing can be performed and requiring various degrees of chemical disclosure.  Colorado recently proposed new air quality standards for methane emissions from oil and gas exploration operations.  Texas recently passed a law requiring public disclosure of certain information about chemicals used in the hydraulic fracturing process, and the Railroad Commission of Texas has adopted rules setting forth requirements for such public disclosure.  In addition, the Texas Commission on Environmental Quality recently adopted more stringent air emission and permitting requirements for oil and gas exploration operations in the Barnett Shale.  More stringent air emissions and permitting requirements, as well as wastewater discharge limitations, may be imposed on the areas in which we operate sometime in the future.  These regulations, if adopted, would affect our operations, increase our costs of exploration and production and limit the quantity of oil and gas that we or our joint ventures can economically produce.  A major risk inherent in drilling plans for our properties is the need to obtain drilling permits from state and local authorities on a timely basis following leasing.  In addition to the imposition of more stringent regulations at the state and federal level, certain local authorities have passed or are considering moratoria on oil and gas drilling and restrictions on hydraulic fracturing.  Delays in obtaining regulatory approvals, drilling permits, the failure to obtain a drilling permit for a well or the receipt of a permit with unreasonable conditions or costs could have a material adverse effect on our ability to explore or develop its properties.  Additionally, the oil and gas regulatory environment could change in ways that might substantially increase our financial and managerial costs to comply with the requirements of these laws and regulations and, consequently, materially adversely affect our profitability.  Furthermore, these additional costs may put us at a competitive disadvantage compared to larger companies in the industry which can spread such additional costs over a greater number of wells and larger operating staff.

The marketability of our production is dependent upon gathering, transportation, and processing facilities over which we may have little or no control.

The marketing of oil and gas production depends in large part on the availability, proximity and capacity of pipelines and storage facilities, gas gathering systems and other transportation, processing and refining facilities, as well as the existence of adequate markets.  If there were insufficient capacity available on these systems, or if these systems were unavailable to us, the price offered for our production could be significantly depressed, or we could be forced to shut-in some production or delay or discontinue drilling plans and commercial production following a discovery of hydrocarbons while we construct our own facility.  We also rely (and expect to rely in the future) on facilities developed and owned by third parties in order to store, process, transmit and sell our oil and gas production.  Our plans to develop our oil and gas reserves could be materially and adversely affected by the inability or unwillingness of third parties to provide sufficient transmission, storage or processing facilities to us, especially in areas of planned expansion where such facilities do not currently exist.

If the amount of oil, gas or condensate being produced by us and others exceeds the capacity of the various transportation pipelines and gathering systems currently available in our operating areas, it will be necessary for new transportation pipelines and gathering systems to be built.  Or, in the case of oil and condensate, it will be necessary for us to rely more heavily on trucks to transport our production, which is more expensive and less efficient than transportation by pipeline.  The construction of new pipelines and gathering systems is capital intensive and construction may be postponed, interrupted or cancelled in response to changing economic conditions and the availability and cost of capital.  In addition, capital constraints could limit our ability to build gathering systems to transport our production to transportation pipelines.  In such event, costs to transport our production may increase materially or we might have to shut-in its wells awaiting a pipeline connection or capacity and/or sell our production at much lower prices than market or than we currently project, all of which would materially adversely affect our results of operation.

Additionally, we do not own all of the land on which gathering and treating systems for our production have been constructed, and we are therefore subject to the possibility of increased costs to retain necessary land use.

ZaZa obtains the rights to construct and operate our gathering and treating systems on land owned by third parties and governmental agencies for a specific period of time.  Our loss of these rights, through our inability to renew right-of-way contracts or otherwise, could have a material adverse effect on our business, results of operations and financial condition.

23

Table of Contents

We are a relatively small company and therefore may not be able to compete effectively.

Compared to many of our competitors in the oil and gas industry, we are a small company.  We face difficulties in competing with larger companies.  The costs of doing business in the exploration and production industry, including such costs as those required to explore new oil and gas plays, to acquire new acreage, and to develop attractive oil and gas projects, are significant.  We face intense competition in all areas of our business from companies with greater and more productive assets, substantially larger staffs and greater financial and operating resources than we have.  Our limited size has placed us at a disadvantage with respect to funding our operating costs, and means that we are more vulnerable to commodity price volatility and overall industry cycles, are less able to absorb the burden of changes in laws and regulations, and that poor results in any single exploration, development, or production play can have a disproportionately negative impact on us.

We also compete for people, including experienced geologists, geophysicists, engineers, and other professionals.  Our limited size has placed us at a disadvantage with respect to attracting and retaining management and other professionals with the technical abilities necessary to successfully operate our business.  While we have entered into employment arrangements with certain of our senior executives, and while a number of consultants have consulting agreements with us, there can be no assurances that any of them will remain with us.

Our ability to use net operating loss carryforwards to reduce future tax payments is limited.

As of December 31, 2014, we had gross U.S. federal tax net operating loss carryforwards (“NOLs”) of approximately $134 million.  Use of these NOLs to offset future taxable income and thereby reduce U.S. federal income taxes otherwise payable is subject to substantial limitations resulting from changes in ownership of our stock and the expiration of NOL carryforwards 20 years from the year in which the losses giving rise to the NOLs were incurred.  In light of these limitations, we do not expect to obtain material future benefits from the use of NOLs.

Our property acquisition strategy could fail or present unanticipated problems for our business in the future.

Our growth strategy includes acquiring oil and gas properties depending on the availability of capital.  We may not be able to identify suitable acquisition opportunities or finance and complete any particular acquisition successfully.  Furthermore, acquisitions involve a number of risks, including:

·                              diversion of management’s attention from our daily operations;

·                              an increase in our expenses and working capital requirements;

·                              uncertainties in the validity of our assumptions about reserves, future production, revenues, capital expenditures, and operating costs, including synergies;

·                              a decrease in our liquidity as a result of using a significant portion of our available cash or borrowing capacity, if any, to finance acquisitions;

·                              a significant increase in interest expense or financial leverage if we incur additional debt to finance acquisitions;

·                              the assumption of unknown liabilities, losses, or costs for which we are not indemnified or for which indemnity is inadequate; and

·                              the incurrence of other significant charges, such as impairment of oil and gas properties, asset devaluation, or restructuring charges.

Our decision to acquire a property will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological analyses, and seismic and other information, the results of which are often inconclusive and subject to various interpretations.

Also, our reviews of acquired properties are inherently incomplete because it generally is not feasible to perform an in-depth review of the individual properties involved in each acquisition given time constraints imposed by sellers.  Even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the properties to fully access their deficiencies and potential.  Inspections may not always be performed on every lease or well, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken.

We face risks associated with hurricanes and other natural disasters in connection with our operations near coastal areas in Texas.

A portion of our oil and gas properties are located near coastal areas of the Texas Gulf Coast.  As a result, in the event of damage due to hurricanes, tropical storms, flooding or similar natural disasters, we could be subject to production curtailments in the future resulting from hurricane damage to certain fields or, even in the event that producing fields are not damaged, production could be curtailed due to damage to facilities and equipment owned by oil and gas purchasers, or vendors and suppliers.

24

Table of Contents

Access to water to conduct hydraulic fracturing may not be available if water sources become scarce.

The availability of sources of water is crucial to conduct hydraulic fracturing.  Approximately 80,000-100,000 gallons of water are necessary for drilling and completing one well with hydraulic fracturing in Texas.  In recent years Texas has experienced severe droughts that have limited the water supplies that are necessary to conduct hydraulic fracturing.  We can make no assurances that sufficient water resources will be available in the short or long term to carry out our current activities.

Hedging activities may require us to make significant payments that are not offset by sales of production and may prevent us from benefiting from increases in oil prices.

We have not historically entered into hedging transactions.  However, we may in the future enter into various hedging transactions for a portion of our production in an attempt to reduce our exposure to the volatility of oil prices.  In a typical hedge transaction, we will have the right to receive from the counterparty to the hedge the excess of the fixed price specified in the hedge over a floating price based on a market index, multiplied by the quantity hedged.  If the floating price exceeds the fixed price, we will be required to pay the counterparty this difference multiplied by the quantity hedged.  In such case, we will be required to pay the difference regardless of whether we have sufficient production to cover the quantities specified in the hedge.  Significant reductions in production at times when the floating price exceeds the fixed price could require us to make payments under the hedge agreements even though such payments are not offset by sales of production.  Hedging also could prevent us from receiving the full advantage of increases in oil prices above the fixed amount specified in the hedge.

Risks Related to the Ownership of Our Common Stock

The public price and trading volume of our common stock may be volatile.

The price and volume of our common stock may be volatile and subject to fluctuations.  Some of the factors that could cause fluctuations in the stock price or trading volume of our common stock include:

·                              general market and economic conditions and market trends, including in the energy and oil industries and the financial markets generally;

·                              the political, economic and social situation in the United States;

·                              actual or expected variations in operating results;

·                              variations in quarterly operating results;

·                              our failure to meet projections in production and revenue;

·                              announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments, or other business developments, such as oil or gas discoveries;

·                              adoption of new accounting standards affecting the industry in which we operate;

·                              operations and stock performance of competitors;

·                              litigation or governmental action involving or affecting us or our subsidiaries;

·                              changes in financial estimates and recommendations by securities analysts;

·                              recruitment or departure of key personnel;

·                              purchase or sales of blocks of our common stock; and

·                              operating and stock performance of the companies that investors may consider to be comparable.

There can be no assurance that the price of our common stock will not fluctuate or decline significantly.  The stock market in recent years has experienced considerable price and volume fluctuations that has often been unrelated or disproportionate to the operating performance of individual companies and that could materially adversely affect the price of our common stock, regardless of our operating performance.  The market prices of stock in exploration stage companies have been especially volatile.  In addition, price volatility might be worse if the trading volume of shares of the common stock is low.  Furthermore, stockholders may initiate securities class action lawsuits if the market price of our common stock declines significantly, which may cause us to incur substantial costs and could divert the time and attention of our management.

We may not be able to maintain compliance with NASDAQ’s continued listing requirements.

Our common stock is listed on NASDAQ. There are a number of continued listing requirements that we must satisfy in order to maintain our listing on NASDAQ. If we fail to maintain compliance with all applicable continued listing requirements and NASDAQ determines to delist our common stock, the delisting could adversely affect the market liquidity of our common stock, our ability to obtain financing and our ability to fund our operations.

One continued listing requirement is for us to maintain a minimum market value of $35 million, which is calculated by multiplying the Company’s total shares of common stock outstanding by the closing bid price of the Company’s common stock.  The historical market value of our common stock has fluctuated significantly, and on February 26, 2015, we received notice from the

25

Table of Contents

NASDAQ that the market value of our common stock was below $35 million for the 30 consecutive trading days preceding February 26, 2015.  As a result of this notice, we have 180 calendar days, or until August 25, 2015, to regain compliance, which can be achieved if our minimum market value exceeds $35 million for at least ten consecutive trading days or a longer period determined by the NASDAQ staff in their sole discretion.  Failure to meet the $35 million minimum market value for the time periods specified by NASDAQ listing requirements could result in our being delisted from the NASDAQ. A delisting of our common stock could negatively impact us by, among other things, reducing the liquidity and market price of our common stock; reducing the number of investors willing to hold or acquire our common stock; and limiting our ability to issue additional securities in the future.

The majority of our common stock is owned by the ZaZa Founders, whose interests may not be aligned with the interests of other stockholders.

As of December 31, 2014 approximately 54% of our common stock is owned directly or indirectly by the ZaZa Founders.  Under a stockholders’ agreement between the Company and the ZaZa LLC Members entered into in connection with the Combination (the “Stockholders’ Agreement”), the ZaZa Founders, during the period ending on February 21, 2015, were entitled to designate a proportional number of directors to the Board (but not more than seven) based upon the ZaZa Founders’ (and their permitted transferees’) percentage ownership of ZaZa.  The remaining directors of ZaZa were nominated by a nominating committee consisting of two directors selected by the designees on the Board that were selected by Toreador prior to the closing of the Combination (and their successors) and one independent director selected by the ZaZa Founders.  However, as of February 21, 2015, there is no limitation on the number of directors of ZaZa that the ZaZa Founders may nominate and elect and, as such, they may be able to nominate and elect the entire Board and remove any directors, including directors who were Toreador designees or nominated by the Board’s nominating committee.

In addition, as a result of their share ownership in ZaZa, the ZaZa Founders are able to control all matters requiring approval by ZaZa stockholders, including, but not limited to:  mergers, consolidations or acquisitions; the sale of all or substantially all of ZaZa’s assets and other decisions affecting ZaZa’s capital structure; the amendment of ZaZa’s certificate of incorporation and bylaws, and ZaZa’s liquidation, winding up and dissolution.

Additionally, under the Stockholders’ Agreement, the ZaZa Founders were subject to a standstill period that expired on February 21, 2015.  Thus, as of February 21, 2015, there is no contractual restriction on the ZaZa Founders’ ability to purchase additional shares of our common stock or take us private on terms that may not be favorable to the other stockholders of ZaZa.  The interests of the ZaZa Founders may not be aligned with the interests of the other stockholders.  This concentration of share ownership may have a material adverse effect on the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders.  However, with certain exceptions, the purchase by one or more ZaZa Founders that takes the total number of shares of common stock owned by the ZaZa Founders over 7,597,686 shares will cause a “fundamental change” under our Senior Secured Notes, giving those noteholders the rights to cause the Company to offer to repurchase the Senior Secured Notes for $1,010 per $1,000 principal amount.

The ZaZa Founders have economic interests in our properties and their interests may not be aligned with our interests.

The ZaZa Founders are board members and collectively, beneficially own approximately 54% of our common stock as of December 31, 2014.  In addition to their interests as equity owners, each of these individuals also has a direct or indirect overriding royalty interest relating to certain of our properties.  These overriding royalty interests generally entitle each of them to one percent of the net revenue interest associated with sales of oil and gas produced from these properties, without any corresponding responsibility for payment of any expenses.

Future sales of our common stock could put a downward pressure on the price of our shares and cause significant dilution.

We have several effective registration statements on file with the SEC that would allow for the sale or resale of substantial amounts of our common stock.  For example, in December 2012, we filed a resale registration statement on Form S-1 for the sale of approximately 3.2 million shares of our common stock, including approximately 2.7 million shares of common stock issuable upon exercise of our Warrants at the time.  A substantial majority of those shares remain unsold.  Also, in October 2012, we issued $40 million in aggregate principal amount of our Convertible Senior Notes, which are convertible into 1.6 million shares of our common stock that may generally be sold by non-affiliates without restriction pursuant to Rule 144 under the Securities Act.  Finally, the ZaZa Founders have demand and piggyback registration rights pursuant to the Stockholders’ Agreement with respect to their shares of common stock held.  The possibility that substantial amounts of our outstanding common stock may be sold by such holders, or the perception that such sales could occur, could materially adversely affect the market price of our common stock and impair our ability to raise additional capital through the sale of equity securities in the future.  In addition, this selling activity could cause significant dilution, decrease the level of public interest in our common stock, inhibit buying activity that might otherwise help support the market price of our common stock, and prevent possible upward price movements in our common stock.  Furthermore, the issuances of a substantial number of shares pursuant to future or existing employee compensation arrangements could produce additional dilution.

26

Table of Contents

An active public market for our common stock may not be sustained.

Although our shares of common stock are listed on the NASDAQ, an active public market for our common stock may not be sustained, which could affect the ability to sell, or depress the market price of, our common stock.  We are unable to predict whether an active trading market for our common stock will be sustained.

We have the ability to issue “blank check” preferred stock, which could affect the rights of holders of our common stock.

Our certificate of incorporation allows the Board of Directors to issue up to 25 million shares of preferred stock and to set the terms of such preferred stock.  The terms of such preferred stock may materially adversely impact the dividend and liquidation rights of holders of our common stock.

We are an emerging growth company and reduced disclosure requirements associated with this status could make our common stock less attractive to investors.

We are an “emerging growth company” as defined in the JOBS Act and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved and an exemption from obtaining an auditor’s attestation on internal control over financial reporting in accordance with Section 404(b) of the Sarbanes-Oxley Act.  In addition, even if we comply with the greater obligations of public companies that are not emerging growth companies, we may avail ourselves of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as we are an emerging growth company.  We may remain an emerging growth company and elect to take advantage of associated exemptions until the earlier of (a) the end of a fiscal year in which our annual revenues exceed $1 billion; (b) the date on which we have, during a three-year period, issued more than $1 billion in non-convertible debt; (c) the date on which we qualify as a large accelerated filer and (d) December 31, 2017.  Investors and securities analysts may find it more difficult to evaluate our common stock because we may rely on one or more of these exemptions, and, as a result, investor confidence and the market price of our common stock may be materially and adversely affected.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.  The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to companies that are not emerging growth companies but any such election to opt out is irrevocable.  We have not elected to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.  This may make it difficult to compare our financial statements with those of other public companies.

Two of the ZaZa Founders are no longer subject to non-competition agreements; the third ZaZa Founder, the Company’s CEO, will not be subject to a non-compete if his employment ends.

On August 9, 2011, each of the ZaZa Founders entered into a separate non-competition agreement with ZaZa.  The non-competition agreements provide that each of the ZaZa Founders and his controlled affiliates may not engage in, carry on or assist any oil or gas business in specified areas in the Eagle Ford and Eagle Ford East trends in Texas and the Paris Basin in France or acquire oil and gas interests in, or acquire interests in any businesses with oil and gas interests in, those specified areas, subject to certain exceptions.  The ZaZa Founders also agreed not to advise, request, induce, attempt to induce or otherwise divert any customer, supplier, licensee or other business relation of ZaZa and its present and future subsidiaries, and further agreed not to materially curtail, limit or cease doing business with any such entities or materially interfere with the customer, supplier and other business relationships of, or oil and gas interests or the businesses of, ZaZa, and its present and future subsidiaries.  The non-competition agreements do not apply to any opportunity in which the ZaZa Founders would be prohibited from participating, if such opportunity is first offered to ZaZa and a majority of the full board of directors of ZaZa, including a majority of the disinterested directors, declines to pursue such opportunity, or a majority of the disinterested directors fails to make a determination as to whether ZaZa will pursue such opportunity within ten business days following such offer.

The non-competition agreement with each ZaZa Founder lasts only until the later of the termination of the ZaZa Founder’s employment with ZaZa or February 21, 2015.  As of February 21, 2015, Todd A. Brooks was the only ZaZa Founder who was still employed by ZaZa; therefore, the non-competition agreements with Gaston L. Kearby and John E. Hearn, both of whom continue to serve on our board of directors, have expired.  Messrs. Hearn and Kearby, subject to their fiduciary duties as members of our board of directors, are therefore free to pursue competitive activities or corporate opportunities, which could create conflicts of interest and

27

Table of Contents

limit ZaZa’s ability to acquire additional assets or pursue its businesses and could have a material adverse effect on us.  Mr. Brooks will be free to pursue competitive activities or corporate opportunities upon termination of his employment as our Chief Executive Officer, or if the ZaZa board of directors declines or fails to determine whether to pursue a corporate opportunity within ten business days of it being presented to the board of directors by Mr. Brooks.

We are a “controlled company” within the meaning of the NASDAQ rules and qualify for, and may rely on, exemptions from certain corporate governance standards.

The ZaZa Founders beneficially own approximately 54% of the outstanding voting power of our capital stock as of December 31, 2014.  Accordingly, the ZaZa Founders will have the ability to elect our board of directors and thereby control the management and affairs of ZaZa.  Therefore, we are deemed to be a “controlled company” for purposes of Nasdaq Rule 5615(c)(2).  Under this rule, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a “controlled company” and may elect to be exempt from certain corporate governance requirements, including requirements that (1) a majority of the board of directors consist of independent directors, and that (2) compensation of officers be determined or recommended to the board of directors by a majority of its independent directors or by a compensation committee comprised of independent directors.

Provisions of Delaware law, our charter documents and the agreements governing the Convertible Senior Notes and the Senior Secured Notes may impede or discourage a takeover, which could cause the market price of our common stock to decline.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a fundamental change or a change in control would be beneficial to our existing stockholders.  In addition, our board of directors has the power, without stockholder approval, to designate the terms of one or more series of preferred stock and issue shares of preferred stock.  The ability of our board of directors to create and issue a new series of preferred stock and certain provisions of Delaware law and our certificate of incorporation and bylaws could impede a merger, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our common stock, which, under certain circumstances, could reduce the market price of our common stock.

In addition, certain provisions of the Convertible Senior Notes and the Senior Secured Notes could make it more difficult or more expensive for a third party to acquire us.  Upon the occurrence of a fundamental change, subject to certain conditions, holders of Senior Secured Notes and Convertible Senior Notes will have the right, at their option, to require us to purchase for cash all or any portion of their notes.  We may also be required, under certain circumstances, to increase the conversion rate for the Convertible Senior Notes if a holder elects to convert its Convertible Senior Notes in connection with a make-whole fundamental change.

ITEM 1B — UNRESOLVED STAFF COMMENTS

None.

ITEM 3 — LEGAL PROCEEDINGS

From time to time, we are named as a defendant in other legal and regulatory proceedings arising in the normal course of business.  In our opinion, the final judgment or settlement, if any, which may be awarded with any such suit or claim would not have a material adverse effect on our financial position, results of operations or cash flows.

ITEM 4 — MINE SAFETY DISCLOSURE

None.

28

Table of Contents

GLOSSARY OF OIL AND GAS TERMS

The terms defined in this section are used throughout this Annual Report on Form 10-K.  For definitions of additional oil and gas terms and complete versions of certain of the definitions below, please refer to Rule 4-10(a) of Regulation S-X as promulgated by the SEC.

“3D” or “3D SEISMIC”—An exploration method of sending energy waves or sound waves into the earth and recording the wave reflections to indicate the type, size, shape, and depth of subsurface rock formations.  3D seismic lines are shot very close together.  This allows for the ability for computers to generate seismic profiles in any direction and form 3D surfaces.  3D surveys are measured in square kilometers or square miles.

“Basin”—A large natural depression on the earth’s surface in which sediments generally brought by water accumulate.

“Bbl”—One stock tank barrel, of 42 U.S. gallons liquid volume, used herein in reference to crude oil, condensate or natural gas liquids.

“Bcf”—One billion cubic feet of natural gas.

“BOE”—Barrel of oil equivalent.  Oil equivalents are determined herein using the relative energy content method, with a ratio of 1.0 Bbl of oil or natural gas liquid to 6.0 Mcf of gas.

“Btu”—British thermal unit.

“Completion”—The process of treating a drilled well followed by the installation of permanent equipment for the production of oil or natural gas, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.

“DD&A”—Depreciation, depletion, amortization and accretion.

“Developed acreage”—The number of acres that are allocated or assignable to productive wells or wells capable of production.

“Development well”—A well drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive.

“Economically producible”—As it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation.

“Estimated ultimate recovery”—The sum of reserves remaining as of a given date and cumulative production as of that date.

“Exploratory well”—A well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir.  Generally, an exploratory well is any well that is not a development well, an extension well, a service well or a stratigraphic test well.

“Extension well”—A well drilled to extend the limits of a known reservoir.

“Field”—An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature and/or stratigraphic condition.  There may be two or more reservoirs in a field that are separated vertically by intervening impervious, strata, or laterally by local geologic barriers, or by both.  Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field.

“Formation”—A layer of rock which has distinct characteristics that differs from nearby rock.

“Gross acres” or “gross wells”—The total acres or wells, as the case may be, in which a working interest is owned.

“Horizontal drilling”—A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval.

“Horizontal well”—A well drilled using horizontal drilling techniques.

“Hydraulic fracturing”—A stimulation treatment routinely performed on oil and gas wells in low-permeability reservoirs.  Specially engineered fluids are pumped at high pressure and rate into the reservoir interval to be treated, causing a vertical fracture to open.  Commonly referred to as “fracking.”

29

Table of Contents

“Identified drilling locations”—Locations specifically identified by management as an estimation of our multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves data on contiguous acreage and geologic formations.  The availability of local infrastructure, drilling support assets and other factors as management may deem relevant, such as spacing requirements, easement restrictions and state and local regulations, are considered in determining such locations.  The drilling locations on which we actually drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and gas prices, costs, actual drilling results and other factors.

“Liquids”—Describes oil, condensate and natural gas liquids.

“MBbl”—One thousand barrels of crude oil, condensate or natural gas liquids.

“MBOE”—One thousand barrels of oil equivalent.

“Mcf”—One thousand cubic feet of natural gas.

“MMcf”—One million cubic feet of natural gas.

“Natural gas liquid” or “NGL”—Components of natural gas that are separated from the gas state in the form of liquids, which include propane, butanes and ethane, among others.

“Net acres”—The percentage of total acres an owner has out of a particular number of acres, or a specified tract.  An owner who has 50% interest in 100 acres owns 50 net acres.

“Productive well”—A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of the production exceed production expenses and taxes.

“Proved area”—The part of a property to which proved reserves have been specifically attributed.

“Proved developed reserves (“PDP”) —Proved reserves that can be expected to be recovered (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

“Proved reserves”—Those quantities of oil and gas, which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible —from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.  The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

“Proved undeveloped reserves or “PUD” —Proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.  Proved undeveloped reserves on undrilled acreage are limited (i) to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances and (ii) to other undrilled locations if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time.

“PV10” — Discounted future net cash flows estimated by applying year-end prices to the estimated future production of year-end proved reserves.  Future cash inflows are reduced by estimated future production and development costs based on period end costs to determine pre-tax cash inflows.  Future net cash inflows after income taxes are discounted using a 10% annual discount rate.

“Reasonable certainty”—If deterministic methods are used, reasonable certainty means a high degree of confidence that that the quantities will be recovered.  If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate.  A high degree of confidence exists if the quantity is much more likely to be achieved than not, and, as changes due to increased availability of geosciences (geological, geophysical and geochemical), engineering and economic data are made to estimated ultimate recovery (“EUR”) with time, reasonably certain EUR is much more likely to increase or remain constant than decrease.

“Reservoir”—A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is separate from other reservoirs.

30

Table of Contents

“Resources”—Quantities of oil and gas estimated to exist in naturally occurring accumulations.  A portion of the resources may be estimated to be recoverable, and another portion may be considered to be unrecoverable.  Resources include both discovered and undiscovered accumulations.

“Service well”—A well drilled or completed for the purpose of supporting production in an existing field.  Specific purposes of service wells include gas injection, water injection, steam injection, air injection, salt-water disposal, water supply for injection, observation or injection for in-situ combustion.

“Spacing”—The distance between wells producing from the same reservoir.  Spacing is often expressed in terms of acres, e.g., 40-acre spacing, and is often established by regulatory agencies.

“Standardized measure”—Discounted future net cash flows estimated by applying year-end prices to the estimated future production of year-end proved reserves.  Future cash inflows are reduced by estimated future production and development costs based on period end costs to determine pre-tax cash inflows.  Future income taxes, if applicable, are computed by applying the statutory tax rate to the excess of pre-tax cash inflows over our tax basis in the oil and gas properties.  Future net cash inflows after income taxes are discounted using a 10% annual discount rate.

“Stratigraphic test well”—A drilling effort, geologically directed, to obtain information pertaining to a specific geologic condition.  Such wells customarily are drilled without the intent of being completed for hydrocarbon production.  The classification also includes tests identified as core tests and all types of expendable holes related to hydrocarbon exploration.  Stratigraphic tests are classified as “exploratory type” if not drilled in a known area or “development type” if drilled in a known area.

“Undeveloped acreage”—Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas regardless of whether such acreage contains proved reserves.

“Unit”—The joining of all or substantially all interests in a reservoir or field, rather than a single tract, to provide for development and operation without regard to separate property interests.  Also, the area covered by a unitization agreement.

“Working interest”—The right granted to the lessee of a property to explore for and to produce and own natural gas or other minerals.  The working interest owners bear the exploration, development, and operating costs on a cash, penalty, or carried basis.

31

Table of Contents

PART II

ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SHARES

Our common stock is listed on the NASDAQ Capital Market and commenced trading on February 22, 2012 under the ticker symbol “ZAZA.”  Prior to that date, there was no public market for our common stock.

As of December 31, 2014, there were approximately 163 holders of record of our common stock.

The following table sets forth the high and low sale prices per share of our common stock as reported by the NASDAQ Capital Market based upon quotations that reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:

On August 19, 2014, we completed a 1-for-10 reverse stock split of our outstanding common stock.  The sale prices per share of our common stock presented above have been adjusted to give effect to the reverse split for all periods presented.

No dividends have ever been paid on our common stock.  Our dividend policy is to retain earnings to finance the operations and expansion of our businesses.  We do not anticipate paying any cash dividends on our common stock at this time.  In addition, the terms of our Senior Secured Notes and Warrants prohibit the payment of dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes equity compensation plan information regarding equity securities authorized for issuance under individual stock option compensation agreements as of December 31, 2014:

Comparative Stock Performance

The following table compares the yearly change in the cumulative total stockholder return on our Common Stock during the period February 21, 2012 through December 31, 2014 with the cumulative total return of the Dow Jones U.S. Exploration and Production Index and S&P 600 Small Cap Index.  The comparison assumes $100 was invested on February 21, 2012 in our Common Stock and in each of the foregoing indices and assumes reinvestment of dividends.  We paid no dividends on our Common Stock during such period.

32

Table of Contents

ITEM 6 — SELECTED FINANCIAL DATA

The following selected financial information is summarized from ZaZa’s results of operations for the years ended December 31, 2014, 2013, 2012, 2011 and 2010, as well as selected balance sheet data of ZaZa as of December 31, 2014, 2013, 2012, 2011, and 2010 and should be read in conjunction with the related financial statements and the notes thereto.

*                                         Includes $195.6 million of other income related to the gain on termination of Hess agreements.

**                                  Defined as current assets less current liabilities.

***                           Amounts are net of debt discounts of $9.5 million, $15.7 million, $24.3 million, zero, and zero for 2014, 2013, 2012, 2011, and 2010 respectively.

33

Table of Contents

ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE OVERVIEW

ZaZa Energy Corporation is an independent oil and gas company focused on the exploration and production of unconventional and conventional oil and gas assets.  We currently operate primarily through joint ventures in the Eagle Ford East trend in East Texas and the Eagle Ford trend in South Texas.  Our common stock is traded on the NASDAQ Capital Market under the trading symbol ZAZA.

Our strategy is to enhance shareholder value through consistent growth in cash flows by focusing on the organic development of our existing assets within our core areas.  We also look for opportunities to diversify and build upon our current portfolio through the acquisition of additional unconventional and conventional assets with a focus on Texas.

Since the third quarter of 2014, our liquidity has been an area of concern.  The drop in oil prices that began at the end of 2014 and continues today has created further liquidity challenges as our revenues are directly linked to the price of oil.  As further discussed below under the heading “Liquidity and Capital Resources,” our prospectus for adequate liquidity in 2015 are uncertain, especially in light of the fact that beginning on March 23, 2015, any holder of the $13.9 million in aggregate principal amount of our Senior Secured Notes may elect to require us to repurchase that holder’s Senior Secured Notes within 30 days of making such an election.  Although we are discussing with the holders of the Senior Secured Notes a 30-day extension (until April 22, 2015) of the earliest date that the holder of any of the Senior Secured Notes can exercise this right of repurchase, there is no assurance that we will be successful in being given such an extension.  Even without considering the repurchase of any of the Senior Secured Notes, the Company will need to access additional capital to continue as a going concern through May of 2015.  Our board of directors and management are actively exploring financing and partnership alternatives while seeking to restructure our debt.  We can offer no assurance that a solution will be found.

ZaZa owns producing and non-producing oil and gas acreage in proven or prospective basins that are located in South Texas and East Texas.  Almost all of our assets are located within the United States.  Except for an immaterial amount of cash held by our foreign subsidiaries, which we are in the process of dissolving, we have no assets or operations outside of the United States.  In this Annual Report, our use of “East Texas” refers to Houston, Leon, Madison, Grimes, Walker, Trinity and Montgomery counties and the surrounding region; and our use of “South Texas” refers to DeWitt and Lavaca counties and the surrounding region.

Additionally, we have converted our natural gas reserves or production into barrel of oil equivalents in this Annual Report. For this purpose, six thousand cubic feet of natural gas is equal to one barrel of oil, which is based on the relative energy content of natural gas and oil.

Recent Developments

East Texas Joint Venture with EOG

On March 7, 2014, we entered into the Fourth Amendment (the “Fourth Amendment”) to our Joint Exploration and Development Agreement with EOG with respect to the joint development of certain of our East Texas properties.  Under the Fourth Amendment, we agreed to assign to EOG approximately 9,600 net acres in East Texas representing a 75% working interest in the acreage remaining in the third and final phase of the joint development program under the JEDA.  As consideration for this transfer, we received approximately $4.7 million in cash and the carry by our counterparty of our share of future drilling and completion costs in an aggregate amount up to approximately $9.2 million. As of December 31, 2014, the $9.2 million of carried costs had been fully deployed.

Also pursuant to the Fourth Amendment and effective March 7, 2014, we and EOG agreed to terminate that certain Participation Agreement, effective as of March 1, 2012, by and between the Company and Range Texas Production, LLC (“Range”) (such agreement, as amended, the “Range Agreement”).  Range’s rights and obligations under the Range Agreement were assigned to, and assumed by, our counterparty pursuant to that certain Quitclaim Assignment and Bill of Sale, effective as of December 1, 2013, by and between Range and our counterparty.

In December 2014, EOG satisfied the last of its drilling obligations under the JEDA.  While selected JEDA provisions survive, the joint venture is now principally governed by the Joint Operating Agreement among EOG, ZaZa, and Quantum.  Pursuant to its terms, ZaZa now has the right to propose new development wells and maintain its desired minimum drilling pace.

East Texas Joint Venture with Quantum

On September 18, 2014, ZaZa entered into the Quantum Agreements with Quantum.  Pursuant to the terms of the Quantum Agreements:

34

Table of Contents

·                  ZaZa assigned to Quantum an approximately 4 percent working interest (6,000 of ZaZa’s net acres) in undeveloped leases within the East Texas joint venture.  ZaZa retained its interest in all existing wells in the East Texas joint venture and is reserving the right to participate with respect to Quantum’s working interest in the next 15 East Texas JV wells that are spudded, drilled and completed after the closing of the Quantum transaction, as long as those wells are spudded, drilled and completed on or before the second anniversary of the closing of the transaction (the “Reserved Wells”).

·                  ZaZa received $11 million in cash as initial consideration and the right to receive Quantum’s interest in certain of the Reserved Wells.

·                  ZaZa will receive ongoing G&A and cost reimbursements from Quantum for providing services related to their jointly owned assets in Walker, Grimes, Madison, Trinity, and Houston counties.

·                  Quantum has the right to cause ZaZa to purchase Quantum’s interest in the jointly owned assets on an all or nothing basis for a cash price based on Quantum’s initial consideration paid of $11 million plus any out-of-pocket costs of acquiring and renewing leases under the Quantum Agreements on September 17, 2016 (the “Quantum Put Option”).

For more information on the Quantum Agreements, see “Item 1 — Joint Venture — East Texas Joint Venture with Quantum.”

Following the closing of the Quantum Agreements, ZaZa’s East Texas acreage holdings comprise two separate development areas, each with different operators and ownership structures:

·                  Madison, Walker, and Grimes Counties. The Madison-Walker-Grimes Development Area comprises approximately 147,000 gross acres of the East Texas joint venture and is operated by EOG. ZaZa holds an approximately 21% working interest, or approximately 31,000 net acres and Quantum holds an approximately 4% working interest, or 6,000 net acres in this area. During the next two years, ZaZa has the option to participate for both its and Quantum’s working interest—for a total of a 25% working interest to ZaZa—in the next 15 wells drilled within the Madison-Walker-Grimes Development Area. ZaZa also retained its full 25% working interest in all wells spudded prior to the closing of the Quantum Agreements.

·                  Houston, Trinity, and Leon Counties. The Houston-Trinity-Leon Development Areas comprises approximately 10,000 net acres and is operated and owned 100% by ZaZa. This acreage is not subject to the Quantum Agreements. Through the remainder of 2015 ZaZa will be preparing the acreage block in Houston and Trinity counties to be drill ready from a unit formation perspective, and the Company’s leasing is now focused on contiguous acreage additions.

Working interests in 6,000 net acres were sold and assigned to Quantum on September 18, 2014.  U.S. generally accepted accounting principles (“U.S. GAAP”) prevents sale accounting due to the Quantum Put Option. Accordingly, the related oil and gas properties continue to be included in the consolidated balance sheet, and a liability was recorded, the Quantum Put Option, equal to Quantum’s initial cash payment of $11 million. Quantum’s out of pocket costs that are incurred subsequent to the initial $11 million represent contingent liabilities and will be recorded as a liability when and if payment becomes probable. As of December 31, 2014, this contingent liability totaled approximately $0.1 million.  The Quantum transaction did not have any impact on revenue, income from continuing operations, net income, or income per share.

South Texas Joint Venture with Sabine

In South Texas, our joint venture partner — Sabine South Texas LLC (“Sabine”), a subsidiary of Sabine Oil & Gas Corporation, completed two fully carried commitment wells during the first quarter of 2014.  In exchange for Sabine fulfilling its obligations with respect to our South Texas joint venture, ZaZa transferred a 75% working interest in approximately 5,700 net acres and a well known as the Boening well.  Participating interests in any additional wells drilled or lease acreage acquired under an area of mutual interest will be shared 75% by Sabine and 25% by ZaZa (assuming affirmative elections to participate in such lease acreage acquisition(s)).  The area of mutual interest expires on September 15, 2015.

Balance Sheet Initiatives

Senior Secured Notes with a current principal amount of $13.9 million were issued under the Securities Purchase Agreement, dated February 21, 2012 (as amended, the “Securities Purchase Agreement”) and will mature on February 21, 2017 (subject to earlier call provisions as discussed below). On February 24, 2015, the Company entered into Amendment No. 7 to the Securities Purchase Agreement. Prior to Amendment No. 7, the Securities Purchase Agreement provided that each holder of Senior Secured Notes had the right, beginning on February 21, 2015, to give notice to the Company, requiring the Company to repurchase up to 100% of such Purchaser’s Senior Secured Notes at par plus accrued and unpaid interest (the “Senior Secured Notes Put Option”). The Company would have had 60 days after such notice to repurchase any such Senior Secured Notes.  Amendment No. 7 amended the Securities

35

Table of Contents

Purchase Agreement to delay the earliest date that any noteholder could exercise the Senior Secured Notes Put Option by 30 days (from February 21, 2015 to March 23, 2015).  Amendment No. 7 also contains a corresponding decrease from 60 days to 30 days of the time period afforded to the Company to complete the repurchase of the Senior Secured Notes of any holder that exercises its rights in accordance with the terms of Senior Secured Notes Put Option.  As of March 31, 2015, we had entered into discussions with the holders of our Senior Secured Notes for an Amendment No. 8 to the Securities Purchase Agreement that would again delay the earliest date that any noteholder could exercise the Senior Secured Notes Put Option by 30 days (from March 23, 2015 to April 22, 2015).  As of March 31, 2015, the holders of a majority of the principal amount of the Senior Secured Notes at the time outstanding had agreed to the additional 30-day delay contained in Amendment No. 8.  However, for Amendment No. 8 to become effective, it must be approved by all holders of the Senior Secured Notes.  The Company is continuing to work to get approval of Amendment No. 8 from all holders, but there can be no assurance that the Company will be successful in doing so.

Our board of directors and management are continuing to pursue further restructuring of our debt and additional cash funding for the 2015 drilling program.  On February 24, 2015, we initiated a process to evaluate broader transactions, such as new partnerships and joint ventures. ZaZa has retained Seaport Global Securities LLC (who merged with Global Hunter Securities LLC) as financial advisor to assist in evaluating such broader alternatives.

On February 24, 2014, the Company entered into the Exchange Agreements to exchange an aggregate of $47.3 million in 8.00% Subordinated Notes due 2017 for a combination of shares of common stock of the Company and shares of a new series of preferred stock of the Company. The Exchange Agreements were amended and superseded by the Subordinated Note Modification Agreements with each of the Subordinated Note Holders on January 19, 2015.  The Modification Agreements provide that, instead of exchanging the Subordinated Notes for common stock and preferred stock of the Company, all interest payments to the Subordinated Note Holders will be paid in kind.  On January 19, 2015 each Subordinated Note Holder exchanged its Subordinated Note for the First Amended and Restated Subordinated Note to provide that interest payments will be paid in kind as additional principal beginning with the first interest payment due with respect to interest that accrues beginning January 1, 2015.  Interest will continue to accrue at a rate of 8.00% per annum, and the maturity date will remain August 21, 2017.  For more information on the Modification Agreements, see “Item 1 — Balance Sheet Initiatives and Other Transactions.”

On July 21, 2014, we closed a capital markets transaction for $4.5 million net proceeds in exchange for ZaZa common stock of $8.30 per share and 0.6 warrants for every share of ZaZa common stock with a strike price of $11.20 per share (the “2019 Warrants”). On November 18, 2014, the Company and the investor entered into an agreement stipulating the number of shares issuable upon exchange of the warrants.  Pursuant to its terms, the Company issued 1 million shares of common stock in the fourth quarter of 2014 in exchange for the warrants.

Financial Summary

For the year ended December 31, 2014:

·                  Production was 232 MBOE of which 86 MBOE was oil production (37 %).

·                  Revenues were $11.5 million.

·                  Operating losses were $22.1 million, including $7.0 million of asset impairments.

·                  Net loss was $8.2 million.

At December 31, 2014, we had:

·                  Cash and cash equivalents of $6.3 million.

·                  Current ratio (current assets/current liabilities) of 0.4 to 1.

RESULTS OF OPERATIONS

The following is a discussion of our consolidated results of operations, financial condition and capital resources. This discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in this Annual Report on Form 10-K.

The following table presents our production, average prices obtained for our production and average production cost for the years ended December 31, 2014 and 2013:

36

Table of Contents