Orca Exploration announces 2015 year-end financial results and independent reserves evaluation

TORTOLA, British Virgin Islands, April 14, 2016

TORTOLA, British Virgin Islands, April 14, 2016 /CNW/ - Orca Exploration Group Inc. ("Orca" or "the Company") announces its financial results and its independent reserves evaluation for the year ended 31 December 2015. All currency amounts are in United States dollars unless otherwise stated.

• Revenue decreased 4% to US$54.1 million from US$56.6 million. The fall in revenue is the result of an 11% fall in total Additional Gas sales volumes, and a 6% fall in the weighted average sale price.  The capital investment in the workover programme during the year increased the Company share of net revenue as a consequence of increased Cost Gas and a smaller Profit Gas allocation to the Tanzanian Petroleum Development Corporation ("TPDC"). This helped to offset the overall decline in revenue resulting from the drop in both volumes and prices. Funds flow from operating activities decreased 18% to US$26.6 million or US$0.76 per share basic and diluted, compared to US$32.4 million or US$0.93 per share basic and diluted in the prior period, primarily the result of lower revenue.
  
  
• Net income for the year was US$1.5 million or US$0.04 per share basic and diluted, as compared to loss of US$38.3 million or loss of US$1.10 per share in the prior year. The loss in 2014 was primarily due to a US$35.1 million provision against the receivable from the Tanzanian Electrical Supply Company ("TANESCO").
  
  
• Total gross proved conventional natural gas reserves decreased 18% to 368 Bcf from 450 Bcf in the prior year and total gross proved plus probable conventional natural gas reserves ("2P") decreased 17% to 417 Bcf from 504 Bcf in the prior year. The decrease in both is a consequence of 2015 Additional Gas production of 17.3 Bcf and the slower anticipated growth in power demand than previously communicated to the Company from the TPDC. The net present value of the estimated future cash flows of the 2P reserves at a 10% discount rate ("NPV10") decreased 14% to US$357 million from US$417 million in the previous year. The decline is a result of the fall in anticipated growth of the Power sector revenues which are anticipated to be realized at lower prices. The Company no longer considers it to be realistic that the Portfolio Gas Supply Agreement ("PGSA") gas prices will be rolled out given the industry competition that now exists in Tanzania.
  
  
• Total capital expenditures were US$38.4 million for the year. In June 2015 the Company entered into a drilling contract with Paragon Offshore plc for the use of its M826 Mobile Drilling Workover Rig, as well the provision of associated services, in order to execute the offshore phase of the development programme for the Songo Songo gas field (the "Offshore Programme"). The Offshore Programme commenced on 2 September 2015 and included the workovers on three existing wells (SS-5, SS-7 and SS-9) and drilling of one new well, SS-12. All workovers were successfully completed during the year while well SS-12 was successfully completed in February 2016. Upon completion of the Offshore Programme, the rig was released.
  
  
• On 29 October 2015, the Company and IFC completed a debt financing agreement for the Company's operating subsidiary, PanAfrican Energy Tanzania Limited to borrow up to US$60 million. The financing is a subordinated, income participating loan with flexible repayment terms and a maximum tenure of approximately 10 years. Drawdowns on the financing are subject to a number of terms and conditions. As at 31 December 2015, US$20 million of the facility had been drawn down, with the remaining US$40 million drawn in February 2016.
  
  
• TANESCO payments for 2015 continued to be irregular. During Q4 2015 TANESCO payments decreased with only US$4.5 million being received against sales of US$11.7 million.  As at 31 December 2015 Management has reviewed the current position with TANESCO and feels that the policy implemented in 2014 is still appropriate and as a result, has reclassified a further US$9.8 million, the arrears in excess of 60 days, as long-term debt and has placed a full provision against this.
  
  
• The Company has an agreement to farm in on Central Adriatic B.R268.RG Permit in offshore Italy. Changes in Italian environmental legislation in late 2015 have resulted in the development of this permit being postponed indefinitely. As at the date of this press release, the Company has no further capital commitments in Italy.
  
  
• Further to the Company's press release dated 17 February 2016, Mr. David Lyons, the Chief Executive Officer and indirect controlling shareholder of Orca, has informed the Board of Directors that he is no longer evaluating a possible privatization transaction involving Orca. As a result, no privatization proposal will be forthcoming. At this time, there is no consideration of Orca undertaking a substantial issuer bid for its Class B Subordinate Voting Shares.
  
  
• The Board of Directors of Orca has called a shareholders meeting to be held on 7 June 2016.

Reserves Summary

The Company's conventional natural gas reserves as at 31 December 2015 for the period to the end of its licence in October 2026 were evaluated by independent petroleum engineering consultants McDaniel & Associates Consultants Ltd. ("McDaniel") in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). The independent reserves evaluation prepared by McDaniel (the "McDaniel Report") is dated 24 March 2016 with an effective date of 31 December 2015. A reserves committee of the Company reviews the qualifications and appointment of the independent reserves evaluator and reviews the procedures for providing information to the evaluators. Reserves included herein are stated on a company gross basis unless noted otherwise. All the Company's reserves are located in Tanzania. Additional reserves information required under NI 51-101 are included in Orca's reports relating to reserves data and other oil and gas information under NI 51-101, which have been filed on its profile on SEDAR at www.sedar.com.

The following tables outline the Company's conventional natural gas reserves as at 31 December 2015 and the net present value of future net revenue attributable to such reserves as evaluated in the McDaniel Report utilising forecast price and cost assumptions.