Friday, 03 December 2021 04:52 GMT

Orca Energy Group Inc. Announces Completion of Q3 2021 Interim Filings


(MENAFN- GlobeNewsWire - Nasdaq) TORTOLA, British Virgin Islands, Nov. 17, 2021 (GLOBE NEWSWIRE) -- Orca Energy Group Inc. (“ Orca ” or the“ Company ” and includes its subsidiaries and affiliates) (TSX-V: ORC.A, ORC.B) today announces that it has filed its condensed consolidated interim financial statements and management's discussion and analysis for the three and nine month periods ended September 30, 2021 with the Canadian securities regulatory authorities. All amounts are in United States dollars (“ $ ”) unless otherwise stated.

Jay Lyons, Chief Executive Officer, commented:

“We are very pleased with Orca's performance to date in 2021. Our production and revenues remained strong during the period and we continue to hit the targets we have set for ourselves. Operationally, Orca remains on track with the installation of compression equipment, designed to ensure the Company can maintain production volumes at 102 MMcfd, with the potential to increase by a further 70 MMcfd. Additionally, the well remediation is in process and is expected to be completed in Q1 2022. With a tight control on costs, we maintain a strong balance sheet, enabling us to not only continue investing in the creation of further value from the world class Songo Songo gas field, but also making appropriate returns to our shareholders.
On behalf of the Board, I would like to thank Blaine Karst for his significant contribution to the Company over the years. We wish him the very best for his retirement. We are very pleased to extend a warm welcome to Lisa Mitchell as our new CFO. Lisa brings a wealth of experience in senior finance and leadership roles within the African energy sector. We will keep our stakeholders appraised of our progress as we move forward in the last quarter of 2021.”

Highlights

  • Revenue increased by 7% for Q3 2021 and by 9% for the nine months ended September 30, 2021 compared to the same prior year periods. The increase for Q3 2021 was primarily a result of the increased sales to the power sector. The increase for the nine months ended September 30, 2021 was a result of the increased sales to both the industrial sector and power sector. Gas deliveries increased by 6% for Q3 2021 and by 3% for the nine months ended September 30, 2021 compared to the same prior year periods. The Q3 2021 increase is due to the 11% increase in gas deliveries to the power sector being partially offset by the decrease of 13% in gas deliveries to the industrial sector as a result of an increase in downtime due to unplanned maintenance at a cement plant. The increase for the nine months ended September 30, 2021 reflects the increase in gas deliveries of 4% to the power sector.
  • Net income attributable to shareholders increased by 412% for Q3 2021 and decreased by 27% for the nine months ended September 30, 2021 compared to the same prior year periods. The increase for Q3 2021 was a combination of the increase in revenue, a decrease in general and administrative expenses and a reversal of loss allowances for receivables in Q3 2021 compared to a loss allowance for receivables in Q3 2020 as a result of the Company fully providing for a receivable from the Tanzanian Revenue Authority (“ TRA ”) who issued an Agency Notice for $5.3 million obligating the commercial bank of PanAfrican Energy Tanzania Limited's (“ PAET ”), the Company's subsidiary operating in Tanzania, to release funds in favour of the TRA. The decrease for the nine months ended September 30, 2021 compared to the same prior year period is primarily related to the decrease in the reversal of loss allowances related to the lower collection of arrears from the Tanzanian Electric Supply Company Limited (“ TANESCO ”) despite higher revenue.
  • Net cash flows from operating activities for Q3 2021 increased by 63% and decreased by 1% for the nine months ended September 30, 2021 compared to the same prior year periods primarily reflecting the changes in net income and non-cash working capital.
  • Adjusted funds flow from operations increased by 4% for Q3 2021 and by 20% for the nine months ended September 30, 2021 compared to the same prior year periods. The increases were primarily a result of the increase in revenue and the reduction in general and administrative expenses.
  • Capital expenditures decreased by 61% for Q3 2021 and increased by 29% for the nine months ended September 30, 2021 compared to the same prior year periods. The capital expenditures in 2021 primarily relate to the installation of compression facilities and the commencement of the well workover program for the SS-3, SS-4 and SS-10 wells. The capital expenditures in 2020 primarily related to the flowline decoupling project and the compression project. The Company is installing inlet compression to allow production volumes to be sustained at approximately 102 million standard cubic feet per day (“ MMcfd ”) in the near term (3-5 years), through the Songas Limited (“ Songas ”) infrastructure. The workover program is scheduled to be completed in Q1 2022 at a gross cost of $21.4 million of which $3.9 million has been incurred to date. The rig is currently on site and under preparation to commence the workover on well SS-3. Subject to demand volumes and associated natural reservoir pressure declines, the workovers and compression facilities provide the opportunity to initially increase production potential to a total of 172 MMcfd by also utilizing the National Natural Gas Infrastructure (“ NNGI ”). The original value of the contract for compression was $38.0 million, however price variations due to increased costs of sea freight, a requirement to increase on site power generation capacity, and design changes to cable routing for the project have seen the total project costs increase to $41.7 million. Of this, $39.2 million has already been incurred and following installation and testing the balance of $2.5 million is forecast to be paid in 2022. The project is currently on schedule for completion in Q2 2022.
  • The Company exited the period in a strong financial position with $46.5 million in working capital (December 31, 2020: $74.2 million), cash and cash equivalents of $71.4 million (December 31, 2020: $104.2 million) and long-term debt of $49.6 million (December 31, 2020: $54.2 million). The decrease in working capital, cash and cash equivalents was primarily related to the substantial issuer bid completed in January 2021 (“ 2021 SIB ”) and the reclassification of $5.0 million of long-term debt into current liabilities as it becomes due in April 2022.
  • As at September 30, 2021 the current receivable from TANESCO was $2.3 million (December 31, 2020: $ nil). TANESCO's long-term trade receivable as at September 30, 2021 was $26.5 million with a provision of $26.5 million compared to $27.6 million (provision of $27.6 million) as at December 31, 2020. Subsequent to September 30, 2021 the Company invoiced TANESCO $1.8 million for October 2021 gas deliveries and TANESCO paid the Company $3.0 million.
  • On September 9, 2021 the Company declared a dividend of CDN$0.10 per share on each of its Class A common voting shares (“ Class A Shares ”) and Class B subordinate voting shares (“ Class B Shares ”) for a total of $1.6 million to the holders of record as of September 29, 2021 which was paid on October 15, 2021.
  • On June 21, 2021 the Company commenced a normal course issuer bid (“ NCIB ”) to purchase Class B Shares through the facilities of the TSXV and alternative trading systems in Canada. To date, 9,400 Class B Shares have been purchased and cancelled by the Company pursuant to the NCIB.

Financial and Operating Highlights for the Three and Nine Months Ended September 30, 2021

Three months
ended September 30
% Change Nine months
ended September 30
% Change
(Expressed in $'000 unless indicated otherwise) 2021 2020 Q3/21 vs
Q3/20
2021 2020 Ytd/21 vs
Ytd/20
OPERATING
Daily average gas delivered and sold (MMcfd) 64.5 60.9 6 % 57.8 56.0 3 %
Industrial 11.6 13.4 (13 )% 12.9 12.8 1 %
Power 52.9 47.5 11 % 44.9 43.2 4 %
Average price ($/mcf)
Industrial 8.54 7.41 15 % 7.89 7.41 6 %
Power 3.55 3.46 3 % 3.49 3.45 1 %
Weighted average 4.45 4.33 3 % 4.47 4.36 3 %
Operating netback ($/mcf)1 2.75 2.98 (8 )% 2.87 2.70 6 %

FINANCIAL
Revenue 22,271 20,859 7 % 61,203 55,894 9 %
Net income attributable to shareholders 7,613 1,487 412 % 14,822 20,386 (27 )%
per share – basic and diluted ($) 0.38 0.06 533 % 0.73 0.72 1 %
Net cash flows from operating activities 12,132 7,456 63 % 21,589 21,799 (1 )%
per share – basic and diluted ($) 0.61 0.29 110 % 1.06 0.77 38 %
Adjusted funds flow from operations 1 12,367 11,847 4 % 32,288 26,796 20 %
per share – basic and diluted ($) 0.62 0.44 41 % 1.58 0.93 70 %
Capital expenditures 3,715 9,412 (61 )% 14,114 10,906 29 %

September 30,
As at
December 31,
2021 2020 % Change
Working capital (including cash) 46,549 74,236 (37 )%
Cash and cash equivalents 71,433 104,190 (31 )%
Long-term loan 49,563 54,246 (9 )%
Outstanding shares ('000)
Class A 1,750 1,750 0 %
Class B 18,231 24,388 (25 )%
Total shares outstanding 19,981 26,138 (24 )%

1 Operating netback and adjusted funds flow from operations are non-GAAP financial measures. Please refer to Non-GAAP measures.

The complete Condensed Consolidated Interim Financial Statements and Notes and Management's Discussion & Analysis for the three and nine months ended September 30, 2021 may be found on the Company's website at or on the Company's profile on SEDAR at .

Orca Energy Group Inc.
Orca Energy Group Inc. is an international public company engaged in natural gas development and supply in Tanzania through its subsidiary PAET. Orca trades on the TSX Venture Exchange under the trading symbols ORC.B and ORC.A.

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Abbreviations

Mcf thousand cubic feet
MMcfd million standard cubic feet per day

Non-GAAP Measures

The Company evaluates its performance using a number of measures that are not prescribed by generally accepted accounting principles (“ non-GAAP ”). These non-GAAP measures are not standardized and therefore may not be comparable to similar measurements of other entities.

  • Adjusted funds flow from operations represents net cash flows from operating activities less interest expense and reversal of loss allowances related to the collection of TANESCO arrears and a previously disputed Songas operatorship receivable before changes in non-cash working capital. Management uses this as a performance measure that represents the Company's ability to generate sufficient cash flow to fund capital expenditures and/or service debt.
Three months ended
September 30
Nine months ended
September 30
$'000 2021 2020 2021 2020
Net cash flows from operating activities 12,132 7,456 21,589 21,799
Interest expense (1,977 ) (1,361 ) (5,088 ) (5,517 )
Reversal of loss allowance – TANESCO arrears (1,567 ) (1,818 ) (16,427 )
Reversal of loss allowance – disputed Songas receivables - (1,046 )
Loss allowance – TRA 5,337 5,337
Changes in non-cash working capital 2,212 1,982 17,605 22,650
Adjusted funds flow from operations 12,367 11,847 32,288 26,796
  • Operating netbacks represent the profit margin associated with the production and sale of gas and is calculated as revenues less processing and transportation tariffs, the Tanzanian Petroleum Development Corporation's (“ TPDC ”) revenue share, operating and distribution costs per one thousand standard cubic feet of gas sold. This is a key measure as it demonstrates the profit generated from each unit of production.
  • Adjusted funds flow from operations per share is calculated on the basis of the adjusted funds flow from operations divided by the weighted average number of shares, similar to the calculation of earnings per share.
  • Net cash flows from operating activities per share is calculated as net cash flows from operating activities divided by the weighted average number of shares, similar to the calculation of earnings per share.

FORWARD LOOKING INFORMATION – This news release contains forward-looking statements or information (collectively,“ forward-looking statements ”) within the meaning of applicable securities legislation. All statements, other than statements of historical fact included in this news release, which address activities, events or developments that Orca expects or anticipates to occur in the future, are forward-looking statements. Forward-looking statements often contain terms such as may, will, should, anticipate, expect, continue, estimate, believe, project, forecast, plan, intend, target, outlook, focus, could and similar words suggesting future outcomes or statements regarding an outlook. More particularly, this news release contains, without limitation, forward-looking statements pertaining to the following: current and potential production capacity through the Songas infrastructure; the Company's ability to expand production volumes and capabilities through the Songas infrastructure, including through the utilization of the NNGI; the Company's expectations regarding timing for the completion of installation of compression on the Songas infrastructure and well remediation; and the expected expenditures required to complete the installation of the compression on the Songas infrastructure and well remediation. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Although management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, operational, competitive, political and social uncertainties and contingencies.

These forward-looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control, and many factors could cause the Company's actual results to differ materially from those expressed or implied in any forward-looking statements made by the Company, including, but not limited to, reduced global economic activity as a result of the COVID-19 pandemic, including lower demand for natural gas and a reduction in the price of natural gas; the potential impact of the COVID-19 pandemic on the health of the Company's employees, contractors, suppliers, customers and other partners and the risk that the Company and/or such persons are or may be restricted or prevented (as a result of quarantines, closures or otherwise) from conducting business activities for undetermined periods of time; the impact of actions taken by governments to reduce the spread of COVID-19, including declaring states of emergency, imposing quarantines, border closures, temporary business closures for companies and industries deemed non-essential, significant travel restrictions and mandated social distancing, and the effect on the Company's operations, access to customers and suppliers, availability of employees and other resources; risk that contract counterparties are unable to perform contractual obligations; failure to receive payments from TANESCO; risk that the potential financial solutions to resolve the TANESCO arrears are not implemented by the Tanzanian government; the potential negative effect on the Company's rights under the Company's production sharing agreement (" PSA ") and other agreements relating to its business in Tanzania as a result of the Petroleum Act, passed in 2015 (the " Act "), and other recently enacted and future legislation, as well as the risk that such legislation will create additional costs and time connected with the Company's business in Tanzania; risks regarding the uncertainty around evolution of Tanzanian legislation; risk that the Company will not be successful in appealing claims made by the TRA and may be required to pay additional taxes and penalties; the impact of general economic conditions in the areas in which the Company operates; civil unrest; the susceptibility of the areas in which the Company operates to outbreaks of disease; industry conditions; lack of availability of qualified personnel or management; fluctuations in commodity prices, foreign exchange rates and/or interest rates; stock market volatility; competition for, among other things, capital, drilling equipment and skilled personnel; failure to obtain required equipment for drilling; delays in drilling plans; failure to obtain expected results from drilling of wells; changes in laws and regulations including the adoption of new environmental laws and regulations, impact of new local content regulations and changes in how they are interpreted and enforced; imprecision in reserve estimates; the production and growth potential of the Company's assets; obtaining required approvals from regulatory authorities; failure to install compression on the Songas infrastructure and to complete well remediation on the timelines anticipated; failure to increase or sustain production volumes and capabilities through the Songas infrastructure; risk that the expenditures to increase production volumes and capabilities through the Songas infrastructure is higher than anticipated; and unanticipated changes to legislation and the effect on the Company's operations, including, but not limited to, the Act and the Natural Gas Pricing Regulation made under Sections 165 and 258(l) of the Act. In addition, there are risks and uncertainties associated with oil and gas operations. Therefore the Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by these forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive.

Such forward-looking statements are based on certain assumptions made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors the Company believes are appropriate in the circumstances, including, but not limited to, that the Company is able to complete the installation of compression on the Songas infrastructure and complete the well remediation program on the timelines and at the cost anticipated; that the Company is able to increase or sustain production volumes and capabilities through the Songas infrastructure; that the Company will be able to negotiate Additional Gas sales contracts; the ability of the Company to complete developments and increase its production capacity; the actual costs to complete the Company's development program are in line with estimates; the TPDC, the Ministry of Energy and Mines and the Company are able to agree on commercial terms for future incremental gas sales and the Company can expand Songo Songo development beyond the existing Songas infrastructure and supply gas to the NNGI; that there will continue to be no restrictions on the movement of cash from Mauritius, Jersey or Tanzania; the impact of the COVID-19 pandemic on the demand for and price of natural gas, volatility in financial markets, disruptions to global supply chains and the Company's business, operations, access to customers and suppliers, availability of employees to carry out day-to-day operations, and other resources; that the Company will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that the Company will have adequate funding to continue operations; that the Company will successfully negotiate agreements; receipt of required regulatory approvals; the ability of the Company to increase production at a consistent rate; infrastructure capacity; commodity prices will not further deteriorate significantly; the ability of the Company to obtain equipment and services in a timely manner to carry out exploration, development and exploitation activities; future capital expenditures; availability of skilled labour; timing and amount of capital expenditures; uninterrupted access to infrastructure; the impact of increasing competition; conditions in general economic and financial markets; effects of regulation by governmental agencies; that the Company's appeal of various tax assessments will be successful; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; and other matters.

The forward-looking statements contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.




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