Orca Energy Group Inc. Announces Completion Of Q1 2022 Inter...| MENAFN.COM

Sunday, 14 August 2022 12:25 GMT

Orca Energy Group Inc. Announces Completion Of Q1 2022 Interim Filings


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TORTOLA, British Virgin Islands, May 19, 2022 (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 month period ended March 31, 2022 (' Q1 2022 ') with the Canadian securities regulatory authorities. All amounts are in United States dollars (“ $ ”) unless otherwise stated.

Jay Lyons, Chief Executive Officer, commented:

“We are pleased to report a strong start to 2022 with results for the first quarter of the year showing significant uplifts in gross sales volumes and revenues. These metrics reflect a continuing strong operational performance at the Songo Songo natural gas field, where we continued to conduct safe and reliable operations throughout the period. The completion of the workover of three gas wells (SS-3, SS-4 and SS-10), and the installation of the feed gas compression at the gas processing facility, were important milestones and will ensure sustained production levels of approximately 102 MMcfd in the near term. We have also been able to increase our average gross gas sales forecasts for the remainder of the year, as new power generation facilities come onstream in Tanzania. The Company maintains a robust financial position, balancing our investment requirements to ensure we can continue to provide affordable gas to meet Tanzania's increasing energy needs, whilst continuing to make returns to our shareholders. I would like to thank the Government of Tanzania for their continuing support, and our team for their hard work and commitment. We look forward to providing further updates on our continuing progress through the year.”

Highlights

  • Revenue for Q1 2022 increased by 47% compared to the same prior year period. The increase was primarily a result of increased sales to customers in the power sector. Gas deliveries for the quarter increased by 25% compared to the same prior year period. The increase in gross sales volume was primarily due to the increase in gas deliveries to customers in the power sector as a result of increased deliveries to the Tanzanian Petroleum Development Corporation's (“ TPDC ”).
  • Net income attributable to shareholders increased by 87% for Q1 2022 compared to the same prior year period primarily a result of the increased revenues compared to Q1 2021.
  • Net cash flows from operating activities for Q1 2022 increased by $4.9 million compared to the same prior year period. This was primarily a result of the increase in net income and non-cash adjustments, which was partially offset by negative changes in non-cash working capital relative to the comparable prior year period.
  • Capital expenditures increased substantially for Q1 2022 compared to the same prior year period. The capital expenditures in Q1 2022 primarily related to completion of both the well workover program for the SS-3, SS-4 and SS-10 wells and the compression project. The Company installed feed gas compression on the Songas Limited (“ Songas ”) gas processing facility to allow production volumes through the Songas infrastructure to be sustained at approximately 102 MMcfd in the near term (2-4 years). Despite increased logistical complexity due to enduring effects of COVID-19, the compression project was completed one-month ahead of schedule. The project was negatively impacted by the scheduling of a 10-day plant shutdown to effect a mechanical tie-in, which was delayed to avoid power generation shortages through a critical period in Tanzania. When eventually enacted, the mechanical tie-in was completed in 8-days as opposed to the scheduled 10-days, significantly increasing gas for power generation. In April 2022, the drilling rig was released having completed the planned three well (SS-3, SS-4 and SS-10) workover program. The $31.6 million program included the reactivation of the SS-3 and SS-4 wells along with the installation of corrosion resistant production tubing on all three of the wells. The SS-3 well was placed on production on February 15, 2022 and the SS-10 well was returned to production on April 18, 2022. The SS-4 well remains shut in following the drilling and completion of a planned side-track wellbore to replace the original wellbore, which had been compromised by excessive sand production. Currently the SS-4 well is unable to flow naturally due to suspected excessive liquid loading associated with extensive circulating time while waiting on necessary services and equipment. The Company is sourcing a coiled tubing nitrogen unit to safely unload the excess liquid, potentially allowing the well to flow naturally. It is expected the coiled tubing equipment will be on location in Q3 2022. The workovers and compression facilities provide the opportunity to initially increase current production deliverability to a total of approximately 160 MMcfd by also producing through the adjacent National Natural Gas Infrastructure (“ NNGI ”) facilities on Songo Songo Island.
  • The Company exited the period in a strong financial position with $41.1 million in working capital (December 31, 2021: $41.8 million), cash and cash equivalents of $67.0 million (December 31, 2021: $73.0 million) and long-term debt of $49.7 million (December 31, 2021: $49.6 million). The decrease in working capital, cash and cash equivalents was primarily related to the well workover program in Q1 2022.
  • As at March 31, 2022 the current receivable from the Tanzanian Electric Supply Company Limited (“ TANESCO ”) was $0.3 million (December 31, 2021: $2.0 million). TANESCO's long-term trade receivable as at March 31, 2022 and December 31, 2021 was $26.5 million with a provision of $26.5 million. Subsequent to March 31, 2022 TANESCO paid the Company $7.1 million and the Company invoiced TANESCO $6.4 million for April 2022 gas deliveries.
  • On February 24, 2022, 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 March 31, 2022, which was paid on April 15, 2022.
  • The Company forecasts average gross conventional natural gas sales, which will be classified as Additional Gas, as defined in the PSA (as defined herein) of 70-76 MMcfd during 2022 representing a 10 MMcfd, or approximately 16%, increase to the prior forecasts of 60-66 MMcfd. The increased gas demand forecast is primarily driven by encouraging discussions with the Ministry of Energy (“ MoE ”), TPDC and TANESCO to increase gas supply to new power generation facilities expected to be commissioned in 2022.

Financial and Operating Highlights for the Three Months Ended March, 2022

Three months
ended March 31
% Change

(Expressed in $'000 unless indicated otherwise)

2022

2021
Q1/21 vs Q1/20
OPERATING
Daily average gas delivered and sold (MMcfd) 73.6 58.7 25%
Industrial 13.9 14.0 (1)%
Power 59.7 44.7 34%
Average price ($/mcf)
Industrial 8.70 7.32 19%
Power 3.52 3.40 4%
Weighted average 4.50 4.33 4%
Operating netback ($/mcf)1 3.29 2.37 39%

FINANCIAL
Revenue 27,452 18,631 47%
Net income attributable to shareholders 7,391 3,963 87%
per share – basic and diluted ($) 0.37 0.19 95%
Net cash flows from (used in) operating activities 4,077 (794) n/m
per share – basic and diluted ($)1 0.20 (0.04) n/m
Capital expenditures 1 14,263 232 6,048%
Weighted average Class A and Class B shares ('000) 19,944 21,352 (7)%

March 31,
As at
December 31,
2022 2021 % Change
Working capital (including cash) 1 41,136 41,776 (2)%
Cash and cash equivalents 66,993 72,985 (8)%
Long-term loan 49,678 49,603 0%
Outstanding shares ('000)
Class A 1,750 1,750 0%
Class B 18,192 18,203 0%
Total shares outstanding 19,942 19,953 0%
1 See the Non-GAAP Financial Measures and Ratios advisory in this press release

The complete Condensed Consolidated Interim Financial Statements and Notes and Management's Discussion & Analysis for the three months ended March 31, 2022 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, PanAfrican Energy Tanzania Limited. Orca trades on the TSX Venture Exchange under the trading symbols ORC.B and ORC.A.

*The principal asset of Orca is its indirect interest in the Production Sharing Agreement (“ PSA ”) with TPDC and the Government of Tanzania in the United Republic of Tanzania. This PSA covers the production and marketing of certain conventional natural gas from the Songo Songo licence offshore Tanzania. The PSA defines the gas produced from the Songo Songo gas field as“Protected Gas” and“Additional Gas”. The Protected Gas is owned by TPDC and is sold under a 20-year gas agreement (until July 31, 2024) to Songas and Tanzania Portland Cement PLC. Songas is the owner of the infrastructure that enables the gas to be processed and delivered to Dar es Salaam, which includes a gas processing plant on Songo Songo Island. Additional Gas is all gas that is produced from the Songo Songo gas field in excess of Protected Gas.

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 Financial Measures and Ratios

In this press release, the Company has disclosed the following non-GAAP financial measures, non-GAAP ratios and supplementary financial measures: capital expenditures, operating netback, operating netback per mcf, working capital and net cash flows from operating activities per share.

These non-GAAP financial measures and ratios disclosed in this press release do not have any standardized meaning under IFRS and may not be comparable to similar financial measures disclosed by other issuers. These non-GAAP financial measures and ratios should not, therefore, be considered in isolation or as a substitute for, or superior to, measures and ratios of Company's financial performance defined or determined in accordance with IFRS. These non-GAAP financial measures and ratios are calculated on a consistent basis from period to period.

Non-GAAP Financial Measures

Capital expenditures

Capital expenditures is a useful measure as it provides an indication of our investment activities. The most directly comparable financial measure is net cash from (used in) investing activities. A reconciliation to the most directly comparable financial measure is as follows:

Three Months ended
March 31
$'000 2022 2021
Pipelines, well workovers and infrastructure 14,014 228
Other capital expenditures 249 4
Capital expenditures 14,263 232
Change in non-cash working capital (7,087 ) 63
Net cash used in investing activities 7,176 295

Operating netback

Operating netback is calculated as revenue less processing and transportation tariffs, TPDC's revenue share, and operating and distribution costs. The operating netback summarizes all costs that are associated with bringing the gas from the Songo Songo gas field to the market, it is a measure of profitability. A reconciliation to the most directly comparable financial measure is as follows:

Three Months ended
 March 31
$'000 2022 2021
Revenue 27,452 18,631
Production, distribution and transportation expenses (3,534 ) (3,212)
Net Production Revenue 23,918 15,419
Less current income tax adjustment (recorded in revenue) (2,159 ) (2,874)
Operating netback 21,759 12,545
Sales volumes MMcf 6,625 5,282
Netback $/mcf 3.29 2.37

Non-GAAP Ratios

Operating netback per mcf

Operating netback per mcf represent the profit margin associated with the production and sale of Additional Gas and is calculated by taking the operating netback and dividing it by the volume of Additional Gas delivered and sold. This is a key measure as it demonstrates the profit generated from each unit of production.

Supplementary Financial Measures

Working capital

Working capital is defined as current assets less current liabilities, as reported in the Company's Consolidated Statements of Financial Position. It is an important measure as it indicates the Company's ability to meet its financial obligations as they fall due.

Net cash flows from operating activities 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. Net cash flow from operations is an important measure as it indicates the cash generated from the operations that is available to fund ongoing capital commitments.

Forward Looking Information

This press 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 press 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 press release contains, without limitation, forward-looking statements pertaining to the following: the ability for the SS-4 well to flow naturally following the installation of a coiled nitrogen unit; the timing of when the coiled nitrogen unit and other equipment will be on location; the demand for gas and Orca's average gross sales of conventional natural gas are in line with the Company's forecasts; the results of discussions with the MoE, TPDC and TANESCO relating to the increase in gas supply; the timing for when new power generation facilities are commissioned; the Company's expectations regarding supply and demand of natural gas; the Company's expectations regarding timing and cost for the completion of the well workover program; anticipated production volumes and increased well deliverability as a result of the installation of compression on the Songas Infrastructure and the completion of the well workover program; current and potential production capacity of the Songo Songo gas field; the Company's forecast for average gross conventional natural gas sales in 2022. Although management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, access to resources and infrastructure, 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: failure to receive payments from TANESCO; risks related to the implementation of potential financing solutions to resolve the TANESCO arrears; risk that the well workovers are; risk of a lack of access to Songas processing and transportation facilities; risk that the Company may be unable to complete additional field development to support the Songo Songo production profile through the life of the license; risk that the Company may be unable to develop additional supply or increase production values; risks associated with the Company's ability to complete sales of Additional Gas; potential negative effect on the Company's rights under the PSA and other agreements relating to its business in Tanzania as a result of the Petroleum Act, 2015 (the“ Act ”) and other recently enacted 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; 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; changes in laws and regulations including the adoption of new environmental laws and regulations, impact of local content regulations and variances in how they are interpreted and enforced; increased competition; the Company's average gross conventional natural gas sales in 2022 lower than forecasted; the lack of availability of qualified personnel or management; fluctuations in commodity prices, foreign exchange or interest rates; stock market volatility; competition for, among other things, capital, oil and gas field services and skilled personnel; failure to obtain required equipment for field development; delays in development plans; failure to obtain expected results from the drilling or workover of wells; effect of changes to the PSA on the Company as a result of the implementation of new government policies for the oil and gas industry; changes in laws; imprecision in reserve estimates; the production and growth potential of the Company's assets; obtaining required approvals of regulatory authorities; failure to complete the well workover program on the timelines or at the costs anticipated; risks associated with negotiating with foreign governments; inability to satisfy debt conditions of financing; failure to successfully negotiate agreements; risk that the Company will not be able to fulfil its contractual obligations; reduced global economic activity as a result of COVID-19, including lower demand for natural gas and a reduction in the price of natural gas; the potential impact of COVID-19 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; and 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. 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.

Future shareholder returns, including but not limited to the payment of dividends or other distributions to shareholders, if any, and the level thereof is uncertain. Any decision to pay further distributions on the Class A Shares and Class B Shares (including the actual amount, the declaration date, the record date and the payment date in connection therewith) will be subject to the discretion of the Board of Directors of the Company and may depend on a variety of factors, including, without limitation the Company's business performance, financial condition, financial requirements, growth plans, expected capital requirements and other conditions existing at such future time including, without limitation, contractual restrictions and compliance with applicable laws. There can be no assurance that the Company will pay any distributions in the future.

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, the ability of the Company to complete additional developments and increase its production capacity; the actual costs to complete the Company's workover program is in line with estimates; the impact of COVID-19 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 successfully negotiate agreements; receipt of required regulatory approvals; the ability of the Company to increase production as required to meet demand; infrastructure capacity; commodity prices will not 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 labor; 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; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; the effect of new environmental and climate-change related regulations will not negatively impact the Company; the Company is able to maintain strong commercial relationships with the Government of Tanzania and other state and parastatal organizations; the current and future administration in Tanzania continues to honor the terms of the PSA and the Company's other principal agreements; the new power generation facilities are commissioned on the expected timelines; the Company's average gross conventional natural gas sales in 2022 are in line with forecasts; 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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