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 periods
ended March 31, 2024 ("
Q1 2024") with the Canadian
securities regulatory authorities. All amounts are in United States
dollars (“
$”) unless otherwise stated.
Jay Lyons, Chief Executive Officer,
commented:
“Despite the early onset of the wet season reducing demand from
power customers this quarter and the impact of the devaluation of
the Tanzanian shilling, I am pleased with Orca's performance on the
business workstreams that are within the Company's control.
Operationally, mobilization has commenced for the production
logging program, targeting SS-3, SS-5, and SS-10, alongside with
the planning of the well intervention for SS-7, subject to the
availability of US dollars in Tanzania, contract agreements on the
extension of the PGSA and contracting new gas sales from August 1,
2024. The success of these programs, coupled with other low-cost
efficiency projects that are underway, are expected to maintain the
Company's production levels, ensuring gas contracts are met.
As noted in our recent communications, this time remains a
critical juncture for Orca, as we continue to strive towards
agreeing to a framework and timeline for a license extension on the
Songo Songo field. Orca has proven itself as a committed investor
in Tanzania, and the extension of the license would allow the
Company to plan for and execute a longer-term development solution,
which enables Tanzania’s anticipated increased gas demands to be
met for the foreseeable future, for the benefit of all
stakeholders.”
Highlights
- Revenue for Q1
2024 decreased by 18% compared to the same prior year period,
primarily as a result of lower sales to the power sector.
- Total gross
conventional natural gas production, including fuel gas, averaged
113.1 MMcfd for Q1 2024, of which 74.3 MMcfd was Additional Gas.
Gas deliveries decreased by 22% for Q1 2024 compared to the same
prior year period. After 20 years of continuous production, natural
gas deliverability from current producing wells and reservoir
compartments in the Songo Songo field is declining. As a result of
meeting significantly higher than forecasted demand in 2022 and
early 2023, the concomitant reservoir pressure decline and the
early onset of the wet season in 2024 (leading to increased
availability of hydro power), liftings by power customers have been
significantly lower in Q1 2024.
- We currently
forecast average Additional Gas sales for 2024 to be in the range
of 80-90 MMcfd for the full year, based on current contracted
volumes continuing and the end of the Protected Gas regime on July
31, 2024.
- Discussions are
ongoing with Songas Limited (“Songas”) and
Tanzania Portland Cement PLC (“TPCPLC”) to
negotiate new gas sales contracts from August 1, 2024 to sell the
volumes which are currently supplied as Protected Gas under the Gas
Agreement (as defined herein). The obligation to supply Protected
Gas ends on July 31, 2024.
- Discussions are
also ongoing with the Tanzania Electricity Supply Company Limited
(“TANESCO”) to extend the Portfolio Gas Supply
Agreement (“PGSA”) between PanAfrican Energy
Tanzania Limited (“PAET”), the Tanzania Petroleum
Development Corporation (“TPDC”) and TANESCO.
TANESCO has confirmed its intent to extend the PGSA to October
2026, however the timing of formal execution of the PGSA extension
is not known at this stage.
- Net income
attributable to shareholders decreased by 72% for Q1 2024 compared
to the same prior year period, primarily as a result of the
decreased revenue and higher net foreign exchange loss due to the
devaluation of the Tanzanian shilling and exchange
conversions.
- Net cash flows
from operating activities decreased by 183% for Q1 2024 compared to
the same prior year period, primarily as a result of negative
changes in non-cash working capital, particularly increase in trade
and other receivables.
- Capital
expenditures decreased by 14% for Q1 2024 compared to the same
prior year period. The capital expenditures in Q1 2024 primarily
related to the costs of the planned SS-7 well workover program. The
capital expenditures in Q1 2023 primarily related to the 3D seismic
acquisition program.
- Mobilization has
commenced for the production logging program planned in conjunction
with the SS-7 intervention. Operations will commence early June
2024, at an estimated cost of $1.1 million. This work program will
provide detailed reservoir information, in addition to annual
pressure surveys, to improve the accuracy of forecasting future
reservoir performance. The key targeted wells under this program
are wells SS-3, SS-5 and SS-10.
- An intervention
in the offshore well SS-7 is planned to take place in 2024, subject
to the continued ability to convert Tanzanian shillings to US
dollars in Tanzania, and further subject to extension of the PGSA
and contracting of new gas sales from August 1, 2024. Mobilization
orders to Mombasa, Kenya have been issued to all suppliers and
service providers. Following mobilization to Songo Songo Island,
well site operations are expected to commence in Q3 2024, with a
forecast return to production for the well in early Q4 2024. The
total expected project cost has increased to $13.9 million from
$8.5 million. The work program is designed to shut off water
production which caused the well to die and be shut in from 2019.
The cause of the water production is interpreted to be a failed
cement bond outside the production liner which created a flow path
for water into the well. If successful, the SS-7 well is expected
to increase field deliverability by 20-25 MMcfd from the currently
non-producing southern reservoir compartment.
- The Company
continues to carry out front-end engineering on the new common
inlet manifold, which is designed to optimise gas flow between the
Songas gas plant and the NNGI plant, both of which are supplied
with gas from the Songo Songo gas field. This project is subject to
final investment decision and stakeholder approvals, at an
estimated cost of $5-6 million. If sanctioned to proceed,
construction and installation is expected to occur in Q4 2024 - Q1
2025.
- The Company
successfully installed positive chokes on all wells, which
increased field deliverability by 3-4 MMcfd. The Company continues
to carry out studies to identify opportunities to improve the
efficiency of operations at the Songas plant.
- Funding of
capital projects will be from working capital. All capital
allocation decisions will be based upon access to US dollars and
prudent economic evaluation to achieve the necessary return given
the short time remaining on the PSA, which expires in October
2026.
- During Q2 2023,
the Company formally requested TPDC to initiate the process of
extending the development license in accordance with the terms of
the PSA. The Government Negotiating Committee held a preliminary
meeting with the Company in March 2024 to discuss timing around
negotiations. We await confirmation of these timings for
negotiations. The Company continues to seek dialogue with TPDC and
the Ministry of Energy to expedite license extension discussions
and will maintain gas sales contract discipline going forward by
operating in line with our gas supply agreements.
- The Company
exited the period with $73.0 million in working capital1 (December
31, 2023: $67.3 million), cash and cash equivalents of $93.9
million (December 31, 2023: $101.6 million) and long-term debt of
$30.0 million (December 31, 2023: $30.0 million).
- As at March 31,
2024, the current receivable from TANESCO was $10.0 million
(December 31, 2022: $5.9 million). The TANESCO long-term receivable
as at March 31, 2024 and as at December 31, 2023 was $22.0 million
with a provision of $22.0 million. Subsequent to March 31, 2024 the
Company has invoiced TANESCO $3.8 million for April 2024 gas
deliveries and TANESCO has paid the Company $9.1 million to
date.
- In Q4 2023, the
Company terminated the contract with the contractor responsible for
the 3D seismic acquisition program on the basis that the contractor
suspended its operations. On March 20, 2024 PAET received a summons
from the Tanzanian High Court (Commercial Division) to file a
written statement of defense against a claim made by the contractor
for losses arising from PAET’s termination of the contract on
October 25, 2023. The contractor seeks to claim $30.0 million for
losses incurred plus legal costs, interest and general damages. The
Company in consultation with its legal advisors believes that there
are limited merits to the claim. In early May, the Company lodged
its own counterclaim for specific damages of $5.5 million and
general damages of $25.8 million.1 See Non-GAAP Financial Measures
and Ratios
Financial and Operating Highlights for
the Three Months Ended March 31, 2024
|
Three Monthsended March 31 |
% Change |
(Expressed in $’000 unless indicated otherwise) |
2024 |
2023 |
Q1/24 vs Q1/23 |
OPERATING |
|
|
|
Daily average gas
delivered and sold (MMcfd) |
74.3 |
94.8 |
(22)% |
Industrial |
14.0 |
13.4 |
4% |
Power |
60.3 |
81.4 |
(26)% |
Average price
($/mcf) |
|
|
|
Industrial |
8.94 |
8.37 |
7% |
Power |
3.87 |
3.64 |
6% |
Weighted average |
4.82 |
4.31 |
12% |
Operating netback ($/mcf)1 |
2.79 |
2.35 |
19% |
FINANCIAL |
|
|
|
Revenue |
24,937 |
30,407 |
(18)% |
Net income
attributable to shareholders |
969 |
3,507 |
(72)% |
per share – basic and diluted ($) |
0.05 |
0.18 |
(72)% |
Net cash flows (used
in)/from operating activities |
(6,170) |
7,472 |
(183)% |
per share – basic and diluted ($)1 |
(0.31) |
0.38 |
(183)% |
Capital
expenditures1 |
1,470 |
1,705 |
(14)% |
Weighted average Class A and Class B shares
(‘000) |
19,799 |
19,855 |
0% |
|
As at |
|
|
March 31,2024 |
December 31,2023 |
% Change |
Working capital (including cash) 1 |
72,993 |
67,323 |
8% |
Cash and cash
equivalents |
93,936 |
101,566 |
(8)% |
Long-term
loan |
30,021 |
29,961 |
0% |
Outstanding
shares (‘000) |
|
|
|
Class A |
1,750 |
1,750 |
0% |
Class B |
18,049 |
18,051 |
0% |
Total shares outstanding |
19,799 |
19,801 |
0% |
1 See Non-GAAP Financial Measures and
Ratios.
The complete Condensed Consolidated Interim
Financial Statements and Notes and Management's Discussion &
Analysis for the three months ended March 31, 2024 may be found on
the Company’s website at www.orcaenergygroup.com or on the
Company's profile on SEDAR+ at www.sedarplus.ca.
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) (the "Gas
Agreement") 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.
For further
information please contact: |
|
|
|
Jay Lyons |
|
Lisa Mitchell |
Chief Executive Officer |
|
Chief Financial Officer |
+44 (0)20 8434 2754 |
|
+44 (0)20 8434 2754 |
ir@orcaenergygroup.com |
|
ir@orcaenergygroup.com |
|
|
|
For media
enquiries please contact: |
|
|
|
Mark Antelme |
|
|
Jimmy Lea |
|
|
+44 (0)20 8434 2754 |
|
|
orca@celicourt.uk |
|
|
|
|
|
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 |
MMcf |
million standard 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, net cash flows
from operating activities per share and weighted average Class A
and Class B Shares.
These non-GAAP financial measures and ratios
disclosed in this press release do not have any standardized
meaning under International Financial Reporting Standards
("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 used in investing
activities. A reconciliation to the most directly comparable
financial measure is as follows:
|
Three Months ended March 31 |
|
$’000 |
2024 |
2023 |
|
Pipelines, well workovers and infrastructure |
1,169 |
1,694 |
|
Other
capital expenditures |
301 |
11 |
|
Capital
expenditures |
1,470 |
1,705 |
|
Change in non-cash working
capital |
(85) |
(208) |
|
Net cash used by investing activities |
1,385 |
1,497 |
|
|
|
|
|
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 and is a measure of profitability. A
reconciliation to the most directly comparable financial measure is
as follows:
|
Three Months ended March 31 |
|
$’000 |
2024 |
2023 |
|
Revenue |
24,937 |
30,407 |
|
Production, distribution and transportation expenses |
(4,310) |
(5,135) |
|
Net Production
Revenue |
20,627 |
25,272 |
|
Less current income tax
adjustment (recorded in revenue) |
(1,726) |
(5,237) |
|
Operating netback |
18,901 |
20,035 |
|
Sales volumes MMcf |
6,764 |
8,532 |
|
Netback $/mcf |
2.79 |
2.35 |
|
|
|
|
|
Non-GAAP Ratios
Operating netback per mcf
Operating netback per mcf represents 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 Condensed
Consolidated Interim Statements of Financial Position (Unaudited).
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.
Weighted average Class A and Class B Shares
In calculating the weighted average number of
shares outstanding during any period the Company takes the opening
balance multiplied by the number of days until the balance changes.
It then takes the new balance and multiplies that by the number of
days until the next change, or until the period end. The resulting
multiples of shares and days are then aggregated and the total is
divided by the total number of days in the period.
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
Company’s expectations regarding the demand for gas supply to
satisfy power demand; anticipated average gas sales, including
Additional Gas sales for 2024; ongoing negotiation of new
commercial terms and discussion of requirements under the Gas
Agreement with Songas and TPCPLC; ongoing discussion with TANESCO
regarding the extension of the PGSA; assessment by the Company of
the merits of the claims made by the seismic contractor and the
counterclaim filed by the Company; the Company's liabilities
pursuant to the claims brought forth by the seismic contract and
recoverability of damages claimed by the Company; the planned
capital projects including the installation of a new common well
inlet manifold, implementation of production logging programs at
various wells and intervention in the offshore well SS-7 and the
anticipated timing, costs and effects of such projects; continued
studies aimed at improving efficiencies of operations at the Songas
plant; the Company’s expectation that all capital allocation
decisions will be based upon prudent economic evaluations and
returns; extension of the development license and the Company’s
expectation to continue to actively engage with the GoT to progress
the license extension; and the maintenance of gas sale contract
discipline by the Company in accordance with its gas supply
agreements. 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: fluctuations in demand for
natural gas and power supply in Tanzania; use of gas fired capacity
different than anticipated; the Company’s average gas sales,
including sale of Additional Gas are lower than anticipated;
uncertainties involving the negotiation of new commercials terms
under the Gas Agreement with Songas and TPCPLC and necessary
requirements; risk that the Company may incur losses and legal
expenses as a result of the claims brought forth by the seismic
contractor; uncertainties regarding quantum of damages payable by
the seismic contractor and/or the Company risk that the budgeted
expenditure, timing of the completion and anticipated benefits from
the Company's various planned development programs and studies in
2024 are different than expected; that not all capital allocation
decisions will be based upon prudent economic evaluations and
returns; inability to extend the development license and inability
to maintain gas sale contract discipline; various uncertainties
involved in the extension of the PGSA; changes to forecasts
regarding future development capital spending and source of capital
spending; risk of a lack of access to Songas processing and
transportation facilities; risks associated with the Company’s
ability to complete sales of Additional Gas; negative effect on the
Company’s rights under the PSA and other agreements relating to its
business in Tanzania as a result of 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;
risk of future restrictions on the movement of cash from Jersey,
Mauritius or Tanzania; occurrence of circumstance or events which
significantly impact the Company’s cash flow and liquidity and the
Company’s ability cover its long-term and short-term obligations or
fund planned capital expenditures; incurrence of losses from
debtors in 2024; prolonged foreign exchange reserves deficiency in
Tanzania; inability to convert Tanzanian shillings into US dollars
as and when required; 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 or pandemics; industry conditions; changes in
laws and regulations including the adoption of new environmental
laws and regulations; impact of local content regulations and
variances in the interpretation and enforcement of such
regulations; increased competition; the lack of availability of
qualified personnel or management; fluctuations in commodity
prices; interest rates risk; stock market volatility; volatility in
financial markets; disruptions to global supply chains and the
Company’s business and operations; competition for, among other
things, capital, oil and gas field services and skilled personnel;
failure to obtain required equipment for field development; 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; imprecision in reserve estimates; incorrect forecasts in
production and growth potential of the Company’s assets; inability
to obtain required approvals of regulatory authorities; risks
associated with negotiating with foreign governments; failure to
successfully negotiate agreements; risk that the Company will not
be able to fulfill its contractual obligations; risk that trade and
other receivables may not be paid by the Company’s customers when
due; inability to satisfy debt conditions of financing; changes to
the Company’s debt and interest payments; the risk that the
Company’s Tanzanian operations will not provide near term revenue
earnings; and such additional risks listed under “Business Risks”
in the Company’s MD&A for the year ended December 31, 2023. 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 Company’s average Additional Gas sales are in line
with forecasts; successful negotiation of the Gas Agreement;
successful extension of the PGSA; successful implementation of
various development and study programs at the budgeted
expenditures, including the planned intervention in the SS-7 well,
production logging program, installation of the common inlet
manifold and optimization studies at the Songas plant; that all
capital allocation decisions will be based upon prudent economic
evaluations and returns; successful extension of the development
license and maintenance of gas sale contract discipline on a go
forward basis pursuant to the Company's gas supply agreements; that
there will continue to be no restrictions on the movement of cash
from Mauritius, Jersey or Tanzania; 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 debt and interest obligations as needed; absence of
circumstances or events that significant impact the Company’s cash
flow and liquidity; the Company will continue to be able to convert
Tanzanian shillings into US dollars; continued work by the Company
with the GoT on alternative development plan for longer term field
development as anticipated; accurate assessment by the Company of
the merits of claims brought forward by the seismic contractor and
the Company’s counterclaim; that the amount of damages recoverable
by the Company will be in line with expectations; the Company’s
ability to obtain revenue earnings from its operations; access to
customers and suppliers; availability of employees to carry out
day-to-day operations and other resources; 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; availability
of skilled labour; timing and amount of capital expenditures and
source of funding are in line with forecasts; 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; the effect of any new
environmental and climate-change related regulations will not
negatively impact the Company; the Company’s ability to maintain
strong commercial relationships with the GoT 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; and other matters.
The forward-looking statements contained in this
press 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.