TORTOLA, British Virgin Islands, August 10, 2020: Orca Energy Group Inc. (“Orca” or the “Company”) (TSX-V: ORC.A, ORC.B) is pleased to provide the following operational update on its current activities in Tanzania and the appointment of two corporate brokers. All currency amounts in this news release are in United States Dollars ($) unless otherwise stated.
On August 3, 2020 Orca signed a contract with China Petroleum and Technology Development Company (“CPTDC”) for the design, supply, installation and commissioning of natural gas compressors within the Songas gas processing facility on Songo Songo Island. The compressors will work in harmony with the previously installed refrigeration to address declining reservoir pressure and ensure maximum production levels can be sustained, subject to demand, through to the end of the Production Sharing Agreement in 2026. The compressors are forecast to cost a total of $38 million of which circa $6 million was expended in 2019 and $19 million will be incurred over the remainder of 2020. The compressors are scheduled to be operational by the end of Q2 2022.
Orca’s careful management of the operational team on Songo Songo Island has enabled it to maintain production throughout the COVID-19 pandemic. Orca’s Additional Gas sales averaged 50.6 million standard cubic feet a day (“MMcfd”) for Q2 2020 (Q2 2019: 56.6 MMcfd) and 53.5 MMcfd for the six months ended June 30, 2020 (six months ended June 30, 2019: 59.5 MMcfd). Gas sales were impacted by sustained and significant rainfalls that enabled the Tanzania Electricity Supply Company (“TANESCO”) to operate its hydro facilities at high utilization rates. The country is now entering the dry season and gas demand is expected to increase for the remainder of the year. Despite the lower demand for gas from the power sector, TANESCO has continued to pay back its arrears during the first six months of the year. Orca continues to benefit from a strong balance sheet, with cash and short-term bonds of $106.1 million as at June 30, 2020.
The Company is preparing for the workover of onshore well SS-10 in early 2021. A decision on whether to conduct remedial work on two of the older onshore wells, SS-3 and SS-4 will be taken on completion of a major subsurface review of the Songo Songo gas field that will be finalized during Q4 2020. This review, which includes a re-build of the static and dynamic reservoir models, will enable the Company to assess whether the workover of SS-3 and SS-4, or the drilling of new infill wells will be preferable over the remainder of the license period. The review will also incorporate the latest trends in pressure measurements to allow a full re-assessment on the contingent and prospective resource potential and associated economics of drilling and developing the natural gas in the areas known as Songo Songo North and Songo Songo West.
To further increase Orca’s visibility and help communicate Orca’s strategy, the Company has engaged Canaccord Genuity Limited (“Canaccord”) and Investec Bank plc (“Investec”) to provide advisory and corporate broking services. As part of the mandate, Canaccord and Investec will introduce Orca to respective institutional investor bases, particularly in Europe and Africa.
Nigel Friend, CEO of Orca commented:
“Despite the challenging macro backdrop, we are very pleased with Orca’s performance in the first six months of 2020. We are well placed to finance and deliver a number of essential capital projects which are critical to sustaining gas production in Tanzania through to the end of the license period. The Government of Tanzania has shown a long-term commitment to natural gas through its investment in gas infrastructure and we will continue to develop the Songo Songo field with our partner, the Tanzania Petroleum Development Corporation, to fuel economic growth and prosperity in country.
We are delighted to have engaged Canaccord and Investec who are expected to help the Company expand its institutional investor bases in Europe and Africa. They will also assist us with communicating the success of our project in Tanzania and the long-term investment case of the Company. I look forward to keeping our shareholders appraised of developments over the coming months.”
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Forward Looking Information
Certain information regarding Orca set forth in this news release, including but not limited to: the compressors’ ability to ensure maximum production levels are sustained through to the end of the Production Sharing Agreement in 2026; the forecast cost of the compressors and Orca’s ability to pay in the remainder of 2020; the compressors’ scheduled operational date; expected gas demand; the workover of onshore well SS-10 and the potential remedial work on wells SS-3 and SS-4; the completion of the subsurface review of the Songo Songo gas field in Q4 2020; and Canaccord and Investec’s ability to introduce Orca to institutional investor bases; the Company’s position in the market; and Orca’s intention to continue to develop the Songo Songo field constitute “forward-looking information” within the meaning of applicable Canadian securities laws. The words “may”, “will”, “would”, “should”, “could”, “expects”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “predicts”, “likely” or “potential” or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking information. Forward-looking information, by its very nature, involves inherent risks and uncertainties and is based on several assumptions, both general and specific. Orca cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although believed reasonable at the time they were made, subject to greater uncertainty. Such forward-looking information is not a guarantee of future performance and involves known and unknown risks, uncertainties and other factors which may cause the actual results or performance of Orca to be materially different from the outlook or any future results or performance implied by such information.
The forward-looking information contained in this new release is provided as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable Canadian securities laws.