Orca Energy Group Inc. Announces Independent Reserves Evaluation for Year End 2020

TORTOLA, BRITISH VIRGIN ISLANDS – March 2, 2021 – Orca Energy Group Inc. (“Orca” or the “Company” and includes its subsidiaries and affiliates) (TSX-V: ORC.A, ORC.B) announces the approval of its Independent Reserves Evaluation as at December 31, 2020. All currency amounts in this news release are in United States Dollars ($) unless otherwise stated.

INDEPENDENT RESERVES EVALUATION

The Company’s conventional natural gas reserves as at December 31, 2020 for the period to the end of the primary (25 year) term of the production sharing agreement (the “Songo Songo PSA“) with the Tanzanian Petroleum Development Corporation (the “TPDC“) have been 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 Songo Songo PSA expires upon the expiry of TPDC’s Songo Songo licence in respect of the Songo Songo Block (the “Songo Songo Licence“) in October 2026. The preparation date of the independent reserves evaluation prepared by McDaniel (the “McDaniel Report“) is February 23, 2021 and the effective date of the evaluation is December 31, 2020.

All the Company’s reserves are located in Tanzania. Reserves included herein are stated on a Company gross reserves basis unless noted otherwise. Company gross reserves are the total of the Company’s working interest share in reserves before deduction of royalties owned by others and without including any royalty interests of the Company, and are based on the Company’s 92.07 percent ownership interest in the reserves following the transaction with Swala Oil & Gas (Tanzania) plc (“Swala“) described in Note 3 to the tables below.

The Company’s Board of Directors has reviewed and approved the year ended December 31, 2020 McDaniel Report. Additional reserves information required under NI 51-101 is included in Orca’s reports relating to reserves data and other oil and gas information under NI 51-101, which [are/will be] filed on its profile on SEDAR at www.sedar.com. The following discussion is subject to a number of cautionary statements, assumptions, contingencies and risks as set forth in this news release.

HIGHLIGHTS

  • Total Proved (“1P”) Gross Company conventional natural gas reserves at year ended December 31, 2020, were 203 billion standard cubic feet (“Bcf”). After adjustment for the Company’s share of gas produced in 2020, this represents a 5%, or 12 Bcf decrease from the year end 2019.
  • Total Proved plus Probable (“2P”) Gross Company conventional natural gas reserves at year ended December 31, 2020, were 229 Bcf. After adjustment for the Company’s share of gas produced in 2020, this represents a 6%, or 16 Bcf decrease from the year end 2019.
  • Net Present Value of 1P estimated future cash flows discounted at 10% were $216.4 million at year end 2020, compared to $237.1 million at year end 2019, representing a 9% decrease.
  • Net Present Value of 2P estimated future cash flows discounted at 10% were $241.3 million at year end 2020, compared to $282.6 million at year end 2019, representing a 15% decrease.
  • The reduction in Gross Company 1P reserves from year end 2019 to year end 2020 are primarily attributed to forecasted Company gas sales of approximately 27 Bcf for the year 2020, of which approximately 19 Bcf were produced and sold. Actual sales of Additional Gas were lower than forecast in 2020 due to reduced power and industrial gas demand in Tanzania attributable to abnormally high rain fall leading to increased hydro power in Tanzania and the worldwide pandemic which impacted global supply chains and associated industrial gas demand in Tanzania.
  • Company gas sales are forecasted to average approximately 65.3 MMcfd (~23.8 Bcf) in 2021 (1P case) assuming normal hydro power generation, recovering industrial demand and prospective customer confidence.
  • The reduction in future net present values were primarily attributed to lower reserves at year end 2020 associated with the reduced number of years remaining on the primary license (5.8 years at YE 2020 versus 6.8 years at YE 2019, or a 15% reduction in producing days to end of license).

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