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Orca Energy Group Inc. Announces 2020 Year End Audited Financial Results

Posted on 22 April 2021

VIRGIN ISLANDS – April 21, 2020: Orca Energy Group Inc. (“Orca” or the “Company” and includes its subsidiaries and affiliates) (TSX-V: ORC.A, ORC.B) today announces its audited financial results for the year ended December 31, 2020. All dollar amounts are in United States dollars unless otherwise stated.

  • Revenue decreased by 5% for Q4 2020 and by 9% for the year compared to the same prior year periods. The decreases are primarily a result of decreased sales to the Tanzanian Electric Supply Company Limited (“TANESCO”) under the Portfolio Gas Sales Agreement (“PGSA”) and a smaller current income tax adjustment due to increased capital expenditure and lower gross field revenue. Gas deliveries decreased by 11% for Q4 2020 and by 9% for the year compared to the same prior year periods. The decrease in revenue and gas delivery volumes for the year were primarily due to the increase in hydropower generated during the first eight months of the year as a result of higher than normal rainfall in 2020 compared to the prior year. The decrease in gas delivery volumes in Q4 2020 is primarily the result of lower nominations of gas volumes by TANESCO and the Tanzanian Production Development Corporation (“TPDC”) through the National Natural Gas Infrastructure (“NNGI”) compared to Q4 2019 as volumes delivered in Q4 2019 were the highest for any single quarter since production started in 2004. The decrease in volumes for Q4 2020 was partially offset by a 2% increase in the weighted average price of gas sold compared to Q4 2019.
  • Net income attributable to shareholders decreased 42% for Q4 2020 and increased by 12% for the year compared to the same prior year periods. The decrease for Q4 2020 was primarily a consequence of the decrease in revenue and a decrease in the reversal of loss allowances related to the lower collection of arrears from TANESCO compared to Q4 2019. The increase in net income attributable to shareholders for the year was primarily the result of the increase in the reversal of loss allowances of $8.2 million, mainly due to increased collection of TANESCO arrears during the first nine months of 2020 and was also positively impacted by savings in general and administrative expenses and stock based compensation. The increase for the year was partially offset by the impairment of receivable as a result of the Tanzania Revenue Authority (“TRA”) issuing an Agency Notice during the year obligating the Company’s bank to release $5.3 million in favour of the TRA.
  • Net cash flows from operating activities increased 283% for Q4 2020 and by 33% for the year compared to the same prior year periods. The increases are primarily a result of the collection of TANESCO arrears and changes in non-cash operating working capital associated with decreases in prepayments and in trade and other receivables.
  • Adjusted funds flow from operations(1) decreased by 8% for Q4 2020 and by 9% for the year compared to the same prior year periods. The decreases are primarily a result of the decreases in revenue.
  • Capital expenditures increased by 1,509% for Q4 2020 and by 551% for the year over the comparable prior year periods. The capital expenditures in 2020 primarily relate to the flowline decoupling construction and payments under the Compression Contract (as defined below). The capital expenditures in 2019 primarily relate to the refrigeration project for the Songas Limited (“Songas”) infrastructure.
  • The Company exited the period in a strong financial position with $74.2 million in working capital (December 31, 2019: $107.0 million), cash and cash equivalents of $104.2 million (December 31, 2019: $93.9 million), short-term investments of $ nil (December 31, 2019: $44.8 million) and long-term debt of $54.2 million (December 31, 2019: $54.1 million). The decrease in working capital and short-term investments was primarily related to the substantial issuer bid (“SIB”) completed in March 2020.
  • As at December 31, 2020 the current receivable from TANESCO was $ nil (December 31, 2019: $ nil). TANESCO’s long-term trade receivable as at December 31, 2020 was $27.6 million with a provision of $27.6 million compared to $47.5 million (provision of $47.5 million) as at December 31, 2019. Subsequent to December 31, 2020 the Company has invoiced TANESCO $6.5 million for 2021 gas deliveries and TANESCO has paid the Company $7.9 million. TANESCO also paid the take or pay invoice of $5.0 million for the 2015-2016 contract year for gas to be taken by June 30, 2021.
  • Work began in 2020 on the $38.0 million compression contract for the Songas gas processing facility planned for installation in Q2 2022 (the “Compression Contract“). This will allow maximum production volumes of approximately 102 MMcfd to be sustained through the Songas infrastructure, with the possibility to expand well deliverability to 172 MMcfd by increasing the amount of gas currently being delivered through the NNGI. To date $24.7 million has been spent under the contract with forecast expenditures of $9.5 million in 2021, upon delivery and inspection of the equipment, and a further $3.8 million in 2022 following completion of installation and testing.
  • On January 22, 2021 the Company announced the final results of an SIB initiated in December 2020 whereby the Company repurchased and cancelled 6,153,846 Class B Subordinate Voting Shares (“Class B Shares”) at a price of CDN$6.50 per Class B Share representing an aggregate purchase price of CDN$40.0 million and 25.2% of the total number of the Company’s issued and outstanding Class B Shares and 23.5% of the total number of the Company’s issued and outstanding shares.
  • On February 23, 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 Shares for a total of $1.6 million to the holders of record as of March 31, 2021 paid on April 15, 2021.

(1) Adjusted funds flow from operations is a non-GAAP financial measure. See non-GAAP measures.

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