Orca Energy Group Inc. Announces Independent Reserves Evaluation for Year End 2022

TORTOLA, BRITISH VIRGIN ISLANDS – February 27, 2023 – 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, 2022. 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, 2022 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 gas field (the “Songo Songo Licence“) in October 2026. The preparation date of the independent reserves evaluation prepared by McDaniel is February 24, 2023 and the effective date of the evaluation is December 31, 2022 (the “McDaniel Report“).

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 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 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, 2022, were 141 billion standard cubic feet (“Bcf“) compared to 160 Bcf at year end 2021, representing a 12% decrease.
• Total Proved plus Probable (“2P”) Gross Company conventional natural gas reserves at year ended December 31, 2022, were 167 Bcf compared to 188 Bcf at year end 2021, representing an 11% decrease.
• The reduction in Gross Company 1P reserves from year end 2021 to year end 2022 was primarily attributed to 2022 gas production and the number of years remaining on the Songo Songo Licence. The reduction in reserves was attributed to a 21% reduction in the time remaining until the expiry of the current Songo Songo Licence (3.8 year remaining at year end 2022 versus 4.8 years at year end 2021), which was partially offset by increased Company conventional natural gas sales and forecasts (which will be classified as Additional Gas (as defined in the Songo Songo PSA) (“gas sales“) until the expiry of the current Songo Songo Licence in October 2026).
• The Company had record gas sales of 29 Bcf in 2022, representing an increase of approximately 42% compared to year end 2021. With the installation and commissioning of inlet compression at the Songas Gas plant in March 2022, the Company was able to contribute to a significant increase in gas to power generation caused in part due to drought conditions in Tanzania throughout 2022 and the commissioning of the Kinyerezi 1 Power Plant extension in Q4 2022.
• Net Present Value of 1P future net revenue discounted at 10% was $147.2 million at year end 2022, compared to $177.8 million at year end 2021, representing a 17% decrease.
• Net Present Value of 2P future net revenue discounted at 10% was $170.7 million at year end 2022, compared to $209.9 million at year end 2021, representing a 19% decrease.
• The reductions in net present values of 1P future net revenues from year end 2021 to year end 2022 was primarily attributed to lower reserves at year end 2022 as a result of the reduced number of years outstanding on the current Songo Songo Licence and an increased need for future development capital to supply increased gas sales.

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