Orca Exploration announces Q2 2013 results

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Aug 28, 2013, 19:55 ET

TSX-V: ORC.A, ORC.B

TORTOLA, British Virgin Islands, Aug. 28, 2013 /CNW/ - Orca Exploration Group Inc. ("Orca" or "the Company") announces its results for the second quarter ended 30^th June 2013.

Highlights

A total of US$35.2 million has been received from TANESCO since the end of Q1 2013 - US$19.8 million during Q2 and a subsequent payment of US$15.4 million in July 2013.
At 30 June 2013, TANESCO owed the Company US$46.3 million including arrears of US$39.7 million (31 March 2013: US$48.8 million, including arrears of US$44.0 million). Current TANESCO arrears are US$31.2 million.
Additional Gas sales continued near field capacity during Q2 averaging 58.4 MMcfd being an increase of 6% over the prior period (Q2 2012: 54.9 MMcfd) and down 5% over Q1 2013 (61.6 MMcfd).
Industrial sales volume decreased by 11% to 11.7 MMcfd from 13.1 MMcfd in Q1 2013. Power sector sales volumes during Q2 averaged 46.7 MMcfd down 4% over Q1 2013 at 48.5 MMcfd.
Average Industrial gas price for the quarter was US$8.60/mcf up 11% from Q1 2013 (US$7.78/mcf) and Power sector gas prices averaged US$3.63/mcf for the quarter up 2% over Q1 2013 price of US$3.55/mcf.
Cost pools were depleted in Q4 2012, which together with capital spending of only US$0.1 million adding to cost pools, constraining earnings and funds from operations. Accordingly, revenue of US$12.0 million was down 9% over Q1 2013 (US$13.2 million).
Stronger gas sales prices and cost reductions drove Q2 funds from operations before working capital changes of US$10.5 million (US$0.30 per share diluted), up 20% from Q1 2013 (US$8.7 million or US$0.25 per share diluted).
Q2 posted a loss of US$6.8 million or US$0.19 per share diluted, down 331% from Q1 2013 earnings of US$3.0 million or US$0.08 per share diluted. Whilst the Company continues to believe it will collect the full TANESCO receivable, the outstanding amount has been discounted by US$7.9 million reflecting the time value of money resulting from delays in collection, such charge applied directly to earnings.
Working capital decreased by 59% during the quarter to US$22.5 million as at 30 June 2013 (US$54.8 million as at 31 March 2013) as a consequence of reclassifying that portion of TANESCO receivables in excess of 60 days as a long-term receivable and providing US$7.1 million for doubtful accounts.
Substantive negotiations to conclude an agreed form of amendment to the Songo Songo Production Sharing Agreement (PSA) and resolution of the remaining issues continued with the Government Negotiating Team (GNT) - the Company has committed to work together with the Government to expedite the conclusion of these negotiations.
Active negotiations which commenced in April 2013 with the Tanzania Petroleum Development Corporation (TPDC) in its capacity as gas aggregator and continued during the quarter and subsequent regarding a long-term sales agreement for incremental gas volumes of up to approximately 110 MMcfd.
The Company has continued in good faith during the quarter preparing a full field development plan for Songo Songo whilst issues are being resolved, and in July 2013 submitted a plan to the Ministry of Energy and Minerals. The execution of the plan, including workovers of existing wells and the drilling of an additional production well SS-12, continue to be on hold until TANESCO arrears and surety of payments is addressed, GNT issues are fully resolved and acceptable commercial terms for the sale of incremental gas has been agreed.

Financial and Operating Highlights


Three months ended/As at	30-Jun-2013	30-Jun- 2012	% Change	31-Mar 2013	% Change

Financial (US$000 except where otherwise stated)
Revenue	11,996	16,914	(29)	13,197	(9)
Profit/(loss) before taxation	(8,509)	8,672	(198)	4,660	(283)
Operating netback (US$/mcf)	2.10	2.56	(18)	2.15	(2)
Cash and cash equivalents	18,752	20,194	(7)	13,421	40
Working capital ⁽¹⁾	22,527	38,689	(42)	54,758	(59)
Shareholders' equity	122,068	118,938	3	128,885	(5)
Total comprehensive income	(6,817)	5,167	(232)	2,950	(331)
Earnings per share - basic (US$)	(0.19)	0.15	(227)	0.08	(338)
Earnings per share - diluted (US$)	(0.19)	0.15	(227)	0.08	(338)
Funds flow from operating activities	10,546	9,982	6	8,699	21
Funds per share from operating activities - basic (US$)	0.30	0.29	7	0.25	20
Funds per share from operating activities - diluted (US$)	0.30	0.28	7	0.25	20
Net cash flows from operating activities	8,101	5,689	42	(5,748)	241
Net cash flows per share from operating activities - basic (US$)	0.23	0.16	44	(0.17)	235
Net cash flows per share from operating activities - diluted (US$)	0.23	0.16	44	(0.16)	244

Outstanding Shares ('000)
Class A shares	1,751	1,751	0	1,751	0
Class B shares	32,892	32,892	0	32,892	0
Options	1,922	2,172	12	1,922	0

Operating
Additional Gas sold (MMcf) - industrial	1,067	829	29	1,176	(9)
Additional Gas sold (MMcf) - power	4,250	4,172	2	4,363	(3)
Additional Gas sold (MMcfd) - industrial	11.7	9.1	29	13.1	(11)
Additional Gas sold (MMcfd) - power	46.7	45.8	2	48.5	(4)
Additional Gas sold (MMcfd)	58.4	54.9	6	61.6	(5)
Average price per mcf (US$) - industrial	8.60	10.14	(15)	7.78	11
Average price per mcf (US$) - power	3.63	2.80	30	3.55	2

Working capital as at 30 June 2013 includes a TANESCO receivable of US$11.5 million (31 December 2012: US$33.3 million) and a net Songas receivable of US$5.2 million (31 December 2012: US$5.9 million). Given the payment pattern, US$34.9 million of TANESCO receivables in excess of 60 days have been discounted by US$7.9 million and classified as long-term receivables. Total long and short-term TANESCO receivables as at 30 June 2013 total US$46.3 million prior to discounting. Subsequent to the end of the quarter, TANESCO paid US$15.4 million, and the current TANESCO arrears total US$31.2 million.

Condensed Consolidated Interim Statement of Comprehensive Income/(Loss)
(Unaudited)

ORCA EXPLORATION GROUP INC.

		THREE MONTHS ENDED		SIX MONTHS ENDED

*US$'000s except per share amounts*	*NOTE*	30 Jun 2013	30 Jun 2012	30 Jun 2013	30 Jun 2012

Revenue	4	11,996	16,915	25,193	34,121
Cost of sales
Production and distribution expenses		(620)	(1,813)	(1,414)	(3,127)
Depletion expense	9	(2,612)	(2,017)	(5,335)	(3,955)

		8,764	13,085	18,444	27,039
General and administrative expenses		(3,430)	(4,362)	(6,960)	(8,026)
Provision for doubtful accounts	7	(7,100)	-	(7,100)	-
Net finance costs	5	(6,743)	(51)	(8,233)	(188)

Profit/(Loss) before taxation		(8,509)	8,672	(3,849)	18,825
Taxation	6	1,943	(3,505)	57	(7,266)

Profit/(Loss) after taxation		(6,566)	5,167	(3,792)	11,559
Foreign currency translation gain from foreign operations		(251)	-	(75)	-

Total comprehensive income/(loss) for the period		(6,817)	5,167	(3,867)	11,559

Earnings per share
Basic (US$)	12	(0.19)	0.15	(0.11)	0.33
Diluted (US$)	12	(0.19)	0.15	(0.11)	0.33

See accompanying notes to the condensed consolidated interim financial statements.

Condensed Consolidated Interim Statement of Financial Position (Unaudited)

ORCA EXPLORATION GROUP INC.

		AS AT
*US$'000s*	NOTE	30 Jun 2013	31 Dec 2012
ASSETS
Current Assets
Cash and cash equivalents		18,752	16,047
Trade and other receivables	7	48,852	73,495
Taxation receivable	6	14,285	14,692
Prepayments		429	246
		82,318	104,480
Non-Current Assets
Long-term trade receivable	7	26,979	-
Exploration and evaluation assets	8	5,722	5,720
Property, plant and equipment	9	96,948	102,044
		129,649	107,764
Total Assets		211,967	212,244

EQUITY AND LIABILITIES
Current Liabilities
Trade and other payables	10	49,758	45,496
Bank loan	11	6,603	5,842
Taxation payable		3,430	6,322
		59,791	57,660
Non-Current Liabilities
Deferred income taxes	6	15,432	20,399
Deferred additional profits tax	6	14,676	8,250
		30,108	28,649
Total Liabilities		89,899	86,309

Equity
Capital stock		84,983	84,983
Contributed surplus		6,753	6,753
Accumulated other comprehensive income		14	89
Accumulated income		30,318	34,110
		122,068	125,935
Total Equity and Liabilities		211,967	212,244

See accompanying notes to the condensed consolidated interim financial statements.

Future operations (Note 1)
Contractual obligations and committed capital investment (Note 13)
Contingencies (Note 14)

The consolidated condensed interim financial statements were approved by the Board of Directors on 26^th August 2013.

Condensed Consolidated Interim Statement of Cash Flows (Unaudited)

ORCA EXPLORATION GROUP INC.


			THREE MONTHS ENDED		SIX MONTHS ENDED
*US$'000s*		NOTE	30 Jun 2013	30 Jun 2012	30 Jun 2013	30 Jun 2012
CASH FLOWS (USED IN)/FROM OPERATING ACTIVITIES
Profit/(Loss) after taxation			(6,566)	5,167	(3,792)	11,559
Adjustment for:
	Depletion and depreciation	9	2,693	2,136	5,502	4,156
	Provision for doubtful debt	7	7,100	-	7,100	-
	Discount on long-term receivable	5, 7	7,900	-	7,900	-
	Stock-based compensation	12	(44)	615	(315)	621
	Deferred income taxes	6	(4,381)	1,350	(4,967)	2,072
	Deferred additional profits tax	6	3,390	717	6,425	1,389
	Interest received		-	(1)	-	(2)
	Unrealised loss on foreign exchange		454	(2)	1390	76
Funds flow from operating activities			10,546	9,982	19,243	19,871
Decrease/(Increase) in trade and other receivables			29,597	(9,373)	8,669	(11,491)
Decrease/(Increase) in taxation receivable			86	(3,077)	407	(6,905)
(Increase)/Decrease in prepayments			(221)	(500)	(183)	(540)
(Decrease)/Increase in trade and other payables			(3,138)	6,503	4,254	7,036
(Decrease)/Increase in taxation payable			(1,623)	2,154	(2,892)	4,371
(Increase) in long-term receivable			(26,979)	-	(26,979)	-
Net cash flows from operating activities			8,268	5,689	2,519	12,342
CASH FLOWS USED IN INVESTING ACTIVITIES
Exploration and evaluation expenditures			-	(2,978)	(2)	(4,557)
Property, plant and equipment expenditures			(138)	(15,486)	(406)	(32,656)
Interest received			-	1	-	2
Increase in trade and other payables			-	2,332	-	10,405
Net cash used in investing activities			(138)	(16,131)	(408)	(26,806)
CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
Bank loan proceeds			-	-	4,000	-
Bank loan repayments		11	(2,455)	-	(3,239)	-
Net cash flow from/ (used in) financing activities			(2,455)	-	761	-
Increase/(Decrease) in cash and cash equivalents			5,675	(10,442)	2872	(14,464)
Cash and cash equivalents at the beginning of the period			13,421	30,634	16,047	34,680
Effect of change in foreign exchange on cash in hand			(344)	2	(167)	(22)
Cash and cash equivalents at the end of the period			18,752	20,194	18,752	20,194

See accompanying notes to the condensed consolidated interim financial statements.

Condensed Consolidated Interim Statement of Changes in Shareholders' Equity (Unaudited)

ORCA EXPLORATION GROUP INC.


US$'000	Capital stock	Contributed surplus	Cumulative translation adjustment	Accumulated income	Total
Note	12

Balance as at 1 January 2013	84,983	6,753	89	34,110	125,935
Foreign currency translation adjustment on foreign operations	-	-	(75)	-	(75)
Loss after tax for the period	-	-	-	(3,792)	(3,792)
Balance as at 30 June 2013	84,983	6,753	14	30,318	122,068

US$'000	Capital stock	Contributed surplus	Cumulative translation adjustment	Accumulated income	Total
Balance as at 1 January 2012	84,610	6,268	-	15,781	106,659
Foreign currency translation adjustment on foreign operations	-	-	-	-	-
Stock based compensation	-	720	-	-	720
Profit after tax for the period	-	-	-	11,559	11,559
Balance as at 30 June 2012	84,610	6,988	-	27,340	118,938

See accompanying notes to the condensed consolidated interim financial statements.

Orca Exploration Group Inc.

Orca Exploration Group Inc. is an international public company engaged in natural gas exploration, development and supply in Tanzania through its wholly-owned subsidiary PanAfrican Energy Tanzania Limited, as well as oil and gas appraisal in Italy. Orca trades on the TSXV under the trading symbols ORC.B and ORC.A. The complete condensed interim consolidated financial statements and notes, and Management Discussion & Analysis may be found on the Company's website www.orcaexploration.com or on www.sedar.com.

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.

Forward Looking Statements

This press release contains forward-looking statements. More particularly, this press release contains statements concerning, but not limited to, the Company's beliefs regarding its ability to collect the full TANESCO receivable; status of negotiations with the GNT to conclude an agreed form of amendment to the Songo Songo PSA; incremental gas sales volumes; status of negotiations with the TPDC regarding a long-term sales agreement for incremental gas volumes; status of execution of a full field development plan for Songo Songo; and the Company's strategic plans. Although management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, operational, competitive, political and social uncertainties and contingencies. Many factors could cause Orca's actual results to differ materially from those expressed or implied in any forward-looking statements made by Orca.

These forward-looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Orca's control, including, but not limited to, the impact of general economic conditions in the areas in which Orca operates; civil unrest; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; increased competition; the lack of availability of qualified personnel or management; fluctuations in commodity prices; foreign exchange or interest rates; stock market volatility; competition for, among other things, capital, drilling equipment and skilled personnel; failure to obtain required equipment for drilling; delays in drilling plans; failure to obtain expected results from drilling of wells; effect of changes to the PSA on the Company; changes in laws; imprecision in reserve estimates; the production and growth potential of the Company's assets; obtaining required approvals of regulatory authorities; risks associated with negotiating with foreign governments; ability to access sufficient capital; failure to collect the full TANESCO receivable; failure to successfully negotiate agreements; and risk that the Company will not be able to fulfill its obligations. In addition there are risks and uncertainties associated with oil and gas operations, therefore Orca's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking estimates and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking estimates will transpire or occur, or if any of them do so, what benefits that Orca will derive therefrom.

Such forward-looking statements are based on certain assumptions made by Orca in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors Orca believes are appropriate in the circumstances, including, but are not limited to, the ability of Orca to add production at a consistent rate; infrastructure capacity; commodity prices will not deteriorate significantly; the ability of Orca to obtain equipment in a timely manner to carry out exploration, development and exploitation activities; future capital expenditures; availability of skilled labour; timing and amount of capital expenditures; 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 will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; and other matters.

The forward-looking statements contained in this press release are made as of the date hereof and Orca 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.

SOURCE: Orca Exploration Group Inc.