Orca Exploration announces record 2012 results amid a year of challenges

Apr 29, 2013, 08:48 ET from Orca Exploration Group Inc.


TORTOLA, British Virgin Islands, April 29, 2013 /CNW/ - Orca Exploration Group Inc. ("Orca" or "the Company") announces its results for the year ended 31 December 2012.

  • Orca Exploration operated its Tanzania Songo Songo gas field at maximum plant and pipeline capacity resulting in record operating and financial results.

  • Profit after tax for the year was a record US$18.3 million, or US$0.52 per share diluted, up 130% over 2011.

  • An 18% increase in gas sales volumes plus a 10% increase in the average gas price, together with higher cost recoveries as a result of capital spending combined to double funds flow from operations over 2011 to a record US$45.8 million, or US$1.30 per share diluted.

  • Capital spending in 2012 was US$54.7 million (2011: US$18.1 million) of which US$38 million was expended on SS-11 drilling and completion, US$7.9 million on preparation for SS-12 and Songo Songo West drilling, and US$7.5 million on the unsuccessful La Tosca exploration well in Italy.

  • Given TANESCO and Songas non-payments, record funds flow did not translate to cash -- balances at the end of 2012 were US$16.0 million, down 54% from 2011, net of US$54.7 million in capital spending during the year and including US$6.0 million in bank borrowings. Accordingly, the Company has incorporated a going concern note into its 2012 Consolidated Financial Statements.

  • Working capital was US$46.8 million, which included a US$33.3 million receivable from TANESCO -- at the end of the year the Company had drawn US$6.0 million of a US$10.0 million senior debt facility which was set up in Q3 to assist in financing TANESCO receivables.

  • Average gas prices up 10% in 2012 to US$4.31/Mcf (2011: US$3.92/Mcf), industrial gas prices were down 7.5% in 2012 to US$9.31/Mcf from changes in the sales mix, and average power sector gas prices increased 15% over 2011 to US$3.18/mcf from US$2.77/mcf, pursuant to the PGSA and ARGA.

  • Current TANESCO receivable is US$49.3 million, or about US$0.90 per share on a net basis - Government of Tanzania has raised US$600 million in debt and US$100 million in World Bank budget support finance and assured the Company that arrears will be paid from these proceeds.

  • Songo Songo PSA and GNT issues remain unresolved, however the Company has continued to work in cooperation with the Government and has tabled a PSA amendment for the Government's consideration.

  • Establishing commercial terms for future incremental gas sales is a key condition to the Company's commitment to Songo Songo development - the Company has recently entered into discussions with TPDC concerning a gas sales agreement.

  • Government of Tanzania succeeded in arranging a US$1.2 billion project financing with the China Exim Bank to deliver a major natural gas infrastructure expansion project which was inaugurated in November 2012 and expected to be completed by the end of 2014.

  • On 1st November 2012, the Government of Tanzania issued a draft natural gas policy which contemplates a restructuring of TPDC, strategic participation throughout the upstream, midstream and downstream sectors, ownership and control over gas infrastructure and setting domestic natural gas prices - at the request of the Government, the Company submitted its views on the draft policy and a second draft policy is expected in the near future.

  • The La Tosca well in the Longastrino exploration block in the Po Valley, Northern Italy was drilled in August and has been plugged and abandoned having encountered gas shows -- Orca has earned a 70% working interest and, subject to government approval, operatorship of the block. The Company intends to review the technical and drilling data to determine whether or not to continue exploration on the block. The offshore Italy Elsa appraisal well is now expected to be drilled in 2014.

  • With the completion of SS-11, brought onstream in October 2012, the Company has substantially upgraded the quality of its wellbore portfolio. Subsequent to bringing SS-11 onstream, the SS-9 and SS-3 wells were taken off production leaving the field producing at maximum capacity and having no redundancy.

  • Songo Songo gas reserves remain solid with a 9% decrease in Songo Songo's Total Proved Additional Gas reserves to the end of the license period, with no change on a life of field basis; total Additional Gas production of 20.6 Bcf during the year; an 11% decrease in the Proved plus Probable Additional Gas reserves on a Gross Company life of license basis from 548.5 Bcf to 489.3 Bcf. NPV10% 2P was estimated at US$386 million.

Financial and Operating Highlights

YEAR ENDED/ AS AT 31 DECEMBER    2012 2011 Change
Financial (US$'000 except where otherwise stated)        
Revenue   77,259 45,893 68%
Profit before taxation   35,454 15,320 131%
Operating netback (US$/mcf)   2.82 2.05 38%
Cash and cash equivalents   16,047 34,680 (54%)
Working capital(1)   46,820 56,006 (16%)
Shareholders' equity   125,935 106,659 18%
Earnings per share - basic  (US$)   0.53 0.23 130%
Earnings per share - diluted (US$)   0.52 0.22 136%
Funds flow from operating activities   45,949 22,658 103%
Funds per share from operating activities  - basic  (US$)   1.33 0.65 105%
Funds per share from operating activities  - diluted (US$)   1.30 0.63 106%
Net cash flows from operating activities   30,568 4,577 568%
Net cash flows per share from operating activities - basic (US$)   0.88 0.13 577%
Net cash flows per share from operating activities - diluted (US$)   0.86 0.13 562%
Outstanding Shares ('000)        
Class A shares   1,751 1,751 0%
Class B shares   32,892 32,746 0%
Options   1,922 3,057 (37%)
Additional Gas sold (MMcf) - industrial   3,813 2,742 39%
Additional Gas sold (MMcf) - power   16,832 14,722 14%
Additional Gas sold (MMcfd) - industrial   10.4 7.5 39%
Additional Gas sold (MMcfd) - power   46.0 40.3 14%
Additional Gas sold (MMcfd)   56.4 47.8 18%
Average price per mcf (US$) - industrial   9.30 10.05 (7%)
Average price per mcf (US$) - power   3.18 2.77 15%
Additional Gas Gross Recoverable Reserves to end of licence (Bcf)(2)        
Proved   429 469 (9%)
Probable   60 79 (24%)
Proved plus probable   489 548 (11%)
Net Present Value, discounted at 10% (US$ million)(2)        
Proved   354 328 8%
Proved plus probable   386 351 10%
  1. Working capital as at 31 December 2012 includes a TANESCO receivable of US$33.3 million (2011: US$24.2 million) and a net Songas receivable of US$5.9 million (2011: US$0.7 million)
  2. Based on report prepared by Orca Exploration's independent reserve evaluator McDaniel & Associates Consultants Ltd. dated effective December 31, 2012, which was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook. It should not be assumed that the undiscounted or  discounted net present value of future net revenue attributable to the Company's reserves estimated by McDaniel represent the fair market value of those reserves.

Consolidated Statement of Comprehensive Income


US$'000 except per share amounts     2012 2011
Revenue     77,259 45,893
Cost of sales        
Production and distribution expenses     (5,953) (6,088)
Depletion expense     (8,968) (8,092)
      62,338 31,713
General and administrative expenses     (17,989) (15,440)
Exploration asset impairment     (8,284) -
Net finance costs     (611) (953)
Profit before taxation     35,454 15,320
Taxation     (17,125) (7,334)
Profit after taxation     18,329 7,986
Foreign currency translation gain from foreign operations     89 -
Total comprehensive income for the year     18,418 7,986
Earnings per share        
Basic (US$)     0.53 0.23
Diluted (US$)     0.52 0.22

Consolidated Statement of Financial Position


AS AT   31-Dec 31-Dec
US$'000   2012 2011
Current assets      
Cash and cash equivalents   16,047 34,680
Trade and other receivables   73,495 40,348
Taxation receivable   14,692 5,880
Prepayments   246 302
    104,480 81,210
Non-current assets      
Exploration and evaluation assets   5,720 2,921
Property, plant and equipment   102,044 67,713
    107,764 70,634
Total Assets    212,244 151,844
Current liabilities      
Trade and other payables   45,496 22,801
Bank loan   5,842 -
Taxation payable   6,322 2,403
    57,660 25,204
Non-Current Liabilities      
Deferred income taxes   20,399 15,194
Deferred additional profits tax   8,250 4,787
    28,649 19,981
Total Liabilities   86,309 45,185
Capital stock   84,983 84,610
Contributed surplus   6,753 6,268
Accumulated other comprehensive income   89 -
Accumulated income   34,110 15,781
    125,935 106,659
Total Equity and Liabilities    212,244 151,844

Consolidated Statement of Cash Flows


US$'000   2012 2011
Profit after taxation   18,329 7,986
Adjustment for:      
    Depletion and depreciation   9,281 8,389
    Impairment of assets   8,284 -
    Gain on disposal of vehicle   - (5)
    Stock-based compensation   1,152 851
    Deferred income taxes   5,205 2,385
    Deferred additional profits tax   3,463 2,527
    Interest received   (23) (5)
    Unrealised loss on foreign exchange   258 530
Funds flow from operating activities   45,949 22,658
Increase in trade and other receivables   (33,133) (27,171)
Increase in taxation receivable   (8,812) (1,871)
Decrease in prepayments   56 107
Increase in trade and other payables   22,589 10,451
Increase in taxation payable   3,919 403
Net cash flows from operating activities   30,568 4,577
Exploration and evaluation expenditures   (11,083) (1,979)
Property, plant and equipment expenditures   (43,612) (16,156)
Interest received   23 5
Proceeds from sale of vehicle   - 5
(Decrease)/increase in trade and other payables   (716) 3,541
Net cash used in investing activities   (55,388) (14,584)
Normal course issuer bid   (12) (681)
Proceeds from exercise of options   150  
Bank loan proceeds   5,842 -
Net cash flow from/ (used in) financing activities   5,980 (681)
Decrease in cash and cash equivalents   (18,840) (10,688)
Cash and cash equivalents at the beginning of the year   34,680 45,519
Effect of change in foreign exchange   207 (151)
Cash and cash equivalents at the end of the year   16,047 34,680

Consolidated Statement of Changes in Shareholders' Equity


US$'000 Capital stock Contributed
Balance as at 1 January 2012 84,610 6,268 - 15,781 106,659
Stock based compensation - 720 - - 720
Options exercised 383 (233) - - 150
Normal course issuer bid (10) (2) - - (12)
Foreign currency translation of foreign operations - - 89 - 89
Total comprehensive income for the period - - - 18,329 18,329
Balance as at 31 December 2012 84,983 6,753 89 34,110 125,935
US$'000 Capital stock Contributed
Balance as at 1 January 2011 85,100 5,288 - 7,795 98,183
Stock based compensation - 1,171 - - 1,171
Normal course issuer bid (490) (191) - - (681)
Total comprehensive income for the period - - - 7,986 7,986
Balance as at 31 December 2011 84,610 6,268 - 15,781 106,659

Orca Exploration Group Inc.

Orca Exploration Group Inc. is an international public company engaged in natural gas exploration, development and supply in Tanzania through the 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 Audited Consolidated Financial Statements and Notes, Management Discussion & Analysis, and the NI-51-101 Standards of Disclosure for Oil and Gas Activities filing 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, repayment of the TANESCO receivable; expected timing of completion of a major natural infrastructure project; terms of the Government of Tanzania's draft natural gas policy and anticipated timing of second draft policy; the Company's plans to review technical and drilling data on the La Tosca well to determine whether or not to continue exploration on the block; expected timing of drilling of an offshore Italy Elsa appraisal well; industry conditions; industry conditions; and the Company's strategic plans. In addition, statements relating to "reserves" or "resources" are by their nature forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future. The recovery and reserve estimates of Orca's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.  As a consequence, actual results may differ materially from those anticipated in the forward looking statements. 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; failure to receive payments from TANESCO; 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; 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.