Orca Exploration announces its results for the quarter ended 31 March 2012
TSX-V: ORC.A, ORC.B
TORTOLA, British Virgin Islands, May 30, 2012 /CNW/ – Orca Exploration
Group Inc (“Orca Exploration” or the “Company”) announces its resultsor
the quarter ended 31 March 2012.
Highlights
-- Increased sales of Additional Gas by 45% to 4.8 Bcf or 52.9
MMcfd (Q1 2011: 3.3 Bcf or 37.1 MMcfd). This resulted in
operating revenue of US$17.2 million (Q1 2011: US$9.6 million).
-- Increased funds from operations before working capital changes
by 100% to US$9.9 million (Q1 2011: US$4.9 million).
-- Working capital decreased by 16% in the last quarter to US$47.1
million (US$56.0 million as at 31 December 2011) as a
consequence of significant capital expenditure on drilling
operations.
-- Continued drilling the SS-11 development well on Songo Songo
Island, which has now been completed. A total of 352 meters
of total gas reservoir was encountered and extensive new
reservoir data was acquired during the drilling of the well.
This will be evaluated during Q2 2012. The well will be
connected to the gas processing plant later in the year.
-- Deferred the drilling of a second development well, SS-12,
pending the normalisation of TANESCO's payments arrears for
gas.
-- At the end of May, as operator, the Company will conduct
corrosion logging on the offshore well SS-9 and has been
independently advised that production can continue until these
results have been analysed. The result will determine whether
or not SS-9 can be kept on production until SS-11 is connected
to the gas processing facilities later in the year.
-- Continued to work on logistics to secure a jack up rig for the
drilling of the exploration prospect, Songo Songo West, in Q4
2012. The rig is expected to be mobilised to Mozambique by
another operator in Q3 2012.
-- Commenced discussions with the Government Negotiation Team
(GNT) to resolve the issues raised in 2011 by the Parliamentary
Committee for Energy and Minerals in respect of the Company's
Production Sharing Agreement.
-- Continued to plan for the drilling of the La Tosca well in the
Longastrino exploration block in the Po Valley, northern Italy
(operated by Northern Petroleum Plc). Under the terms of the
farm in agreement, Orca will earn between 70% and 75% of the
block in return for financing the drilling and the testing of
the well up to predefined caps. The well is expected to be
spud in July 2012.
.
Financial and Operating Highlights
Threemonths ended or asat
31-Mar 31-Mar
2012 2011 Change
Financial (US$ 000 except where otherwise
stated)
Revenue 17,207 9,640 78%
Profit before taxation 10,154 4,030 152%
Operating netback (US$/mcf) 2.55 2.16 18%
Cash and cash equivalents 30,635 47,776 (36%)
Working capital 47,063 55,759 (16%)
Shareholders' equity 113,051 100,573 12%
Earnings per share - basic (US$) 0.19 0.07 171%
Earnings per share - diluted (US$) 0.18 0.07 157%
Funds flow from operating activities 9,888 4,947 100%
Funds flow per share from operating 0.28 0.14 100%
activities - basic (US$)
Funds flow per share from operating 0.28 0.14 100%
activities - diluted (US$)
Net cash flows from operating activities 6,653 3,496 90%
Net cash flows per share from operating 0.19 0.10 90%
activities - basic (US$)
Net cash flows per share from operating 0.19 0.10 90%
activities - diluted (US$)
Outstanding Shares ('000)
Class A shares 1,751 1,751 0%
Class B shares 32,743 32,939 (1%)
Options 2,257 2,557 (12%)
Additional Gas sold(MMcf) - industrial 835 550 52%
Additional Gas sold(MMcf) - power 3,973 2,794 42%
Additional Gas sold(MMcfd) - industrial 9.2 6.1 51%
Additional Gas sold(MMcfd) - power 43.7 31.0 41%
Average price per mcf (US$) - industrial 9.63 9.42 2%
Average price per mcf (US$) - power 2.72 2.62 4%
Chairman & CEO’s Letter to Shareholders
2012 is a pivotal year for the Orca Exploration Group. Continuing global
economic uncertainties and their impact on capital markets requires
that we focus even more carefully on the business that shapes the
Company. At the same time we are acutely aware of the critical role
Orca plays within Tanzania to develop the country’s natural gas
resources and make them available to the country’s power and industrial
sectors to the ultimate benefit of all Tanzanians. To play its part in
meeting that challenge Orca is moving forward to increase gas
production from Songo Songo Island and is working closely with the
Government of Tanzania and other Songo Songo stakeholders.
Orca has already taken the first steps in the US$130 million expansion
program it announced last November. The drilling of the first
development well SS-11 has now been completed on Songo Songo Island and
negotiations are proceeding to have a jack-up rig available for the
drilling of the Songo Songo West exploratory well later this year. The
drilling of Orca’s farm-in well in Italy is scheduled to begin in Q3
2012.
FINANCIAL RESULTS
Revenue grew by 78% to US$17.2 million in Q1 2012 (Q1 2011: US$9.6
million). The revenue increase was aided by strong Additional Gas
sales of 4,808 MMcf or 52.9 MMcfd (Q1 2011: 3,344 MMcf and 37.1 MMcfd)
and the fact that cost recovery was maximised following the first phase
of our capital expenditure programme. Funds from operations before
working capital changes increased by 100% to US$9.9 million. With
significant expenditure on drilling programmes available working
capital decreased from US$56.0 million at 31 December 2011 to US$47.1
million at 31 March 2012.
Orca continues to experience significant cash flow challenges due to
delays in payments owed by TANESCO. The state electric utility
currently owes the Company US$22.9 million. To help alleviate the
funding gap caused by the delays in TANESCO payments, the Company is in
the process of finalising a short-term US$10 million bank facility in
Tanzania. Further funding will be required if TANESCO continues to be
significantly in arrears with its payments.
TANZANIA OPERATIONS
In Q1 2012 Orca pushed ahead with the drilling of the SS-11 development
well. The well was drilled at an angle of 40 degrees entering the top
Neocomian reservoir in its highest position in the Songo Songo field.
A total of 352 meters of total gas reservoir was encountered and
extensive new reservoir data was acquired during the drilling of the
well. SS-11 is expected to be an excellent producer and will be brought
on production later this year. The intention was to drill a further
development well SS-12 from the same drilling location. However, this
well has been deferred as it was considered imprudent to drill a
further well whilst there was still considerable uncertainty over the
timing of the receipts from TANESCO.
To increase infrastructure capacity to deliver gas to Dar es Salaam, the
Company assisted the Tanzanian Petroleum Development Corporation
(“TDPC”) in Q1 2012 with the design of a pipeline and expanded
infrastructure facilities that the Government has announced its
intention to construct by the end of 2013. Initially this expansion is
expected to increase the Songo Songo infrastructure capacity to 200
MMcfd. Orca’s production is currently restricted by infrastructure
limits to a maximum of 102 MMcfd. In the short term, production could
be further restricted in the event that the SS-9 well is taken off
production following a current corrosion assessment of the well. If
that happens there may be a period where Orca can only deliver 80 MMcfd
until the new SS-11 well is connected later in 2012.
The Company is continuing its plans to drill the Songo Songo West
exploration well in Q4 2012. During Q1 2012, the Company purchased
long lead items and conducted seismic surveys to pinpoint the best
drilling location. A suitable jack up rig will be operating in
Mozambique in Q3 2012 and Orca is negotiating to contract the rig once
it has completed the work programme there.
Drilling Songo Songo West is dependent on TANESCO clearing its arrears
and resuming regular payments as well as completion of a reserve-based
lending facility that is currently under discussion. This financing is
also dependent on a satisfactory outcome of discussions with the
Government Negotiation Team (‘GNT’) on various issues in Orca’s
Production Sharing Agreement (“PSA”) including, but not limited to,
TPDC back in rights, profit sharing arrangements, the unbundling of the
downstream assets, cost recovery and Orca’s management of the upstream
operations. The Company has presented a package proposal to the GNT
that aims to resolve all the outstanding issues and is expecting to
receive a counterproposal. While changes to the PSA could have material
adverse impacts, the Company reserves its right to defend its position
if no satisfactory agreement is reached. The drilling of Songo Songo
West could be delayed if no good faith satisfactory resolution is
negotiated and TANESCO continues to delay payments.
ITALIAN OPERATIONS
In Italy we are moving forward with a land-based exploration programme.
The drilling of the La Tosca farm-in well is scheduled to spud in July
2012. Northern Petroleum, as operator, will drill the well in the
Longastrino Block in the Po Valley region of northern Italy. Orca will
pay 100% of the costs of the La Tosca 1 well up to EUR4.3 million (US$5.4
million) and 70% thereafter for the drilling phase, together with
back-in costs of EUR0.6 million (US$0.7 million) to earn a 70% interest
in the block. If the well is tested and completed, Orca will earn an
additional 5% (taking it to 75%) by paying 100% of the testing costs up
to EUR1.3 million (US$1.6 million) and 75% thereafter. There are a
number of other prospects on the Longastrino block that will be
evaluated following the completion of the drilling of the La Tosca
well.
BOARD AND MANAGEMENT CHANGES
At the Annual General Meeting in June, the Company will be seeking the
appointment of two new board members. Mr William (Bill) Smith was
secretary of the Board at Pan-Ocean Energy Corporation Limited
(“PanOcean”). Mr. Robert Wynne was the Chief Financial Officer at
PanOcean. Currently serving Board members, Lord Howard of Lympne,
Robert (Bob) Wigley, John Patterson, Beer van Straten and Robin Gaeta,
are stepping down with our sincere thanks and will assume new advisory
roles.
Two new executive appointments have also been made. Beer van Straten
has been named Chief Operating Officer replacing Dale Rollins who
resigned in March 2012. He is responsible for the Company’s field
operations including the current large scale development and
exploration drilling programme in Tanzania. Robert Wynne is assuming
the role of Chief Financial Officer following the resignation of Nigel
Friend who has been a valued member of Orca’s management team for the
past seven years.
NEXT STEPS
Orca’s commitment to fully meet all its obligations and contribute to
Tanzania’s energy self-sufficiency is clearly on the record. In that
spirit, the Company is engaged with the Government of Tanzania in a
joint review of all performance and financial concerns. We are doing
this with transparency and full cooperation.
Orca is proud of its contributions to Tanzania’s self-sufficiency and to
the businesses and people of Tanzania. We are equally proud of the
value that the Company is building for its shareholders. None of this
would be possible without the high quality performance of our
employees, management and advisors. Looking ahead we will continue to
work on strategic growth initiatives, maintaining strong partnerships,
controlling costs, creating value and continuing to build sustainable
relationships wherever we operate.
W. David Lyons
Chairman & CEO
Condensed Consolidated Interim Statement of Comprehensive Income (unaudited)
ORCA EXPLORATION GROUP INC.
Threemonths ended
31-Mar 31-Mar
(thousands of US dollars except per share amounts) 2012 2011
Revenue 17,207 9,640
Cost of sales
Production and distribution expenses (1,316) (1,026)
Depletion expense (1,938) (1,582)
13,953 7,032
General and administrative expenses (3,664) (2,850)
Finance income 38 -
Finance costs (173) (152)
Profit before taxation 10,154 4,030
Taxation (3,762) (1,640)
Profit after taxation and comprehensive income 6,392 2,390
Earnings per share
Basic (US$) 0.19 0.07
Diluted (US$) 0.18 0.07
Condensed Consolidated Interim Statement of Financial Position (unaudited)
ORCA EXPLORATION GROUP INC
AS AT 31-Mar 31-Dec
(thousands of US dollars) 2012 2011
ASSETS
Current Assets
Cash and cash equivalents 30,635 34,680
Trade and other receivables 42,435 40,348
Taxation receivable 9,708 5,880
Prepayments 342 302
83,120 81,210
Non- Current Assets
Exploration and evaluation assets 4,500 2,921
Property, plant and equipment 82,863 67,713
87,363 70,634
Total Assets 170,483 151,844
EQUITY AND LIABILITIES
Current Liabilities
Trade and other payables 31,437 22,801
Taxation payable 4,620 2,403
36,057 25,204
Non-Current Liabilities
Deferred income taxes 15,916 15,194
Deferred additional profits tax 5,459 4,787
21,375 19,981
Total Liabilities 57,432 45,185
Equity
Capital stock 84,610 84,610
Contributed surplus 6,268 6,268
Accumulated income 22,173 15,781
113,051 106,659
Total Equity and Liabilities 170,483 151,844
Condensed Consolidated Interim Statement of Cash Flows (unaudited)
ORCA EXPLORATION GROUP INC
THREE MONTHS ENDED 31-Mar 31-Mar
(thousands of US dollars) 2012 2011
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit after taxation 6,392 2,390
Adjustment for :
Depletion and depreciation 2,019 1,630
Stock-based compensation 6 73
Deferred income taxes 722 538
Deferred additional profits 672 193
tax
Gain on disposal of vehicle - (5)
Interest income (1) (3)
Unrealised foreign exchange 78 131
loss
(Increase) in trade and other (2,118) (887)
receivables
(Increase) in taxation (3,828) (1,462)
receivable
Decrease/(increase) in (40) 28
prepayments
(Decrease)/increase in trade and 534 (232)
other payables
Increase in taxation payable 2,217 1,102
Net cash flows from operating 6,653 3,496
activities
CASH FLOWS USED IN INVESTING
ACTIVITIES
Exploration and evaluation (1,578) (224)
expenditures
Property, plant and equipment (17,170) (1,132)
expenditures
Proceeds from sale of vehicle - 3
Interest received 1 5
Increase in trade and other 8,072 106
payables
Net cash used in investing (10,675) (1,242)
activities
(Decrease)/Increase in cash and (4,022) 2,254
cash equivalents
Cash and cash equivalents at the 34,680 45,519
beginning of theperiod
Effect of change in foreign (23) 3
exchange
Cash and cash equivalents at the 30,635 47,776
end of the period
Condensed Consolidated Interim Statement of Changes in Shareholders’
Equity (unaudited)
ORCA EXPLORATION GROUP INC
(thousands of Capital Contributed Accumulated income Total
US dollars) stock surplus
Balance as at 85,100 5,288 10,185 100,573
1 January
2011
Stock-based - - - -
compensation
Total - - 2,390 2,390
comprehensive
income for
the period
Balance as at 85,100 5,288 10,185 100,573
31 March 2011
(thousands of Capital Contributed Accumulated income Total
US dollars) stock surplus
Note
Balance as at 84,610 6,268 15,781 106,659
1 January
2012
Stock-based - - - -
compensation
Total - - 6,392 6,392
comprehensive
income for
the period
Balance as at 22,173 113,051
31 March 2012 84,610 6,268
Orca Exploration is an international public company engaged in natural
gas exploration, development and supply in Tanzania and oil appraisal
and gas exploration in Italy. Orca Exploration trades on the TSXV under
the trading symbols ORC.B and ORC.A.
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, timing of evaluation of new reservoir data for the
SS-11 development well on Songo Songo Island and expected timing of
connecting the well to the gas processing plant; anticipated timing of
conducting corrosion logging on the offshore well SS-9; efforts to
secure a jack up rig for the drilling of the Songo Songo West well and
the expected timing of securing the rig and drilling of the well; the
Company’s plans for drilling of a La Tosca well in the Longastrino
exploration block in the Po Valley, northern Italy and expected timing
for spudding the well; the Company’s plans to finalize a short-term
bank facility; future funding requirements; anticipated timing of
bringing the SS-11 development well on Songo Songo Island on
production; expected increases to Songo Songo infrastructure capacity
as a result of expanded infrastructure facilities; effect of corrosion
assessment on bringing the SS-9 well on production; conditions to
drilling of the Songo Songo West well and bank financing; effect of
changes to the PSA on the Company and on timing of drilling of the
Songo Songo West well; and the Company’s strategic plans. These
forward-looking statements involve substantial known and unknown risks
and uncertainties, certain of which are beyond Orca Exploration’s
control, including, but not limited to, the impact of general economic
conditions in the areas in which Orca Exploration 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; failure to obtain short-term bank facility; delays in
drilling plans; failure to meet conditions to drilling of Songo Songo
West well; effect of changes to the PSA on the Company; and obtaining
required approvals of regulatory authorities. In addition there are
risks and uncertainties associated with oil and gas operations,
therefore Orca Exploration’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,
including the amounts of proceeds, that Orca Exploration will derive
therefrom. Such forward-looking are based on certain assumptions made
by Orca Exploration in light of its experience and perception of
historical trends, current conditions and expected future developments,
as well as other factors Orca Exploration believes are appropriate in
the circumstances, including, but are not limited to, the ability of
Orca Exploration to add production at a consistent rate; commodity
prices will not deteriorate significantly; the ability of Orca
Exploration to obtain equipment in a timely manner to carry out
exploration, development and exploitation activities; and future
capital expenditures. The forward-looking statements contained in this
press release are made as of the date hereof and Orca Exploration
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.
