TSX-V: ORC.A, ORC.B
TORTOLA, British Virgin
Islands, April 24, 2014 /CNW/
- Orca Exploration Group Inc. ("Orca" or "the Company") announces
its results for the year ended 31 December
2013.
- Orca operated its Tanzania Songo Songo gas field in 2013 at
near plant and pipeline capacity generating record results from
production operations. Additional Gas sales volumes increased 9%
over 2012 to average 61.5 MMcfd. Overall production of Protected
Gas and Additional Gas was essentially flat over 2012 at 96.3 MMcfd
(2012: 95.8 MMcfd) and current average production is approximately
94 MMcfd.
- The situation with respect to the outstanding accounts
receivable from TANESCO is increasingly urgent. In the event that
the Company does not collect from TANESCO the balance of the
receivables and TANESCO continues to be unable to pay the Company
for subsequent gas deliveries, the Company will need additional
funding for its ongoing operations by the end of the 2014 fiscal
year.
- Working capital was US$27.8
million at year-end, down 41% over 2012 (US$46.8 million), a result of reclassifying
US$47.0 million (prior to discount)
of TANESCO debt as a long-term receivable. As at 31 December 2013, TANESCO owed the Company
US$56.6 million of which US$51.5 million was in arrears.
- TANESCO currently owes the Company US$64.9 million, of which US$60.2 million is in arrears. Neither TANESCO
nor the Government has proposed any plan to address arrears and/or
ongoing payments. The Company has served notice to TANESCO and is
actively pursuing all legal options available to collect the
arrears and arrest the increase in TANESCO receivables, including
but not limited to the suspension of gas deliveries to
TANESCO.
- Earnings suffered in 2013 with the Company posting a
US$5.9 million loss after tax, or
US$0.17 loss per share diluted (2012:
income US$18.4 million or
US$0.52 per share), as a result of
provisions of US$17.1 million against
TANESCO receivables to account for the cost of timing, and
US$10.5 million against doubtful
debts, primarily Songas.
- Average gas prices were up 8% in 2013 to US$4.66/Mcf (2012: US$4.31/Mcf), Industrial gas prices were down 11%
in 2013 to US$8.27/Mcf (2012:
US$9.30/Mcf) from changes in the
sales mix, and average Power sector gas prices increased 18% over
2012 to US$3.76/Mcf from US$3.18/Mcf, a result of increased take at higher
marginal prices.
- The 9% increase in Additional Gas sales volumes together with
an 8% increase in the average gas price generated increased gross
revenue, but the lack of Cost Pool recoveries due to minimal
capital spending during the year reduced the Company's share of
revenue to US$54.7 million (2012:
US$77.3 million).
- Funds flow from operating activities was down 14% to
US$39.8 million or US$1.15 per share (2012: US$46.3 million or US$1.33 per share), a result of lower net
revenues partially offset by reduced operating and G&A
costs.
- The Company ended the year with US$32.6
million in cash and US$1.7
million in debt, double the cash balances of the prior year.
Notwithstanding the stronger cash position, the continued TANESCO
and Songas non-payment still threatens the Company's viability and
the Company has maintained a going concern note in its 2013
Consolidated Financial Statements. The Company currently has
US$35 million in cash and no
debt.
- During 2013 the Company received a number of assessments for
additional tax from the Tanzania Revenue Authority ("TRA"), which
together with interest penalties total US$18.4 million. Management together with tax
advisors have reviewed each of the assessments and believe them to
be without merit. The Company has appealed against the assessments
for additional withholding tax and employment related taxes, and
has filed formal objections against TRA's claims for additional
corporation tax and VAT.
- The Company ended negotiations on the Songo Songo Production
Sharing Agreement (the "PSA") and Government Negotiating Team
issues having obtained a full retraction by the Tanzania Petroleum
Development Corporation ("TPDC") of the alleged over-recovery of
US$21 million in Cost Pools. The
claim was the cornerstone of Parliament's 2011 resolution advising
the Government to terminate the PSA. The Company has committed to
use the dispute resolution mechanisms in its agreements to address
any and all pertinent issues going forward, including Cost Pool
audits and downstream unbundling.
- Establishing commercial terms for future incremental gas sales
remains a key condition to the Company's commitment to Songo Songo development – after a year of
proposals from the Company on gas pricing, there has yet to be
agreement with TPDC. In the absence of an agreement in the near
future, the Company intends to pursue its rights under the PSA to
develop other markets for Songo
Songo gas.
- Despite the stalled efforts to reach agreement on commercial
terms, the Company continued planning the full development of
Songo Songo to reach 190 MMcfd
deliverability by mid-2015, beginning designs for workovers of
SS-3, SS-5 and SS-9, followed by the drilling of SS-12 and the
installation of infrastructure, for projected total capital
spending of approximately US$165
million. The Company is currently working with the
International Finance Corporation of the World Bank Group to
finance the development programme. All development work remains
contingent upon (i) satisfactory resolution of TANESCO arrears;
(ii) acceptable commercial terms; and (iii) payment guarantees for
future gas deliveries to TANESCO.
- The Tanzania National Natural Gas Infrastructure Project
("NNGIP") made significant progress during 2013, with the pipeline
currently 72% complete and gas processing facilities 58% complete.
Expected onstream date is mid-2015.
- In October 2013, the Government
of Tanzania issued a National
Natural Gas Policy which contemplates a restructuring of TPDC, its
strategic participation throughout the upstream, midstream and
downstream sectors, its ownership and control of gas infrastructure
and the setting by the Government of domestic natural gas prices.
The Company expects its rights under the PSA to be respected at
such time as the policy is enacted by law in Tanzania.
- Songo Songo gas reserves on a
Company Gross basis remain solid with a 11% increase in
Songo Songo's Total Proved
Additional Gas reserves to the end of the license period, after
production of 22.4 Bcf during the year (2012: 20.6 Bcf); a 8%
increase in the Proved plus Probable Additional Gas reserves from
489 Bcf to 527 Bcf (based on a report prepared by Orca's
independent reserves evaluator as at 31
December 2013 and dated 3 April
2014 in accordance with National Instrument 51-101 and the
Canadian Oil and Gas Evaluation Handbook). The increase is
primarily due to increased recoverability and adjustments to TPDC
back-in, offset by a reduction in the remaining life of the
licence. NPV10% 2P was estimated at US$403
million (2012: US$386
million).
- Beer van Straten stepped down at
the end of 2013 from the role of Chief Operating Officer to join
the Advisory Board. The Company recently appointed Stephen Huckerby as Chief Accounting Officer.
Mr. Huckerby has been with Orca since 2007 and has been
instrumental in supporting the Company's economics and business
analysis, treasury management and accounting needs.
Operating and Financial Highlights
US$'000
except where otherwise stated
|
2013
|
2012
|
% Change
|
Revenue
|
54,718
|
77,259
|
(29)
|
(Loss)/profit before
tax
|
(3,722)
|
35,454
|
n/m
|
Operating netback
(US$/mcf)
|
2.20
|
2.82
|
(22)
|
Cash
|
32,588
|
16,047
|
103
|
Working capital
(1)
|
27,756
|
46,820
|
(41)
|
Shareholders'
equity
|
120,252
|
125,935
|
(5)
|
Total comprehensive
(loss)/income
|
(5,857)
|
18,418
|
n/m
|
per share - basic
(US$)
|
(0.17)
|
0.53
|
n/m
|
per share - diluted
(US$)
|
(0.17)
|
0.52
|
n/m
|
Funds flow from
operating activities (2)
|
39,840
|
46,264
|
(14)
|
per share - basic
(US$)
|
1.15
|
1.33
|
(14)
|
per share - diluted
(US$)
|
1.15
|
1.30
|
(12)
|
Net cash flows from
operating activities
|
22,491
|
30,883
|
(27)
|
per share - basic
(US$)
|
0.65
|
0.88
|
(26)
|
per share - diluted
(US$)
|
0.65
|
0.86
|
(24)
|
Outstanding
Shares ('000)
Class A
shares
|
1,751
|
1,751
|
–
|
Class B
shares
|
33,072
|
32,892
|
1
|
Options
|
1,742
|
1,922
|
(9)
|
Operating
|
|
|
|
Additional Gas sold
(MMcf) - Industrial
|
4,478
|
3,813
|
17
|
Additional Gas sold
(MMcf) - Power
|
17,957
|
16,832
|
7
|
Additional Gas sold
(MMcfd) - Industrial
|
12.3
|
10.4
|
18
|
Additional Gas sold
(MMcfd) - Power
|
49.2
|
46.0
|
7
|
Additional Gas sold
(MMcfd)
|
61.5
|
56.4
|
9
|
Average price per mcf
(US$) - Industrial
|
8.27
|
9.30
|
(11)
|
Average price per mcf
(US$) - Power
|
3.76
|
3.18
|
18
|
Average price per mcf
(US$) - Industrial & Power
|
4.66
|
4.31
|
8
|
Additional Gas Gross
Recoverable Reserves to end of licence (BCF)
(3)
|
476
|
429
|
11
|
Proved
|
Probable
|
52
|
60
|
(13)
|
Proved plus
probable
|
527
|
489
|
8
|
Net Present Value,
discounted at 10% (US$ millions)
(3)
Proved
|
365
|
354
|
3
|
Proved plus
probable
|
403
|
386
|
4
|
1.
|
Working
capital as at 31 December 2013 includes a TANESCO
receivable of US$9.6 million (31 December 2012: US$33.3 million).
Given the payment pattern, the TANESCO receivables have been
discounted by US$17.1 million and receivables from TANESCO in
excess of 60 days of US$47 million have been
classified as long-term receivables. Total long and short-term
TANESCO receivables as at 31 December 2013 were US$56.6
million prior to discounting. Subsequent to the end of the year,
TANESCO paid US$6.4 million, and as at 24 April 2014 the
TANESCO balance was US$64.9
million of which arrears total US$60.2 million.
|
2.
|
See MD&A –
Non-GAAP Measures.
|
3.
|
Based on a report
prepared by independent petroleum engineers McDaniel &
Associates Consultants Ltd. dated 31 December 2013, which
was prepared on 3 April 2014 in accordance with
National Instrument 51-101 and definitions, standards and
procedures contained in the Canadian Oil and Gas Evaluation
Handbook.
|
Consolidated Statement of Comprehensive
(Loss)/Income
ORCA EXPLORATION GROUP INC.
YEAR ENDED 31
DECEMBER
|
|
|
US$'000 except
per share amounts
|
NOTE
|
2013
|
2012
|
|
|
|
|
REVENUE
|
6,7
|
54,718
|
77,259
|
Cost of
sales
|
|
|
|
Production and
distribution expenses
|
|
(4,426)
|
(5,953)
|
Depletion
expense
|
13
|
(12,166)
|
(8,968)
|
|
|
38,126
|
62,338
|
General and
administrative expenses
|
|
(15,428)
|
(17,989)
|
Exploration asset
impairment
|
12
|
(158)
|
(8,284)
|
Finance
income
|
9
|
2,646
|
23
|
Finance
costs
|
9
|
(28,908)
|
(634)
|
(Loss)/profit
before tax
|
|
(3,722)
|
35,454
|
Income
taxes
|
10
|
(1,743)
|
(17,125)
|
(Loss)/profit
after tax
|
|
(5,465)
|
18,329
|
Foreign currency
translation (loss)/gain from foreign operations
|
|
(392)
|
89
|
Total
comprehensive (loss)/income for the period
|
|
(5,857)
|
18,418
|
|
|
|
|
EARNING PER
SHARE
|
|
|
|
Basic
(US$)
|
17
|
(0.17)
|
0.53
|
Diluted
(US$)
|
17
|
(0.17)
|
0.52
|
See Going Concern (Note 1) and accompanying notes to the
consolidated financial statements.
Consolidated Statement of Financial Position
ORCA
EXPLORATION GROUP
INC.
|
|
AS
AT
|
US$'000s
|
NOTE
|
31 Dec
2013
|
31 Dec
2012
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash
|
3
|
32,588
|
16,047
|
Trade and other
receivables
|
11
|
37,215
|
73,495
|
Tax
receivable
|
10
|
14,585
|
14,692
|
Prepayments
|
|
281
|
246
|
|
|
84,669
|
104,480
|
Non-current
assets
|
|
|
|
Long-term trade
receivable
|
11
|
29,911
|
-
|
Exploration and
evaluation assets
|
12
|
5,564
|
5,720
|
Property, plant and
equipment
|
13
|
90,832
|
102,044
|
|
|
126,307
|
107,764
|
Total
assets
|
|
210,976
|
212,244
|
|
|
|
|
EQUITY AND
LIABILITIES
|
|
|
|
Current
liabilities
|
|
|
|
Trade and other
payables
|
14
|
53,296
|
45,496
|
Bank loan
|
15
|
1,659
|
5,842
|
Tax
payable
|
|
1,958
|
6,322
|
|
|
56,913
|
57,660
|
Non-current
liabilities
|
|
|
|
Deferred income
taxes
|
10
|
12,132
|
20,399
|
Deferred additional
profits tax
|
10
|
21,679
|
8,250
|
|
|
33,811
|
28,649
|
Total
liabilities
|
|
90,724
|
86,309
|
|
|
|
|
Equity
|
|
|
|
Capital
stock
|
16
|
85,428
|
84,983
|
Contributed
surplus
|
|
6,482
|
6,753
|
Accumulated other
comprehensive income
|
|
(303)
|
89
|
Accumulated
income
|
|
28,645
|
34,110
|
|
|
120,252
|
125,935
|
Total equity and
liabilities
|
|
210,976
|
212,244
|
See accompanying notes to the consolidated financial
statements.
Going concern (Note 1)
Contractual obligations and committed capital investment (Note
19)
Contingencies (Note 20)
The consolidated
financial statements were approved by the Board of Directors on
24 April 2014.
Consolidated Statement of Cash Flows
ORCA EXPLORATION
GROUP INC.
YEAR ENDED 31
DECEMBER
|
|
|
US$'000
|
NOTE
|
2013
|
2012
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
(Loss)/profit after
tax
|
|
(5,465)
|
18,329
|
Adjustment
for:
|
|
|
|
Depletion and depreciation
|
13
|
12,498
|
9,281
|
Exploration asset impairment
|
12
|
158
|
8,284
|
Provision for doubtful debt
|
9
|
10,531
|
-
|
Discount on long-term receivable
|
9
|
17,073
|
-
|
Stock-based compensation
|
16
|
(209)
|
1,152
|
Deferred income taxes
|
10
|
(8,267)
|
5,205
|
Deferred additional profits tax
|
7,10
|
13,429
|
3,463
|
Interest income
|
9
|
-
|
(23)
|
Interest expense
|
9
|
678
|
315
|
Unrealised loss on foreign exchange
|
|
(586)
|
258
|
Funds flow from
operating activities
|
|
39,840
|
46,264
|
Decrease/(Increase)
in trade and other receivables
|
|
25,845
|
(33,133)
|
Decrease/(Increase)
in tax receivable
|
|
107
|
(8,812)
|
(Increase)/Decrease
in prepayments
|
|
(35)
|
56
|
Increase in trade and
other payables
|
|
8,082
|
22,589
|
(Decrease)/Increase
in taxation payable
|
|
(4,364)
|
3,919
|
Increase in long-term
receivable
|
|
(46,984)
|
-
|
Net cash flows
from operating activities
|
|
22,491
|
30,883
|
CASH FLOWS USED IN
INVESTING ACTIVITIES
|
|
|
|
Exploration and
evaluation expenditures
|
12
|
(2)
|
(11,083)
|
Property, plant and
equipment expenditures
|
13
|
(1,286)
|
(43,612)
|
Interest
received
|
9
|
-
|
23
|
Increase in trade and
other payables
|
|
-
|
(716)
|
Net cash used in
investing activities
|
|
(1,288)
|
(55,388)
|
CASH FLOWS (USED
IN)/FROM FINANCING ACTIVITIES
|
|
|
|
Normal course issuer
bid
|
16
|
-
|
(12)
|
Bank loan
proceeds
|
15
|
4,000
|
5,842
|
Bank loan
repayments
|
15
|
(8,183)
|
-
|
Interest
paid
|
9
|
(678)
|
(315)
|
Proceeds from
exercise of options
|
|
174
|
150
|
Net cash flow
(used in)/from financing activities
|
|
(4,687)
|
5,665
|
Increase/(decrease) in cash
|
|
16,516
|
(18,840)
|
Cash at the
beginning of the year
|
|
16,047
|
34,680
|
Effect of change
in foreign exchange on cash in hand
|
|
25
|
207
|
Cash at the end of
the year
|
|
32,588
|
16,047
|
See accompanying notes to the consolidated financial
statements.
Condensed Consolidated Interim Statement of Changes in
Shareholders' Equity
ORCA EXPLORATION GROUP INC.
US$'000
|
Capital
stock
|
Contributed
surplus
|
Cumulative
translation
adjustment
|
Accumulated
income
|
Total
|
Balance as at 1
January 2013
|
84,983
|
6,753
|
89
|
34,110
|
125,935
|
Options
exercised
|
445
|
(271)
|
-
|
-
|
174
|
Foreign currency
translation adjustment on foreign operations
|
-
|
-
|
(392)
|
-
|
(392)
|
Loss after tax for
the period
|
-
|
-
|
-
|
(5,465)
|
(5,465)
|
Balance as at 31
December 2013
|
85,428
|
6,482
|
(303)
|
28,645
|
120,252
|
|
|
|
|
|
|
US$'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
|
Stock based
compensation
|
-
|
720
|
-
|
-
|
720
|
Options
exercised
|
383
|
(233)
|
-
|
-
|
150
|
Normal course issuer
bid
|
(10)
|
(2)
|
-
|
-
|
(12)
|
Foreign currency
translation adjustment on foreign operations
|
-
|
-
|
89
|
-
|
89
|
Profit after tax for
the period
|
-
|
-
|
-
|
18,329
|
18,329
|
|
|
|
|
|
|
Balance as at 31
December 2012
|
84,983
|
6,753
|
89
|
34,110
|
125,935
|
See accompanying notes to the consolidated 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 the wholly-owned subsidiary
PanAfrican Energy Tanzania Limited, as well as oil and gas
appraisal in Italy. Orca trades on
the TSX Venture Exchange 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 receivables; the need
for additional funding by year end for the Company's ongoing
operations if the Company is unable to collect the TANESCO
receivables; the actions taken and to be taken by the Company to
collect the TANESCO receivables; the Company's viability and its
ability to meet its obligations as they come due; the
potential taxes and penalties payable by the Company to the
TRA and the Company's beliefs regarding the assessments and
the steps taken and to be taken by the Company to appeal and object
to such assessments; status of negotiations with the
TPDC regarding a sales agreement for incremental gas volumes
and the Company's plans if an agreement is not reached in the near
future; status of execution of a full field development plan for
Songo Songo, including the
anticipated gas sales volumes, the funding of the
development plan, and the contingencies related to the development
work; the expected onstream date for the
NNGIP; anticipated effect of the National Natural Gas Policy
on the Company's rights under the PSA; and the Company's
strategic plans. In addition, statements relating to "reserves" are
by their nature forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions that
the 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. It should not be assumed that
the estimates of future net revenues presented above represents the
fair market value of the reserves. 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.
These forward-looking statements involve substantial known
and unknown risks and uncertainties, certain of which are beyond
Orca's control, and many factors could cause Orca's actual results
to differ materially from those expressed or implied in any
forward-looking statements made by Orca, including, but not limited
to: failure to receive payments from TANESCO; failure to obtain
adequate funding to meet the Company's obligations as they
come due; failure to reach a sales agreement with TPDC for
incremental gas volumes; potential negative effect on the Company's
rights under the PSA as a result of the National Natural Gas
Policy; risk that the contingencies related to the development work
for the full field development plan for Songo Songo are not satisfied; risk that the
expected onstream date for the NNGIP
is delayed; failure to obtain funding for full field development
plan for Songo Songo; risk that the
Company will be required to pay additional taxes and penalties;
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;
inability to access sufficient capital; 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. Readers are
cautioned that the foregoing list of factors is not
exhaustive.
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: 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; that the
Company will have adequate funding to continue operations;
that the Company will successfully negotiate agreements;
receipt of required regulatory approvals; 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 obtain funding
for full field development plan for Songo
Songo; that the Company's appeal of the tax assessment by
the TRA will be successful; 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.