Orca Energy Group Provides Key Updates on Operations and Finances

Overview of Orca Energy Group's Operational Update

Orca Energy Group Inc. (TSX-V: ORC.A, ORC.B) is excited to announce significant updates regarding its operations and financial performance. The company, which operates in natural gas development, continues its focus on the production and supply of gas in Tanzania through its subsidiary, PanAfrican Energy Tanzania Limited.

Recent Developments with Songas

On October 30, it was brought to the attention of Orca that the Interim Power Purchase Agreement (PPA) with Songas Limited is set to expire. Following the expiration, operations at the Songas Power Plant were halted, leaving uncertainty surrounding the future of gas supply from the Songo Songo gas field. The company is currently assessing the implications this has on demand for their production volumes.

Production Projections

Looking ahead, Orca anticipates that the average Additional Gas sales volumes will range between 65 to 68 million cubic feet per day (MMcfd). This estimation excludes prior volumes expected to be supplied to Songas for the last quarter, along with some disputed amounts due to the stance taken by the Tanzania Petroleum Development Corporation (TPDC).

Implications of the Protected Gas Cessation

Despite the cessation of Protected Gas from July 31, 2024, production has continued, with Songas lifting an average of 17.8 MMcfd during August and September. However, complications arose regarding payment, as only a fraction of the total invoiced amount has been settled due to ongoing disputes with TPDC.

Operational Advances in Q3-2024

During the third quarter of this year, Orca successfully completed a production enhancement and logging program across three wells. The results have been promising, indicating that both the wells and the broader gas field are aligning with performance expectations.

Intervention Work on SS-7 Well

A workover program is currently being executed on the SS-7 well, following logistical arrangements to mobilize various resources to Songo Songo Island. The operational phase aims to restore mechanical integrity and commence the southern compartment’s production. The expected costs for this project have escalated due to delays but are anticipated to be manageable.

Commercial Developments and Disputes

In August, Orca issued a Notice of Dispute concerning an investment treaty claim against the Government of Tanzania for breaches related to critical agreements. Initial negotiations failed to yield a resolution. Ongoing discussions are being arranged for further evaluations of the disputes in the coming months.

Gas Supply to TPCPLC

Throughout the fall, Orca maintained its supply of gas to Tanzania Portland Cement PLC. However, invoicing issues have emerged due to disagreements over the Supplementary Gas Agreement that was rejected by TPDC. The company is carefully monitoring its outstanding invoices for the provided gas volumes.

Financial Position and Outlook

As of September 30, 2024, Orca reported cash reserves of $101.7 million, reflecting a solid financial position with no change to long-term debt levels. The company continues its commitment to maintaining a strong liquidity profile as it navigates ongoing challenges in the Tanzanian market.

Delivery of Gas under PGSA

Delivery of gas under the Portfolio Gas Supply Agreement (PGSA) with TANESCO has proceeded smoothly, with significant volumes recorded. Orca is closely tracking receivables to ensure accurate financial management.

Commitment to Stakeholders

Orca Energy Group is dedicated to supporting its stakeholders in Tanzania. The company recognizes the importance of its role in providing reliable energy sources and adheres to best practices in natural gas supply. The strategic focus remains on enhancing operational efficiencies while addressing buyer concerns and maintaining open lines of communication with governmental bodies.

Frequently Asked Questions

What is the current status of the PPA with Songas?

The PPA with Songas expired, resulting in a shutdown of operations. Future negotiations are underway to establish a new agreement.

How much gas is Orca expected to produce?

Orca's production guidance is currently forecasted between 65 and 68 MMcfd for Additional Gas.

What financial position does Orca hold?

As of September 30, 2024, Orca reported cash reserves of $101.7 million with stable long-term debt levels.

Why was the SGA with TPCPLC not approved?

TPDC's refusal to sanction the Supplementary Gas Agreement led to invoicing issues for supplied gas volumes.

What steps are being taken regarding the Notice of Dispute?

The Notice of Dispute has been escalated to higher management levels, with further meetings proposed for November or December.

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