Orca Energy Group Inc. (“
Orca” or the
“
Company” and includes its subsidiaries and
affiliates) (TSX-V: ORC.A, ORC.B) announces a further update to its
announcement of July 29, 2024.
Following extensive discussions with the
Tanzania Electricity Supply Company Limited
(“TANESCO”) to extend the Portfolio Gas Supply
Agreement (“PGSA”) between PanAfrican Energy
Tanzania Limited (“PAET”), the Tanzania Petroleum
Development Corporation (“TPDC”) and TANESCO, Orca
confirms a second amendment to the PGSA has been entered into by
TANESCO, PAET, and TPDC (the “Amendment”). The
Amendment extends the terms of the PGSA to October 10, 2026.
The Amendment is effective August 1, 2024 and
the applicable Maximum Daily Quantity (“MDQ”) is
expected to be 26.1 MMcfd, with no change to pricing.
As of August 1, 2024, PAET will have total
contracted volumes of approximately 68 MMcfd of which 0.3 MMcfd is
given to the village electrification scheme.
Update on Protected Gas
Demands
Further to our press release of July 29, 2024,
PAET and Songas Limited (“Songas”) received
letters on July 26, 2024 (the “TPDC Letters”) from
TPDC in which TPDC indicated: (i) that it will continue to treat
any natural gas produced from certain specified blocks within the
Songo Songo gas field (the “Discovery Blocks”)
after July 31, 2024 as PG (as defined below); and (ii) TPDC has
stated its intention to extend the transfer and assignment to
Songas of the right to explore for and develop PG. PAET has
responded to the TPDC Letters confirming that it will not consent
to such an amendment. At this time, PAET has not received a
response from TPDC to such response letter.
As detailed in the Company’s press release of July
29, 2024, PG ceased on July 31, 2024. As such PAET will be entitled
to payment at a commercial rate for all volumes of gas taken by
Songas starting on August 1, 2024. If such gas is taken by Songas,
there is a risk that PAET will not receive payment or payment may
form part of a contract dispute.
PAET and Tanzania Portland Cement PLC
(“TPCPLC”) have agreed (but not executed) the
terms of a new gas sales agreement (“New
GSA”) from August 1, 2024 to sell the volumes as
AG, which, prior to August 1, 2024, were supplied as PG. The New
GSA cannot be executed without approval of TPDC. TPDC has rejected
the entering into of the New GSA. On July 25, 2024, PAET escalated
the matter to the Minister of Energy under article 4.3(b) of the
PSA (as defined below). The Ministry of Energy should attempt to
respond to PAET within 30 days from the day of receipt of the
application.
Financial Summary
On a look forward basis, the revenue generated
from this agreement is expected to be in line with historical
revenue contributions under the PGSA which was 30% of total revenue
in 2022 and 33% of total revenue in 2023. See the table below which
illustrates the production and revenue contributions of the PGSA
for the time periods indicated.
Revenues cease for volumes supplied to Songas as
Complex AG under the respective agreements. These volumes
contributed to approximately 9.5% of total daily gross volumes over
2022/2023 and H1 2024 and 8% of gross revenue from sales for the
same period.
In the event the issue with TPDC over PG is not
resolved in the near-term, the Board will be forced to
significantly reduce costs and ensure capital expenditure projects
are in line with signed gas sales contracts and economic
returns.
Further updates on the matter will be made in
due course.
Orca Energy Group Inc.
Orca Energy Group Inc. is an international
public company engaged in natural gas development and supply in
Tanzania through its subsidiary, PAET. Orca trades on the TSX
Venture Exchange under the trading symbols ORC.B and ORC.A.
The principal asset of Orca is its indirect
interest in the Production Sharing Agreement between the Government
of Tanzania, TPDC, and PAET dated October 11, 2001 (the
“PSA”). The PSA covers the production and
marketing of certain conventional natural gas from the Songo Songo
license offshore Tanzania. The PSA defines the gas produced from
the Songo Songo gas field as “Protected Gas”
(“PG”) and “Additional Gas”
(“AG”). Songas is the owner of the infrastructure
that enables the gas to be processed and delivered to Dar es
Salaam, which includes a gas processing plant on Songo Songo
Island. AG is all gas that is produced from the Field in excess of
PG.
For further information please contact:
Jay Lyons ir@orcaenergygroup.com
Lisa Mitchell ir@orcaenergygroup.com
For media enquiries:
Celicourt (PR) Jimmy Lea Mark Antelme
Orca@celicourt.uk+44 (0)20 7770 6424
Forward-Looking Information
This press release contains forward-looking
statements or information (collectively, “forward-looking
statements”) within the meaning of applicable securities
legislation. All statements, other than statements of historical
fact included in this press release, which address activities,
events or developments that Orca expects or anticipates to occur in
the future, are forward-looking statements. Forward-looking
statements often contain terms such as may, will, should,
anticipate, expect, continue, estimate, believe, project, forecast,
plan, intend, target, outlook, focus, could and similar words
suggesting future outcomes or statements regarding an outlook.
More particularly, this press release contains,
without limitation, forward-looking statements pertaining to the
following: the expectation around the MMcfd deliverable under the
Amendment; the Company’s expectation that PAET will receive payment
in respect of PG supplied after July 31, 2024; the concern that if
the PG is not resolved, the Board will be required to reduce costs
and ensure capital expenditure projects on the field are in line
with contracts and economic returns; the expectation that the
Amendment to the PGSA will generate 34% of the Company’s revenues
for 2024; the expectations regarding future revenues of the
Company; expectations as to when the Ministry of Energy will
respond and outcomes; and expectations that TPDC will respond to
PAET’s response letter. Although management believes that the
expectations reflected in the forward-looking statements are
reasonable, it cannot guarantee future results, levels of activity,
access to resources, results of negotiation, results from
arbitration, amount of damages or costs incurred by the Company
relating to negotiations and/or arbitration, 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 the Company’s control, and many factors could
cause the Company’s actual results to differ materially from those
expressed or implied in any forward-looking statements made by the
Company, including, but not limited to: uncertainties involving the
negotiation of new commercial terms under the GA and PSA and
necessary requirements; various uncertainties involved in the
extension of the Songo Songo license and execution of extensions to
material contracts which expired on July 31, 2024; uncertainty
regarding the response from the Ministry of Energy; negative effect
on the Company’s rights under the PSA and other agreements relating
to its business in Tanzania; changes in laws and regulations;
impact of local content regulations and variances in the
interpretation and enforcement of such regulations; uncertainty
regarding results through negotiations and/or exercise of legally
available remedies; failure to successfully negotiate agreements,
including new commercial terms under the GA and PSA; risks of
non-payment by recipients of natural gas supplied by the Company;
changes in national and local government legislation, taxation,
controls, or regulations and/or changes in the administration of
laws, policies, and practices, expropriation or nationalization of
property and political or economic developments in Tanzania; lack
of certainty with respect to foreign legal systems, corruption, and
other factors that are inconsistent with the rule of law; risk of
loss due to acts of war, terrorism, sabotage and civil
disturbances; timing of receipt of, or failure to comply with,
necessary permits and approvals; and potential damage to the
Company’s reputation due to the actual or perceived occurrence of
any number of events, including negative publicity with respect to
the Company’s dealings with the Government of Tanzania, TPDC and
TANESCO, whether true or not. Therefore, the Company’s actual
results, performance or achievement could differ materially from
those expressed in, or implied by, these forward-looking statements
and, accordingly, no assurances can be given that any of the events
anticipated by these forward-looking statements will transpire or
occur, or if any of them do so, what benefits the Company 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 the Company in light of its experience
and perception of historical trends, current conditions and
expected future developments, as well as other factors the Company
believes are appropriate in the circumstances, including, but not
limited to: the Company’s relationship with TPDC and the Government
of Tanzania; the current status of negotiations in respect of the
GA and PSA; accurate assessment by the Company of the merits of its
rights and obligations in relation to TPDC and the Government of
Tanzania and other stakeholders in the Songo Songo gas field;
receipt of required regulatory approvals; the Company’s ability to
maintain strong commercial relationships with the Government of
Tanzania and other state and parastatal organizations and other
stakeholders in the Songo Songo gas field; the current and future
administration in Tanzania continues to honor the terms of the PSA
and the Company’s other principal agreements; and other
matters.
The forward-looking statements contained in this
press release are made as of the date of this news release and the
Company 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.
For reference: Table below demonstrating
materiality of PGSA with TANESCO
|
2022 |
|
2023 |
|
H1 2024 |
|
Gross Daily AG Sales Volumes (MMcfd) |
86.8 |
|
85.6 |
|
68.5 |
|
TANESCO (MMcfd) |
30.4 |
|
33.2 |
|
27.1 |
|
% of Total |
35 |
% |
39 |
% |
40 |
% |
Gross Revenue from Sales ($000) |
138,825 |
|
141,072 |
|
60,979 |
|
TANESCO ($000) |
41,730 |
|
47,096 |
|
20,185 |
|
% of Total |
30 |
% |
33 |
% |
33 |
% |