Orca Exploration announces its result for the quarter ended 30 September 2009
TORTOLA,
Financial and Operating Highlights
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Three months ended Nine months ended
30-Sep 30-Sep 30-Sep 30-Sep
2009 2008 Change 2009 2008 Change
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Financial (US$
except where
otherwise stated)
Revenue 7,536 7,301 3% 17,480 17,411 0%
Profit/(loss)
before taxation 2,682 1,609 67% 4,083 (7,831) n/m
Operating netback
(US$/mcf) 2.17 2.79 (22%) 2.17 2.71 (20%)
Cash and cash
equivalents 9,703 11,178 (13%) 9,703 11,178 (13%)
Working capital 12,147 8,705 40% 12,147 8,705 40%
Shareholders'
equity 67,159 64,142 5% 67,159 64,142 5%
Profit/(loss) per
share - basic and
diluted (US$) 0.05 0.03 67% 0.06 (0.32) n/m
Funds from
operations before
working capital
changes 4,247 3,773 13% 8,228 7,783 6%
Funds per share
from operations
before working
capital changes
- basic (US$) 0.14 0.13 8% 0.28 0.26 8%
Funds per share
from operations
before working
capital changes
- diluted (US$) 0.14 0.12 17% 0.27 0.25 8%
Net cash flows from
operating
activities 1,959 363 440% 5,591 5,765 (3%)
Net cash flows per
share from
operating
activities - basic
(US$) 0.07 0.01 600% 0.19 0.19 0%
Net cash flows per
share from
operating
activities -
diluted (US$) 0.06 0.01 500% 0.18 0.19 (5%)
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Outstanding Shares
('000)
Class A shares 1,751 1,751 0% 1,751 1,751 0%
Class B shares 27,770 27,863 0% 27,770 27,863 0%
Options 2,797 2,847 (2%) 2,797 2,847 (2%)
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Operating
Additional Gas sold
(MMcf) - industrial 581 425 37% 1,554 1,083 43%
Additional Gas sold
(MMcf) - power 2,493 2,097 19% 5,756 5,036 14%
Average price per
mcf (US$) -
industrial 9.01 13.29 (32%) 7.96 12.67 (37%)
Average price per
mcf (US$) - power 2.41 2.41 0% 2.39 2.37 1%
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Highlights
- Increased profit before taxation by 67% to US$2.7 million for the
quarter (Q3 2008: US$1.6 million).
- Increased funds from operations before working capital changes by
13% to US$4.2 million for the quarter (Q3 2008: US$3.8 million).
- Increased working capital by 40% to US$12.1 million (Q3 2008:
US$8.7 million).
- Increased Q3 2009 sales of Additional Gas to Dar es Salaam
industrial customers by 37% to 581 MMcf or 6.3 MMcfd (Q3 2008:
425 MMcf or 4.6 MMcfd).
- Increased Q3 2009 sales of Additional Gas to the power sector by 19%
to 2,493 MMcf or 27.1 MMcfd (Q2 2008: 2,097 MMcf or 22.8 MMcfd).
- Designed a 140 MMcfd permanent expansion upgrade to the existing
infrastructure system that processes and transports the gas to Dar es
Salaam. It will be possible to expand the system to handle up to 200
MMcfd with the addition of a new onshore pipeline.
- Commenced work to identify a jack up rig for the drilling of Songo
Songo West in 2011.
- Re-activated the new venture team to identify two new high impact oil
opportunities in proven hydrocarbon basins in West Africa and the
Middle East. Shortly after the quarter end, the Company participated
in a joint bidding application for an exploration licence.
President & CEO's Letter to Shareholders
Orca Exploration reports a positive third quarter. This is the second consecutive quarter in which gas sales and cash flows from operations increased and G & A expenses decreased. Results were also up significantly over the same period in 2008. These encouraging results were achieved despite infrastructure limitations and current relatively low levels of gas fired generation in the country.
Sales of Additional Gas averaged 33.4 MMcfd (3.1 Bcf for the quarter), an increase of 22% on the volumes sold in Q3 2008. Funds flow from operations before working capital changes increased 13% to US$4.2 million compared with US$3.8 million in 2008 and this trend is expected to continue through 2010. The Company currently has working capital of US$12.1 million and cash of US$9.7 million.
Having successfully weathered the global financial storm of the past year, your Company is again ready to seek out new high potential exploration opportunities to compliment the steady growth of our cash flow generating business and exploration potential within
Tanzanian reserves and exploration
The current Songo Songo gas wells continue to perform well and in line with expectations. Based on current simulations, the main Songo Songo field has established adequate reserves to meet an average gas demand of 160 MMcfd (including approximately 40 MMcfd of Protected Gas) with the addition of two new development wells. Highly sensitive downhole gauges installed in the second quarter were successfully pulled from each producing well just after the end of the third quarter and are currently being analyzed in advance of the year end reserves evaluation by McDaniel & Associates Consultants Ltd.
Orca is planning for the exploration drilling of Songo Songo West in 2011. The well will be drilled utilizing a jack up rig and the Company is discussing the possibility of sharing a rig with other operators in
Power sector
To address longer term power needs, TANESCO has started planning for the construction of an additional 200 MW power plant at Kinyerezi,
In Q4 2009 power sector demand for gas is expected to be seasonally reduced to approximately Q2 2009 levels. More rain in the last quarter of each year leads to higher hydro output and lower demand for gas fired generation.
Industrial sector
Sales of industrial gas increased substantially during Q3 to an average of 6.3 MMcfd. This was a 37% increase on the same quarter in 2008, primarily as a result of average sales of 1.5 MMcfd to
Infrastructure
As operator of the Songo Songo gas processing plant, the Company made excellent progress during Q3 2009 in designing a permanent expansion upgrade that will enable 140 MMcfd to be transported through the existing system. The design involves the construction of two new gas processing facilities and the addition of more field and pipeline compression. The owner of the existing system, Songas Limited, has indicated its willingness to finance the project providing it can reach appropriate terms with the energy regulator, EWURA. Orca continues to finance the initial design of the project and to assist Songas in its discussions with EWURA.
The target is to have the expanded infrastructure in place by the end of 2012 when new power plants are expected to be commissioned. With the addition of a new onshore pipeline it will be possible to expand the system to handle up to 200 MMcfd.
If the owners of the infrastructure, Songas Limited, gain confidence that the permanent expansion upgrade will be successful, they are likely to approve a temporary re-rating of the existing system to 105 MMcfd (from a current limitation of 90 MMcfd) during 2010. This will be required to meet the forecast demand for gas.
Financial Results
The Company generated funds flow before working capital changes of US$4.2 million during Q3 2009 which enabled the financing of US$2.0 million of capital expenditures, primarily on CNG and infrastructure development.
Orca was again successful in cutting General and Administrative ("G&A") costs during the quarter. In Q3 2009, this resulted in an effective US$1.2 million reduction in G&A expenses compared with Q3 2008. The Company currently has cash on hand of approximately US$9.7 million and working capital of US$12.1 million. Both are expected to increase in the last quarter of 2009 and operations are expected to generate positive cash flows throughout 2010. New funding will be required for any material new acquisitions.
Outlook
Your Company remains well positioned to generate increasing cash flows in the growing Tanzanian market for natural gas. These internally generated funds will be allocated to finance the relatively low risk Songo Songo West exploration prospect in 2011.
Management assesses that this is the right time for Orca to invest in two high impact oil opportunities in proven hydrocarbon basins in West
We thank our shareholders, our employees and our partners and particularly the Tanzanian Ministry of Energy and Minerals and the Tanzanian Petroleum Development Corporation for their continued support.
Consolidated Income Statements (unaudited)
ORCA EXPLORATION GROUP INC.
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Three months Nine months
ended ended
(thousands of US dollars except 30-Sep 30-Sep 30-Sep 30-Sep
per share amounts) 2009 2008 2009 2008
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Revenue 7,536 7,301 17,480 17,411
Cost of sales Production and
distribution expenses (997) (391) (1,898) (1,124)
Depletion expense (1,199) (1,554) (2,861) (3,736)
Impairment of exploration and
evaluation assets - - - (9,520)
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5,340 5,356 12,721 3,031
Administrative expenses (2,647) (3,821) (8,633) (10,834)
Net financing income/(charges) (11) 74 (5) (28)
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Profit/(loss) before taxation 2,682 1,609 4,083 (7,831)
Taxation (1,133) (793) (2,323) (1,704)
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Profit/(loss) after taxation 1,549 816 1,760 (9,535)
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Profit/(loss) per share
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Basic and diluted(US$) 0.05 0.03 0.06 (0.32)
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Consolidated Balance Sheets (unaudited)
ORCA EXPLORATION GROUP INC
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30-Sep 31-Dec
(thousands of US dollars) 2009 2008
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ASSETS
Current assets
Cash and cash equivalents 9,703 10,586
Trade and other receivables 11,098 13,196
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20,801 23,782
Exploration and evaluation assets 757 648
Property, plant and equipment 63,395 60,818
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64,152 61,466
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84,953 85,248
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LIABILITIES
Current liabilities
Trade and other payables 8,654 14,055
Non current liabilities
Deferred income taxes 7,833 5,510
Deferred additional profits tax 1,307 971
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17,794 20,536
SHAREHOLDERS' EQUITY
Capital stock 66,329 66,537
Capital reserve 4,610 3,715
Accumulated (loss) (3,780) (5,540)
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67,159 64,712
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84,953 85,248
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Consolidated Statements of Cash Flows (unaudited)
ORCA EXPLORATION GROUP INC
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Three months Nine months
ended ended
30-Sep 30-Sep 30-Sep 30-Sep
(thousands of US dollars) 2009 2008 2009 2008
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CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) after taxation 1,549 816 1,760 (9,535)
Adjustment for:
Depletion and depreciation 1,230 1,566 2,947 3,782
Impairment of exploration and
evaluation assets - - - 9,520
Stock-based compensation 188 502 898 2,134
Deferred income taxes 1,133 793 2,323 1,704
Deferred additional profits tax 156 107 336 262
Interest income (9) (11) (36) (84)
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4,247 3,773 8,228 7,783
(Increase)/decrease in trade and
other receivables (2,061) (3,116) 2,098 (2,106)
(Decrease)/increase in trade and
other payables (227) (294) (4,735) 88
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Net cash flows from operating
activities 1,959 363 5,591 5,765
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CASH FLOWS USED IN INVESTING
ACTIVITIES
Exploration and evaluation
expenditures (3) (412) (109) (3,051)
Property, plant and equipment
expenditures (1,990) (761) (5,524) (3,409)
Interest income 9 11 36 84
Increase/(decrease) in trade and
other payables 711 53 (666) (4,724)
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Net cash used in investing
activities (1,273) (1,109) (6,263) (11,100)
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CASH FLOWS USED IN FINANCING
ACTIVITIES
Normal course issuer bid (55) - (211) (2)
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Net cash flow used in financing
activities (55) - (211) (2)
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Increase/(decrease) in cash and
cash equivalents 631 (746) (883) (5,337)
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Cash and cash equivalents at the
beginning of the period 9,072 11,924 10,586 16,515
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Cash and cash equivalents at the end
of the period 9,703 11,178 9,703 11,178
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Statement of Changes in Shareholders' Equity (unaudited)
ORCA EXPLORATION GROUP INC
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Accumu-
lated
Capital Capital Income/
(thousands of US dollars) stock reserve (loss) Total
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Balance as at 1 January 2008 66,538 1,023 3,983 71,544
Stock-based compensation - 2,134 - 2,134
Normal course issuer bid (1) - - (1)
Loss for the period - - (9,535) (9,535)
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Balance as at 30 September 2008 66,537 3,157 (5,552) 64,142
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Accumu-
lated
Capital Capital Income/
(thousands of US dollars) stock reserve (loss) Total
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Balance as at 1 January 2009 66,537 3,715 (5,540) 64,712
Stock-based compensation - 898 - 898
Normal course issuer bid (208) (3) - (211)
Profit for the period - - 1,760 1,760
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Balance as at 30 September 2009 66,329 4,610 (3,780) 67,159
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Forward Looking Statements
This disclosure contains certain forward-looking estimates that involve substantial known and unknown risks and uncertainties, certain of which are beyond Orca Exploration's control, including 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 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.
For further information: Nigel A. Friend, CFO, +255 (0)22 2138737, [email protected]; Peter R. Clutterbuck, CEO, +44 (0) 7768 120727, [email protected]; or visit the Company's web site at www.orcaexploration.com
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