Orca Exploration announces the completion of the offshore workover and drilling program phase of its Songo Songo Main Field development programme

TSX-V: ORC.A, ORC.B

TORTOLA, British Virgin Islands, Feb. 19, 2016 /CNW/ - Orca Exploration Group Inc ("Orca" or the "Company") announces the successful completion of its offshore workover and drilling program (the "Off-Shore Programme") and the release of the Paragon M826 mobile drilling workover rig. The Off-Shore Programme of the Songo Songo Main Field development programme (the "development programme") included workovers on three existing wells (SS-5, SS-7 and SS-9) and the drilling of one new development well, SS-12. Phase 1 of the development programme also includes the completion of the SS-12 production platform, flowlines and tie-in facilities connecting SS-12 to the Company's gas processing facilities and a refrigeration system required to ensure field production stability to enable the Company to produce wells into the newly built National Natural Gas Infrastructure Project ("NNGIP"). The total cost of Phase 1 of the development programme was originally estimated to cost US$120 million, however, now that the Off-Shore Programme has been completed, the Company expects that Phase 1 of the development programme to have a total cost of under US$80 million with costs incurred to date of approximately US$68 million. The reduction in costs was a result of being able to successfully workover the three wells without having to do any side-tracking, efficiencies achieved during the work-overs, and work scope changes which reduced the original estimated time required to complete Phase 1. The full development programme provides for additional workovers, compression systems and additional infrastructure to ensure all production commitments are met through to the end of the licence in 2026.

The Offshore Programme was designed to: (i) put safe existing suspended and operating production wells; (ii) restore and increase the current productive capacity of the Songo Songo Main Field to ensure the continued delivery of Protected and Additional gas into the existing Songas infrastructure; and (iii) provide additional operational redundancy and deliverability for future additional gas sales.

The Offshore Programme has successfully increased production capacity from approximately 83 million standard cubic feet per day ("MMscfd") prior to the development programme to current production capabilities of approximately 150 MMscfd. Upon completion of the platform for SS-12 and the tie-in to production facilities, production capabilities are expected to be in excess of 185 MMscfd. The field is now capable of both filling the existing Songas infrastructure to capacity of approximately 102 MMscfd, as well as providing additional gas volumes to the NNGIP. The Company is currently negotiating terms for the sales agreement to the NNGIP with the Tanzania Production and Development Company ("TPDC"). Until the agreement is signed, the Company's production is limited by infrastructure and contractual constraints, producing an average of 90 MMscfd for the fourth quarter of 2015 and is expected to average 94 MMscfd in 2016.

Orca currently supplies gas primarily for power generation to the Tanzania Electric Supply Company ("TANESCO"), Songas, and 38 industrial customers in the Dar es Salaam area. Orca committed to the current expansion programme to ensure that the Company is playing its part in meeting Tanzania's urgent need for increased power generation and energy security. The use of natural gas from the Songo Songo Main Field has made a significant contribution to Tanzania's economy and is estimated to have saved Tanzania over US$6 billion in other fuel costs since commercial operations began in 2004 according to Tanzanian government sources. Orca's Tanzania operations are managed by the Company's wholly owned subsidiary, Pan African Energy Tanzania Limited ("PAET"), headquartered in Dar es Salaam. PAET has for the past 10 years been the lead private sector investor in Tanzania's gas industry.

"We are delighted with the success of the Offshore Programme and the significant cost savings achieved, this reflects the strength of our operation's team," said Orca's Chairman and Chief Executive Officer, David Lyons, "The development programme has enabled the Company to significantly increase production capacity in Tanzania and ensure the continued reliable supply of natural gas to our customers."

In order to complete the Off-Shore Programme, the Company's wholly owned subsidiary, PAET has utilized the US$60 million loan facility with International Finance Corporation which was signed on 29 October 2015 (the "Loan"). The final US$40 million drawdown of the Loan was received today. For further details on the Loan, please see the copy of the agreement for the Loan which is filed under Orca's issuer profile on SEDAR at www.sedar.com.

About Orca Exploration Group Inc.

Orca is an international public company engaged in natural gas exploration, development and supply in Tanzania through its wholly-owned subsidiary, PAET. Orca trades on the TSX Venture Exchange under the trading symbols ORC.A and ORC.B.

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 Information

This news release contains forward-looking information. More particularly, this news release contains statements and information concerning, but not limited to, the terms and design of the Off-Shore Programme and the full development programme; the expected total cost of the development programme; the Company's future plans in respect of the development programme, including additional costs that may be incurred and additional workovers, compression systems and infrastructure to ensure production commitments are met through the end of the license; the status of the tie-in agreement to the NNGIP with TPDC and the effect on the Company's production capability; the Company's expected production volumes for 2016; the Company's plans for the funds received on drawdown of the Loan; and other matters. Although management believes that the expectations reflected in the forward-looking information are reasonable, it cannot guarantee future agreement, levels of activity, performance or achievements since such expectations are inherently subject to significant uncertainties and contingencies. As a consequence, actual results may differ materially from those anticipated in the forward-looking information.

Forward-looking information involves substantial known and unknown risks and uncertainties, certain of which are beyond Orca's control, and many factors could cause the actual results to differ materially from those expressed or implied in the forward-looking information presented by Orca, including, but not limited to: risk that Orca is unable to access the additional funding required to proceed with the entire development programme; risk that the drilling rigs fail to fulfill the terms of drilling contracts; failure to enter into a tie-in contract to the NNGIP with TPDC; inability to achieve full production capability due to infrastructure constraints; risk that the development programme is not completed as planned and the actual cost to undertake the development programme exceeds the Company's estimates; risk that the contingencies related to the development work for the full field development plan for Songo Songo Main Field are not satisfied; the impact of general economic conditions in the areas in which Orca operates; changes in laws and regulations including changes in how they are interpreted and enforced; the lack of availability of qualified personnel or management; fluctuations in commodity prices, foreign exchange and/or interest rates; stock market volatility; obtaining certain required contractual approvals and approvals of certain regulatory authorities; risks associated with negotiating with foreign governments; risk that the Company will be required to pay additional taxes and penalties; delays in drilling plans; failure to obtain expected results from drilling; inability to access sufficient capital; and risk that the Company will not be able to fulfill its obligations, including under the Loan. Actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits Orca will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive.

Such forward-looking information is based on certain assumptions made by Orca in light of its experience and current knowledge of the circumstances, as well as other factors Orca believes are appropriate in the circumstances, including, but not limited to: that the Company will have all necessary regulatory and contractual approvals related to certain aspects of the Offshore Programme and the Loan; that the Company will have sufficient cash flow, debt or equity sources or other financial resources required to fund its operations; that the Company will have access to the additional funding required to proceed with the entire development programme; that the Company and TPDC will agree to the terms of a tie-in agreement for the NNGIP; the estimated cost to undertake the development programme; infrastructure capacity; the ability of Orca to obtain equipment and services in a timely manner to carry out exploration, development and exploitation activities; future capital expenditures; availability of skilled labour; conditions in general economic and financial markets; commodity prices will not further deteriorate significantly; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated; and other matters.

The forward-looking information contained in this news release is made as of the date hereof and Orca undertakes no obligation to update publicly or revise forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

SOURCE Orca Exploration Group Inc.

W. David Lyons, Chairman and CEO, [phone], [email protected]