TSX-V: ORC.A, ORC.B
TORTOLA, British Virgin
Islands, Feb. 24, 2015 /CNW/
- Orca Exploration Group Inc. ("Orca" or the "Company") today
announced an update of its activities in respect of Songo Songo
development and changes among some of the Company's key
stakeholders in Tanzania.
Following a Tanzania Parliament review of an alleged fraud in the
energy sector, the Minister and Permanent Secretary for Energy and
Minerals have been replaced, along with the board of directors of
state power company TANESCO. With Songo Songo production declining
below infrastructure capacity and markets continuing to expand, the
Company has been developing plans to embark upon a first phase of
Songo Songo development, with financing of approximately half of
the US$120 million estimated capital
cost in the process of receiving internal approvals by the
International Finance Corporation ("IFC") of the World Bank Group.
Weekly TANESCO payments have resumed since the beginning of 2015
and form an integral part of the plan to finance Songo Songo
development.
Tanzania
stakeholders
Following a review by the Tanzania Parliament concerning
allegations of the fraudulent transfer of funds from a Bank of
Tanzania escrow account held by
the Ministry of Energy and Minerals on behalf of TANESCO and an
independent power producer IPTL, and involving Pan Africa Power
Solutions Tanzania (a company unrelated to Orca), a number of
changes in senior Tanzania Government positions were made by
President Kikwete: a new board of directors of TANESCO was
appointed; the Minister for Lands, Housing and Human Settlement
Development, Prof. Anna Tibaijuka,
was removed from her post; the Attorney General, Judge Frederick Werema and the Minister for Energy and
Minerals, Prof. Sospeter Muhongo,
both resigned; and the Permanent Secretary for Energy and Minerals,
Eliakim Maswi, was suspended pending an investigation into his
involvement in the transfer of the escrow funds.
Following the resignation of Judge Werema, President Kikwete
appointed George Mcheche Masaju as Attorney General, prior to which
Mr. Masaju was the Deputy Attorney General. The President appointed
Dr. Mighanda Manyahi as Chairman of the TANESCO board of
directors, and eight new individual board members were appointed by
the Minister for Energy and Minerals. Replacing Prof. Muhongo, the
President appointed George Simbachawene as Minister for Energy and
Minerals. Prior to the appointment, Mr. Simbachawene was the Deputy
Minister for Lands, Housing and Human Settlement Development;
previously he had worked as deputy energy minister from 2012 to the
beginning of 2014. The deputy permanent secretary, Ngosi Mwihava,
is currently the Acting Permanent Secretary for Energy and
Minerals.
Separately, President Kikwete appointed a Managing Director to
the Tanzania Petroleum Development Corporation ("TPDC"), Dr.
James Mataragio, to succeed Yona
Killigane who retired in 2014.
TANESCO payments
TANESCO currently owes the Company US$60.3 million of which US$55.9 million is in arrears. Having instituted
regular weekly payments in Q2 and Q3 2014, TANESCO made only one
payment in Q4 2014. Since the beginning of 2015, TANESCO has made
five of six weekly payments of TZsh 3.0 billion (approximately
US$1.7 million). The Company
currently has approximately US$59
million in cash, of which US$34
million is held outside of Tanzania.
Songo Songo development
The Company continues to develop options to move ahead with
Songo Songo field development in Tanzania. The field currently produces
approximately 91 million standard cubic feet per day ("MMcfd"),
which is less than the existing Songas Limited ("Songas")
infrastructure capacity of approximately 102 MMcfd. In order to
fill the existing Songas infrastructure to capacity and provide
operational redundancy, the Company is contemplating a first phase
of offshore development consisting of working over two existing
wells (SS-5 and SS-9) that are currently suspended, working over an
existing production well (SS-7) and drilling a new offshore
development well (SS-12). The workovers, if successful, will use
the existing infrastructure (platform and flow-lines). Should the
workovers be deemed unfeasible or prove to be unsuccessful during
the workover operation, it is expected that the wells will be
either side-tracked or abandoned and new wells drilled to replace
the old wells. The development programme also includes the
installation of a refrigeration unit at the Songo Songo Processing
plant. The programme is currently contemplated to occur from Q3
2015 to Q1 2016. Additional productive capacity would be available
to supply some volumes to the National Natural Gas Infrastructure
Project ("NNGIP") if as and when the Company concludes a gas sales
agreement with TPDC. This first phase of Songo Songo development is
not dependent upon concluding a gas sales agreement with TPDC, and
additional gas volumes could be sold through the existing Songas
infrastructure to industrial and/or power markets. The NNGIP
pipeline is approximately 98% completed and associated plants and
facilities are approximately 83% complete, with commissioning
expected by the end of Q2 2015.
The Company estimates the cost of the first phase of Songo Songo
field development to be approximately US$120
million. Additional drilling resulting from unsuccessful
workovers could cost from US$20 million to
US$40 million depending on whether one or two new wellbores
are required. The Company has disclosed since Q3 2013 that it has
been in discussions regarding development finance with the IFC.
Given the new scope of the project, IFC is in the process of
receiving its internal approvals to provide approximately half the
capital cost, or US$60 million, in
quasi-equity financing to Orca's operating subsidiary, PanAfrican
Energy Tanzania Limited. Definitive terms have yet to be agreed and
any financing will require board approval of both IFC and the
Company and be subject to a number of terms and conditions,
including with respect to the assurance of ongoing TANESCO
payments. There is no assurance such financing will be concluded on
mutually agreeable terms. As part of its approval process and in
accordance with its policy of transparency, IFC has posted project
documents for the potential investment on its website, www.ifc.org;
these documents are available to the public for review and comment.
Following a tender process, the Company has signed a non-binding
letter of intent with a drilling company regarding the mobilisation
of a jack-up rig which would be capable of undertaking the
development programme. The Company has no current commitments with
respect to the development programme or the financing thereof.
Discussions with third parties
Orca announced in July 2014 that
it was in discussions with third parties relating to the sale of
the Company, a significant asset disposal, strategic investment or
other transaction involving the Company. Orca has nothing to
report at this time.
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 ("PanAfrican
Energy"), as well as oil and gas appraisal in Italy. Orca trades on the TSX Venture Exchange
under the trading symbols ORC.A and ORC.B. PanAfrican Energy is
party to a production sharing agreement with respect to the Songo
Songo Block in Tanzania with TPDC
and the Government of Tanzania,
and is party to a gas sales agreement respecting Songo Songo
natural gas production with TANESCO and TPDC.
Financial reports and other corporate information concerning
Orca may be found on the Company's website at
www.orcaexploration.com or on the Company's profile on SEDAR at
www.sedar.com . Additional information concerning the Tanzania
Ministry of Energy and Minerals, TANESCO and TPDC is available at
www.mem.go.tz, www.tanesco.co.tz and www.tpdc-tz.com
respectively.
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, the Company's Songo Songo development plans,
including the Company's contemplation of a first phase of offshore
development consisting of working over two existing wells that are
currently suspended, working over an existing production well, and
drilling a new offshore well as well as the installation of a
refrigeration unit at the Songo Songo processing plant; the plan to
use certain existing infrastructure if the contemplated workovers
are successful; the expectation that, if the contemplated workovers
are not successful, such wells will either be side-tracked or
abandoned and replaced by newly drilled wells; the expectation that
there will be additional productive capacity available to supply
some volume to the NNGIP if the Company concludes a gas sales
agreement with TPDC; the expectation that the contemplated first
phase of the Company's Songo Songo development plans are not
dependent on a gas sales agreement with TPDC and that additional
volumes could be sold through existing Songas infrastructure to
industrial or power markets; the estimated cost of the contemplated
first phase Songo Songo field development and the estimated cost of
additional drilling if the contemplated workovers are not
successful. 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. As a consequence,
actual results may differ materially from those anticipated in the
forward-looking statements.
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 IFC
financing or other funding on mutually agreeable terms; 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 the contemplated workovers and drilling of
wells; 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; 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.