Orca Energy Group Inc. announces its audited financial results for the year ended December 31, 2021. All dollar amounts are in United States dollars unless otherwise stated.
- Revenue increased by 13% for Q4 2021 and by 10% for the year ended December 31, 2021 compared to the same prior year periods. The increase for Q4 2021 was primarily a result of the increased sales to the industrial sector. The increase for the year ended December 31, 2021 was a result of the increased sales to both the industrial sector and power sector. Gas deliveries increased by 13% for Q4 2021 and by 6% for the year ended December 31, 2021 compared to the same prior year periods. The Q4 2021 increase is due to the 20% increase in gas deliveries to the industrial sector and the 12% increase in gas deliveries to the power sector. The increase for the year ended December 31, 2021 reflects the increase in gas deliveries of 6% to both the power and the industrial sectors.
- Net income attributable to shareholders decreased by 79% for Q4 2021 and by 41% for the year ended December 31, 2021 compared to the same prior year periods. The decreases are primarily related to decreases in the reversal of loss allowances related to the lower collection of arrears from Tanzania Electric Supply Company Limited ("TANESCO").
- Net cash flows from operating activities decreased by 4% for Q4 2021 and by 14% for the year ended December 31, 2021 compared to the same prior year periods, primarily reflecting the changes in net income and non-cash working capital.
- Capital expenditures decreased by 23% for Q4 2021 and by 2% for the year ended December 31, 2021 compared to the same prior year periods. The capital expenditures in 2021 primarily relate to the continuation of the compression project and the commencement of the well workover program for the SS-3, SS-4 and SS-10 wells. The capital expenditures in 2020 primarily related to the flowline decoupling project and the compression project. The Company installed feed gas compression on the gas processing facility owned by Songas Limited ("Songas") to allow production volumes through the Songas infrastructure to be sustained at approximately 102 MMcfd in the near term (3-5 years). The drilling rig was released on April 8, 2022 having completed the planned three well (SS-3, SS-4 and SS-10) workover program. The $31.6 million program included the reactivation of the SS-3 and SS-4 wells along with the installation of corrosion resistant production tubing on all three of the wells. The SS-3 well was placed on production on February 15, 2022 and the SS-10 well was returned to production on April 18, 2022 after a 36 day shut in period to accommodate the installation of down hole sand mitigation equipment and replacement production tubing. The SS-4 well remains shut in following the drilling and completion of a planned side-track wellbore to replace the original wellbore, which had been compromised by excessive sand production. Currently the SS-4 well is unable to flow naturally due to suspected excessive liquid loading associated with extensive circulating time while waiting on necessary services and equipment. The Company is sourcing a coiled tubing nitrogen unit to safely unload the excess liquid, potentially allowing the well to flow naturally. Subject to logistics and transportation from Poland, it is expected the coiled tubing equipment will be on location in Q3 2022. Together with compression facilities, and subject to demand volumes and associated natural reservoir pressure decline, the current well stock now provides the opportunity to initially increase production potential to within a range of 150 MMcfd to 160 MMcfd by also producing through the adjacent National Natural Gas Infrastructure (“NNGI”) facilities on Songo Songo Island. If successful in lifting fluids from the SS-4 well, production potential will further increase.
- The Company exited the period in a strong financial position with $41.8 million in working capital (December 31, 2020: $74.2 million), cash and cash equivalents of $73.0 million (December 31, 2020: $104.2 million) and long-term debt of $49.6 million (December 31, 2020: $54.2 million). The decrease in working capital, cash and cash equivalents was primarily related to the substantial issuer bid completed in January 2021 (“2021 SIB”) and the reclassification of $5.0 million of long-term debt into current liabilities as it becomes due in 2022.
- As at December 31, 2021 the current receivable from TANESCO was $2.0 million (December 31, 2020: $ nil). TANESCO’s long-term trade receivable as at December 31, 2021 was $26.5 million with a provision of $26.5 million compared to $27.6 million (provision of $27.6 million) as at December 31, 2020. Subsequent to December 31, 2021 TANESCO paid the Company $8.2 million and the Company invoiced TANESCO $5.5 million for 2022 gas deliveries.
- On February 23, 2021, June 4, 2021, September 9, 2021 and November 19, 2021 the Company declared dividends of CDN$0.10 per share on each of its Class A common voting shares (“Class A Shares”) and Class B subordinate voting shares (“Class B Shares”) for a total of $6.4 million to the holders of record as of March 31, 2021, June 30, 2021, September 29, 2021 and December 31, 2021 (paid on April 15, 2021, July 15, 2021, October 15, 2021 and January 14, 2022, respectively).
- On January 22, 2021 the Company announced the final results of the 2021 SIB whereby the Company repurchased and cancelled 6,153,846 Class B Shares at a price of CDN$6.50 per Class B Share representing an aggregate purchase price of CDN$40.0 million and 25.2% of the total number of the Company’s issued and outstanding Class B Shares and 23.5% of the total number of the Company’s issued and outstanding shares.
- On June 21, 2021 the Company commenced a normal course issuer bid (“NCIB”) to purchase Class B Shares through the facilities of the TSXV and alternative trading systems in Canada. Purchases pursuant to the NCIB will not exceed 500,000 Class B Shares, representing approximately 2.74% of the total outstanding Class B Shares. The NCIB will be in effect until June 21, 2022 (or until such time as the maximum number of Class B Shares have been purchased). To date, 41,200 Class B Shares have been purchased and canceled by the Company pursuant to the NCIB.
- On February 24, 2022 the Company declared a dividend of CDN$0.10 per share on each of its Class A Shares and Class B Shares for a total of $1.6 million to the holders of record as of March 31, 2022 paid on April 15, 2022.
- 2022 production started strongly, with gross sales of conventional natural gas, which will be classified as Additional Gas, as defined in the PSA (as defined herein) (“gas sales”) averaging 74 MMcfd in January.
- The Company forecasts average gross gas sales of 70-76 MMcfd during 2022 representing a 10 MMcfd, or approximately 16%, increase to the prior forecasts of 60-66 MMcfd. The increased gas demand forecast is primarily driven by encouraging discussions with the Ministry of Energy ("MoE"), Tanzanian Petroleum Development Corporation ("TPDC") and TANESCO to increase gas supply to new power generation facilities expected to be commissioned in 2022.
Jay Lyons, Chief Executive Officer, commented:
“While global markets continued to be impacted during 2021, the rollout of the COVID-19 vaccine, and the improved macroeconomic backdrop, enabled Orca to deliver a strong operational and financial performance. During the period, our average sales volume was up 6% year-on-year to 61.1 MMcfd and we were responsible for providing ~45% of the gas fired power generation in Tanzania. Other milestones include the installation of our inlet compression project at the Songo Songo plant and the completion of two gas well workovers, with the third expected to be finished by the end of April. These operational initiatives are expected to increase production capacity from the Songo Songo gas field to in excess of 160 million cubic feet per day range, representing a 60% increase in productive capacity since early 2022.
On the financials, balancing our growth objectives with sustainable cash returns to shareholders continues to be our corporate strategy. This can be seen with Orca returning a cumulative total of $38.2 million via its quarterly dividend and selective share buybacks, while also investing in the field to underpin production. The business continues to benefit from being in a strong financial position and our ambition is to preserve this profile while also investing in our core asset to safeguard the future success of the Company.”