Orca Energy Group Inc. has filed its condensed consolidated interim financial statements and management’s discussion and analysis for the three month period ended March 31, 2022 (“Q1 2022”) with the Canadian securities regulatory authorities. All amounts are in United States dollars (“$”) unless otherwise stated.
Jay Lyons, Chief Executive Officer, commented:
“We are pleased to report a strong start to 2022 with results for the first quarter of the year showing significant uplifts in gross sales volumes and revenues. These metrics reflect a continuing strong operational performance at the Songo Songo natural gas field, where we continued to conduct safe and reliable operations throughout the period. The completion of the workover of three gas wells (SS-3, SS-4 and SS-10), and the installation of the feed gas compression at the gas processing facility, were important milestones and will ensure sustained production levels of approximately 102 MMcfd in the near term. We have also been able to increase our average gross gas sales forecasts for the remainder of the year, as new power generation facilities come onstream in Tanzania. The Company maintains a robust financial position, balancing our investment requirements to ensure we can continue to provide affordable gas to meet Tanzania’s increasing energy needs, whilst continuing to make returns to our shareholders. I would like to thank the Government of Tanzania for their continuing support, and our team for their hard work and commitment. We look forward to providing further updates on our continuing progress through the year.”
- Revenue for Q1 2022 increased by 47% compared to the same prior year period. The increase was primarily a result of increased sales to customers in the power sector. Gas deliveries for the quarter increased by 25% compared to the same prior year period. The increase in gross sales volume was primarily due to the increase in gas deliveries to customers in the power sector as a result of increased deliveries to the Tanzanian Petroleum Development Corporation’s (“TPDC”).
- Net income attributable to shareholders increased by 87% for Q1 2022 compared to the same prior year period primarily a result of the increased revenues compared to Q1 2021.
- Net cash flows from operating activities for Q1 2022 increased by $4.9 million compared to the same prior year period. This was primarily a result of the increase in net income and non-cash adjustments, which was partially offset by negative changes in non-cash working capital relative to the comparable prior year period.
- Capital expenditures increased substantially for Q1 2022 compared to the same prior year period. The capital expenditures in Q1 2022 primarily related to completion of both the well workover program for the SS-3, SS-4 and SS-10 wells and the compression project. The Company installed feed gas compression on the Songas Limited (“Songas”) gas processing facility to allow production volumes through the Songas infrastructure to be sustained at approximately 102 MMcfd in the near term (2-4 years). Despite increased logistical complexity due to enduring effects of COVID-19, the compression project was completed one-month ahead of schedule. The project was negatively impacted by the scheduling of a 10-day plant shutdown to effect a mechanical tie-in, which was delayed to avoid power generation shortages through a critical period in Tanzania. When eventually enacted, the mechanical tie-in was completed in 8-days as opposed to the scheduled 10-days, significantly increasing gas for power generation. In April 2022, the drilling rig was released 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. 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. It is expected the coiled tubing equipment will be on location in Q3 2022. The workovers and compression facilities provide the opportunity to initially increase current production deliverability to a total of approximately 160 MMcfd by also producing through the adjacent National Natural Gas Infrastructure (“NNGI”) facilities on Songo Songo Island.
- The Company exited the period in a strong financial position with $41.1 million in working capital (December 31, 2021: $41.8 million), cash and cash equivalents of $67.0 million (December 31, 2021: $73.0 million) and long-term debt of $49.7 million (December 31, 2021: $49.6 million). The decrease in working capital, cash and cash equivalents was primarily related to the well workover program in Q1 2022.
As at March 31, 2022 the current receivable from the Tanzanian Electric Supply Company Limited (“TANESCO”) was $0.3 million (December 31, 2021: $2.0 million). TANESCO’s long-term trade receivable as at March 31, 2022 and December 31, 2021 was $26.5 million with a provision of $26.5 .Subsequent to March 31, 2022 TANESCO paid the Company $7.1 million and the Company invoiced TANESCO $6.4 million for April 2022 gas deliveries.
- On February 24, 2022, the Company declared a dividend 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 $1.6 million to the holders of record as of March 31, 2022, which was paid on April 15, 2022.
- The Company forecasts average gross conventional natural gas sales, which will be classified as Additional Gas, as defined in the PSA (as defined herein) 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”), TPDC and TANESCO to increase gas supply to new power generation facilities expected to be commissioned in 2022.