TORTOLA, British Virgin Islands, Nov. 29 /CNW/ - Orca Exploration Group Inc ("Orca Exploration" or the "Company") announces its results for the quarter ended 30 September 2007.
Quarter Highlights
- Generated a profit before tax of US$3.0 million (Q3 2006:
US$1.3 million) with funds from operations before working capital
changes of US$3.7 million (Q3 2006: US$1.6 million). The increase in
profitability is primarily the result of an increase in sales volumes
to the power sector.
- Satisfied the conditions precedent for the option agreement with
Tower Resources plc that gives Orca the opportunity to become a 50%
interest holder in the 6,040 square kilometer Exploration Area 5 in
Uganda.
- Shortly after the quarter end, successfully completed the SS-10 well,
which was tested at rates up to 52 mmscf/d. It is forecast that the
well will be able to flow at a rate in excess of 55 mmscf/d once on
production. The well is expected to be one of the best producers in
the field and takes the deliverability of the six wells in the field
to greater than 200 mmscf/d.
- Increased Q3 2007 sales of Additional Gas to the power sector by 165%
to 1,974 mmscf (an average of 21.5 mmscf/d) compared with 744 mmscf
in Q3 2006, at an average price of US$2.19/mcf (Q3 2006:
US$1.69/mcf).
- Sold 442 mmscf of Additional Gas to Dar es Salaam industrial
customers or an average of 4.8 mmscf/d. This represented a 10%
decrease on Q3 2006 when 491 mmscf was sold. However, average
industrial prices increased by 11% to an average of US$9.58/mcf (Q3
2006: US$8.63/mcf)
- Advanced negotiations with the Tanzanian Ministry of Energy and
Minerals and TANESCO for the supply of gas to 245 MWs of gas fired
generation for a period of 16 years.
- Completed the installation of an additional 8 kilometers of low
pressure distribution pipeline to improve security of supply. Four
new industrial customers are in the process of being connected from
this new line.
- Submitted a proposal to Songas that would enable the gas processing
capacity to be increased by approximately 25 - 35 mmscf/d. It is
estimated that the proposal would take less than six months to
implement and could be introduced before the third and fourth gas
processing trains are installed by Songas.
- Completed the private placement that raised gross proceeds of
Cdn$34.5 million through the issuance of 2.5 million Class B shares
at a price of Cdn$13.80 per share.
Financial and Operating Highlights
Three months ended Nine months ended
30-Sep 30-Sep 30-Sep 30-Sep
2007 2006 Change 2007 2006 Change
----------------------------------------------- ------------------------
Financial (US$'000
except where
otherwise stated)
Revenue 6,363 3,835 66% 13,215 9,106 45%
Profit before taxation 3,012 1,309 130% 2,918 2,655 10%
Operating netback
(US$/mcf) 2.30 2.89 (20%) 2.32 2.58 (10%)
Cash and cash
equivalents 27,436 4,580 499% 27,436 4,580 499%
----------------------------------------------- ------------------------
Working capital 20,938 3,298 535% 20,938 3,298 535%
Shareholders' equity 70,996 18,676 280% 70,996 18,676 280%
Profit per share
- basic (US$) 0.07 0.03 133% 0.05 0.06 (17%)
Profit per share
- diluted (US$) 0.06 0.03 100% 0.05 0.06 (17%)
Funds from operations
before working
capital changes 3,718 1,572 137% 5,998 3,546 69%
Funds per share from
operations before
working capital
changes - basic (US$) 0.13 0.07 86% 0.22 0.15 47%
Funds per share from
operations before
working capital
changes - diluted
(US$) 0.12 0.06 100% 0.20 0.14 43%
----------------------------------------------- ------------------------
Outstanding Shares
('000)
Class A shares 1,751 1,751 - 1,751 1,751 -
Class B shares 27,881 21,658 29% 27,881 21,658 29%
Options 2,622 2,042 28% 2,622 2,042 28%
----------------------------------------------- ------------------------
Operating
Additional Gas sold
(mmscf) - industrial 442 491 (10%) 1,140 1,068 7%
Additional Gas sold
(mmscf) - power 1,974 744 165% 4,075 2,165 88%
Average price per mcf
(US$) - industrial 9.58 8.63 11% 8.75 8.27 6%
Average price per mcf
(US$) - power 2.19 1.69 30% 2.19 1.87 17%
----------------------------------------------- ------------------------
President & CEO's Letter to Shareholders
Orca's increased power sector gas sales, combined with stronger industrial gas prices in Tanzania, generated a before tax profit of US$3.0 million, up 130% over Q3 2006 (US$1.3 million). This is primarily a result of the Tanzanian power sector being ahead of schedule in installing gas-fired generation. There are now 310 MWs of commissioned plants that require Additional Gas supplied by Orca as feedstock - a testament to the speed with which TANESCO and the Government of Tanzania have acted to increase power generation capacity.
To address this increasing power demand, the Company has invested in the Songo Songo field development over the course of 2007. In Q1 2007, the Company conducted remedial work on the offshore well, SS-9 and shortly after the end of Q3, completed the SS-10 development well, which was tested at rates up to 52 mmscf/d. As a result of this work, Songo Songo field deliverability has increased by approximately 80 mmscf/d to in excess of 200 mmscf/d.
In Uganda, the 300-kilometer seismic acquisition programme is due to commence in December 2007 on Orca option lands. The data will be processed and interpreted during Q1 2008. It is anticipated that the decision on whether or not to drill two wells in Uganda will be made by 30 April 2008 with drilling proceeding in the second half of the year. Work is already underway to contract a suitable drill rig in country.
Exploration in Uganda by other energy companies continues to show positive results. In the south, Tullow Resources plc has had significant success with the drill bit and its reserves are reported to be approaching the level at which it will be economically viable to install a 1,200 kilometer export pipeline to Mombasa. This would mark a significant milestone in the development of the Ugandan oil reserves and would help to monetise any oil discovered by Orca.
To meet Orca's vigorous exploration, development and acquisition objectives, the Company successfully raised Cdn$34.5 million during Q3 2007 through a fully subscribed private placement. These funds have enabled the Company to fund the successful completion of the SS-10 well and to have sufficient funds for the Ugandan exploration efforts in 2008. There is good reason to look forward to the next year with considerable confidence.
Tanzania Development
The rapid monetisation of the Songo Songo field remains a key focus for Orca. During Q3 2007, there were positive developments in increasing well deliverability, expanding the infrastructure and negotiating the power supply contract.
Increasing the Songo Songo field deliverability to meet the growing power sector demand for gas was the principal reason for the drilling of the SS-l0 development well and the remedial work on the offshore well, SS-9. There is now sufficient back up deliverability to meet demand over the next few years in the event of any failure or reduced production from the current wells.
The SS-10 well was the first well to be drilled on the Songo Songo field in 25 years. In the course of drilling this well a modern suite of logs was acquired and will be interpreted during the course of Q4 2007. This information, combined with the retrieval of further downhole pressure readings in December 2007, will be the principal data used to update Orca's year end reserve report.
To further increase Songo Songo reserves, the Company is also planning to drill an appraisal well in the northern portion of the field ("Songo Songo North") and an exploration well approximately 2 kilometers west of the existing field ("Songo Songo West"). Planning for these wells is underway, but drilling is not expected to commence until 2009 if the Company proceeds with the drilling of two wells in Uganda in 2008.
Infrastructure
High-pressure distribution system
During Q3 2007, sales of Additional Gas were occasionally limited by the current infrastructure capacity. The current configuration of the gas processing plant on Songo Songo Island limits the supply of gas to Dar es Salaam to 70 mmscf/d. This constraint is expected to continue through Q4 2007 and Q1 2008.
In Q3 2007, Orca submitted proposals to Songas that would enable the gas processing capacity to be increased by approximately 25 - 35 mmscf/d within six months. This would involve upgrading the existing trains and utilising a bypass. The Company expects to get clearance on these initiatives from Songas during Q4 2007 and has commenced the purchase of some of the longer lead-time items. The total cost of this capacity increase, which would accelerate the sales volumes to the power sector, is estimated at approximately US$0.7 million.
Over the longer term, Songas has made an application to Tanzania's regulatory authority, EWURA, for the installation of two new gas processing trains to increase throughput capacity to more than 140 mmscf/d. During Q3 2007 the tender documents for the engineering, procurement and construction contract were received and all parties are working on the project agreements to enable Songas to award the contract. It is expected that construction will take 12 months from the time of awarding the tender to the new trains being operational.
Additional work is being undertaken to determine the best means of increasing the capacity of the pipeline infrastructure system from its current estimated capacity of 105 mmscf/d to the full capacity of the gas processing trains (once the third and fourth train are operational).
Low-pressure distribution system
Shortly after the end of Q3 2007, Orca completed a further 8 kilometer extension of its low-pressure distribution system that now consists of 35 kilometers. In addition, a second pressure reduction station was also installed. This provides the Company greater security of deliverability to its existing customers and allows for growth. Four customers adjacent to the expanded pipeline are expected to be connected during Q1 2008.
The second pressure reduction station will also meet the needs of the 8 kilometer extension to the Mwenge area that will be constructed in 2008 once contracts averaging 1 mmscf/d are signed with the local industries.
Market Development
The rapid expansion of gas-fired power generation in Tanzania continues to exceed Orca's expectations. During Q3, Dowans commissioned 40 MWs of emergency generation and shortly after the quarter end, TANESCO commissioned the TANESCO Wartsila 100 MW power plant. This increased the total installed generation using Additional Gas to 310 MWs. Combined with the 150 MWs of generation that is operating on Protected Gas from the Songo Songo field, there is now more electricity being generated from gas fired generation than hydro.
During Q3 2007, TANESCO reached agreement for the purchase of an additional 45 MWs of generation at Tegeta. It is forecast that the plant will be operational in Q3 2008. It is understood that discussions to convert IPTL to gas operation are continuing.
There have been detailed discussions with TANESCO/MEM to secure long-term contracts for this expanded generation capacity. It is expected that the principal terms will be agreed by the end of Ql 2008 covering the supply of gas to 245 MWs of permanent generation (TANESCO Wartsila 100 MWs, IPTL 100 MWs (or alternate) and Tegeta 45 MWs) for a 16-year period. The 245 MWs of permanent generation are forecast to have a maximum demand of 45 mmscf/d.
A separate long-term contract for the 42 MW sixth turbine at Ubungo ("UGT 6") is expected to be concluded within a similar timeframe. UGT 6 has a demand of approximately 7.0 mmscf/d at an 80% utilisation rate.
Current Gas Sales
There was a significant improvement in gas sales volumes during Q3 2007 since utilisation of the gas fired generation increased as the hydro capacity fell during the dry season. The industrial sales also picked up as they entered their most active period of the year. Whilst the general trend is for an increase in gas sales, quarterly swings caused by the use of the hydro generation are anticipated. This seasonal volatility may be eliminated if demand increases to the point where more gas fired generation can be base-loaded.
Total sales of Additional Gas to the power sector increased 165% to 1,974 mmscf or an average of 21.5 mmscf/d (Q3 2006: 8.1 mmscf/d). With the commissioning of an additional 268 MWs of gas fired generation in the past year, TANESCO can now utilise gas and preserve the water in the Mtera dam for 284 MWs of peak requirements.
In Q3 2007, sales of Additional Gas to Orca's industrial customers decreased 10% to 442 mmscf (Q3 2006: 491 mmscf) due to a temporary shortage of demand. However, in value terms, Q3 sales to the industrial sector increased due to an 11% improvement in the industrial sales price to US$9.58/mcf (Q3 2006: US$8.63/mcO. Sales volumes are expected to increase in 2008 as more customers are connected to the expanded ringmain system and the extension to Mwenge area is constructed.
It is forecast that there will be a slight decrease in the gas-fired generation volumes in Q4 2007 as the rains in November and December improve the performance of the 277 MWs of run-of-river hydros. There will also be a small seasonal decrease in the demand by the textile industry.
CNG
To further expand gas sales, Orca is planning to commence the sale of Compressed Natural Gas ("CNG") to industrial customers and to markets that are not located near the existing distribution pipeline. These new CNG markets include all of the major hotels in Dar es Salaam and Zanzibar.
This initiative will play a major part of the Company's marketing activity in 2008 and capital will be made available to establish a small compression unit and distribution vehicles. The feasibility of transporting CNG to other markets outside of Dar es Salaam will also be investigated.
Orca has also commissioned a CNG pilot for vehicle fuels, which has been a successful operation. Plans are in progress to expand CNG supply for transportation use.
Outlook
In Tanzania the success of the SS-10 well and the progress that is being made on the gas contracts to the power sector encourages Orca to allocate more capital over the next 18 months to increase infrastructure capacity and further develop high value markets.
In Uganda, management will focus on finding oil reserves. A 300 kilometer 2-D seismic programme will be shot over the next three months by IMC Geophysics International Limited and will be processed and interpreted by the end of Q1 2008. Orca can then determine whether to proceed with the drilling of two wells during 2008. The Company continues to evaluate existing and new Ugandan data and is encouraged by the findings to date.
We thank our employees and shareholders for their continuing support.
Peter R. Clutterbuck
President & CEO
29 November 2007
Consolidated Income Statements (unaudited)
ORCA EXPLORATION GROUP INC. (formerly EastCoast Energy Corporation)
(thousands of
US dollars Three months ended Nine months ended
except per 30-Sep 30-Jun 30-Sep 30-Sep 30-Sep
share amounts) 2007 2007 2006 2007 2006
----------------------------------------------------- ------------------
Revenue 6,363 3,021 3,835 13,215 9,106
Cost of sales
Production and
distribution expenses (311) (261) (211) (836) (573)
Depletion expense (1,334) (630) (435) (2,879) (1,141)
----------------------------------------------------- ------------------
Gross profit 4,718 2,130 3,189 9,500 7,392
Administrative expenses (2,568) (2,704) (1,846) (7,520) (4,701)
Net financing income/
(charges) 862 50 (34) 938 (36)
----------------------------------------------------- ------------------
Profit/(loss) before
taxation 3,012 (524) 1,309 2,918 2,655
Taxation (1,070) (84) (500) (1,456) (1,103)
----------------------------------------------------- ------------------
Profit/(loss) after
taxation 1,942 (608) 809 1,462 1,552
----------------------------------------------------- ------------------
Profit/(loss) per share
Basic (US$) 0.07 (0.02) 0.03 0.05 0.06
Diluted (US$) 0.06 (0.02) 0.03 0.05 0.06
----------------------------------------------------- ------------------
Consolidated Balance Sheets (unaudited)
ORCA EXPLORATION GROUP INC. (formerly EastCoast Energy Corporation)
As at As at As at
30-Sep 30-Jun 31-Dec
(thousands of US dollars) 2007 2007 2006
-------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents 27,436 7,601 20,678
Trade and other receivables 8,040 4,931 4,275
Assets held for sale 2,847 2,847 -
-------------------------------------------------------------------------
38,323 15,379 24,953
Natural gas properties and other equipment 52,893 43,413 18,951
-------------------------------------------------------------------------
91,216 58,792 43,904
-------------------------------------------------------------------------
LIABILITIES
Current liabilities
Trade and other payables 17,385 18,429 4,523
Non current liabilities
Deferred income taxes 2,346 1,694 1,229
Deferred additional profits tax 489 377 263
SHAREHOLDERS' EQUITY
Capital stock 66,556 36,217 34,469
Capital reserve 740 317 1,182
Accumulated income 3,700 1,758 2,238
-------------------------------------------------------------------------
70,996 38,292 37,889
-------------------------------------------------------------------------
91,216 58,792 43,904
-------------------------------------------------------------------------
Consolidated Statements of Cash Flows (unaudited)
ORCA EXPLORATION GROUP INC. (formerly EastCoast Energy Corporation)
Three months ended Nine months ended
(thousands of 30-Sep 30-Jun 30-Sep 30-Sep 30-Sep
US dollars 2007 2007 2006 2007 2006
----------------------------------------------------- ------------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Profit/(loss) after
taxation 1,942 (608) 809 1,462 1,552
Adjustments for:
Depletion and
depreciation 1,375 661 462 2,977 1,224
Stock-based
compensation 324 799 142 1,064 334
Deferred taxation 652 343 124 1,117 360
Deferred additional
profits tax 112 56 52 226 123
Interest income (273) (64) (17) (434) (47)
Foreign exchange gain (414) - - (414) -
-------------------------------------------------------------------------
3,718 1,187 1,572 5,998 3,546
(Increase)/decrease
in trade and other
receivables (3,109) 782 423 (3,765) (791)
(Increase) in assets
held for sale - (2,847) - (2,847) -
Increase in trade
and other payables 1,683 1,939 501 4,690 1,431
----------------------------------------------------- ------------------
Net cash flows from
operating activities 2,292 1,061 2,496 4,076 4,186
----------------------------------------------------- ------------------
CASH FLOWS USED IN
INVESTING ACTIVITIES
Petroleum and natural
gas properties
expenditures (10,756) (14,989) (749) (36,822) (2,634)
Interest income 273 64 17 434 47
Proceeds from sale
of vehicle - - - 2 -
Increase/(decrease)
in trade and other
payables (2,727) 6,611 (23) 8,172 (345)
----------------------------------------------------- ------------------
Net cash used in
investing activities (13,210) (8,314) (755) (28,214) (2,932)
----------------------------------------------------- ------------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Repurchase of shares (27) - - (27) -
Shares issued, net of
share issue costs 30,366 - - 30,366 -
Foreign exchange gain 414 - - 414 -
Options exercised - 118 10 143 128
----------------------------------------------------- ------------------
Net cash flow from
financing activities 30,753 118 10 30,896 128
----------------------------------------------------- ------------------
Increase (decrease)
in cash and cash
equivalents 19,835 (7,135) 1,751 6,758 1,382
----------------------------------------------------- ------------------
Cash and cash
equivalents at the
beginning of the period 7,601 14,736 2,829 20,678 3,198
----------------------------------------------------- ------------------
Cash and cash
equivalents at the
end of the period 27,436 7,601 4,580 27,436 4,580
----------------------------------------------------- ------------------
Statement of Changes in Shareholders' Equity (unaudited)
ORCA EXPLORATION GROUP INC. (formerly EastCoast Energy Corporation)
(thousands of US dollars) Accum-
ulated
Capital Capital (loss)/
stock reserve income Total
-------------------------------------------------------------------------
Balance as at 1 January 2006 16,237 764 (339) 16,662
Options exercised 128 - - 128
Profit for the period - - 1,552 1,552
Stock-based compensation - 334 - 334
-------------------------------------------------------------------------
Balance as at 30 September 2006 16,365 1,098 1,213 18,676
-------------------------------------------------------------------------
(thousands of US dollars) Accum-
Capital Capital ulated
stock reserve income Total
-------------------------------------------------------------------------
Balance as at 1 January 2007 34,469 1,182 2,238 37,889
Options exercised 143 - - 143
Shares issued, net of share
issue costs 31,971 (810) - 31,161
Stock-based compensation - 368 - 368
Normal course issuer bids (27) - - (27)
Profit for the period - - 1,462 1,462
-------------------------------------------------------------------------
Balance as at 30 September 2007 66,556 740 3,700 70,996
-------------------------------------------------------------------------
Orca has an option to participate in this exciting new petroleum province adjacent to the Uganda onshore lake Albert Rift basin. The Company has joined forces with Tower Resources at 50% equity to jointly explore for oil in Uganda onshore Exploration Area 5 ("EA 5"). Recently both London-based Tullow plc ("Tullow") and Calgary-based Heritage Oil Corporation ("Heritage") have been successful in finding significant hydrocarbons within the basin. Orca has identified a number of significant leads similar to the prospects further to the south. These leads will be further evaluated with the acquisition of seismic data beginning in December 2007. Depending on the results of the seismic program, Orca has the option to participate in the drilling of 2 exploratory wells.
Exploration History
Uganda's Albertine Graben is a largely underexplored sedimentary basin. Its petroleum potential in terms of thickness of sediment, presence of source rocks, reservoirs and seals was established in 2006 and early 2007 through the exploration successes of Heritage and Tullow. The sediment thickness evidently exceeds 5,000 meters in the deepest parts of the basin. Oil seeps have been known within the Albertine Graben for some time and were identified over a large area indicating the existence of a working petroleum system in the region. The presence of reservoir units within the sedimentary cover of the Tertiary age was proven by three wells that Heritage drilled in 2003/2004.
There have been 11 exploratory and appraisal wells drilled in Uganda since 2003.
Status/Flow rates Exploration
Year Operator bbl/day Area
-------------------------------------------------------------------------
Turaco 1 2003 Heritage Non discovery 3A
Turaco 2 2004 Heritage Non discovery 3A
Turaco 3 2004 Heritage Non discovery 3A
Mputa 1 2006 Tullow Suspended oil, 1,120 b/d 2
Mputa 2 2006 Tullow Suspended oil, logged not tested 2
Waranga 1 2006 Tullow Suspended oil,12,000 b/d max
aggregate 2
Nzizi 1 2006 Tullow Logged not tested 2
Kingfisher
1 + 1A 2007 Heritage Suspended oil,13,893 b/d max
aggregate 3A
Nzizi 2 2007 Tullow P&A oil + 14 mmscf/d of gas 2
Mputa 3 2007 Tullow Suspended oil, 1,968 bopd 2
Mputa 4 2007 Tullow Suspended oil, logged not tested 2
-------------------------------------------------------------------------
Future industry activity in Uganda
Significant seismic and drilling activity is planned in Uganda by all operators during the course of the next 18 months. It is estimated that at least 8 wells will be drilled. Two rigs are currently operating in country and a third rig is expected in the near future. Additionally, 1,100 kilometers of seismic will be acquired by year end.
EA 1
EA 1 is jointly held by Tullow and Heritage and is operated by Heritage.
2-D Seismic is currently being acquired. The original 500 kilometer programme has been extended due to the positive results from the initial 172 kilometer survey in the southern part of the block. There are currently plans to drill two to three exploration wells commencing in the first half of 2008.
EA 2
Tullow holds 100% of EA 2.
Tullow has drilled three exploration wells in 2007, namely the Nzizi 2 well with the Dafora-F200 rig and a further two appraisal wells Mputa 3 and Mputa 4. All three wells have encountered oil. The Mputa 4 was the third and final well to be drilled as part of the Kaiso-Tonya appraisal programme.
A rig (Nabors 221) has been contracted to drill the significant Ngassa prospect (same rig as will be used to drill the Kingfisher-2 well in EA 3 A). This well is scheduled to be completed by the end of 2007.
EA 3 A
EA 3 A is jointly held by Tullow and Heritage (50% each) and is operated by Heritage.
Heritage is currently conducting a 325 kilometer 3-D seismic programme over the Kingfisher and Pelican prospects. Initial interpretation has indicated that the prospects are structurally uncomplicated and approximately 70 and 40 square kilometers in size. Following the full interpretation of the survey, Heritage has contracted the Nabors 221 rig to drill the Kingfisher-2 well (scheduled to spud in Q1 2008). Heritage is targeting deeper objectives that require a larger capacity rig than was used on Kingfisher-1 (3,195 meters).
EA 5
Tower Resources plc ("Tower") holds 100% of EA 5 subject to Orca Exploration's 50% option rights.
EA 5 is at the northern end of the Albertine Graben. It lies approximately 200 kilometers north of the 12,000 bbl/d Tullow discovery at Waranga and south of the Unity and Heglig oil fields in the Muglad rift basin in Sudan.
To date here has been no seismic acquired and no wells drilled on EA 5. A regional gravity survey and subsequent analysis has identified that EA 5 contains a sedimentary sequence within the Albertine Graben system, within which prospective structures have been indicated. This part of the Albertine Graben is called the Rhino Camp Basin. The Semliki Basin further to the south where the discoveries have been found was prognosed from a similar type of gravity survey and was later confirmed to exist following the seismic conducted by Heritage in the late 1990s.
In the next 18 months, Tower will acquire 300 kilometers of 2-D seismic and drill 2 exploration wells to a depth of 2,500 meters and 1,500 meters. There will be at least two rigs in country in this period that could potentially be utilised.
Export routes
Current provisional estimates are that a 500,000 bbl/day pipeline could be required to export the crude to international markets. It is estimated that this would cost approximately US$1.5 billion and is considered commercially viable. It is forecast that this could be completed between 2010 and 2013 based on the current drilling activities in Uganda and the drilling successes over the last 2 years. If exportable accumulations are discovered, it is anticipated that a 1,200 kilometer pipeline will be constructed from the oil fields to the Kenyan coast at Mombasa, via Kampala and Nairobi. There is an existing pipeline that runs along this route taking oil products to Uganda.
EA 5 PSA terms
The principal terms of the PSA, as amended are as follows:
- The First Exploration Period ends on 27 March 2008. By this time,
200 kilometers of seismic must be acquired, processed and
interpreted. This will be satisfied by the acquisition of 300
kilometers of 2-D seismic in the last quarter of 2007.
- Under the terms of the Second Exploration Period, minimum exploration
of two wells and one contingent well is required to be drilled by 27
March 2010.
- The Third Exploration Period ends on 27 March 2012. By this time an
additional exploration well and one contingent well has to be
drilled.
- Cost recovery is permitted for up to 50% of the oil production after
deduction of the Royalty. Carry forward provisions apply.
- The Royalty ranges from 5% on volumes up to 2,500 bbls/day to 12.5%
above 7,500 bbls/day.
- The profit sharing percentage of the licensee decreases as production
increases. The range is 53% for 0 - 5,000 bbls/day and 25% for
production in excess of 40,000 bbls/day.
- The Government of Uganda has a 20% back in right.
Terms of Orca's agreement with Tower Resources
The principal terms of the agreement are as follows:
- The agreement is structured as an option with Tower to earn a 50%
interest in EA 5.
- In consideration for granting the option, Orca will fund 83.33% of
certain back costs and a 2-D seismic programme of 300 kilometers,
beginning in December 2007, subject to a maximum cost to the Company
of US$5-6 million.
- On completion of the interpretation of the seismic data expected
during Q1 2008, Orca will have the exclusive right to acquire a 50%
working licence interest in return for funding 83.33% of two
exploration wells forecast to commence mid 2008. The carry is capped
at a maximum cost to the Company of between US$10 million and
US$15 million depending on whether the wells are tested.
- In the event that Orca exercises its option to become a 50% partner,
Tower will continue to remain operator under the licence for a period
of three years. However, Orca will assume management responsibility
for all drilling activities.
- Orca has put a guarantee in place at the outset to cover
US$15 million of expenditure.
Uganda statistics
Size of country
-------------------------------------------------------------------------
Size of country 236,000 square kilometers
Population 30 million
Population growth rate (1990 - 2005) 3.2%
Inflation rate (1990 - 2005) 8%
GDP growth rate 3.2%
Oil imports 2006 US$300 - US$400 million
Gross National income per capita US$280
Country Information and Governance
Uganda is a landlocked country in central East Africa with a population of approximately 30 million. It borders Tanzania, Kenya, Sudan, Democratic Republic of the Congo and Rwanda. Agriculture is the most important economic sector with coffee accounting for the bulk of Uganda's export revenues. The country has substantial mineral resources including large deposits of copper and cobalt. Uganda's official language is English.
Uganda is a presidential republic. General elections are held every five years. The elected President is both head of state and head of government. Executive power is exercised by the government. Legislative power is vested in both the government and a 303-member National Assembly that includes 217 elected and 86 appointed representatives (who represent the interests of specific populations e.g. women, persons with disabilities and others). The system is parliamentary with voting for all citizens over 18.
Presidential elections were held in February 2006 and President Yoweri Museveni (of the National Resistance Movement Party) was elected for a third term. The current Prime Minister is Apolo Nsibambi. The Cabinet is appointed by the President from among elected legislators.
Uganda is a member of the East Africa Community with Tanzania and Kenya that aims to support closer cooperation between the countries including free trade.
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.