Orca Energy Group Inc. (“Orca” or the “Company” and includes its subsidiaries and affiliates) (TSX-V: ORC.A, ORC.B) today announces that it has filed its condensed consolidated interim financial statements and management's discussion and analysis for the three and six month periods ended June 30, 2025 ("Q2 2025") with the Canadian securities regulatory authorities. All amounts are in United States dollars (“$”) unless otherwise stated.
Jay Lyons, Chief Executive Officer, commented:
“Operationally, Orca continues to perform in line with expectations, delivering a 9% increase in daily gas sold, compared with Q2 2024. We continue to see robust demand from our industrial customers, with sales growing in excess of 40% from H1 2024. I am also pleased to report that Orca remains in a strong financial position, with working capital of ca.$50 million and total cash and cash equivalents of ca.$100 million.
In light of the recently filed arbitration proceedings by PAEM and PAET, Orca is carefully considering its capital expenditures and capital allocation policy for the remainder of the licence. Ensuring that we continue to maintain the high levels of safety we have achieved since entering Tanzania, along with performing essential maintenance work, will be our core focus going forward, with a review of cost efficiencies also likely being considered.”
Highlights
- Revenue decreased by 3% for Q2 2025 and by 1% for the six months ended June 30, 2025 over the comparable prior year periods, primarily as a result of the increases in the Tanzanian Petroleum Development Corporation (“TPDC”) share of revenue as an outcome of decreased capital expenditures and lower Cost Gas revenue (as defined in the Management’s Discussion & Analysis for the three and six months ended June 30, 2025) recoveries by the Company.
- Gas deliveries increased by 9% for Q2 2025 and by 2% for the six months ended June 30, 2025 compared to the same prior year periods. The increases were mainly a result of increased consumption by industrial customers due to a higher demand for services and products. Additionally, the end of the Protected Gas (defined below) regime Q3 2024 resulted in higher deliveries of Additional Gas (defined below) to Tanzania Portland Cement PLC (“TPCPLC”) from August 2024 onward. This was partially offset by the completion of the Julius Nyere Hydropower Project (“JNHPP”) in 2024 leading to increased availability of hydro power and causing lower lifting from power customers.
- On August 7, 2024, PanAfrican Energy Tanzania Limited (“PAET”) and Pan African Energy Corporation (Mauritius) (“PAEM”) issued a notice of dispute (“Notice of Dispute”) in respect of an investment treaty claim against the Government of Tanzania (“GoT”) for breach of the Agreement on Promotion and Reciprocal Protection of Investment between the Government of the Republic of Mauritius and the GoT (“BIT”), and a contractual dispute against the GoT and TPDC, for breaches of the: (i) the Production Sharing Agreement between PAET, TPDC and the GoT (“PSA”), and (ii) the Gas Agreement between the GoT, TPDC, Songas Limited ("Songas") and PAET (the "Gas Agreement"). Initial meetings with both the Advisory and Coordinating Committees were held during the week of October 14, 2024 without any resolution on the key issues in dispute. The matters have been further referred to the relevant entity’s chief executive officers and working groups in accordance with the dispute resolution process. Discussions continued with meetings held in January and March 2025 without resolution. The Company’s Counsel subsequently submitted a letter to the Ministry of Energy (“MoE”), requesting an urgent meeting to address the issues. In July 2025, the Company's counsel received a letter from the Permanent Secretary to the MoE, dated June 26, 2025, advising PAET that the MoE was working on the Songo Songo Development License (the “License”) extension application and that feedback would be available in due course. The letter also advised against interference with the independence of the MoE, in the interests of good governance and proper processing of the application. The Company’s Counsel submitted a response to the MoE advising that the enquiries made to the MoE were reasonable and proportionate enquiries into the status of the application, given the lengthy inaction and engagement to date. The letter urged immediate engagement to resolve the matter of the Licence extension. To date, there has been no response to that request.
- On April 15, 2025, PAET and TPDC signed a settlement agreement with the Tanzanian Electric Supply Company Limited (“TANESCO”) (“Settlement Agreement”), for TANESCO to pay PAET and TPDC $52.0 million for unpaid amounts owing by TANESCO for deliveries of natural gas from the Songo Songo gas field, which unpaid amounts totalled $104,164,507.41 as of January 9, 2025, comprising of $33.7 million of principal amount owing and approximately $70.5 million of default interest. The Settlement Agreement requires TANESCO to pay the Tanzanian Shilling equivalent of $52.0 million, comprised of the $33.7 million principal amount and $18.3 million representing a portion of the default interest owed by TANESCO. It was agreed that the remaining balance of the default interest owing by TANESCO would be waived if TANESCO pays the settlement amount when required and in full while remaining current on amounts owed. TANESCO must pay the settlement amount to PAET in weekly instalments and meet monthly total payment amounts, commencing in April 2025 and ending in September 2025. Payments on account of the settlement amount will be allocated between PAET and TPDC in accordance with the PSA. Pursuant to the PSA, and assuming payment in full of the settlement amount, the Company expects to retain approximately $29.4 million of the settlement amount with TPDC retaining the balance. To date, TANESCO has paid $34.1 million due under the Settlement Agreement leaving a balance remaining of $17.9 million as at August 14, 2025.
- Net income attributable to shareholders increased by 1,786% for Q2 2025 and by 943% for the six months ended June 30, 2025 compared to the same prior year periods, primarily as a result of the reversal of loss allowance in Q2 2025 following the collection of TANESCO long-term arrears pursuant to the Settlement Agreement.
- Net cash flows from operating activities increased by 91% for Q2 2025 and by 394% for the six months ended June 30, 2025 compared to the same prior year periods primarily as a result of higher payments from TANESCO in Q2 2025 pursuant to the Settlement Agreement.
- Capital expenditures decreased by 98% for Q2 2025 and by 82% for the six months ended June 30, 2025 compared to the same prior year periods. The capital expenditures in Q1 and Q2 2025 primarily related to the costs of flowlines replacements on SS-5 and SS-9 wells, deferred from 2024 at the request of the GoT. The flowline replacement program for the SS-5 well was further deferred to Q2 2025. Inclement weather through the wet season and SE (Kusini) winds caused delay to the completion of the project and with it the employment of some capital. Given the lump-sum costs for the project, total capital expenditure is not expected to increase when the project resumes in Q4 2025. The capital expenditures in Q1 and Q2 2024 primarily related to the costs of the planned SS-7 well workover program.
- The Company exited Q2 2025 with $49.3 million in working capital (December 31, 2024: $21.9 million) and cash and cash equivalents of $98.6 million (December 31, 2024: $90.1 million). Cash held in hard currencies (USD, Euro, GBP, CDN) was $87.7 million, as at June 30, 2025 (December 31, 2024: $87.1 million). Of the total cash balance of $98.6 million, $24.7 million was posted as security in respect to an appeal initiated by the Company relating to a seismic judgment received from the Tanzania High Court (Commercial Division) for a claim brought by a contractor against PAET relating to losses arising from PAET’s termination of a contract relating to the Company’s 3D seismic acquisition program.
- The TANESCO long-term receivable as at December 31, 2024 was $22.0 million and had been fully provided for. Of the cash the Company received under the Settlement Agreement in Q2 2025, $16.1 million was attributed to the long-term gas receivable balance. As at June 30, 2025 the remaining $5.9 million balance was recategorized as a current receivable and was received in July. Accordingly, the provision has been reversed in full and the long-term receivable balance as at June 30, 2025 is $ nil. Subsequent to June 30, 2025, the Company has invoiced TANESCO $5.0 million for July 2025 gas deliveries and TANESCO has paid the Company $5.8 million to date for current year gas supplies and a further $9.9 million under the Settlement Agreement.
- On April 25, 2025, Swala Oil & Gas (Tanzania) Plc (“Swala”) submitted a claim to the Tanzanian High Court (Commercial Division) (the “Court”) against Orca, PAEM and PAET for alleged breach of oral contract, unlawful conspiracy, unjust enrichment and breach of fiduciary duty. Swala claims damages of approximately $237,930,013 in addition to pre- and post-judgment interest. This breaks down to: (i) $167,930,013 for damages arising from breach of contract or conspiracy; (ii) $50.0 million for general damages, and (iii) $20.0 million for punitive and exemplary damages. The Company believes there is limited merit to the claim (the “Swala Dispute”).
- Subsequent to Q2 2025, on August 1, 2025, PAEM submitted a Request for Arbitration (“RFA”) to the International Centre for Settlement of Investment Disputes (“ICSID”), an arm of the World Bank, against Tanzania for various breaches by Tanzania of the investment protections provisions of the BIT; and PAET submitted two separate RFA’s to ICSID against Tanzania and TPDC for breaches of the PSA and the Gas Agreement. The three claims (the “Claims”) arise out of a series of actions and omissions by Tanzania and TPDC that threaten the viability of the Songo Songo Gas-to-Electricity Project (the “Project”) and breach multiple obligations under the BIT, the PSA and the Gas Agreement.
- Considering the anticipated reduction in capital expenditure going forward, with safety and maintenance being the main focus for the remainder of the Licence, the Company intends to review its capital allocation policy in the near term and will update the market as appropriate.