Orca Exploration Group Inc Drive to value creation and liquidity for shareholders
Disclaimer The information in this presentation (the " Presentation ") is provided as of 17 June, 2019 for informational purposes only, is not complete, is based (in part) on information prepared for internal evaluation purposes only and does not contain all material information about Orca Exploration Group Inc. (" Orca " or the " Company "), including important disclosures and risk factors associated with the Company's business. This Presentation does not take into account the particular investment objectives or financial circumstances of any specific person who may receive it and does not constitute an offer to sell or a solicitation of an offer to buy any security in Canada, the United States or any other jurisdiction. The contents of this Presentation have not been approved or disapproved by any securities commission or regulatory authority in Canada, the United Sates or any other jurisdiction, and Orca expressly disclaims any obligation to make disclosure or any filings with any securities commission or regulatory authority, beyond that imposed by applicable laws. See "Advisories" beginning on slide 18 and other important disclosures regarding forward-looking information, financial outlook and other financial matters, oil and gas information, non- GAAP measures and other important information. Certain other information contained in this Presentation has been prepared by third-party sources, which information has not been independently audited or verified by Orca. No representation or warranty, express or implied, is made by Orca as to the accuracy or completeness of the information contained in this Presentation, and nothing contained in this Presentation is, or shall be relied upon as, a promise or representation by Orca. Orca Exploration Group June 2019 Slide 2 AN 2019
Orca overview Significant management experience developing and operating an integrated gas project. • Continuous reliable gas production in Tanzania since 2004 2019 gas production guidance of 60 – 75 MMscfd (10.0 – 12.5 Mboepd) • Strong balance sheet with cash and investments in bonds of US$141 million (net cash US$83 • million) 1 Dividend of CDN$0.05/share paid in April 2019 for A and B shares on record at 31 March • 2019. Dividend of CDN$0.06/share to be paid in July 2019 for A and B shares on record at 30 June 2019. Moving forward the Board expects to evaluate the appropriateness of declaring and paying cash dividends on a quarterly basis. NCIB initiated on June 14, 2019 Gross 2P conventional natural gas reserves of 293 Bcf (49 MMboe) as at 31 December 2018 • Continuation of strategy to maximise the value of the Tanzanian asset, diversify risk and • increase liquidity for shareholders. 1. The financial information is as at 31 March 2019. Net cash is a non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Please see "Non-GAAP Measures" in this Presentation Orca Exploration Group June 2019 Slide 3 AN 2019
Orca snapshot Listed on the TSXV as ORC.A and ORC.B. Market • 35.3 million shares issued (1.8 million Class A common shares and 33.5 million Class B subordinated shares) • Market capitalization on 15 June 2019 based on CDN$6.30 per share: US$167 million status • Shaymar Limited holds 20.7% of the equity and controls 59.2% of the total votes of the Company. David Ross is the protector of the trust and an Orca Board director Operator of the Songo Songo integrated gas project in Tanzania since 2004 Under the terms of the Production Sharing Agreement (“PSA”), Orca is entitled to produce and sell all Additional Gas • (“AG”). AG is the gas in the field that is in excess of Protected Gas (“PG”). PG is a maximum of 45 MMscfd and Orca is Operations obligated to make it available for the Songas power plant and a cement facility in Dar es Salaam through to July 2024 January to May 2019 AG sales averaged 60 MMscfd (40 MMscfd for the year ended 31 December 2018). New Gas • Sales Agreement signed May 2019 through to October 2026 with the Tananzian Production and Development Company (“TPDC”) utilizing National Natural Gas Infrastructure (“NNGI”) PSA licence expires in October 2026 with possibility to extend • Key financial parameters for the three months ended 31 March 2019 (US$ million) Current Net cash flows from operating activities 13 financial Net income 3 2P conventional natural gas reserves as at 31 December 2018 (Bcf) Reserves Gross 2P conventional natural gas reserves: 293 Orca Exploration Group June 2019 Slide 4 AN 2019
Tanzania in a nutshell Management assesses that there is significant spare production and infrastructure capacity to process and transport gas from Songo Songo Island (“SSI”) to Dar es Salaam 350 300 250 200 MMscfd 150 100 50 0 Current gas markets in Dar es Gas processing Pipeline capacity - SSI Deliverability from 7 producing Salaam for SSI gas capacity on SSI to Dar es Salaam wells (after refrigeration) 1 PG - Power PG - Industrial SS-4 SS-7 SS-9 SS-5 National Natural Gas Infrastructure ("NNGI") AG - Power AG - Industrial Songas Facilities SS-10 SS-11 SS-12 1. Compression and potentially the drilling of SS North will be required to sustain this level of deliverability through to 2026. Before refrigeration is installed, production is capped at circa 130 MMscfd Orca Exploration Group June 2019 Slide 5
Strategy - Maximising the value of the Tanzanian asset Increasing gas sales At the end of 2018 there was a step change in natural gas demand from the Songo Songo field fuelled by increased industrial • consumption, the introduction of new generation capacity and the requirement to stabilise the overall infrastructure system • With the significant spare production and infrastructure capacity, Orca is well placed to capture new markets as they materialise. 180 MWs of new gas fired generation capacity is expected to be commissioned by TANESCO in stages over the next 9-18 months. Licence extension Licence expires in October 2026. There is scope within existing Tanzanian petroleum laws for this to be extended • • Licence extension may enable the drilling of Songo Songo North (appraisal) and potentially Songo Songo West (exploration) to extend plateau production to meet increasing gas demand in country Recovery of receivables Working capital including cash of US$90 million 1 as at 31 March 2019 excludes a US$59 million gas receivable and US$31 • million of related late payment interest from the electricity utility, TANESCO. These have been fully provided for in Orca’s financial statements The gas receivable element peaked at US$74 million in 2016; since then TANESCO has repaid US$15 million of this amount. • 1. Working capital including cash is a non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Please see "Non-GAAP Measures" in this Presentation Orca Exploration Group June 2019 Slide 6
Strategy - Increasing liquidity for shareholders Dividend of C$0.05/share was paid in April for A and B shares on record at 31 March 2019. Dividend of C$0.06/share to • be paid in July 2019 for A and B shares on record at 30 June 2019. Moving forward the Board expects to evaluate the appropriateness of declaring and paying cash dividends on a quarterly basis In May 2019 the Board was enhanced through the appointment of two additional non executive directors • • Improved interaction between Orca and the investment community through regular communication There will be a focus on improving ‘Adjusted funds flow from operations per share’ 1 and net income per share through • cost control, organic growth and accretive M&A activity Quarterly Net Income Quarterly adjusted funds flow from operations US$000s US$/share US$/share US$000s $8,000 $0.20 $0.40 0.18 $13,000 0.17 0.35 $0.15 $6,000 0.13 0.13 $11,000 0.12 0.12 $0.30 $0.10 $4,000 $9,000 $0.05 $0.20 $2,000 $7,000 0.01 $0.00 $0 $5,000 $0.10 -$0.05 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 0.08 0.07 -$2,000 $3,000 0.03 -$0.10 0 $0.00 $1,000 -$4,000 -0.02 -$0.15 -$1,000 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 -$6,000 -0.2 -$0.20 -$0.10 -0.13 -0.13 -$3,000 -$8,000 -$0.25 -$5,000 -$0.20 Adjusted Funds flow from operations Net income (loss) Earnings (loss) per share Adjusted Funds flow from operations per share 1. Adjusted funds flow from operations is a non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Please see "Non-GAAP Measures" in this Presentation Orca Exploration Group June 2019 Slide 7
Strategy - Diversification to reduce risk The Company is reliant on the cash flows from its only asset, the Songo Songo field in Tanzania • • There is scope for Orca to reduce this asset concentration through mergers, acquisitions and divestitures • In the current market environment where traditional sources of capital for upstream companies are limited, Orca is well positioned to capitalise on opportunities available in the market • M&A activity may enable Orca to realise significant cost synergies by reducing corporate overheads per unit of production Orca Exploration Group June 2019 Slide 8
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