Orca Exploration announces its results for the quarter ended 30 September 2008

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TORTOLA, British Virgin Islands, Nov. 27, 2008 (Canada NewsWire via COMTEX) -- ORXGF | Quote | Chart | News | PowerRating -- Orca Exploration Group Inc ("Orca Exploration" or the "Company") announces its results for the quarter ended 30 September 2008.

<< Financial and Operating Highlights - 15% increase in Orca Exploration's Q3 revenues to US$7.3 million (Q3 2007: US$6.4 million). - Increased Q3 2008 sales of Additional Gas to the power sector by 6% to 2,097 Mmscf (Q3 2007: 1,974 Mmscf). This equated to an average of 22.8 Mmscf/d (Q3 2007: 21.5 Mmscf/d). Gas sales to the power sector are now underpinned by the long term gas demand by the TANESCO Wartsila 100 MW plant and the sixth turbine at Ubungo. The average price for the gas to the power sector was US$2.41/mcf (Q3 2007: US $2.19/mcf). - Q3 2008 sales of Additional Gas to industrial customers decreased by 4% to 425 Mmscf (Q3 2007: 442 Mmscf). This equated to an average of 4.6 Mmscf/d (Q3 2007: 4.8 Mmscf/d). Average prices were 39% higher at US$13.29/mcf resulting in a 33% increase in industrial sales revenue when compared to Q3 2007. - 1% increase in funds flow from operations to US$3.8 million (Q3 2007: US$3.7 million). The Company forecasts that it has sufficient working capital to fund its 2009 capital program. - Orca Exploration signed a five year contract with Tanzania Portland Cement Company ("TPCC"), a subsidiary of Heidelberg Cement, for the supply of gas to a new US$100 million kiln at its Wazo Hill plant in Dar es Salaam. The contract is forecast to commence in the first half of 2009 when the kiln is commissioned. Initially, it is forecast that 2 Mmscf/d of Additional Gas will be supplied under the contract, but this is expected to increase to in excess of 6 Mmscf/d by 2012 as TPCC overhauls its existing kilns and brings them back on production to meet increasing demand. - McDaniel and Associates Consultants Ltd finalised their resource evaluation report of the Songo Songo West prospect which lies 2.5 km west of the Songo Songo field and within the Company's licence acreage. The report concluded the prospect has recoverable mean unrisked gas resources of 552 Bcf with a one in two chance of success. This compares favourably with the gross life of field Additional Gas reserves of 500 Bcf at Songo Songo that is currently being marketed by Orca under the terms of the production sharing agreement with the Tanzania Petroleum Development Corporation ("TPDC"). - Tendered for a jack up rig with the view to drilling the Songo Songo West prospect. Given the current contraction in the financial markets, Orca will defer the drilling until 2010 when it is also forecast that drilling costs will have fallen. - In Q3 2008, Orca Exploration ordered US$2.5 million of compressed natural gas ("CNG") facilities, consisting of a compressor, a vehicle dispenser and two trailer filling facilities to deliver 0.7 Mmscf/d of compressed natural gas to industrial customers in Dar es Salaam. The facilities are expected to be operational during Q1 2009. - As operator of the gas processing plant, constructed pipework and mobilised the equipment to install two new higher capacity Joule- Thompson valves ("JT Valves") at the existing gas processing plant with the objective of increasing the capacity of two existing trains from 70 Mmscf/d to 90 Mmscf/d. The owner of the facilities, Songas Limited, approved the installation of the JT Valves on one of the trains in November and the Company successfully implemented the work. The impact of the modifications on the train is currently being evaluated before Songas will issue the notice to proceed on the second train. Lloyds Register will then formally re-rate the plant. It is expected that this will occur in Q1 2009. ------------------------------------------------------------------------- Three months ended Nine months ended (US$'000 except where 30-Sep 30-Sep 30-Sep 30-Sep otherwise stated) 2008 2007 Change 2008 2007 Change ------------------------------------------------- ----------------------- Revenue 7,301 6,363 15% 17,411 13,215 32% Profit/(loss) before taxation 1,609 3,012 (47%) (7,831) 2,918 - Operating netback (US$/mcf) 2.79 2.30 21% 2.71 2.32 17% Cash and cash equivalents 11,178 27,436 (59%) 11,178 27,436 (59%) Working capital 8,705 20,938 (58%) 8,705 20,938 (58%) Shareholders' equity 64,142 70,996 (10%) 64,142 70,996 (10%) ------------------------------------------------------------------------- Profit/(loss) per share - basic (US$) 0.03 0.07 (57%) (0.32) 0.05 - Profit/(loss) per share - diluted (US$) 0.03 0.06 (50%) (0.32) 0.05 - Funds from operations before working capital changes 3,773 3,718 1% 7,783 5,998 30% Funds per share from operations before working capital changes - basic (US$) 0.13 0.13 0% 0.26 0.22 18% Funds per share from operations before working capital changes - diluted (US$) 0.12 0.12 0% 0.25 0.20 25% Net cash flows from operating activities 363 2,292 (84%) 5,765 4,076 41% Net cash flows per share from operating activities - basic (US$) 0.01 0.08 (88%) 0.19 0.15 27% Net cash flows per share from operating activities - diluted (US$) 0.01 0.07 (86%) 0.19 0.14 36% ------------------------------------------------------------------------- Outstanding Shares ('000) Class A shares 1,751 1,751 0% 1,751 1,751 0% Class B shares 27,863 27,881 0% 27,863 27,881 0% Options 2,847 2,622 9% 2,847 2,622 9% ------------------------------------------------- ----------------------- Operating Additional Gas sold (Mmscf) - industrial 425 442 (4%) 1,083 1,140 (5%) Additional Gas sold (Mmscf) - power 2,097 1,974 6% 5,036 4,075 24% Average price per mcf (US$) - industrial 13.29 9.58 39% 12.67 8.75 45% Average price per mcf (US$) - power 2.41 2.19 10% 2.37 2.19 8% ------------------------------------------------- ----------------------- President & CEO's Letter to Shareholders Orca Exploration is well positioned to weather the severe global deterioration in financial markets that commenced in Q3 2008. - Orca has a solid cash position with deposits of US$11.2 million at 30 September 2008. The Company has no outstanding long term indebtedness and no work program commitments in Tanzania or elsewhere. - Operating in Tanzania, Orca is partially insulated from the volatility of world oil prices. The Company has long term, utility and industrial gas sales contracts that are not expected to be seriously impacted by the current credit and financial crisis. - The Company's cash flows remain strong. During Q3 2008 Orca recorded cash flows before working capital changes of US$3.8 million, increasing total cash flows for the nine months ended 30 September 2008 to US$7.8 million. The cash flows from operating activities were US$0.4 million for the quarter and US$5.8 million for the nine months ended 30 September 2008. - Tanzania's power sector demand is forecast to increase at 7% per annum and utility sales (83% of Orca's total sales volumes) are at fixed prices under long term contracts. - The term of the Company's seven largest gas supply contracts (representing 87% of Orca's industrial sales) has been recently extended for five years. The new contracts contain pricing caps and floors that limit the industrial downside price to US$7.38/mcf. >>

Tanzania's economy is not expected to be as severely impacted by the financial crisis given the minimal credit levels in the country. It is currently anticipated that the World Bank and other multi-laterals will continue to finance infrastructure projects including the strengthening of electricity transmission networks, making credit available on a timely basis. While there will be some impact on Tanzania's tourism, and potentially the manufacture and export of textiles, the Company is not anticipating any material deterioration in its gas sales.

Orca continues to make good progress in developing and supplying gas markets in Tanzania and sees increasing opportunities to maximise and monetise its reserves. The costs of exploring and developing the Songo Songo field, the accumulation in Songo Songo North and the exploration acreage at Songo Songo West are expected to fall significantly as worldwide demand for rigs, ancillary services and infrastructure projects declines.

Tanzanian reserves and exploration

Confidence in the Songo Songo field's potential continues to increase as cumulative production rises and further subsurface data is analysed. During Q2, the Company undertook a detailed evaluation of the Songo Songo West prospect that lies some 2.5 kilometers west of the existing Songo Songo field within the Company's licence acreage. In early Q3 2008, McDaniel and Associates Consultants Ltd. was contracted to conduct a resource evaluation report on the potential of this prospect.

The report summarises the prospective recoverable resources to be as follows:

<< ------------------------------------------------------------------------- Formation Unrisked Unrisked Unrisked Unrisked P90 Bcf P50 Bcf Mean Bcf P10 Bcf ------------------------------------------------------------------------- Neocomian 170.1 418.1 505.2 1,027.9 ------------------------------------------------------------------------- Cenomanian 8.5 31.7 46.4 117.7 ------------------------------------------------------------------------- 551.6 ------------------------------------------------------------------------- >>

The Songo Songo West prospect is interpreted by McDaniel as having a high geological chance of success - 52% in the Neocomian and 35% in the Cenomanian reservoirs.

The size of the prospect compares extremely favourably with the existing Songo Songo field that contains total gross 2P recoverable Additional Gas reserves of approximately 500 Bcf on a life of licence basis (gross to the Company 474 Bcf with an NPV 10 of US$255 million) that is available to be marketed and sold by Orca under the terms of the PSA with the Tanzania Petroleum Development Corporation.

Infrastructure

During Q3 2008, the capacity of the gas processing facilities was limited to 70 Mmscf/d. In November 2008, the Company agreed a draft Memorandum of Understanding ("MOU") with Songas that enabled the Company, as operator, to install a larger Joule-Thompson valve on the first of the two gas processing trains. The objective is to increase the capacity of the trains by 20 Mmscf/d to 90 Mmscf/d. The work on the first train was successfully implemented in 30 hours without significant disruption to the supply of gas to customers in Dar es Salaam. The capacity of the train is currently being evaluated and the MOU finalised before Songas will permit further work on the second train. Once the testing is successfully completed on both trains, Lloyds Register will formally re-rate the plant. It is expected that this will occur in Q1 2009. Initial results are promising.

In Q3 2008, Songas submitted a third application to the electricity regulator, EWURA, for the installation of a third and fourth gas processing train. The total cost of these trains is estimated at US$65 million. In the event that the installation of these trains proceeds, it is envisaged that they will be operational by mid-2010. However, it is currently forecast that the capacity of the system (gas processing and pipeline) can be increased to 105 Mmscf/d through some further debottlenecking of the facilities. Accordingly, whilst the third and fourth train will improve security of supply by providing excess gas processing capacity, it will not increase the overall infrastructure capacity until compression or a new pipeline is installed. Ultimately TANESCO will need to determine whether it wishes to pay the major share of the transportation tariffs associated with the US$65 million of expenditure to ensure this security of supply or whether the interim solution combined with the acquisition of sufficient spares will suffice until reserves and demand warrant the construction of new infrastructure.

Power sector developments

In June 2008, the Company initialled two long term power contracts with TANESCO, the owner of the Ubungo power plant, Songas Limited and the Ministry of Energy and Minerals for the supply of approximately 30 - 45 Mmscf/d for power generation. The first of the contracts covers the supply of gas to the sixth turbine at the Ubungo power plant and provides for a maximum of approximately 9 Mmscf/d until July 2024. The second initialled contract covers the supply of Additional Gas sales to the remaining gas powered generation currently in Tanzania. The required short term volumes will depend on the availability of the 561 MWs of Tanzania's hydro generation, the timing of the increase in the Songo Songo infrastructure capacity and the level of installed gas fired generation. Beginning in November 2010, the take or pay contract volume is set at 32 Mmscf/d through to July 2023, with a maximum daily quantity of 36 Mmscf/d. These contracts will be signed once agreements are finalised to increase the infrastructure capacity to approximately 100 Mmscf/d. In the meantime, gas continues to be supplied to the power plants under short term agreements, with prices that equate to those set out in the initialled long term agreements.

The same contract price applies to both contracts. It is composed of a wellhead price, an amount that is paid to Songas for the use of the gas processing and pipeline infrastructure and an amount that is charged by Orca Exploration for marketing and distribution. The wellhead price is fixed at approximately US$1.95/mcf and will increase at an expected 2% per annum from July 2009. From July 2012, there will be a step change in the wellhead price to a forecast US$2.83/mcf which will then increase at a forecast 2% per annum.

The other contractual pricing provisions (gas processing, pipeline, marketing and distribution costs) require EWURA approval and are subject to annual amendments. The Company will continue to pass on any increase or decrease in the EWURA approved charges to TANESCO/Songas. This protocol insulates Orca Exploration from any increases in the gas processing and pipeline infrastructure tariffs.

Based on the applications that Songas and Orca Exploration submitted to EWURA during Q2 2008, the initial all-in contract price is expected to be in the range of US$2.36/mcf - US$2.46/mcf. The final price will be determined once final charges are known. These charges are expected to vary annually dependent on infrastructure operating costs and volumes transported.

In response to the Tanzanian Power Sector Master Plan, which projects growth in electricity demand at 7% per annum, TANESCO has commenced planning for a 200 MW gas fired plant at Kinyerezi in Dar es Salaam. Orca Exploration has commenced discussions with interested parties in respect to the supply of gas to this plant (which could be operational by 2012).

There are currently approximately 190 MWs of gas fired generation in country operating on Additional Gas (maximum demand of 40 Mmscf/d). This includes the TANESCO Wartsila 100 MW plant, the sixth 42 MW turbine at Ubungo and 48 MWs of Aggreko emergency generation. Effective 31 July 2008, TANESCO terminated its power purchase agreement with Dowans Tanzania Limited ("Dowans") for 120 MWs of emergency generation. Dowans has recently offered these units for sale and accordingly it is expected that this generation will now remain in country and that a new power purchase agreement covering these units will be negotiated with TANESCO. A further 45 MWs is due to be commissioned at Tegeta during the second half of 2009 and in the event that Dowans remains in country, it is expected that the Aggreko contract will terminate at the end of 2008. When these factors are considered, it is forecast that there will be 262 MWs of installed generation at the end of 2008 rising to 307 MWs by the end of 2009. This will be in line with the gas processing and infrastructure capacity once the proposed interim solutions referred to above are implemented.

Industrial sector developments

During Q3 2008, Orca Exploration signed a contract with Tanzania Portland Cement Company ("TPCC") for the supply of gas to a new kiln at its Wazo Hill cement plant that is currently under construction. The supply of gas is expected to commence during Q2 2009 at a rate of approximately 2.0 Mmscf/d increasing to an expected 4.0 Mmscf/d in 2010. It is anticipated that TPCC may increase gas consumption above the contracted rates as early as 2010 given the significant growth in cement demand in Tanzania.

The Company has extended the term of seven contracts accounting for 87% of the industrial gas sales volumes for an additional five years from the dates that existing contracts were due to expire (the earliest termination date is now September 2014). In return the Company has agreed to cap the price of gas to these customers whilst also incorporating a floor price. This is expected to keep the price of gas in the range of US$7.38/mcf to US$11.49/mcf (increasing at 2% per annum).

The Company continues to sign and connect other smaller industrial customers to the Company's existing 35 kilometers of low pressure pipeline. Two industrial contracts were signed in Q3 2008 and gas is currently being supplied to 20 premises. It is expected that an additional 10 industrial customers will be connected over the next 12 months with the addition of 8 kilometers of pipeline adding an average demand of 1.2 Mmscf/d.

Compressed Natural Gas ("CNG") developments

During Q3, the Company continued to install CNG facilities in Dar es Salaam, including a compressor, a vehicle refuelling dispenser and two trailer filling facilities at a cost of US$2.5 million. The CNG facilities are expected to be operational in Q1 2009 leading to 0.7 Mmscf/d of CNG sales. It is anticipated that this market will expand rapidly to supply gas to consumers that cannot be cost-effectively connected to Orca's existing low pressure gas distribution system. Internal assessments are that this market has the potential to grow to 15 Mmscf/d, with the majority of the load growth being achieved in the industrial centres of Morogoro and Tanga and through the usage of CNG in vehicles.

Financial Results

Total sales of Additional Gas to the power sector were up 6% to 2,097 Mmscf (22.8 Mmscf/d) in Q3 2008 from 1,974 Mmscf (21.5 Mmscf/d) in Q3 2007. Power sales were constrained by the current gas processing infrastructure capacity limitations. Sales are expected to remain high in Q4 2008, although the short rains in December, with increased usage of the 561 MWs of installed hydro generation, may reduce demand during that period.

Sales of Additional Gas to Orca Exploration's industrial customers decreased 4% to 425 Mmscf (4.6 Mmscf/d) in Q3 2008 compared with 442 Mmscf (4.8 Mmscf/d) in Q3 2007. However the average achieved price was up 39% at US$13.29/mcf. Q3 2008 sales to the industrial sector followed historical trends with higher production than in the first half of the year as textile manufacturers increased output to maximise the benefit of cheaper indigenous cotton supplies.

Orca Exploration's Q3 2008 revenues increased 15% to US$7.3 million compared to Q3 2007. Funds from operations before working capital changes were up 1% to US$3.8 million. A review is currently underway to reduce the general and administrative costs and this will be implemented in Q1 2009.

The Company had cash and cash equivalents of approximately US$11.2 million at the end of Q3 2008 and an undrawn US$5.0 million short term overdraft facility.

Outlook

Orca is taking positive steps to adapt to the changing financial climate. We have increased our focus on the Company's core Tanzanian asset and are vigorously reviewing all aspects of our cost structure. Since the Company is well positioned to increase its value from its existing asset base, we will not be looking to acquire assets outside of Tanzania until the markets settle.

The implementation of infrastructure expansion in Tanzania in a timely manner remains the key focus of Orca Exploration. Interim solutions are now being implemented and once long term infrastructure expansion is committed, Orca Exploration anticipates the signing of the initialled long term power contracts within a relatively short period.

Orca Exploration acknowledges the commitment and support of the Tanzanian Government to expand gas developments at Songo Songo in a transparent process, with the right blend of free market pricing, and regulatory protection typical of other countries' energy sectors.

In a changing world, management fully appreciates that the Company's sustainability and growth are always dependent on our skilled and dedicated employees and our loyal shareholders. The demand for natural gas continues to grow in Tanzania and your Company remains committed to seek ways to increase reserves, expand markets and monetise its assets.

<< Consolidated Income Statements (unaudited) ORCA EXPLORATION GROUP INC. ------------------------------------------------------- ----------------- Three months ended Nine months ended (thousands of US dollars 30-Sep 30-Jun 30-Sep 30-Sep 30-Sep except per share amounts) 2008 2008 2007 2008 2007 ------------------------------------------------------- ----------------- Revenue 7,301 4,826 6,363 17,411 13,215 Cost of sales Production and distribution expenses (391) (457) (311) (1,124) (836) Depletion expense (1,554) (776) (1,334) (3,736) (2,879) Impairment of exploration and evaluation assets - (9,520) - (9,520) - ------------------------------------------------------- ----------------- 5,356 (5,927) 4,718 3,031 9,500 Administrative expenses (3,821) (3,918) (2,568) (10,834) (7,520) Net financing income/(charges) 74 135 862 (28) 938 ------------------------------------------------------- ----------------- Profit/(loss) before taxation 1,609 (9,710) 3,012 (7,831) 2,918 Taxation (793) (498) (1,070) (1,704) (1,456) ------------------------------------------------------- ----------------- Profit/(loss) after taxation 816 (10,208) 1,942 (9,535) 1,462 ------------------------------------------------------- ----------------- Profit/(loss) per share ------------------------------------------------------- ----------------- Basic (US$) 0.03 (0.34) 0.07 (0.32) 0.05 Diluted (US$) 0.03 (0.34) 0.06 (0.32) 0.05 ------------------------------------------------------- ----------------- Consolidated Balance Sheets (unaudited) ORCA EXPLORATION GROUP INC ------------------------------------------------------------------------- 30-Sep 30-Jun 31-Dec (thousands of US dollars) 2008 2008 2007 ------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents 11,178 11,924 16,515 Trade and other receivables 10,342 7,227 8,236 ------------------------------------------------------------------------- 21,520 19,151 24,751 Exploration and evaluation assets 412 - 6,881 Property, plant and equipment 60,784 61,589 61,157 ------------------------------------------------------------------------- 61,196 61,589 68,038 ------------------------------------------------------------------------- 82,716 80,740 92,789 ------------------------------------------------------------------------- LIABILITIES Current liabilities Trade and other payables 12,815 13,057 17,452 Non-current liabilities Deferred income taxes 4,909 4,116 3,205 Deferred additional profits tax 850 743 588 SHAREHOLDERS' EQUITY Capital stock 66,537 66,537 66,538 Capital reserve 3,157 2,655 1,023 Accumulated (loss)/income (5,552) (6,368) 3,983 ------------------------------------------------------------------------- 64,142 62,824 71,544 ------------------------------------------------------------------------- 82,716 80,740 92,789 ------------------------------------------------------------------------- Consolidated Statements of Cash Flows (unaudited) ORCA EXPLORATION GROUP INC ------------------------------------------------------- ----------------- Three months ended Nine months ended 30-Sep 30-Jun 30-Sep 30-Sep 30-Sep (thousands of US dollars) 2008 2008 2007 2008 2007 ------------------------------------------------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES Profit/(loss) after taxation 816 (10,208) 1,942 (9,535) 1,462 Adjustment for: Depletion and depreciation 1,566 794 1,375 3,782 2,977 Impairment of exploration and evaluation assets - 9,520 - 9,520 - Stock-based compensation 502 978 324 2,134 1,064 Deferred income taxes 793 498 652 1,704 1,117 Deferred additional profits tax 107 65 112 262 226 Interest income (11) (28) (273) (84) (434) Foreign exchange gain - - (414) - (414) ------------------------------------------------------- ----------------- 3,773 1,619 3,718 7,783 5,998 (Increase)/decrease in trade and other receivables (3,116) 70 (3,109) (2,106) (3,765) (Increase) in assets held for sale - - - - (2,847) (Decrease)/increase in trade and other payables (294) 2,877 1,683 88 4,690 ------------------------------------------------------- ----------------- Net cash flows from operating activities 363 4,566 2,292 5,765 4,076 ------------------------------------------------------- ----------------- CASH FLOWS USED IN INVESTING ACTIVITIES Exploration and evaluation expenditures (412) (2,220) (792) (3,051) (1,557) Property, plant and equipment expenditures (761) (1,631) (9,964) (3,409) (35,263) Interest income 11 28 273 84 434 (Decrease)/increase in trade and other payables 53 (1,340) (2,727) (4,724) 8,172 ------------------------------------------------------- ----------------- Net cash used in investing activities (1,109) (5,163) (13,210) (11,100) (28,214) ------------------------------------------------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES Normal course issuer bid - - (27) (2) (27) Shares issued - - 30,366 - 30,366 Foreign exchange gain - - 414 - 414 Proceeds from exercise of options - - - - 143 ------------------------------------------------------- ----------------- Net cash flow from financing activities - - 30,753 (2) 30,896 ------------------------------------------------------- ----------------- Decrease in cash and cash equivalents (746) (597) 19,835 (5,337) 6,758 ------------------------------------------------------- ----------------- Cash and cash equivalents at the beginning of the period 11,924 12,521 7,601 16,515 20,678 ------------------------------------------------------- ----------------- Cash and cash equivalents at the end of the period 11,178 11,924 27,436 11,178 27,436 ------------------------------------------------------- ----------------- Statement of Changes in Shareholders' Equity (unaudited) ORCA EXPLORATION GROUP INC ------------------------------------------------------------------------- Accumulated Capital Capital Income/ (thousands of US dollars) stock reserve (loss) Total ------------------------------------------------------------------------- Balance as at 1 January 2007 34,469 1,182 2,238 37,889 Shares issued 31,971 (810) - 31,161 Options exercised 143 - - 143 Stock-based compensation - 368 - 368 Normal course issuer bid (27) - - (27) Profit for the period - - 1,462 1,462 ------------------------------------------------------------------------- Balance as at 30 September 2007 66,556 740 3,700 70,996 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Accumulated Capital Capital Income/ (thousands of US dollars) stock reserve (loss) Total ------------------------------------------------------------------------- Balance as at 1 January 2008 66,538 1,023 3,983 71,544 Stock-based compensation - 2,134 - 2,134 Normal course issuer bid (1) - - (1) Loss for the period - - (9,535) (9,535) ------------------------------------------------------------------------- Balance as at 30 September 2008 66,537 3,157 (5,552) 64,142 ------------------------------------------------------------------------- >>

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.

SOURCE: Orca Exploration Group Inc.

Nigel A. Friend, CFO, +255 (0)22 2138737, nfriend@orcaexploration.com; Peter R. Clutterbuck, CEO, +44 (0) 7768 120727, prclutterbuck@orcaexploration.com

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