Orca announced its results for the year ended December 31, 2009.
During 2009, Orca Exploration strengthened its financial position generating US $12.7 million of funds flow before working capital changes, finishing the year with cash resources of US$14.5 million and no debt.
The Company's cash generative natural gas production and marketing operations in Tanzania continue to provide Orca with a solid financial and operating foundation. During 2010 the Tanzanian operations are forecast to generate between US $15 million and US $20 million.
Orca is well positioned to expand its reserve base and to seek additional growth through the future acquisition and drilling of new oil exploration prospects in Africa, the Middle East or southern Europe. The Company is also planning the drilling in 2011 of a low risk, high potential exploration prospect adjacent to the Orca operated Songo Songo natural gas field.
Exploration acquisition targets are currently under close review. They must meet carefully selected strategic growth criteria - a proven hydrocarbon basin, the ability to draw on a knowledge base about the region, significant upside potential and the ability to drill within two years. The preference is for oil interests that can be commercialized rapidly with low upfront capital expenditure.
Orca has emerged from the financial turmoil of the past year in a strong operating, marketing and financial position. General and administrative expenses have been reduced and opportunities for growth in the market for Tanzanian natural gas continue to increase.
The outlook for Orca Exploration is positive. After some consolidation in 2010 as the Company grows its asset base, 2011 is expected to be a significant year with the potential that relatively low risk exploration wells will be drilled.
2010 Tanzanian targets
During 2010, the Company will work to build larger natural gas markets in Tanzania to maximize the utilization of existing proven and probable reserves. Because significantly increased natural gas sales are now dependent on expanded natural gas processing and throughput from the Songo Songo field, work on resolving these issues will be a priority in 2010.
The principal targets for 2010 are to:
A plan to increase Songo Songo reserves
As at December 31, 2009, the independent reserve evaluator, McDaniel and Associates Consultants Ltd. ("McDaniel") assessed that the Company's gross proven (1P) and proven and probable (2P) Songo Songo Additional Gas reserves to the end of the license period to be 384.9 (2008: 389.4 Bcf) and 490.2 (2008: 491.4 Bcf) respectively. This represents a marginal decrease over 2008 due to produced volumes, but is an increase on original reserves. Since the field was brought on production in 2004, there has been a 125% increase in the 1P and a 92% increase in the 2P Company gross Additional Gas reserves to the end of the license period. The Company continues to collect pressure data to be used in future reserve evaluations.
Based on the current reserves and anticipated field deliverability profiles, Orca intends to develop gas markets that will utilize approximately 100 to 120 MMcfd of Additional Gas (140 - 160 MMcfd including Protected Gas) on an average annual basis. To meet these sales levels, there is the need to drill two new development wells in the field.
Orca anticipates that reserves can be further increased by the drilling of the Songo Songo West exploration prospect. McDaniel evaluated this prospect and assessed it to contain unrisked mean resources of 551 Bcf and an upside case in excess of 1 Tcf. This prospect will be drilled in 2011.
Orca Exploration's 2009 revenues increased 6% to US$25.3 million compared to 2008. Funds from operations before working capital changes increased 30% to US$12.7 million. The Company's sales revenues were shielded from low oil price risks due to fixed gas price contracts, and floors tied to oil pricing.
Cash flows benefited from a 22% reduction in general and administrative costs to US$11.5 million. The majority of these costs involve the operation of the Songo Songo gas wells and gas processing operations rather than corporate overheads.
During 2009, the Company continued to receive the maximum amount of Cost Gas. In the second half of 2010, cash flows may be sufficiently strong enough to see a reduction in the Cost Gas and a higher Profit Gas contribution.
Orca wants to express its appreciation to Peter Clutterbuck for his leadership as CEO since the Company came into existence in 2004. He stepped down in late March 2010 to assume the role of Deputy Chairman. Mr. Clutterbuck has played a key role in advancing Orca's growth and development over its first six years and on behalf of the Board of Directors and our shareholders we thank him for his many contributions.
Orca Exploration enters 2010 in a strong financial, operating and expansion position, as a result of revenue growth, and tight financial discipline. The Company is expected to continue to increase its cash generation from the Tanzanian assets in 2010 and is excited about its potential to grow substantially through exploration drilling in Tanzania and other drilling programs involving acquisitions now under active review. The Company is well placed to add assets due to its strong financial base, and the utilization of a management team that has the full range of expertise needed to manage oil and gas exploration and production at the highest standards.
Orca appreciates the confidence and support of its loyal shareholders. Management remains very optimistic about your Company's prospects in Tanzania and other countries. It will work hard to seek additional growth, expand Orca's reserve base, and build more value for the Company.
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