Orca Energy Group (ORCB) Q2 2024 earnings summary

Executive summary

• Revenue for Q2 2024 declined 11% year-over-year to $25.0 million, with net income down 56% to $1.2 million, mainly due to lower power sector sales and higher FX losses from Tanzanian shilling devaluation.

• Gas deliveries fell 25% year-over-year in Q2 2024, impacted by increased hydroelectric generation from the Julius Nyerere Hydropower Project and declining Songo Songo field deliverability.

• The Protected Gas regime ended July 31, 2024; all Songo Songo gas is now classified as Additional Gas, but payment disputes have arisen with TPDC and the Government of Tanzania.

• A Notice of Dispute was filed in August 2024 for breaches of the PSA and Gas Agreement, seeking damages exceeding $1.2 billion.

• The company forecasts average Additional Gas sales for 2024 in the range of 70–80 MMcfd, reflecting current contracts and the end of Protected Gas.

Financial highlights

• Q2 2024 revenue: $25.0 million (down 11% year-over-year); six months: $50.0 million (down 14%).

• Net income attributable to shareholders: $1.2 million in Q2 2024 (down 56%); $2.2 million for six months (down 65%).

• Operating netback per mcf: $3.19 in Q2 2024 (up 27%); $2.98 for six months (up 23%).

• Net cash flows from operating activities: $16.7 million in Q2 2024 (up 4%); $10.6 million for six months (down 55%).

• Capital expenditures: $1.9 million in Q2 2024 (up 36%); $3.4 million for six months (up 9%), mainly due to the SS-7 well workover.

Outlook and guidance

• Forecasts 2024 average Additional Gas sales of 70–80 MMcfd, reflecting current contracts and the end of Protected Gas.

• The SS-7 well intervention is expected to commence in September 2024, with production anticipated to resume in early Q4 2024, potentially increasing field deliverability by 20–25 MMcfd.

• Capital projects, except the SS-7 well intervention, are on hold pending license extension and dispute resolution.

• Sufficient cash flow expected to cover 2024 obligations, but FX conversion risk in Tanzania remains.

• The company continues to assess flowline reconfiguration to sustain plateau production rates.