Mr. W. David Lyons reports

ORCA EXPLORATION ANNOUNCES COMPLETION OF ITS Q1 2018 INTERIM FILINGS

Orca Exploration Group Inc. has filed its condensed consolidated interim financial statements and management's discussion and analysis for the three-month period ended March 31, 2018, with the Canadian securities regulatory authorities.

Operating and financial highlights (amounts are in U.S. dollars unless otherwise stated):

• On Jan. 18, 2018, the company sold 7.9 per cent of PAE PanAfrican Energy Corp. (PAEM), a wholly owned subsidiary, for a net sales price of $21.0-million ($17.0-million in cash and $4.0-million in preferred shares with a 10-per-cent coupon) based on a net enterprise value of $265.0-million. The effective date of the transaction was Jan. 1, 2017, and, as a consequence, the purchase price was reduced by $1.4-million to reflect the buyer's share of cash flow from the effective date of the transaction until closing. The buyer has until June 29, 2018, to acquire up to a maximum of 40 per cent of PAEM under the same terms and conditions. There are no assurances given that one or more of the transactions will be completed by June 29, 2018, or that they will be completed on the terms previously disclosed.
• On Jan. 18, 2018, the company declared a dividend of 60 Canadian cents per share on each of its Class A voting and Class B subordinate voting shares to holders of record as of Jan. 31, 2018. The dividend was paid on Feb. 7, 2018. The total dividend amount paid was $16.9-million.
• The company's revenue for the quarter decreased by 22 per cent to $14.2-million from $18.1-million in first quarter 2017. The decrease is the result of: (i) lower sales volumes and; (ii) lower cost gas allocations, which resulted in an increase in profit gas attributable to Tanzanian Petroleum Development Corp. (TPDC). This was a consequence of the decline in the cost pool with the company having now recovered the cost of the 2015-2016 capital program. Additional gas deliveries and sales for the quarter averaged 37.4 million standard cubic feet per day (MMcfd), a decrease of 14 per cent from 43.5 MMcfd in first quarter 2017. The decrease in additional gas volumes between periods is primarily the result of reduced nominations of natural gas volumes by Tanesco. The decrease in volumes was partially offset by a 10-per-cent rise in the weighted-average price for the year to $5.16 per thousand cubic feet from $4.68 per Mcf in first quarter 2017. The increase in price is a consequence of the change in the sales mix.
• The company recorded a net loss of $4.6-million for the quarter compared with a net income of $2.8-million in first quarter 2017. The net loss for the quarter is primarily due to: (i) the increase in finance expenses relating to participatory interest expense of $3.1-million to the International Finance Corp. (IFC); and (ii) the increase in stock-based compensation of $3.8-million. The participatory interest expenses charged during the quarter of $3.1-million includes an additional payment of $2.6-million associated with the sale of the 7.9-per-cent interest in PAEM in accordance with the terms of the IFC loan agreement. As a result of the additional payment, the annual variable participatory interest is reduced to 6.4 per cent from 7.0 per cent.
• The company's net cash flows from operating activities for the year decreased by 83 per cent to $1.5-million from $8.8-million in first quarter 2017. The decrease is primarily a consequence of the exercise of stock-based compensation incentives following the closing of the sale of the minority interest in PAEM.
• The company's funds flow from operations for the quarter was an outflow of $7.1-million compared with an inflow of $5.9-million in first quarter 2017. The decrease is primarily a combination of the exercise of stock appreciation rights and restrictive stock units and the participatory interest paid to the IFC.
• Working capital decreased to $65.2-million at March 31, 2018, compared with $69.6-million at Dec. 31, 2017. The decrease is primarily due to the increase in stock-based compensation payments during the quarter.
• At March 31, 2018, the current receivable from Tanesco was nil (fourth quarter 2017: nil). During the quarter, the amounts received from Tanesco were in excess of the revenue recognized for gas sales to Tanesco resulting in a deferred revenue balance of $8.1-million (fourth quarter 2017: $8.4-million) after the reallocation of $4.2-million to net field revenue during the quarter. The Tanesco long-term trade receivable at March 31, 2018, and Dec. 31, 2017, was $74.4-million (provision of $74.4-million). Subsequent to March 31, 2018, the company has invoiced Tanesco $1.3-million for 2018 gas deliveries, and Tanesco has paid the company $6.2-million.

               OPERATING AND FINANCIAL HIGHLIGHTS
       (expressed in $000 (U.S.) unless indicated otherwise) 

                                               Three months ended March 31,    
                                                          2018        2017
Operating
Daily average gas delivered and sold (MMcfd)
Additional gas                                            37.4        43.5
Industrial                                                13.9        11.6
Power                                                     23.5        31.9
Average price (U.S.$/Mcf)
Industrial                                               $7.79       $7.75
Power                                                     3.60        3.57
Weighted average                                          5.16        4.68
Operating netback  (U.S.$/Mcf) (1)                        2.23        3.34

Financial
Revenue                                                $14,223     $18,126
Net cash flows from operating activities                 1,527       8,787
Per share -- basic and diluted (U.S.$)                    0.04        0.25
Net (loss) income                                       (4,638)      2,840
Per share -- basic and diluted (U.S.$)                   (0.13)       0.08
Funds flows (used in) from operations (1)               (7,054)      5,926
Per share -- basic and diluted (U.S.$)                   (0.20)       0.17
Capital expenditures (excluding transfers)                 819         120

(1) The funds flow from operations and operating netback are 
non-generally accepted accounting principle measures, which 
may not be comparable with other companies. Please refer to 
management's discussion and analysis for information on 
non-GAAP measures. 

The complete condensed consolidated unaudited interim financial statements and MD&A for the three-month period ended March 31, 2018, may be found on the company's website or on the company's profile on SEDAR.

About Orca Exploration Group Inc.

Orca Exploration Group is an international public company engaged in natural gas exploration, development and supply in Tanzania through its subsidiary PanAfrican Energy Tanzania, as well as oil and gas appraisal in Italy.

We seek Safe Harbor.