Mr. Jay Lyons reports

ORCA ENERGY GROUP INC. ANNOUNCES COMPLETION OF Q2 2023 INTERIM FILINGS

Orca Energy Group Inc. has filed its condensed consolidated interim financial statements, and management's discussion and analysis (MD&A) for the three- and six-month periods ended June 30, 2023 (Q2 2023), with the Canadian securities regulatory authorities. All amounts are in U.S. dollars unless otherwise stated. Any terms not defined herein have the meanings given to such terms in the Q2 2023 MD&A.

Jay Lyons, Chief Executive Officer, commented: "We have had an active first half of the year, with the Company delivering a robust financial and operational performance.

"We continue to assess the potential to carry out a number of projects later this year and into 2024. These workstreams will enable development of additional reserves to meet increasing demand. However, capital allocation towards these initiatives will need to be weighed against the existing timeline remaining on the license period and are subject to the necessary approvals. As such, we formally requested TPDC initiate the process to work towards a license extension. As evidenced by the Group's significant investment in Tanzania to date, we are a forward looking organization and want to keep supporting Tanzania's economic and industrial growth by realizing further value from the Songo Songo Gas Field for the benefit of all stakeholders. We await a formal response from TPDC and look forward to actively engaging with the Government of Tanzania and TPDC to progress this matter.

"However, and although acquisition has now commenced, delays continue to hamper the progress of the 3D seismic project. This is largely due to poor performance of the contractor and lack of equipment reliability. As a result, the Company is now reviewing its options regarding the way forward for this project."

Highlights

• Revenue decreased by 1% for Q2 2023 and increased by 5% for the six months ended June 30, 2023 compared to the same prior year periods. The decrease for Q2 2023 is primarily a result of higher TPDC share of revenue as an outcome of decreased capital expenditures and lower Cost Gas revenue. The increase for the six months ended June 30, 2023 is primarily a result of increased sales to the power sector and higher current income tax adjustment partially offset by a higher TPDC share of revenue.
• Gross conventional natural gas production was in line with forecasts and averaged 120.6 MMcfd (total) for Q2 2023, of which 84.2 MMcfd was Additional Gas. Gas deliveries decreased by 2% for Q2 2023 and increased by 12% for the six months ended June 30, 2023 compared to the same prior year periods. The decrease for Q2 2023 was primarily due to increased planned maintenance of the wells and compression facilities as well as increased hydro production following the onset of the wet season. The increase for the six months ended June 30, 2023 was primarily due to increased gas sales to TPDC through the NNGI.
• We now anticipate our average gas sales to be in the range of 90.0 to 95.0 MMcfd during 2023, compared to 2022 sales of 86.8 MMcfd.
• Net income attributable to shareholders decreased by 59% for Q2 2023 and by 55% for the six months ended June 30, 2023 compared to the same prior year periods, primarily as a result of the increased depletion expense.
• Net cash flows from operating activities decreased by 43% for Q2 2023 and by 28% for the six months ended June 30, 2023 compared to the same prior year periods. This was primarily a result of changes in non-cash working capital adjustments.
• Capital expenditures decreased by 58% for Q2 2023 and by 82% for the six months ended June 30, 2023 compared to the same prior year periods. The capital expenditures in Q1 and Q2 2023 primarily related to the 3D seismic acquisition program. The capital expenditures in Q1 and Q2 2022 primarily related to well workover program.
• The Songo Songo 3D seismic project moved towards completion of mobilization for acquisition at the end of Q2. The progress of the contractor has been slow with delays due to technical challenges associated with the remote location, exacerbated by challenging weather and supply issues. As a result, the company is evaluating the options for delivering this project.
• We commenced detailed planning work to carry out a number of projects in late 2023 and 2024. These include an intervention to restore production on the SS-7 well (from the non-producing southern compartment of the field) and installation of a common inlet manifold to optimize production performance of the well gathering system. We have also commenced front end engineering for installing further compression to support production field compartments where pressure is declining. Additionally, procurement of long lead items is ongoing. This will provide the option for drilling an infill development well to access additional reserves in the proven southern compartment of the field. All capital allocation decisions will be based upon prudent economic evaluations and returns given the timeline of the existing license period through to September 2026. Execution of projects will be subject to the necessary stakeholder and government approvals.
• The Company exited the period in a strong financial position with $71.3 million in working capital (December 31, 2022: $61.6 million) cash and cash equivalents of $102.9 million (December 31, 2022: $96.3 million) and long-term debt of $34.9 million (December 31, 2022: $39.8 million). The decrease in long-term debt is related to payment of $5.0 million in April 2023, representing the second semi-annual repayment of the Company's long-term debt.
• During Q2 2023, the PGSA with TANESCO, which was due to expire on June 30, 2023, was extended to a new expiry date of July 31, 2024. As part of the extension, the maximum daily quantity of gas to be sold was increased from 16.0 MMcfd to 26.0 MMcfd. Discussions with TANESCO will now focus on a further extension of this contract to the end of the current period of the development license in October 2026 to meet expected gas demand and to allow the Company to effectively deploy near term capital.
• As at June 30, 2023 the current receivable from TANESCO was $3.6 million (December 31, 2022: $3.7 million). During Q2 2023 TANESCO paid the Company $6.5 million against the 2020 take or pay invoice and $3.3 million against the 2021 take or pay invoice. The TANESCO long-term receivable as at June 30, 2023 and as at December 31, 2022 was $22.0 million with a provision of $22.0 million. Subsequent to June 30, 2023 the Company has invoiced TANESCO $1.1 million for July 2023 gas deliveries and TANESCO has paid the Company $3.3 million. Additionally, subsequent to June 30, 2023 TANESCO paid the Company $3.4 million against the 2021 take or pay invoice and TANESCO have now settled the final outstanding principal take or pay invoice (related interest balances remain outstanding).
• On February 24, 2023, the Company declared dividends of CDN$0.10 per share on each of its Class A common voting shares ("Class A Shares") and Class B subordinate voting shares ("Class B Shares") for a total of $1.5 million to the holders of record as of March 31, 2023 paid on April 14, 2023.
• On May 17, 2023, the Company declared dividends of CDN$0.10 per share on each of its Class A Shares and Class B Shares for a total of $1.5 million to the holders of record as of June 30, 2023 payable on July 14, 2023.
• During Q2 the Company formally requested to TPDC to initiate the process of license extension, in accordance with the terms of the PSA. The Company awaits a formal response from TPDC on this and continues to actively engage with the Government of Tanzania to progress this matter.
• On August 8, 2022, the Company issued a redemption notice to Swala Oil & Gas (Tanzania) plc ("Swala TZ"), requesting that Swala TZ redeem 20% of the outstanding Swala TZ convertible preference shares ("Preference Shares") by August 23, 2022, which were issued to the Company in accordance with the investment agreement dated December 29, 2017 (the "Investment Agreement"), between the Company, the Company's subsidiary PAE PanAfrican Energy Corporation ("PAEM") and Swala's TZ subsidiary, Swala (PAEM) Limited ("Swala UK"). Swala TZ responded to the Company's redemption notice and is disputing its obligation to redeem the Preference Shares. On January 31, 2023, the Company issued a further redemption notice to Swala TZ, requesting that Swala TZ redeem a further 20% of the outstanding Preference Shares by February 15, 2023. As at August 16, 2023, the redemption notice requests of the Company remain outstanding. The Company has submitted a notice of claim to the Tanzanian liquidators.
• On August 5, 2022, the Fair Competition Commission of the United Republic of Tanzania ("FCC") issued Provisional Findings with respect an investigation the FCC initiated against Orca, PAEM, PanAfrican Energy Tanzania Limited ("PAET") and Swala UK and Swala TZ in response to a letter Swala TZ sent the FCC on March 31, 2022. In the Provisional Findings, the FCC claimed that Orca's sale of investment shares held in PAEM to Swala UK pursuant to the Investment Agreement amounted to a notifiable merger whose non-notification infringed the provisions of the Fair Competition Act, 2003 and the Fair Competition Rules, 2018. In September 2022, the Company responded to the FCC's Provisional Findings submitting that the transactions did not amount to a prohibited merger and that, if the transactions were notifiable, it was Swala UK who had the obligation to notify the authorities of the merger and not Orca, PAEM and PAET. On November 11, 2022, the FCC issued another letter to Orca, PAEM and PAET requesting a settlement plan to be submitted to the FCC. The Company is optimistic that there is no merit to the allegations of the FCC against the Company.
• On April 3, 2023, Swala TZ announced that a meeting of its creditors held on March 31, 2023, resolved that Swala TZ be placed into liquidation. Also, on March 31, 2023, Apex Corporate Trustees (UK) Limited appointed representatives of Grant Thornton UK LLP as administrators of Swala UK. Subsequent to June 30, 2023, the Company has repurchased the 7.9% shares in PAEM held by Swala UK, for $7.5 million.

The complete Condensed Consolidated Interim Financial Statements and Notes and Management's Discussion & Analysis for the three and six months ended June 30, 2023 may be found on the Company's website or on the Company's profile on SEDAR.

Orca Energy Group Inc.

Orca Energy Group Inc. is an international public company engaged in natural gas development and supply in Tanzania through its subsidiary, PanAfrican Energy Tanzania Limited. Orca trades on the TSX Venture Exchange under the trading symbols ORC.B and ORC.A.

The principal asset of Orca is its indirect interest in the Production Sharing Agreement ("PSA") with TPDC and the Government of Tanzania in the United Republic of Tanzania. This PSA covers the production and marketing of certain conventional natural gas from the Songo Songo licence offshore Tanzania. The PSA defines the gas produced from the Songo Songo gas field as "Protected Gas" and "Additional Gas". The Protected Gas is owned by TPDC and is sold under a 20-year gas agreement (until July 31, 2024) to Songas and Tanzania Portland Cement PLC. Songas is the owner of the infrastructure that enables the gas to be processed and delivered to Dar es Salaam, which includes a gas processing plant on Songo Songo Island. Additional Gas is all gas that is produced from the Songo Songo gas field in excess of Protected Gas.

We seek Safe Harbor.