Mr. Jay Lyons reports

ORCA ENERGY GROUP ANNOUNCES OPERATIONAL UPDATE

Orca Energy Group Inc. has provided an operational update. All amounts are in United States dollars unless otherwise stated.

Jay Lyons, chief executive officer, commented:

"I am pleased to report that Orca achieved average natural gas production (for additional gas (AG)) of 85.6 MMcfd [million cubic feet per day] during 2023, in line with its revised forecasts for the period, with total field production averaging 126.0 MMcfd for the year.

"We are pro-actively managing daily production volumes so we can meet our contracted sales obligations through 2026. We are also actively seeking to engage with the government of Tanzania to commence discussions on an extension to the Songo Songo development licence beyond October, 2026. We have emphasized to the government that achieving a licence extension and U.S. dollar availability are prerequisites for making further investments into the field in order to underpin production. This will ensure that low cost reliable gas continues to be produced for the benefit of all Tanzanian citizens for the foreseeable future. We look forward to actively working with all of our partners in country to deliver these commercial milestones in a timely manner.

"As we approach the end of the protected gas era from August, 2024, we forecast average gas production (for AG) to be in the range of 80 to 90 MMcfd for the full year and we look forward to providing further updates to our stakeholders over the coming months."

Operational

Production, sales and demand

Total gross conventional natural gas production, including fuel gas, was in line with revised forecasts and averaged 121.8 million cubic feet per day for Q4 2023, of which 80.8 MMcfd was AG. Gas sales decreased by 2.5 per cent for Q4 2023 compared with Q3 2023 and decreased by 1.4 per cent for the 12 months ended Dec. 31, 2023, compared with the same prior year period.

Average production guidance (AG) for 2024 is forecast to be in the range of 80 to 90 MMcfd (expected toward the lower end of the range) for the full year, based on current contracted volumes continuing and the end of the protected gas (PG) regime on July 31, 2024.

Discussions are continuing with Songas Ltd. and Tanzania Portland Cement Company Ltd (TPCLC) to negotiate new commercial terms of the gas agreement from Aug. 1, 2024, to supply the volumes which are currently dispatched as PG, the obligation for which ends on July 31, 2024.

Discussions are also continuing with Tanesco to extend the portfolio gas supply agreement (PGSA) between the company, the Tanzania Petroleum Development Corp. (TPDC) and the Tanzanian Electric Supply Company (Tanesco), which currently ends on July 31, 2024.

Field development activities

Facilities management

The company continues to carry out studies to identify opportunities to improve the efficiency of operations at the Songas plant. The company will install positive chokes in all wells in early Q1 2024 to reduce bottlenecking on the gas flow path. At a cost of $77,000, this is expected to increase production, initially by two to three MMcfd.

Well SS-7 intervention: An intervention in offshore well SS-7 remains in the plan to take place in 2024, subject to the availability of United States dollars (USD) and board approvals. Based on expected supplier mobilization timelines, operations are now expected to take place in the second quarter of 2024. Following the negotiation of commercial terms with service providers, the total expected cost of the project has increased to $13.3-million. The work program is designed to shut off water production which caused the shut in of the well in 2019. The cause of the water production is interpreted to be a failed cement bond outside the production liner which created a flow path for water into the well when it was on production. If successful, SS-7 is expected to increase field deliverability by 20 to 25 MMcfd primarily from the non-producing southern compartment.

Production logging: The production logging program remains planned in conjunction with the SS-7 intervention and will take place early in the second quarter of 2024. The total estimated cost is $1.1-million. This work program will provide detailed reservoir information, in addition to annual pressure surveys, which enables improved accuracy of forecasting future reservoir performance. Key targeted wells under the program include SS-3, SS-5, SS-7 and SS-10.

Common inlet manifold (CIM): Front-end engineering continues on CIM in order to optimize gas flow across the Songas gas plant and the national gas plant, both of which are supplied with gas from the Songo Songo gas field. Project construction and installation are expected to occur in Q4 2024, with commissioning in Q1 2025, subject to final investment decision (FID) and government of Tanzania (GoT) approvals, at an estimated cost of $5-million to $6-million.

Financial and corporate

The company continues to wait on a response from TPDC on the initiation of the licence extension which was requested by the company in April, 2023. The company is continuing the dialogue with TPDC and the Ministry of Energy seeking to expedite licence extension discussions.

Cash and cash equivalents of $101.6-million, as at Dec. 31, 2023.

For 2024, the development program outlined above requires a firm capital budget of $21.6-million. Subject to the necessary board and in-country approvals and the availability of USD, this capital budget will finance the following projects:

• A common inlet manifold to optimize production performance of the well gathering system;
• An intervention on well SS-7 to restore production (from the non-producing southern compartment of the field);
• Production logging on wells SS-3, SS-4, SS-5, SS-7 and SS-10.

As at Dec. 31, 2023, the current receivable from Tanesco was $5.9-million (Dec. 31, 2022: $3.7-million). As reported in previous announcements, Orca continues to witness decreased availability of USD in Tanzania. To date, this has impaired PAET's ability to convert local currency into USD required for the company's planned capital commitments in 2024. The company has requested assistance from TPDC and the Bank of Tanzania in sourcing USD for the 2024 capital plan, with further updates to be made as necessary.

On Dec. 17, 2023, company, its subsidiary, PAE PanAfrican Energy Corp. (PAEM), and PAET entered into a settlement agreement with the Fair Competition Commission of the United Republic of Tanzania (FCC) to settle allegations under the provisional findings issued by the FCC on Aug. 5, 2022. The settlement was made without prejudice to the company's objections to the validity of the allegations and without any admission of liability, for an aggregate settlement amount of $200,000.

Orca will continue to manage production according to contracts to ensure all contract volumes are met through to October, 2026.

About Orca Energy Group Inc.

Orca is an international public company engaged in natural gas exploration, development and supply in Tanzania through its subsidiary, PanAfrican Energy Tanzania Ltd.

We seek Safe Harbor.