Orca Exploration (formerly EastCoast Energy Corporation) announces its results for the year ended 31 December 2006



    TORTOLA, British Virgin Islands, April 30 /CNW/ - Orca Exploration Group
Inc ("Orca Exploration" or the "Company") announces its results for the year
ended 31 December 2006.

    
    FINANCIAL AND OPERATING HIGHLIGHTS

    Year ended 31 December                          2006      2005    Change
    -------------------------------------------------------------------------
    Financial (US$'000 except where otherwise
     stated)

    Revenue                                       13,828     5,759       140%
    Profit before taxation                         4,261       953       347%
    Operating netback (US$/mcf)                     2.45      2.11        16%
    Cash and cash equivalents                     20,678     3,198       547%
    Working capital                               20,430     2,211       824%
    Shareholders' equity                          37,889    16,662       127%
    Profit per share - diluted (US$)                0.10      0.02       400%
    Funds  from operations before working
     capital changes                               6,030     2,268       166%
    Funds per share from operations before
     working capital changes - diluted (US$)        0.24      0.09       167%
    -------------------------------------------------------------------------
    Operating

    Additional Gas sold - industrial (mmscf)       1,466       777        89%
    Additional Gas sold - power (mmscf)            3,371     1,672       102%
    Average price per mcf - industrial (US$)        8.22      7.07        16%
    Average price per mcf - power  (US$)            1.90      1.66        14%

    Gross Recoverable Reserves to end of licence
     (bcf)

    Proved                                           266       241        10%
    Probable                                         149        79        89%
    Proved plus probable                             415       320        30%

    Present Value, discounted at 10% (US$ million)

    Proved                                         109.0      67.7        61%
    Proved plus probable                           158.7      83.8        89%
    -------------------------------------------------------------------------
    

    President & CEO's Letter to Shareholders

    2006 was another good year for Orca Exploration Group Inc (formerly
EastCoast Energy Corporation). The Company continued development of the Songo
Songo gas field in Tanzania with positive results. Reserves have increased, a
substantial development programme is underway, sales are ahead of forecast and
markets continue to grow as significant gas-fired generation is installed at
Dar es Salaam over the next 12 months.
    The Company has also developed a strengthened exploration capability
through the recruitment of key individuals with substantial international oil
and gas experience especially in West Africa. Building on this, the Company
has indicated its intention to identify and acquire oil opportunities by the
end of 2007 as well as continuing to develop its existing business in
Tanzania.
    During 2006 Orca Exploration delivered substantial performance results in
all key areas.

    
    -   Increased profit before tax by 347% to US$4.3 million (2005:
        US$1.0 million) and funds flow from operations before working capital
        changes by 166% to US$6.0 million.

    -   Produced 18.0 bcf from the Songo Songo field (2005: 14.7 bcf),
        increasing the volume produced since the commencement of commercial
        operations in 2004 to 37.3 bcf. Over 2006 Orca Exploration did not
        record any downtime that impacted gas supply to major customers.

    -   Increased the certified gross proved (1P) and proved and probable
        (2P) recoverable Additional Gas reserves by 10% to 266 bcf and 30% to
        415 bcf respectively.

    -   Expanded the Company's industrial gas distribution network to
        28 kilometers by constructing 3 kilometers of new pipeline.

    -   Commenced gas sales to six new industrial customers and increased
        annual sales to the industrial sector by 89% to an average of
        4.0 mmscf/d.

    -   Signed a two-year contract to sell Additional Gas to the 48 MWs of
        emergency power generation operated by Aggreko plc at Dar es Salaam.
        In 2006 sales to the power sector increased 102% to an average of
        9.2 mmscf/d.

    -   Initiated remedial downhole work on SS-9 to increase Songo Songo
        production by 30 mmscf/d. This was successfully completed in Q1 2007.

    -   Negotiated a contract for the drilling of a new Songo Songo
        development well (SS-10) to further increase production capability in
        2007.

    -   Raised Cdn$21.5 million gross through a fully subscribed one-for-
        seven rights offering of 3.3 million Class B shares.
    

    Market Development

    The power and industrial markets continue to develop in line with
expectations with a 102% and 89% increase in volumes respectively. During 2006
average gas sales increased 98% to 13.3 mmscf/d. By Q4 2006 Additional Gas
sales had increased to 17.4 mmscf/d (industrial sector 4.3 mmscf/d, power
sector 13.1 mmscf/d) as a result of the installation of some emergency power
plants. Industrial and power demand is expected to increase further as new gas
fired generation is installed.
    During 2006 the lower than average rainfalls experienced for the last
three years severely impeded TANESCO's ability to operate its 561 MWs of
installed hydro generation capacity at normal levels. This restriction,
combined with an increase in overall demand for electricity, led to a
significant shortfall in power generation and the need to load shed for up to
14 hours a day. The Government of Tanzania and TANESCO moved swiftly to
rectify the problem and entered into two contracts with Aggreko plc
("Aggreko") and Dowans Tanzania Limited ("Dowans") for the supply of 140 MWs
of temporary gas-fired generation. Aggreko fulfilled its obligations in
October 2006 with the startup of 40 MWs of generation (48 MWs installed).
Dowans was contracted to supply the remaining 100 MWs. A 20 MW temporary
generator was installed in January 2007 and a further 60 MWs is currently
being assembled and should be operational during Q3 2007. A final 40 MWs is
being shipped to Tanzania and is expected to be installed during Q4 2007. This
will increase the total installed emergency generation to 168 MWs, of which
the suppliers are obligated to supply 140 MWs.
    This emergency generation is now forecast to be operational until at
least the end of 2008. In addition, a Wartsila 100 MW unit is still on target
to be operational by the end of Q3 2007 and a new 45 MW plant at Tegeta in
Dar es Salaam is forecast to be operational by mid-2008. If the Dowans
emergency units remain in country after the end of 2008, the conversion of the
100 MW IPTL plant (that currently uses heavy fuel oil) may be delayed. As a
result of the acceleration of the installation of the emergency units the
Company may be supplying Additional Gas to up to 310 MWs of power generation
(including 42 MWs of existing generation at the Ubungo Power Plant) by the end
of 2007. At a peak, these units would require approximately 68 mmscf/d (or
41 mmscf/d at a 60% utilisation rate).
    The Company is negotiating a long term portfolio contract with the
electricity utility, TANESCO, for the supply of gas to these units. TANESCO is
in the process of determining their volume requirements given the improved
hydrology in the country. A contract is forecast to be in place in the next
three months.
    Whilst Tanzania will have significant gas fired generation in country by
December 2007, above average rainfall in January 2007 (thought to be
attributable to El Nino) significantly changed the outlook for the 561 MWs of
Tanzania's installed hydro generation. The Mtera dam which supplies water to
the 80 MW Mtera and the 204 MW Kidatu hydro stations, rose from a non
operational level of 687 meters above sea level to its maximum capacity of
698 meters. As a result, it is anticipated that these hydro units will have
sufficient water to run at high utilisation rates during 2007 and 2008. The
remaining 277 MWs of hydro generation is "run of river" and will only be
available for four to five months of a year based on average rainfalls.
Accordingly, the Company is forecasting that sales to the power sector will
average approximately 15 - 20 mmscf/d during 2007.
    Whilst the power sector provides a solid base load of gas sales, the
Company is embarking on an aggressive programme to increase sales to the
industrial sector. The Company now has 13 industrial customers in 15
locations. A 16-kilometer expansion of the existing 28-kilometer distribution
system is planned for 2007 at a cost of US$4.5 million. It is forecast that
this will increase industrial sales to 7.5 mmscf/d by the end of 2007.
    In addition, the Company, in conjunction with TPDC, is planning to
commence the sale of Compressed Natural Gas ("CNG") by Q1 2008. The intention
is to transport CNG to industrial customers and markets that are not located
near the existing distribution pipeline. This could be an exciting new market
that has the potential to develop to over 10 mmscf/d in the coming years.
    The Company is also looking at constructing high pressure pipelines to
other industrial towns in Tanzania including Tanga and Morogoro. Whilst the
infrastructure costs will be high and will take at least two years to develop,
the netbacks will be better than sales to the power sector at current oil
prices.
    The Company is also reviewing the possibility of applying for an
electricity generation licence and selling power directly to industrial
customers. This will be progressed during 2007.

    Infrastructure

    Planning was initiated in 2006 to expand the infrastructure to meet this
forecast increase in demand. The Company commissioned Petrofac Engineering
Limited to undertake a capacity re-rating and debottlenecking review of the
existing Songo Songo gas processing plant to determine how to meet immediate
and future projected demands. As a result of this work, Songas Limited
("Songas") appointed Bureau Veritas to re-rate the gas plant capacity. Whilst
work is ongoing and this is still to be agreed with the insurers, the
indications are that the gas processing plant could be run at 85 mmscf/d for a
short period of time compared with its present nameplate capacity of
70 mmscf/d.
    The Company also entered into negotiations with Songas and TANESCO for
the installation of a third and fourth gas processing train. This could
increase the capacity of the gas processing facilities to 140 mmscf/d. A
Memorandum of Understanding ('MOU') identifying the key issues that needed to
be addressed to enable the expansion to take place was signed with Songas and
TANESCO in December 2006. Under the terms of the MOU, the Company will
continue to pay 17.5% of the achieved sales price of gas and part of this will
be allocated to Songas to compensate for their investment in the trains. This
is still the subject of an application by Songas to the Electricity, Water,
Utilities Regulatory Authority ('EWURA') and is also subject to the agreements
on gas terms and prices with TANESCO to justify the expansion.
    The capacity of the 232-kilometer pipeline system to Dar es Salaam is
estimated at 105 mmscf/d and is limited by the 12" 25-kilometer offshore line.
Additional compression or a new offshore pipeline may be required during
2008/2009 to meet peak loads. Work will be undertaken in 2007 to assess the
most cost effective means of achieving the forecast peak rates.

    Reserves Increase

    The Songo Songo reservoir continues to perform above expectations. During
the year, further pressure testing has generated positive results. The
independent reserves engineers, McDaniel & Associates Consultants Ltd, have
reviewed all the data and have assessed that the gross proven and probable
reserves ("2P") for the total field on a life-of-licence basis increased by
14% to 648 bcf (2005: 569 bcf). The proportion in which the Company has a
financial interest, under the Songo Songo PSA ("Additional Gas"), increased by
30% to 415 bcf (2005: 320 bcf).
    A majority of the 2P reserves can be delivered from the existing well
stock. However, to deliver all the reserves will require significant capital
expenditure over the next five years. This includes the drilling of a well in
the northern portion of the field ("Songo Songo North") which will require a
jack up rig or the drilling of a deviated well using a land rig from an
artificial island.
    To meet immediate forecast deliverability requirements, the Company
signed a drilling contract with Caroil SA in February 2007 and commenced the
drilling operations in April 2007. The well is being drilled with a land rig
on Songo Songo Island and will deviate 1 kilometer offshore into the main
reservoir. It should be completed by mid June 2007 and is forecast to add
deliverability of 50 mmscf/d.
    In addition, the Company successfully completed the removal of over
5,000 feet of wireline and two pressure gauges that were left in the hole in
1997 and which were severely impacting the deliverability of the SS9 well. The
deliverability has subsequently increased from 20 mmscf/d to a maximum of
50 mmscf/d. The cost of the remedial work was US$1.9 million.

    Exploration

    Reserves and deliverability need to be ahead of demand so that
commitments to power and infrastructure developments can be planned with
greater certainty.
    The Company continues to review ways of increasing the reserve base. The
drilling of the Songo Songo West prospect approximately 2 kilometers west of
the existing Songo Songo field is an excellent target and the Company intends
to drill at least one well on this location as soon as practicable. The well
could be drilled using a jack up rig or a land rig from the same artificial
island that may be used to drill Songo Songo North. Work is currently being
undertaken to assess the feasibility of this approach as well as identifying a
suitable jack up rig.
    The Company relinquished seven Adjoining Blocks neighbouring the Songo
Songo field during the year as the only identified lead was considered small
and expensive to drill and therefore less attractive than the Songo Songo West
prospect.

    New ventures

    The Company recruited several key individuals in 2006 including James
Smith who was integral to the growth of PanOcean Energy Corporation. The
Company is now evaluating several oil opportunities in sub Saharan Africa with
a view to acquiring exploration and/or development assets by the end of 2007.

    2007 Targets

    Over 2007, the Company will continue to focus on growth, with an
increasing emphasis on new project development.

    
    -   Negotiate and sign a number of long term contracts to supply gas for
        use in the 120 MWs of gas fired plants owned and operated by Dowans,
        the 100 MW Wartsila plant, the 45 MW Wartsila plant at Tegeta and the
        42 MW plant that is operational at the Ubungo Power Plant.

    -   Expand sales to the industrial markets to 6-7 mmscf/d by Q4 2007
        through the construction of an additional 16 kilometers of the
        Company's low pressure distribution system.

    -   Prepare for the commencement of CNG sales to industrial and retail
        customers who are not located along existing pipeline infrastructure
        and assess feasibility for the supply of electricity direct to
        industrial customers.

    -   Finalise drilling plans for the Songo Songo West exploration well and
        the Songo Songo North appraisal well.

    -   Increase the 2007 deliverability of the Songo Songo gas field from
        130 mmscf/d at 31 December 2006 to approximately 210 mmscf/d as a
        result of the remedial work on SS-9 and the drilling of a new
        development well, SS-10.

    -   Farm-in, licence or acquire high potential oil properties with
        significant exploration potential.
    

    Over the past two and one half years, the Company has exceeded its
targets. This achievement has been made possible by all those who have stood
with us and helped us to achieve the results that this Annual Report presents.
We have relied on the investment of our shareholders; the skill, dedication
and innovative spirit of our employees; the wise counsel of our Board of
Directors; the commitment of our partners; the support of our customers and in
particular the opportunities provided to us by the Government of Tanzania.
    Our commitment to growth is based on clear goals, the necessary resources
and a determination to succeed. There is much to be done as we continue to
grow through 2007.

    Peter R. Clutterbuck
    President & CEO

    30 April 2007


    
    CONSOLIDATED INCOME STATEMENTS

    Years ended 31 December                                   2006      2005
    (thousands of US dollars except per share amounts)
    -------------------------------------------------------------------------

    Revenue                                                 13,828     5,759

    Cost of sales

    Production and distribution expenses                      (793)     (495)
    Depletion expense                                       (2,027)     (818)
    -------------------------------------------------------------------------
    Gross profit                                            11,008     4,446

    Other income                                                61        64
    Administrative expenses                                 (6,724)   (3,555)
    Foreign exchange losses                                    (84)       (2)
    -------------------------------------------------------------------------

    Profit before taxation                                   4,261       953

    Taxation                                                (1,684)     (565)
    -------------------------------------------------------------------------
    Profit after taxation                                    2,577       388
    -------------------------------------------------------------------------
    Profit per share
    -------------------------------------------------------------------------
    Basic (US$)                                               0.11      0.02
    -------------------------------------------------------------------------
    Diluted (US$)                                             0.10      0.02
    -------------------------------------------------------------------------


    CONSOLIDATED BALANCE SHEETS

    As at 31 December                                         2006      2005
    (thousands of US dollars)
    -------------------------------------------------------------------------
    ASSETS

    Current assets

    Cash and cash equivalents                               20,678     3,198
    Trade and other receivables                              4,275     2,862
    -------------------------------------------------------------------------
                                                            24,953     6,060

    Natural gas properties and other equipment              18,951    15,037
    -------------------------------------------------------------------------
                                                            43,904    21,097
    -------------------------------------------------------------------------

    LIABILITIES

    Current liabilities

    Trade and other payables                                 4,523     3,849

    Non current liabilities

    Deferred tax                                             1,229       506

    Additional profits tax                                     263        80

    SHAREHOLDERS' EQUITY

    Capital stock                                           34,469    16,237
    Capital reserve                                          1,182       764
    Accumulated profit/(loss)                                2,238      (339)
    -------------------------------------------------------------------------
                                                            37,889    16,662
    -------------------------------------------------------------------------
                                                            43,904    21,097
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF CASH FLOWS

    Year ended 31 December                                    2006      2005
    (thousands of US dollars)
    -------------------------------------------------------------------------
    CASH FLOWS FROM OPERATING ACTIVITIES

    Profit after taxation                                    2,577       388

    Adjustments for:
      Depletion and depreciation                             2,129       911
      Stock-based compensation                                 418       383
      Deferred taxation                                        723       506
      Additional profits tax                                   183        80
    -------------------------------------------------------------------------
                                                             6,030     2,268

    Increase in trade and other receivables                 (1,413)   (2,421)

    Increase in trade and other payables                       540     1,956
    -------------------------------------------------------------------------
    Net cash flows from operating activities                 5,157     1,803
    -------------------------------------------------------------------------
    CASH FLOWS USED IN INVESTING ACTIVITIES

    Acquisition of natural gas properties and other
     equipment                                              (6,043)   (5,648)
    Increase in trade and other payables                       134       628
    -------------------------------------------------------------------------
    Net cash flows used in investing activities             (5,909)   (5,020)
    -------------------------------------------------------------------------
    CASH FLOWS FROM FINANCING ACTIVITIES

    Net proceeds from rights issue                          18,087     4,365

    Proceeds from exercise of options                          145        10
    -------------------------------------------------------------------------
    Net cash flows from financing activities                18,232     4,375

    Increase in cash and cash equivalents                   17,480     1,158
    -------------------------------------------------------------------------
    Cash and cash equivalents at the beginning of the year   3,198     2,040
    -------------------------------------------------------------------------
    Cash and cash equivalents at the end of the year        20,678     3,198
    -------------------------------------------------------------------------


    STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

    (thousands of US dollars)          Capital   Capital  Accumulated  Total
                                        stock    reserve    profit
                                                            (loss)
    -------------------------------------------------------------------------
    Balance as at 31 December 2004      11,862       381      (727)   11,516
    Rights issue net of share issue
     costs                               4,365         -         -     4,365
    Options exercised                       10         -         -        10
    Profit for the year                      -         -       388       388
    Stock-based compensation                 -       383         -       383
    -------------------------------------------------------------------------
    Balance as at 31 December 2005      16,237       764      (339)   16,662
    Rights issue                        18,087         -         -    18,087
    Options exercised                      145         -         -       145
    Profit for the year                      -         -     2,577     2,577
    Stock-based compensation                 -       418         -       418
    -------------------------------------------------------------------------
    Balance as at 31 December 2006      34,469     1,182     2,238    37,889
    -------------------------------------------------------------------------
    

    Forward Looking Statements

    This disclosure contains certain forward-looking estimates that involve
substantial known and unknown risks and uncertainties, certain of which are
beyond Orca Exploration's control, including the impact of general economic
conditions in the areas in which Orca Exploration operates, civil unrest,
industry conditions, changes in laws and regulations including the adoption of
new environmental laws and regulations and changes in how they are interpreted
and enforced, increased competition, the lack of availability of qualified
personnel or management, fluctuations in commodity prices, foreign exchange or
interest rates, stock market volatility and obtaining required approvals of
regulatory authorities. In addition there are risks and uncertainties
associated with oil and gas operations, therefore Orca Exploration's actual
results, performance or achievement could differ materially from those
expressed in, or implied by, these forward-looking estimates and, accordingly,
no assurances can be given that any of the events anticipated by the
forward-looking estimates will transpire or occur, or if any of them do so,
what benefits, including the amounts of proceeds, that Orca Exploration will
derive therefrom.





For further information:

For further information: Nigel A. Friend, CFO, +255 (0)22 2138737,
nfriend@orcaexploration.com; Peter R. Clutterbuck, CEO, +44 (0) 7768 120727,
prclutterbuck@orcaexploration.com; or visit the Company's web site at
www.orcaexploration.com


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