Orca Exploration announces its results for the quarter ended 30 June 2008

    TORTOLA, British Virgin Islands, Aug. 29 /CNW/ - Orca Exploration Group
Inc ("Orca Exploration" or the "Company") announces its results for the
quarter ended 30 June 2008.


    -   60% increase in Orca's Q2 revenues to US$4.8 million (Q2 2007:
        US$3.0 million).

    -   Increased Q2 2008 sales of Additional Gas to the power sector by 28%
        to 956 Mmscf (Q2 2007: 745 Mmscf). This equated to an average of
        l0.5 Mmscf/d (Q2 2007: 8.2 Mmscf/d). Gas demand increases for the
        power sector is now underpinned by the TANESCO Wartsila 100 MW plant,
        which is now commissioned and fully operational for the long term.
        The average price for the gas to the power sector was US$2.93/Mcf
        (Q2 2007: US$2.17/Mcf).

    -   Q2 2008 sales of Additional Gas to Dar es Salaam industrial customers
        decreased by 15% to 336 Mmscf (Q2 2007: 397 Mmscf). This equated to
        an average of 3.7 Mmscf/d (Q2 2007: 4.4 Mmscf/d). Average prices were
        51 % higher at US$12.97/Mcf leading to a 27% increase in industrial
        sales revenue when compared to Q2 2007.

    -   63% increase in funds flow from operations to US$1.6 million
        (Q2 2007: US$ 1.0 million). A 427% increase in net cash flows to
        US$4.6 million from US$0.8 million. Loss before tax of US$9.7 million
        (Q2 2007 loss: US$0.5 million) included a one-time impairment charge
        of US$9.5 million with respect to the write down of the Company's
        activities in Uganda.

    -   Orca is continuing its exploration focus in Sub-Saharan Africa, and
        is evaluating a lower risk, potentially early commercialisation
        opportunity offshore West Africa.

    -   Extended the gas purchase contracts of five of the larger industrial
        customers by a further five years from the end of their existing
        contracts in return for capping the gas price at approximately
        US$11.49/mcf with a floor of US$7.38/mcf.

    -   Contracted McDaniel and Associates Consultants Ltd to conduct a
        resource evaluation report of the Songo Songo West prospect within
        the Company's licence acreage. The report is expected to be published
        at the end of Q3 2008.

    -   Undertook extensive work to secure a jack up rig to drill the Songo
        Songo West prospect in 2009. An invitation to tender was issued
        during Q3 2008 and three offers were received. Evaluation is
        currently underway. Materials for the first Songo Songo West well are
        already stockpiled on Songo Songo Island and funds that were
        allocated for Uganda can now be assigned for this drilling campaign.

    -   Ordered CNG facilities, consisting of one CNG compressor, a vehicle
        dispenser and two trailer filling facilities to deliver 0.7 Mmscf/d
        of compressed natural gas at a cost of US$2.5 million. The facilities
        are expected to be operational during Q1 2009.

    -   Finalised in all material respects, the negotiations for the supply
        of approximately 2.0 Mmscf/d to the Wazo Hill cement plant from
        Q2 2009. This is expected to rise to 4.0 Mmscf/d by 2010.

    -   Initialled the long term contracts for the supply of a forecast
        200 Bcf - 250 Bcf of Additional Gas to the power sector signalling
        the end of negotiations subject to the resolution of infrastructure
        capacity issues with respect to the installation of two new gas
        processing trains.

    -   Constructed pipework and mobilised the equipment to install two new
        higher capacity Joule-Thompson valves at the existing gas processing
        plant with the objective of re-rating the two existing trains to a
        forecast 90 Mmscf/d. Songas authorisation to commence the work is
        pending the finalisation of some engineering work at the Ubungo power

    -   Finalised the review of 300 kilometres of 2-D seismic and geochemical
        data in exploration area 5 in Uganda and determined that it was not
        in the interests of the Company to proceed.

    Financial and Operating Highlights

    ---------------------------------------------- --------------------------
    (US$'000 except          Three months ended         Six months ended
     where otherwise     30-Jun   30-Jun            30-Jun   30-Jun
     stated)               2008     2007   Change     2008     2007   Change
    ---------------------------------------------- --------------------------

    Revenue               4,826    3,021      60%   10,110    6,852     (48%)
    Loss before taxation (9,710)    (524) (1,753%)  (9,440)     (94) (9,942%)
    Operating netback
     (US$/mcj)             3.44     2.79      23%     2.65     2.35      13%
    Cash and cash
     equivalents         11,924    7,601      57%   11,924    7,601      57%
    Working capital       6,094   (3,050)     n/m    6,094   (3,050)     n/m
    ---------------------------------------------- --------------------------
     equity              62,824   38,292      64%   62,824   38,292      64%
    Loss per share -
     basic(US$)           (0.34)   (0.02) (1,600%)   (0.35)   (0.02) (1,650%)
    Loss per share -
     diluted (US$)        (0.33)   (0.02) (1,550%)   (0.33)   (0.02) (1,550%)
    Funds from operations
     before working
     capital changes      1,619      995      63%    4,010    2,168      85%
    Net cash flows from
     operating activities 4,566      867     427%    5,402    1,672     223%
    Funds per share from
     operations before
     working capital
     changes - basic (US$) 0.05     0.04      25%     0.14     0.08     (75%)
    Funds per share from
     operations before
     working capital
     changes - diluted
     (US$)                 0.05     0.03      67%     0.13     0.08     (63%)
    Net cash flows per
     share from operating
     activities - diluted
     (US$)                 0.15     0.03     400%     0.17     0.06     183%
    ---------------------------------------------- --------------------------
    Outstanding Shares
    Class A shares        1,751    1,751        -    1,751    1,751        -
    Class B shares       27,863   25,383      10%   27,863   25,383      10%
    Options               2,847    2,622       9%    2,847    2,622       9%
    ---------------------------------------------- --------------------------

    Additional Gas sold
     (Mmscf) -
     industrial             336      397     (15%)     658      698      (6%)
    Additional Gas sold
     (Mmscf) - power        956      745      28%    2,939    2,101      40%
    Average price per
     mcf (US$) -
     industrial           12.97     8.61      51%    12.27     8.22      49%
    Average price per
     mcf (US$) - power     2.93     2.17      35%     2.33     2.18       7%
    ---------------------------------------------- --------------------------

    President & CEO's Letter to Shareholders

    During the second quarter, the Company continued to expand operations in
Tanzania, and decisively addressed exploration and infrastructure challenges
while continuing to lay a strong foundation for long term success in Tanzania.
Funds flow from operations increased to US$1.6 million compared with
US$1.0 million in Q2 2007. Progress was made to increase future gas sales from
the Songo Songo field and the Company enjoys solid, stable, and rising cash
flow from its Tanzanian business. An invitation to tender was prepared in
Q2 2008 for the services of a jackup rig to drill Songo Songo West in 2009.
    At the end of Q2, Orca made the decision not to proceed further with its
oil exploration activities in Uganda. This was primarily because the level of
technical risk was determined to be higher than expected. The seismic
programme was successfully concluded and interpreted, allowing a more detailed
assessment of the Block. The costs of drilling were considered not justifiable
given the size and risk of the opportunity. As a result the Company has taken
a one-time write-off of US$9.5 million associated with the costs of acquiring
and interpreting 300 kilometers of 2-D seismic in Uganda's Exploration Area 5.
Funds previously allocated for additional Uganda exploration and drilling have
now been allocated to Songo Songo exploration and development, including
drilling Songo Songo West.
    An important gas sales milestone was achieved in June 2008 with the
agreement of terms (subject to Board approvals) for long term contracts for
the supply of gas to Tanzania's power sector. This signalled the finalisation
of negotiations, subject to the receipt by Songas Limited (the owner of the
infrastructure) of a satisfactory ruling from the EWURA, Tanzania's energy
regulator, with respect to the Songas application to install two new gas
processing trains on Songo Songo Island. The capacity expansion application
received an initial review and in August the EWURA issued a notice requesting
Songas to resubmit the application with additional firm costing information.
The Ministry of Energy and Minerals ("MEM") is involved in discussions to
address this issue in order to minimise delays.
    Over the near term, Orca plans to implement a re-rating initiative on the
two existing gas processing trains to ensure there is sufficient
infrastructure capacity until the two new trains are installed. The re-rating
equipment has been purchased and mobilised to Songo Songo Island and is ready
for installation as soon as the notice to proceed is given by Songas. Songas
is undertaking some engineering work at the Ubungo power plant before
authorizing commencement of this work.
    To date the current short term infrastructure limitations have not
impacted Orca's gas sales since the seasonal rains in Tanzania decreased gas
demand with run-of-river hydros operating at high utilisation rates. However,
with the commencement of the dry season in Q3, the 70 Mmscf/d infrastructure
is limiting the volumes of gas available to the power sector. We are confident
that the Company, as operator of the gas processing facilities, will be able
to implement the planned interim solutions efficiently as soon as Songas gives
the notice to proceed.
    The long term prospects for Orca's Tanzanian projects are excellent. We
are confident in the reserves already established, the potential upside in
Songo Songo West and the future demand for natural gas in the country. We
continue to expand our markets for gas and have recently signed new contracts
with our largest industrial customers to extend their term for an additional
five years. We have also finalised negotiations with Twiga Cement, Tanzania's
largest cement manufacturer, to provide gas to their new kiln at Wazo Hill.
The new cement plant is expected to be operational in Q2 2009. Finally, Orca
is excited by the opportunities to develop new compressed natural gas markets
- especially in the industrial centres of Morogoro and Tanga.
    We also remain committed to increase our assets and build additional
shareholder value in sub-Saharan Africa. To this end, Orca is also evaluating
a lower risk, potentially early commercialisation opportunity offshore West

    Tanzanian reserves and exploration

    Confidence in the Songo Songo field's potential is increasing as
cumulative production rises and further subsurface data is analysed. During
Q2, the Company undertook a detailed evaluation of the Songo Songo West
prospect that lies some four kilometers west of the existing Songo Songo field
within the Company's licence acreage. In early Q3 2008, McDaniel and
Associates Consultants Ltd. was contracted to conduct a resource evaluation
report on the potential of this prospect. The results of the report will be
available at the end of Q3 2008.
    Early in Q3 Company issued a tender for a jackup rig with the view to
drilling Songo Songo West in the second half of 2009. Evaluation of the bids
is currently in progress. A substantial portion of the drilling materials for
this well are already stockpiled on Songo Songo Island and discussions are
underway to secure gas markets for this potentially large resource.

    Status of long term power contracts

    During Q2 2008, Orca was engaged in intensive negotiations with TANESCO,
the owner of the Ubungo power plant, Songas Limited and the Ministry of Energy
and Minerals to secure two long term contracts for the supply of approximately
30 - 45 Mmscf/d for power generation. To enable Orca to supply this quantity
of gas, Songas is planning to install a third and fourth gas processing train
on Songo Songo Island, conditional on a satisfactory economic return.
Negotiations proceeded well and the contracts were initialled at the end of
June, subject to adjustments that might be required following the EWURA
review. In early August the EWURA requested Songas to resubmit its
application, principally on the grounds that the costs of the engineering and
procurement contract needed to be firm. All parties are now working to
expedite the process. In the meantime, gas continues to be supplied to the
power plants under short term agreements, with prices that equate to those set
out in the initialled long term agreements.
    The first of the initialled long term power contracts covers the supply
of gas to the sixth turbine at the Ubungo power plant and provides for a
maximum of approximately 9 Mmscf/d until July 2024. The second initialled
contract covers the supply of Additional Gas sales to the remaining gas fired
generation currently in Tanzania. The required short term volumes will depend
on the availability of the 561 MWs of Tanzania's hydro generation, the timing
of the increase in the Songo Songo infrastructure capacity and available
generation requiring natural gas. Beginning in November 2010, the take or pay
contract volume is set at 32 Mmscf/d through to July 2023, with a maximum
daily quantity of 36 Mmscf/d.
    The same contract price applies to both contracts. It is composed of a
wellhead price, an amount that is paid to Songas for the use of the gas
processing and pipeline infrastructure and an amount that is charged by Orca
for marketing and distribution. The wellhead price is fixed at approximately
US$1.95/mcf and will increase at an expected 2% per annum from July 2009. From
July 2012, there will be a step change in the wellhead price to a forecast
US$2.83/mcf which will then increase at a forecast 2% per annum.
    The other contractual provisions (gas processing, pipeline, marketing and
distribution costs) have to be approved by the regulatory authority, EWURA and
are subject to annual amendments. The Company will continue to pass on any
increase or decrease in the EWURA approved charges to TANESCO/Songas. This
protocol insulates Orca from any increases in the gas processing and pipeline
infrastructure tariffs.
    Based on the applications that Songas and Orca submitted to EWURA during
Q2 2008, and the EWURA Orders issued during August, the initial all-in
contract price is expected to be in the range of US$2.36/mcf - US$2.46/mcf.
The final price will be determined once final charges are known. These charges
are expected to vary annually dependent on infrastructure operating costs and
volumes transported.

    Contracts with industrial customers

    Orca has finalised negotiations with Twiga Cement for the supply of
approximately 2.0 Mmscf/d of gas to its Wazo Hill plant from Q2 2009,
increasing to an expected 4.0 Mmscf/d in 2010. The contract is expected to be
signed during Q3 2008.
    The Company has extended the term of five of its larger contracts with
industrial customers for an additional five years from the date that existing
contracts were due to expire. In return the Company has agreed to cap the
price of gas to these customers with immediate effect whilst also
incorporating a floor price. This is expected to keep the price of gas in the
range of US$7.38/mcf to US$11.49/mcf (increasing with US CPI).
    The Company continues to sign and connect other smaller industrial
customers to the Company's existing 35 kilometers of low pressure pipeline.
Two industrial contracts were signed in Q2 2008 and gas is currently being
supplied to 18 premises. It is expected that an additional 10 industrial
customers will be connected over the next 12 months with the addition of
8 kilometers of pipeline adding an average demand of 1.2 Mmscf/d.

    Developing markets


    TANESCO terminated its power purchase agreement with Dowans Tanzania
Limited for 120 MWs of emergency generation effective 31 July 2009. This
temporary plant has been replaced with the permanent TANESCO Wartsila 100 MW
plant, which is now fully operational. There is currently approximately
190 MWs of gas fired generation in country operating on Additional Gas
(maximum demand of 40 Mmscf/d) and a further 45 MWs is due to be commissioned
at Tegeta during the first half of 2009. The increase in 2009 is expected to
bring gas fired generation to a level in line with the capacity of the
expanded gas infrastructure, once the interim solutions are implemented or the
third and fourth processing trains are installed on Songo Songo island.
    TANESCO's current planning calls for an additional 150 MWs of generation
by 2011. With the increase in Songo Songo reserves during 2007, the Company is
in a position to commence discussions with TANESCO for the supply of gas to
this new level of generation. Orca will start to negotiate a contract for the
supply of gas once development of infrastructure capacity issues are resolved.

    Compressed Natural Gas

    During Q2, the Company ordered CNG facilities, including one CNG
compressor, a vehicle dispenser and two trailer filling facilities to make
0.7 Mmscf/d of compressed natural gas available at a cost of US$2.5 million.
The CNG facilities are expected to be operational in Q12009. It is anticipated
that this market will expand rapidly to supply gas to consumers that cannot be
cost-effectively connected to Orca's existing low pressure gas distribution
system. Internal assessments are that this market could grow to 15 Mmscf/d,
with the majority of the load growth being achieved in the industrial centres
of Morogoro and Tanga both of which are approximately 200 kilometers from Dar
es Salaam.
    Initially, the intention is to sell CNG to a group of hotels and
institutions in Dar es Salaam and to industries not connected to the Company's
low pressure distribution systems. CNG used in these applications will
displace heavy fuel oil ("HFO") and liquid petroleum gas ("LPG"). Pricing of
gas is relative to displaced fuels, which is higher in the case of LPG than
HFO. Once the initial market is established, there can be incremental
additions to the CNG compressors, trailers and distribution vehicles to meet
increases in demand. With increased sales volumes Orca anticipates that the
capital cost to provide CNG service will reduce to US$1 million for every
0.5 Mmscf/d of sales.


    Orca has determined not to exercise its option in Uganda to drill two
wells in Exploration Area 5 ("EA5") to secure a 50% interest in the licence.
The 300 kilometers of 2-D seismic revealed a number of structures, but the
technical data analysis indicated a level of risk too high to warrant the
costs of an exploration drilling program. Funds released from the Uganda
programme will now be more effectively used to progress the planned drilling
of Songo Songo West in 2009.

    Financial Results

    Total sales of Additional Gas to the power sector were up 28% to
956 Mmscf (10.5 Mmscf/d) in Q2 2008 from 745 Mmscf (8.2 Mmscf/d) in Q2 2007.
The power sales will increase significantly in Q3 2008 as the utilisation of
the 561 MWs of installed hydro generation deteriorates as Tanzania enters its
dry season.
    Sales of Additional Gas to Orca's industrial customers fell 15% to
336 Mmscf (3.7 Mmscf/d) in Q2 2008 compared with 397 Mmscf (4.4 Mmscf/d) in Q2
2007, but the average achieved price was up 51% at US$12.97/mcf. As
anticipated, Q2 sales to the industrial sector followed historical trends with
relatively low production by the textile manufacturers due to the lack of
indigenous cotton supplies. Industrial demand is now forecast to increase over
2008 as new customers are connected, Orca constructs additional new low
pressure distribution lines in the Dar es Salaam area and textile
manufacturers increase their production.
    Orca's Q2 revenues increased 60% to US$4.8 million compared to Q2 2007.
Loss before taxation was US$9.7 million as a consequence of the write down of
US$9.5 million following the decision not to proceed with the drilling of two
wells in Uganda. Profitability is expected to increase in the second half of
the year with the increase in sales revenue and the decrease in costs as the
long term power contracts are finalised.
    Orca's operations generated cash flows before working capital changes of
US$1.6 million, an increase of 63% on Q2 2007. This is forecast to grow in the
second half of 2008 as gas sales increase and marketing costs decrease.
    The Company had cash of approximately US$11.9 million at the end of Q2
and now has a US$5.0 million short term overdraft facility in place. Once
long-term contracts are signed for the supply of gas to the power sector, the
Company plans to seek a term loan facility to continue to grow its Tanzanian
asset base and to pursue additional opportunities in Africa.


    The implementation of the infrastructure expansion in a timely manner in
Tanzania remains a key focus for Orca during the second half of 2008. Once
long term infrastructure expansion is committed Orca anticipates the signing
of the initialled long term power contracts within a relatively short period.
In the event of unacceptable delays in the long term additions of trains three
and four, Orca has developed plans for upgrading the capacity of the existing
trains in two trenches.
    Orca acknowledges the commitment and support of the Tanzanian Government
to expand the gas developments at Songo Songo in a transparent process, with
the right blend of free market pricing, and regulatory protection typical of
other countries' gas sectors.
    The results of the jack up rig tender will be available in Q3 providing
the Company with a clearer picture of the timing and costs of our 2009
drilling program. During Q3 Orca also anticipates the completion of a resource
report by McDaniel and Associates Consultants Ltd. on the potential of the
Songo Songo West prospect that lies within the Company's licence acreage.
    As always, management is aware that Orca Exploration's growth and
vitality are always dependent on our skilled and dedicated employees and our
loyal shareholders. The demand for natural gas continues to grow in Tanzania
and the Company remains committed to seek ways to increase reserves, expand
markets and monetise its assets.

    Consolidated Income Statements (unaudited)(*)


    ----------------------------------------------------- -------------------
    (thousands of US dollars      Three months ended        Six months ended
     except per share         30-Jun    31-Mar    30-Jun    30-Jun    30-Jun
     amounts)                   2008      2008      2007      2008      2007
    ----------------------------------------------------- -------------------
    Revenue                    4,826     5,284     3,021    10,110     6,852

    Cost of sales

    Production and
     distribution expenses      (457)     (276)     (261)     (733)     (525)
    Depletion expense           (776)   (1,406)     (630)   (2,182)   (1,545)
    Impairment of exploration
     and evaluation assets    (9,520)        -         -    (9,520)        -
    ----------------------------------------------------- -------------------
                              (5,927)    3,602     2,130    (2,325)    4,782

    Administrative expenses   (3,918)   (3,095)   (2,704)   (7,013)   (4,952)
    Net financing
     income/(charges)            135      (237)       50      (102)       76
    ----------------------------------------------------- -------------------
    (Loss)/profit before
     taxation                 (9,710)      270      (524)   (9,440)      (94)

    Taxation                    (498)     (413)      (84)     (911)     (386)
    ----------------------------------------------------- -------------------
    Loss after taxation      (10,208)     (143)     (608)  (10,351)     (480)
    ----------------------------------------------------- -------------------
    Loss per share
    ----------------------------------------------------- -------------------
    Basic (US$)                (0.34)        -     (0.02)    (0.35)    (0.02)
    ----------------------------------------------------- -------------------
    Diluted (US$)              (0.33)        -     (0.02)    (0.33)    (0.02)
    ----------------------------------------------------- -------------------

    Consolidated Balance Sheets (unaudited)

                                                  30-Jun    31-Mar    31-Dec
    (thousands of US dollars)                       2008      2008      2007

    Current assets

    Cash and cash equivalents                     11,924    12,521    16,515
    Trade and other receivables                    7,227     7,297     8,236
                                                  19,151    19,818    24,751

    Exploration and evaluation assets                  -     7,300     6,881
    Property, plant and equipment                 61,589    60,752    61,157
                                                  61,589    68,052    68,038
                                                  80,740    87,870    92,789


    Current liabilities

    Trade and other payables                      13,057    11,521    17,452

    Non current liabilities
    Deferred income taxes                          4,116     3,618     3,205
    Deferred additional profits tax                  743       678       588


    Capital stock                                 66,537    66,537    66,538
    Capital reserve                                2,655     1,676     1,023
    Accumulated (loss)/income                     (6,368)    3,840     3,983
                                                  62,824    72,053    71,544
                                                  80,740    87,870    92,789

    Consolidated Statements of Cash Flows (unaudited)

                              30-Jun    31-Mar    30-Jun    30-Jun    30-Jun
    (thousands of US dollars)   2008      2008      2007      2008      2007
    Loss after taxation      (10,208)     (143)     (608)  (10,351)     (480)
    Adjustment for
      Depletion and
       depreciation              794     1,422       661     2,216     1,602
      Impairment of
       exploration and
       evaluation assets       9,520         -         -     9,520         -
      Stock-based compensation   978       654       799     1,632       740
      Deferred income taxes      498       413       343       911       465
      Deferred additional
       profits tax                65        90        56       155       114
      Interest income            (28)      (45)     (256)      (73)     (273)
                               1,619     2,391       995     4,010     2,168

     decrease in trade
     and other receivables        70       939       782     1,009      (656)
    (Increase) in inventory                       (2,847)        -    (2,847)
    Increase/(decrease) in
     trade and other payables  2,877    (2,494)    1,937       383     3,007
    Net cash flows from
     operating activities      4,566       836       867     5,402     1,672
    Exploration and
     evaluation expenditures  (2,220)     (419)     (765)   (2,639)     (765)
    Property, plant and
     equipment expenditures   (1,631)   (1,017)  (14,224)   (2,648)  (25,301)
    Interest income               28        45       256        73       273
    (Decrease)/increase in
     trade and other payables (1,340)   (3,437)    6,613    (4,777)   10,901
    Net cash used in
     investing activities     (5,163)   (4,828)   (8,120)   (9,991)  (14,892)
    Normal course issuer bid       -        (2)        -        (2)        -
    Proceeds from exercise of
     options                                 -       118         -       143
    Net cash flow (used in)/
     from financing activities     -        (2)      118        (2)      143
    Decrease in cash and cash
     equivalents                (597)   (3,994)   (7,135)   (4,591)  (13,077)
    Cash and cash equivalents
     at the beginning of the
     period                   12,521    16,515    14,736    16,515    20,678
    Cash and cash equivalents
     at the end of the
     period                   11,924    12,521     7,601    11,924     7,601

    Statement of Changes in Shareholders' Equity (unaudited)

    (thousands of US dollars)                          Accumulated
                                 Capital     Capital       Income/
                                   stock     reserve        (loss)     Total

    Balance as at 1 January 2007  34,469       1,182        2,238     37,889
    Shares issued                  1,605        (945)           -        660
    Options exercised                143           -            -        143
    Stock-based compensation           -          80            -         80
    Loss for the period                -           -         (480)      (480)
    Balance as at 30 June 2007    36,217         317        1,758     38,292

    (thousands of US dollars)                          Accumulated
                                 Capital     Capital       Income/
                                   stock     reserve        (loss)     Total

    Balance as at l January 2008  66,538       1,023        3,983     71,544
    Stock-based compensation           -       1,632            -      1,632
    Normal course issuer bid          (1)                       -         (1)
    Loss for the period                -           -      (10,351)   (10,351)
    Balance as at 30 June 2008    66,537       2,655       (6,368)    62,824

    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,

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Orca Exploration Group Inc.

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