NEWS RELEASE
24 February, 2015

Orca Exploration provides update on operations in Tanzania

TSX-V: ORC.A, ORC.B

TORTOLA, British Virgin Islands 24 February 2015: Orca Exploration Group Inc. ("Orca" or the "Company") today announced an update of its activities in respect of Songo Songo development and changes among some of the Company’s key stakeholders in Tanzania. Following a Tanzania Parliament review of an alleged fraud in the energy sector, the Minister and Permanent Secretary for Energy and Minerals have been replaced, along with the board of directors of state power company TANESCO. With Songo Songo production declining below infrastructure capacity and markets continuing to expand, the Company has been developing plans to embark upon a first phase of Songo Songo development, with financing of approximately half of the US$120 million estimated capital cost in the process of receiving internal approvals by the International Finance Corporation (“IFC”) of the World Bank Group. Weekly TANESCO payments have resumed since the beginning of 2015 and form an integral part of the plan to finance Songo Songo development.

Tanzania stakeholders

Following a review by the Tanzania Parliament concerning allegations of the fraudulent transfer of funds from a Bank of Tanzania escrow account held by the Ministry of Energy and Minerals on behalf of TANESCO and an independent power producer IPTL, and involving Pan Africa Power Solutions Tanzania (a company unrelated to Orca), a number of changes in senior Tanzania Government positions were made by President Kikwete: a new board of directors of TANESCO was appointed; the Minister for Lands, Housing and Human Settlement Development, Prof. Anna Tibaijuka, was removed from her post; the Attorney General, Judge Frederick Werema and the Minister for Energy and Minerals, Prof. Sospeter Muhongo, both resigned; and the Permanent Secretary for Energy and Minerals, Eliakim Maswi, was suspended pending an investigation into his involvement in the transfer of the escrow funds. Following the resignation of Judge Werema, President Kikwete appointed George Mcheche Masaju as Attorney General, prior to which Mr. Masaju was the Deputy Attorney General. The President appointed Dr. Mighanda Manyahi as Chairman of the TANESCO board of directors, and eight new individual board members were appointed by the Minister for Energy and Minerals. Replacing Prof. Muhongo, the President appointed George Simbachawene as Minister for Energy and Minerals. Prior to the appointment, Mr. Simbachawene was the Deputy Minister for Lands, Housing and Human Settlement Development; previously he had worked as deputy energy minister from 2012 to the beginning of 2014. The deputy permanent secretary, Ngosi Mwihava, is currently the Acting Permanent Secretary for Energy and Minerals. Separately, President Kikwete appointed a Managing Director to the Tanzania Petroleum Development Corporation (“TPDC”), Dr. James Mataragio, to succeed Yona Killigane who retired in 2014.

TANESCO payments

TANESCO currently owes the Company US$60.3 million of which US$55.9 million is in arrears. Having instituted regular weekly payments in Q2 and Q3 2014, TANESCO made only one payment in Q4 2014. Since the beginning of 2015, TANESCO has made five of six weekly payments of TZsh 3.0 billion (approximately US$1.7 million). The Company currently has approximately US$59 million in cash, of which US$34 million is held outside of Tanzania.

Songo Songo development

The Company continues to develop options to move ahead with Songo Songo field development in Tanzania. The field currently produces approximately 91 million standard cubic feet per day (“MMcfd”), which is less than the existing Songas Limited (“Songas”) infrastructure capacity of approximately 102 MMcfd. In order to fill the existing Songas infrastructure to capacity and provide operational redundancy, the Company is contemplating a first phase of offshore development consisting of working over two existing wells (SS-5 and SS-9) that are currently suspended, working over an existing production well (SS-7) and drilling a new offshore development well (SS-12). The workovers, if successful, will use the existing infrastructure (platform and flow-lines). Should the workovers be deemed unfeasible or prove to be unsuccessful during the workover operation, it is expected that the wells will be either side-tracked or abandoned and new wells drilled to replace the old wells.

The development programme also includes the installation of a refrigeration unit at the Songo Songo Processing plant. The programme is currently contemplated to occur from Q3 2015 to Q1 2016. Additional productive capacity would be available to supply some volumes to the National Natural Gas Infrastructure Project (“NNGIP”) if and when the Company concludes a gas sales agreement with TPDC. This first phase of Songo Songo development is not dependent upon concluding a gas sales agreement with TPDC, and additional gas volumes could be sold through the existing Songas infrastructure to industrial and/or power markets. The NNGIP pipeline is approximately 98% completed and associated plants and facilities are approximately 83% complete, with commissioning expected by the end of Q2 2015.

The Company estimates the cost of the first phase of Songo Songo field development to be approximately US$120 million. Additional drilling resulting from unsuccessful workovers could cost from US$20 million to US$40 million depending on whether one or two new wellbores are required. The Company has disclosed since Q3 2013 that it has been in discussions regarding development finance with the IFC. Given the new scope of the project, IFC is in the process of receiving its internal approvals to provide approximately half the capital cost, or US$60 million, in quasi-equity financing to Orca’s operating subsidiary, PanAfrican Energy Tanzania Limited. Definitive terms have yet to be agreed and any financing will require board approval of both IFC and the Company and be subject to a number of terms and conditions, including with respect to the assurance of ongoing TANESCO payments. There is no assurance such financing will be concluded on mutually agreeable terms. As part of its approval process and in accordance with its policy of transparency, IFC has posted project documents for the potential investment on its website, www.ifc.org; these documents are available to the public for review and comment. Following a tender process, the Company has signed a non-binding letter of intent with a drilling company regarding the mobilisation of a jack-up rig which would be capable of undertaking the development programme. The Company has no current commitments with respect to the development programme or the financing thereof.

Discussions with third parties

Orca announced in July 2014 that it was in discussions with third parties relating to the sale of the Company, a significant asset disposal, strategic investment or other transaction involving the Company. Orca has nothing to report at this time.

 

Orca Exploration Group Inc.
Orca Exploration Group Inc. is an international public company engaged in natural gas exploration, development and supply in Tanzania through the wholly-owned subsidiary PanAfrican Energy Tanzania Limited (“PanAfrican Energy”), as well as oil and gas appraisal in Italy. Orca trades on the TSX Venture Exchange under the trading symbols ORC.A and ORC.B. PanAfrican Energy is party to a production sharing agreement with respect to the Songo Songo Block in Tanzania with TPDC and the Government of Tanzania, and is party to a gas sales agreement respecting Songo Songo natural gas production with TANESCO and TPDC. Financial reports and other corporate information concerning Orca may be found on the Company’s website at www.orcaexploration.com or on the Company's profile on SEDAR at www.sedar.com. Additional information concerning the Tanzania Ministry of Energy and Minerals, TANESCO and TPDC is available at www.mem.go.tz, www.tanesco.co.tz and www.tpdc-tz.com respectively.

For further information please contact:

W. David Lyons, Chairman and CEO +44-7717-100-200 wdlyons@orcaexploration.com Robert S. Wynne, Chief Financial Officer and Director +1 (403) 399-8046 rswynne@orcaexploration.com

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward Looking Statements

This press release contains forward-looking statements. More particularly, this press release contains statements concerning, but not limited to, the Company's Songo Songo development plans, including the Company's contemplation of a first phase of offshore development consisting of working over two existing wells that are currently suspended, working over an existing production well, and drilling a new offshore well as well as the installation of a refrigeration unit at the Songo Songo processing plant; the plan to use certain existing infrastructure if the contemplated workovers are successful; the expectation that, if the contemplated workovers are not successful, such wells will either be side-tracked or abandoned and replaced by newly drilled wells; the expectation that there will be additional productive capacity available to supply some volume to the NNGIP if the Company concludes a gas sales agreement with TPDC; the expectation that the contemplated first phase of the Company's Songo Songo development plans are not dependent on a gas sales agreement with TPDC and that additional volumes could be sold through existing Songas infrastructure to industrial or power markets; the estimated cost of the contemplated first phase Songo Songo field development and the estimated cost of additional drilling if the contemplated workovers are not successful. Although management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, operational, competitive, political and social uncertainties and contingencies. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.

These forward-looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Orca's control, and many factors could cause Orca's actual results to differ materially from those expressed or implied in any forward-looking statements made by Orca, including, but not limited to: failure to receive payments from TANESCO; failure to obtain IFC financing or other funding on mutually agreeable terms; risk that the Company will be required to pay additional taxes and penalties; the impact of general economic conditions in the areas in which Orca 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; competition for, among other things, capital, drilling equipment and skilled personnel; failure to obtain required equipment for drilling; delays in drilling plans; failure to obtain expected results from the contemplated workovers and drilling of wells; changes in laws; imprecision in reserve estimates; the production and growth potential of the Company's assets; obtaining required approvals of regulatory authorities; risks associated with negotiating with foreign governments; inability to access sufficient capital; failure to successfully negotiate agreements; and risk that the Company will not be able to fulfill its obligations. In addition there are risks and uncertainties associated with oil and gas operations, therefore Orca'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 that Orca will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive.

Such forward-looking statements are based on certain assumptions made by Orca in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors Orca believes are appropriate in the circumstances, including, but are not limited to: that the Company will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that the Company will have adequate funding to continue operations; that the Company will successfully negotiate agreements; receipt of required regulatory approvals; the ability of Orca to add production at a consistent rate; infrastructure capacity; commodity prices will not deteriorate significantly; the ability of Orca to obtain equipment in a timely manner to carry out exploration, development and exploitation activities; future capital expenditures; availability of skilled labour; timing and amount of capital expenditures; uninterrupted access to infrastructure; the impact of increasing competition; conditions in general economic and financial markets; effects of regulation by governmental agencies; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; and other matters.

The forward-looking statements contained in this press release are made as of the date hereof and Orca undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

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