in the media
Orca Shifts Focus to Exploration Activities
1 June 2011 (Source: Oil Voice)
Orca Exploration now has a greater focus on exploration to balance its cash flow generative asset in Tanzania. This will commence with the drilling of the La Tosca well in the Po Valley Basin in Q4 2011 where the Company has signed a contract with a subsidiary of Northern Petroleum Plc to farm in on between 70% and 75% of its Longastrino exploration block.
The Longastrino block has several potential leads and it is anticipated that 3D seismic will be acquired on completion of the La Tosca well. Further drilling activities will be conducted if the seismic interpretation is positive.
The Company is still optimistic that the Italian government will ultimately issue a decree of environmental compatibility and allow further offshore drilling to re-commence in the Central Adriatic. The drilling of the Elsa-2 well is an excellent opportunity to participate in an appraisal project where there is a known 65 meter oil column that was drilled in 1992. This prospect is particularly attractive at the current oil price. In addition, the farm in provides the Company with significant upside through the ability to participate in the exploration of 11 adjacent blocks at a 15% working interest.
In Tanzania, Orca is actively pursuing a jack up rig to drill the Songo Songo West (SSW) exploration well. The development plan for SSW, and any tie into existing processing capacity, will be reviewed once the results of the well are known.
The Company's 2011 work programme includes the drilling of SS-A, the enhancement of SS-10, the drilling of La Tosca in the Po Valley and the purchase of long lead time items for Songo Songo West. The indicative capital expenditure programme for 2011 is US$58 million compared with the current cash balance of US$47.8 million. While there should be sufficient funds to undertake this 2011 work programme after taking into account self generated cash flows for the balance of the year, the Company will look to secure a financing facility and/or raise new equity to cover 2012 exploration activities.
The Company's cost pool in Tanzania may be recovered during Q2 2011 as a result of strong sales revenue and relatively low capital expenditure levels. This would result in a reduction in the percentage of net revenue attributable to the Company prior to any significant expenditure on the drilling activities. Orca will also see a reduction in the net revenue allocated to the Company now that a significant proportion of production is coming from the deemed TPDC backed-in well (SS-10).
In Tanzania, Orca has an extremely strategic asset and in 2011 the company will work to maximize its value while still addressing the inherent challenges associated with operating in an emerging hydrocarbon basin.
Orca is by far the largest producer and seller of natural gas in East Africa and it is well positioned to lead the way in developing East African gas markets and infrastructure.
Strengthened board and management team
During 2010 the Board of Directors was restructured and three highly experienced independent directors, Lord Howard of Lympne, Robert (Bob) Wigley and Beer van Straten were elected. Orca is now able to announce that Robin Gaeta, currently a Director of a Shell division that focuses on the market entry strategies for small scale liquid natural gas projects, has agreed to be nominated to Orca's Board at the Annual General Meeting of Orca shareholders on 20 June 2011. His experience will increase the company's ability to develop alternative gas markets.
The Company has also continued to strengthen its management team. Additions were made in 2010 and this has continued into 2011. The recruitment of a highly experienced chief operating officer was identified as critical to the advancement of the Company's growth plans Orca reports that Dale Rollins has been appointed to that role.