Orca Energy Group Rated Hold: Tanzania Exit and Capital Return Strategy Signal Major Strategic Shift
Research Report

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Disclosures for Research Capital Corp., Orca Energy Group Inc., April 14, 2026

Analyst Certification I, Bill Newman, CFA, certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report. Each analyst of Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report. 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In a research note published on April 14, 2026, Bill Newman, CFA of Research Capital Corporation, maintained a Hold rating on Orca Energy Group Inc. (ORC.B:TSXV; ORXGF:OTCMKTS), with no target price currently in place pending additional clarity from year-end results and pre-close cash extraction.

Newman views the transaction as a de-risking event that transitions Orca from an operating exploration and production company to a capital return story, while noting limited remaining upside beyond near-term cash distributions.

Transaction Overview

Orca Energy Group Inc. announced it has entered into a definitive agreement to sell its wholly owned subsidiary, PAEM — which holds all Tanzanian assets and liabilities through its operating entity, PAET — to a consortium led by Amber Energy (51%) and Taifa Gas (49%) for nominal consideration of US$10. The purchaser will assume all associated obligations, including ongoing litigation, tax exposures, and future development commitments related to the Songo Songo gas asset.

Orca retains the right to extract cash prior to closing and may receive a portion of certain extraordinary income generated between signing and closing. Following completion, Orca will have no ongoing interest in the Tanzanian business. The transaction remains subject to customary closing conditions, including Tanzanian government approvals and the release of certain guarantees. Shareholder approval by a simple majority is also required, and major shareholder Shaymar Limited has indicated its support.

Valuation and Distributable Capital

Research Capital estimates Orca's residual equity value at approximately US$65.7 million, or CA$4.55 per share. The firm's analysis begins with reported cash and cash equivalents of US$127.9 million as of September 30, 2025, and adjusts for US$43.3 million in dividends paid since that date — comprising a US$14.4 million special dividend paid October 6, 2025 and a US$28.9 million special dividend paid March 2, 2026. After these payments, net cash stands at approximately US$84.6 million.

Deducting US$24.7 million in restricted cash related to an ongoing legal judgment reduces net usable cash to approximately US$59.9 million. Adding estimated Q4/25 free cash flow of US$11.9 million and subtracting US$1.1 million for the IFC participating interest and approximately US$5.0 million in estimated pre-close costs yields the residual equity estimate of US$65.7 million (CA$4.55/share). The analyst notes this is a preliminary estimate and will be revisited following year-end results.

On a forward-looking basis, Research Capital estimates Orca could generate approximately US$16.7 million (CA$1.23/share) in free cash flow during 2026, though this figure is excluded from the base case valuation given uncertainty around transaction timing and the company's ability to extract cash prior to closing. It is characterized as potential incremental upside.

Strategic Context

Research Capital views the transaction positively, noting it "materially simplifies the Orca investment thesis, transitioning the Company from an operating E&P with significant geopolitical and regulatory risk to a capital return story anchored by its cash balance."

With shares trading at CA$3.80 against a preliminary estimated residual value of CA$4.55 per share, the analyst observes that the stock appears broadly in line with current valuation.

Risks

The analyst highlights several material risks investors should consider. Transaction closing risk remains, as the divestiture requires Tanzanian government approvals and guarantee releases, and any delay or failure to close would leave Orca exposed to ongoing operational, regulatory, and legal risks in Tanzania. Pre-close cash extraction risk is also significant, as the valuation assumes Orca can successfully upstream a substantial portion of its cash balance prior to closing — an outcome that could be constrained by regulatory requirements or repatriation limitations.

Additional risks include variability in wind-down and legal costs, uncertainty surrounding the AGS appeal outcome, potential fluctuations in the IFC participating interest payment, and foreign exchange and repatriation risk given that a portion of cash flow is denominated in Tanzanian shillings.

Outlook

Research Capital maintains its Hold rating and does not currently publish a price target, citing the need for additional clarity from year-end results (expected April 24, 2026) and greater visibility on pre-close cash extraction.

At the current share price of CA$3.80, the stock trades at a modest discount to the analyst's preliminary residual equity estimate of CA$4.55 per share.