TORTOLA, British Virgin Islands 16 January 2018: Orca Exploration Group Inc. (TSX-V:ORC.A) (TSX-V:ORC.B) (“Orca” or the “Company”) today announced that the escrow release conditions have been met regarding the first tranche of the previously announced investment of up to US$130 million by Swala Oil & Gas (Tanzania) plc (“Swala”) in the Orca Group

(the “Investment”). As a result, the definitive agreements for the Investment have been released from escrow and are delivered and effective and the first tranche of the Investment is complete.

First Tranche of the Investment

Under the first tranche of the Investment, Orca sold 7,933 Class A PAEM Shares (the “PAEM Shares”) (7.93%) that it holds of PAE PanAfrican Energy Corporation (“PAEM”) to Swala (PAEM) Limited (“Swala PAEM”), a wholly-owned subsidiary of Swala, for gross proceeds of US$25,782,250 (US$21,022,450 net of certain purchase adjustments) payable in US$17,055,950 cash and the right to receive either US $3,966,500 face amount of Swala convertible preferred shares by 2 March 2018 or US $3,966,500 in cash in the event such Swala shares are not issued by such date.

Amendment and Consent Letter with International Finance Corporation

As part of the Investment, Orca entered into an amendment and consent letter with PanAfrican Energy Tanzania Limited (“PAET“) and International Finance Corporation (“IFC“) pursuant to which:

  • PAET agreed to prepay the IFC loan facility in part based on the proportion to the total percentage of PAEM Shares sold to Swala PAEM by no later than 10 December 2019;
  • upon each closing occurring under the Investment, IFC’s 7% participation interest would be reduced pro rata with the percentage of the PAEM Shares sold to Swala in consideration for PAET paying IFC the sum equal to the liquidity participation interest (10%) of the proportion of PAEM sold based on a valuation of US$325 million; and
  • the parties agreed to make certain amendments to the IFC loan agreement and related financing documents in connection with the foregoing.

As part of the amendment and consent letter, Orca guaranteed the prepayments owed by PAET to IFC discussed above. As a result of the closing of the first tranche of the Investment, that guarantee covers US$4,759,800 in prepayments. Assuming that the second and third tranches of the Investment close, Orca’s guarantee would cover an aggregate of US$24,000,000 in prepayments due 10 December 2019.

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