Orchid Island Capital, Inc. Annual Report 2021

FY2021 Annual Report · Orchid Island Capital, Inc.

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Annual Report & Accounts
2021

Welcome

Orca Energy Group Inc.
(“Orca” or the “Company”)
operates the Songo Songo
natural gas field and
associated production
and processing facilities on
behalf of the Government
of Tanzania and Songas
Limited, under the
Operatorship Agreement
on a “no gain no loss
basis”. Orca has the right
to produce and market
gas in accordance with
the terms of the Songo
Songo Production
Sharing Agreement
(“PSA”), signed with
the Government of
Tanzania and the Tanzania
Petroleum Development
Corporation (“TPDC”).

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The Songo Songo natural gas field can be found approximately
200km south of Tanzania’s economic hub, Dar es Salaam, and
approximately 25km offshore of the mainland, in the Kilwa
District of Lindi Region. The field sits on and offshore Songo
Songo Island.

Our main goal is to continue growing our sustainable business
around the asset in Tanzania, generating long-term value
through prudent governance of business risk and financial
resources. Orca believes that a combination of strong
governance practices, our sustainable business model and a
diverse talented workforce gives us the ability to create value
for our stakeholders while contributing to a lower carbon-
based future.

Our Website

For more information on our business
and operations, please visit our
website:

www.orcaenergygroup.com

Orca Energy Group Inc. Annual Report & Accounts 2021

Financial Highlights

Revenue

$86.0m

+10%

Net cash flows from
operating activities

-14%

$40.1m

2021

2020

$86.0m

2021

$77.9m

2020

$40.1m

$46.5m

Net income
attributable to shareholders

$16.4m

-33%

Cash and cash equivalents

-30%

$73.0m

Inside this Report

Strategic Report

At a Glance

CEO’s Statement

Our History

The Orca Difference

Company Operations

Gas Reserves

Sustainability & Responsibility

Our Workforce

Board of Directors

Forward Looking Information
Statement

2021

2020

$16.4m

2021

$73.0m

$27.8m

2020

Earnings per share

-19%

Gas sales

$104.2m

+6%

Management’s Discussion
& Analysis

$0.81

61.1 MMcfd

2021

2020

$0.81

2021

$1.00

2020

61.1 MMcfd

57.7 MMcfd

Working capital (1)

- 44%

$41.8m

2021

2020

$41.8m

$74.2m

Glossary

US dollar

MMcfd Million standard cubic feet per day

Million US dollar

(1) These non-GAAP financial measures and ratios do not have any standardized meaning under IFRS and may

not be comparable to similar financial measures disclosed by other issuers. (See Page 54 MD&A).

Management’s Discussion
& Analysis

Glossary

Financial Statements

Management’s Report to
Shareholders

Independent Auditors’ Report

Consolidated Statements
of Comprehensive Income

Consolidated Statements
of Financial Position

Consolidated Statements
of Cash Flows

Consolidated Statements
of Changes in Shareholder’s Equity 73

Notes to the Consolidated
Financial Statements

Corporate Information

Find out how we support our
communities on page 22

Strategic ReportManagement’s Discussion & AnalysisFinancial StatementsHighlights

Producing wells

6 (Songo Songo license)

Orca and PAET employees

116

Percentage of
Tanzanian employees

90% (99% within Tanzania)

Experience operating the
Songo Songo gas field and
related infrastructure

17 years

Songo Songo
Island

At a Glance

PARTNERING
TO CREATE
OPPORTUNITY
IN TANZANIA

Orca is the operator of
the world class Songo
Songo integrated gas
project in Tanzania,
through its subsidiary
PanAfrican Energy
Tanzania Limited
(“PAET”). Growing
production from the
Songo Songo gas field
is a core focus for the
Company, working with its
partners and Stakeholders
to ensure that affordable
gas remains a significant
proportion of the energy
mix for Tanzania’s
expanding population
and industrial economy.

Tanzania

Size

950,000km2

Population

62,000,000

Orca Energy Group Inc. Annual Report & Accounts 2021
Producing Gas in Tanzania since 2004

The Company is proud of its operating history in Tanzania
and works closely with Tanzanian Government entities and
formed long-term relationships with a number of in-country
partners. The Company strives to be a best in class employer
in Tanzania, which can be seen with the in-country workforce
being comprised of 99% local Tanzanians. The Company
continually strives to have a positive social and economic
contribution and takes its role as a major power supplier in
Tanzania very seriously, supplying gas that fuels more than
45% of Tanzania’s total power generation and sustains more
than 50 major industries in Dar es Salaam.

Read more on page 13.

DOWNSTREAM
OPERATIONS

Downstream Operations Highlights

The Company’s downstream team has worked tirelessly throughout the year to maintain,
expand and realign our ever-increasing distribution network to ensure uninterrupted gas
supply to our existing customers, and to establish connections to several new customers.
In conjunction with this, the team has supported field development planning, undertaking
considerable market research to identify potential new customers reachable via virtual
pipelines, and has been heavily involved in the assessment of expansion options to meet
future demand.

Sales Volumes - Power

+6%

Sales Volumes - Industrials

+6%

47.7 MMcfd

13.4 MMcfd

2021

2020

47.7 MMcfd

45.0 MMcfd

2021

2020

13.4 MMcfd

12.7 MMcfd

Case Study

East Coast Oils and Fats
Limited (“ECO”).

ECO is a state-of-the-art facility
for the manufacture of edible oils,
fats and soaps, it is the largest
plant of its kind in Tanzania.
ECO has been in production
since October 2006, attracting
approximately 60% of the
Tanzanian market. The plant, in
Dar es Salaam, consists of refinery,
dry-fractionation plant and soap
manufacturing, cooking fat and
margarine production. ECO
utilizes natural gas from PAET.

ECO’s primary use of natural gas is for steam
generation using boilers. The Company
converted to natural gas, having previously
used HFO for boiler firing.

Speaking about the benefits of using
natural gas, ECO’s Chief Executive Officer
commented:

“Natural gas proves to be very reliable to us, it
is environment friendly and burning without
releasing smoke to the environment. HFO
is now only used on the very rare occasion
in the absence of natural gas. Over the past
four years we have only experienced one
unplanned shutdown due to a pipe leaking
at Buguruni following some unexpected
damaged during road excavation”.

ECO plans to double its production capacity
to 1,200,000 metric tons of oil, fats and soaps
per annum. The plant will also introduce new
product lines including palm oil, sunflower oil,
soya oil, margarine and soap.

“We intend to increase our natural gas usage
to captive power by generating 9.3MW in
the future providing it is cost effective to the
business.” stated ECO’s Chief Executive Officer.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Company Operations cont.

Upstream Operations

Highlights

The Company employs a team
of around 50 local staff to
operate the plant in two equal
rotations, ably supported by up
to 70 local contractors providing
security, camp maintenance
and catering, and several casual
laborers providing general
support to operational staff.

The gas produced and processed from
the Songo Songo natural gas field is
transported to Dar es Salaam via 16-inch
and 36-inch pipelines owned and operated
by Songas Ltd. and TPDC respectively.
On arrival in Dar es Salaam the gas from
the 16-inch line enters a downstream
distribution network owned and operated
by the Company, supporting national power
generation and industries across the city.
The gas from the 36-inch line enters the gas
receiving station at Kinyerezi, operated by
Songas and supplied to the power industry,
among others.

The compression project was a complex
undertaking which has significantly
increased the gas plant production
potential, as well as its physical footprint,
each by around 30%,

The project was delivered successfully and
ahead of time, with construction carried in
and around a live gas processing plant on
a remote island, in the middle of a global
pandemic, with very little engineering
services available in-country.

Planning had to be meticulous to ensure
personnel and equipments were in the
right place at the right time to allow on-
time delivery of the project, without any
unplanned gas supply interruptions.

2021 was an exceptionally intensive
year for upstream operations and the
Company’s sub-surface team. Alongside
annual calliper logging and data retrieval,
the Company also undertook further
sand tagging, with no noticeable change
to previously recorded Hold Up Depth.
Having previously identified that the once
considered homogenous field actually
comprised at least four compartments,
Orca also undertook multi-tank modeling
to match pressure data to better
understand recent p/Z behaviour, with
promising results that we expect to
be substantiated through 3D seismic
acquisition in 2022.

Installation of feed gas compression at the
Songas gas processing plant progressed
well through 2021 and by the end of the year
Orca and its contractor China Petroleum
Technology and Development Corporation
(“CPTDC”) were ready to commence the
mechanical tie-in of the compression
equipment to the Songas gas processing
facility, the final step before commissioning
and what would have been a very early
handover of the project. Unfortunately,
requiring a 10-day gas processing plant
shutdown to facilitate the tie-in, coincided
with an unusually dry period in Tanzania that
reduced hydro power production, increasing
demand for gas production that could not
have been met. Consequently, at the request
of the Government of Tanzania the tie-in was
delayed to early 2022 and project handover
occurred one month in advance during
March 2022.

The long-planned workover of three onshore
wells, delayed due to the ongoing pandemic,
was finally approved through 2020/21. 2021
itself saw the Company work tirelessly to
secure a rig and support services in an
extremely scant and challenging market.
Of 21 invitations to tender for a land rig, only
seven responded positively, and ultimately
only one, from Exalo Drilling S.A, was
available in the timeframe required. Support
services were similarly hard to contract,
with pricing and conditioning of tools and
materials reflecting the recent downturn
in the industry and the limited activity and
support bases in East Africa.

Nonetheless, by November 18 work
had commenced on SS-3, with the well
successively completed and placed on
production on February 15, 2022.

The rig immediately moved across to SS-4,
a more technically challenging well that had
been shut in 2019 due to sand and water
production. SS-4 was side-tracked into a more
consolidated part of the Neocomian reservoir,
completed with 13% chrome tubing and sand
screens to mitigate further deterioration of
the formation. The workover commenced on
December 17, however considerable delays
at the Port of Dar es Salaam and associated
logistical issues significantly slowed progress,
in addition to several technical challenges
through the course of the program.

Regrettably, delays and open borehole
deterioration in the new sidetrack portion
of the wellbore led to the open hole logging
program being abandoned.

The SS-4 well remains shut in following the
drilling and completion of a planned side-track
wellbore which is unable to flow naturally,
due to suspected excessive liquid loading
associated with extensive circulating time
while waiting on necessary services and
equipment. The Company is sourcing a coiled
nitrogen unit to safely unload the excess liquid,
allowing the well to potentially flow naturally.
Subject to logistics and transportation, it is
expected the equipment could be on location
by Q3, 2022.

Following SS-4 the rig was moved to SS-10
to remove the existing corroded production
tubing, install internal casing patches to
mitigate sand production and install new
corrosion resistance 13% chrome tubing. SS-10
has been placed back on production on April
18, following the removal of the rig equipment.

Alongside routine operations, maintenance,
detailed field development and asset
management planning, the approvals obtained,
the projects delivered, and the progress made
through 2021 were exceptional. They were the
result of a highly coordinated and collaborative
team effort across Orca, PAET, its contractors,
the Tanzanian Government and other project
partners. When COVID-19 threatened to
derail several initiatives, the team rapidly
implemented solutions to deliver results
that today have reinforced the Company’s
position as Tanzania’s foremost gas producer,
well placed to meet and sustain anticipated
increases in demand in the near term.

Orca Energy Group Inc. Annual Report & Accounts 2021Downstream Operations

Highlights

Whether it is the bottle that
holds a cold beer at the end of
the day, the steel that forms the
structure of Tanzania’s homes
or roofs, the concrete that forms
the bridges and roads, tissues, or
the textiles we wear, much of it
comes from industries supplied
by the Company.

Alongside this, the Company also operates
the high-pressure spur lines, pressure
reducing stations, and filtering and metering
skids of the downstream network that
ultimately feed the power generation
facilities that constitute around 45% of all
power generated in Tanzania. So, alongside
the everyday products from industry, much of
the lighting under which the local population
reads or dines, the electricity that powers our
computers and televisions, or charges our
phones is also borne of Songo Songo gas
and the Company’s operations. Separately,
the Company runs a natural gas to CNG
operation that supports growing demand
from the transportation and hospitality
sectors, among others.

While upstream operations and projects
dominated 2021, such efforts would
have been futile without a reliable
and efficient downstream distribution
business. This interface with the customer
is where the Company’s reputation is
made or lost, and as Tanzania’s only
fully integrated gas developer that
manages an expansive upstream through
midstream to downstream operation,
the Company has excelled again. In
2021, the Company has signed three new
industrial customer contracts, adding
an additional steel manufacturer and
a pharmaceutical manufacturer to its
portfolio, further integrating itself and the
gas the Company produces into the fabric
of Tanzanian society.

Additionally, the Company signed a contract
with its first independent CNG retailer to
the transportation sector. One of many
companies seeking to enter this space in
Tanzania, its establishment and accessibility
in Dar es Salaam will generate further
exposure and proof of concept. Aligned with
the Minister of Energy’s directive that all
new fuel stations shall be constructed with
CNG distribution facilities, we believe further
expansion of the CNG arm of the business
will be seen in the next one to three years.
Indeed, the Company is already in discussions
with several potential large developers
and existing fuel retailers that may see the
number of CNG fuel stations reach double
figures in that period.

Tanzania, and in particular Dar es Salaam, is
developing infrastructure at an extraordinary
pace, while its population growth rate is
amongst the highest in the world. Such
development has led for space in recent years,
to competing demand for space and as such
the Company has been required frequently to
realign its downstream distribution network
to clear the way for national projects such
as the Standard Gauge Railway and the Bus
Rapid Transportation system, both of which
carve through Dar es Salaam. Recognizing
the strategic importance of these projects,
in recent years the Company’s Downstream
team has worked hand in hand with local
Government contractors to ensure progress
is not delayed, while gas supply is not
interrupted. 2021 was no different, and it is a
credit to the team that through construction
of intricate bypasses and control systems
no industry or power generation plant
experienced any supply interruptions this year.

Case Study

Aluminium Africa
(“ALAF”) Limited.

ALAF Limited was established
in 1960 and is a leading supplier
of steel roofing and related
products in Tanzania. The
Company began using natural
gas in 2010 for furnacing and
for captive power in 2019.

ALAF’s primary uses of natural gas is
for both the heating system and for its
power generation which has displaced the
use of HFO. Since the Company started
using natural gas it has seen a marked
improvement with downtime reduced
and power reliability for continuous
production maintained. The Electrical
Department Manager at ALAF commented
“the quality of service offered by PAET
has been excellent, notably on reliability,
communication during maintenance and
timely responses in case of potential
emergencies. Natural gas has been
a positive change for the Company
compared to using HFO. We have seen
a reduction in running costs including,
logistics, inventory costs and theft,
improved reliability and availability whilst
being more environmental friendly and
energy saving”.

Gas Generator pipe inlet

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial StatementsSongo Songo Island
Facilities

The Songo Songo Island gas processing
facility was originally designed with a
70 MMcfd gas send-out capacity, which
was subsequently re-rated to 110 MMcfd in
2010 (2 x 55 MMcfd dew-pointing trains).
The maximum facility send-out rate was
constrained to 96 MMcfd based on the
export pipeline operating envelope of
87.5bar(g) send-out pressure and a 52bar(g)
arrival pressure at Songas’ LM6000 GTs at
the Ubungo Power plant.

The original Songas infrastructure (Songo
Songo gas processing facility and pipeline)
is typical in its type for such conventional
hydrocarbon resources, where the reservoir
pressure declines as the resource is produced.

The arrival pressure at the gas processing
facility is currently at 80bar(g), which is
below the 110bar(g) minimum required by
design, hence constrained in production
potential. To address the declining pressure,
the Company began phase 2 compression.

Phase 2 – Compression
Project Overview

Design studies verified a combination
of mechanical refrigeration and
compression to be the most cost-effective
way to ensure the gas processing facilities
could continue to function effectively
to meet gas demand, as pressure in the
reservoir declines.

Following the completion of the phase 1
plant upgrade (refrigeration project) in
2020, CPTDC progressed the detailed
engineering of the phase 2 plant upgrade
(Compression project) during the same
year. CPTDC completed this in good
order despite engineering reviews having
to be conducted remotely, across several
time zones and in various languages,
due to the ongoing negative impact on
the movement of personnel due to
COVID-19 restrictions.

2021 saw rapid progression to the
procurement and construction phases
of the project, with both completed
successfully, largely due to the
professionalism and dedication of PAET
and CPTDC personnel. Mechanical tie-in of
the project equipment ahead of schedule
during the required shutdown period in
February 2022 further demonstrated the
excellent levels of cooperation between
parties. The project, which main units
consists of three compressor trains with
gas engine driver sets, was completed and
handed over in March 2022.

Company Operations cont.

The maintenance of
gas deliverability as
pressure in the
reservoir declines.

N
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Orca Energy Group Inc. Annual Report & Accounts 2021
Orca Energy

Highlights

Challenges

Steady increases in the cost of logistics
relating to sea freighting were a continued
concern to the project. The selection
of a major engineering, procurement and
construction contractor, with extensive
logistics support, proved a decisive factor
in limiting impairment to both cost
and schedule.

The attention to detail applied during the
challenging contract negotiations also
proved beneficial when the decision was
taken to establish a “lump sum turnkey”
model agreement. These forward-looking
mitigations were warranted.

Capital Expenditure

$42m

Compliance

Strict adherence to Local
Content Legislation

Contract Personnel

CPTDC – 45

Subcontractors – 134
(57% Tanzanian
subcontractors)

Contract
Personnel

HSSE

Manhours – 734916
Days without LTI – 416
LTIFR – 0.00
Permits to Work – 2160

“The completed $42
million compression
project which was
over three years in
the planning and
execution phase,
ensures that Tanzania
continues to benefit
from a reliable
supply of natural
gas. Increasing
access to electricity,
enabling the country
to continue on its
economic growth
trajectory.”

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements

Company Conventional
Natural Gas Reserves (Bcf)

Independent reserves evaluation

Proved producing

Proved developed non-producing

Proved undeveloped

Total proved (1P)

Probable

Total proved and probable (2P)

2021

2020

Gross1

Net2 Gross

Net

159.8

97.3

202.6

124.7

–

159.8

97.3

202.6

124.7

28.3

18.3

26.9

16.8

188.1

115.6

229.5

141.5

1 Gross equals the gross reserves that are available for the Company based on its effective ownership interest.
2 Net equals the economic allocation of the gross reserves to the Company as determined in accordance with the PSA.

Company share of Net
Present Value ($’millions)

10%

2021

15%

2020

10%

15%

Proved producing

201.4

177.8

158.4

252.4

216.4

187.7

Proved developed non-producing

Proved undeveloped

Total proved (1P)

Probable

–

201.4

177.8

158.4

252.4

216.4

36.4

32.1

28.6

30.5

24.9

–

187.7

20.6

Total proved and probable (2P)

237.8

209.9

187.0

282.9

241.3

208.3

Gas Reserves

2021 Independent
Evaluation

The Company’s natural gas reserves as
at December 31, 2021 and December
31, 2020 for the period to the end of its
license in October 2026 were evaluated
by McDaniel & Associates Consultants
Ltd. (“McDaniel”) independent petroleum
engineering consultants in accordance
with the definitions, standards and
procedures contained in the Canadian Oil
and Gas Evaluation Handbook and National
Instrument 51-101 – Standards of Disclosure
for Oil and Gas Activities (“NI 51-101”).
The 2021 independent reserves evaluation
prepared by McDaniel (the “McDaniel
Report”) is dated February 24, 2022
with the effective date of December 31,
2021 and the 2020 independent reserves
evaluation prepared by McDaniel is dated
February 23, 2021 with an effective date of
December 31, 2020.

A Reserves Committee of the Board of
Directors reviews the qualifications and
appointment of the independent reserves
evaluator and reviews the procedures for
providing information to the evaluators.

Reserves included herein are stated on
a Company gross basis (92.07%) unless
noted otherwise.

All the Company’s reserves are conventional
natural gas reserves and are located in
Tanzania. Additional reserves information
required under NI 51-101 are included in Orca’s
reports relating to reserves data and other
oil and gas information under NI 51-101, which
have been filed on its profile on SEDAR
at www.sedar.com.

On a gross Company basis there has been
a 21% decrease in 1P reserves, and a 18%
decrease in the 2P reserves compared to
2020. Total gas production in 2021 was 22.3
Bcf and taking this into account results in a
11% decrease in 1P reserves and a 9% decrease
in 2P reserves.

There has been a 13% decrease in the 2P
present value at a 10% discount basis from
$241.3 million to $209.9 million compared to
2020. This represents an effective decrease
of 6% after taking the 2021 results into
consideration. The decrease is predominately
a consequence of lower 2P reserves to the
end of the license.

Orca Energy Group Inc. Annual Report & Accounts 2021Background to the
2021 year end reserves
evaluation

The Company continued the
comprehensive review of the Songo
Songo subsurface field mapping,
reservoir simulation modeling and
well performance in 2021, which was
initiated in 2020 to better understand the
remaining potential of the Songo Songo
(SS) field to the end of the license and
assess the remaining resource potential
beyond October 2026.

The 2021 studies included a slick line
campaign, to monitor sand production and to
retrieve downhole pressure data, a Multi Well
Pressure Test Analysis (“PTA”) to match the
well pressure data with the well performance
up to 2021, together with the development
of a multi tank reservoir model.

Forecast Gas Prices and Sales Volumes1

1P
Weighted
Average Gas Price
$/mcf

2022

2023

2024

2025

2026

4.07

4.06

4.11

4.15

4.26

1P
Gross Gas

2P
Weighted
Volumes Average Gas Price
$/mcf

MMcfd

77.10

85.30

101.90

120.90

115.90

3.94

4.02

4.15

4.30

4.42

2P
Gross Gas
Volumes
MMcfd

92.90

102.30

117.10

138.40

139.90

The weighted average gas price, reflects the well head price received for power generation the delivered price for
industrial customers after the processing and transportation tariffs.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements

Sustainability & Responsibility

H
C
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O
R
P
P
A
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U
O

Orca Energy Group Inc. Annual Report & Accounts 2021
Sustainable activities roadmap

Stakeholder
Engagement

Materiality
Analysis

Strategy
Definition

Objective
& Target
Setting

Progress
Review

We have historically been focused on
sustainability, and have continued enhancing
our strategy and approach. Our main
ambition is to continue growing a sustainable
business model around our asset in Tanzania.
We take a holistic approach to sustainability
and look at how we can contribute positively
to all our stakeholders and the environment.
We believe that a combination of strong
governance practices and a diverse and
talented workforce gives us the ability to
create value for all our stakeholders. Our
actions are also inspired by the 17 United
Nations Sustainable Development Goals
(SDGs) and the 2019 World Bank Pathways
for Tanzania.

In 2020, we engaged a third party to assist
with conducting a materiality assessment for
our business. Since then, we have reviewed
and clarified our priority issues in order to
define our principles, policies, reporting and
governance structure. In 2021, we took further
action to formalize our sustainability strategy
and reporting by appointing a third-party
sustainability consultant, to assist in achieving
our goals. We further included key employees
and senior management as part of the
sustainability strategy development process,
which yielded the below material issues.

We are looking to publish our first dedicated
sustainability report this year, summarizing
our performance and ambitions on each
of the key material issues. We provide
a summary of key strategic topics and
developments below.

Environmental

• Climate Change

• Biodiversity Impact

Social

• Community Relations

• Employee Wellbeing

Governance

• Business Ethics

• Board Structure

• Water and Waste Management

• Human Capital Development

• Cybersecurity

• Supply Chain Management

• Human Rights

• Supply Chain Management

• ESG Oversight

• Remuneration

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Sustainability & Responsibility cont.

Environment

Climate Change

When we think about climate change as a
business, we aim to understand both how our
activities have an impact on climate change,
and how climate change has the potential to
impact our business.

United Nations SDG 13 Climate Action

13.1 Strengthen resilience and adaptive
capacity to climate related disasters

13.2 Integrate climate change measures
into policies and planning

13.3 Build knowledge and capacity to meet
climate change

As a natural gas producer and operator, we
are exposed to both physical and transitional
climate change risks, while we acknowledge
that our operations have the potential to
exacerbate these risks over the long term.

The need to accelerate the global
transition to clean, renewable, and
sustainable energy sources is undeniable,
and nations and companies are
increasingly committing to net-zero
targets to limit global warming below a
2°C increase compared to pre-industrial
levels. The quest for global reduction
in GHG emissions places pressure on
emerging economies, where a high
proportion of economic activity is based
on extractive and carbon intensive
industries. At the same time, African
economies have very low historic and
current emissions per capita and low
access to electricity. This conundrum
places countries like Tanzania at a
crossroads between the need for
development and action on climate
change mitigation.

The development versus climate debate
often ignores the role that gas can and needs
to play as a lower-emissions alternative to
traditional fossil fuels in developing countries,
and also misses the opportunity to foster a
market for carbon-neutral or “green” Liquid
Natural Gas (“LNG”). As such, we believe that
our business is vital in assisting Tanzania in
its development goals while also advancing
towards a lower carbon economy.

The Tanzanian government has pledged to:

1. Strengthen the availability and reliability

of electrical power by increasing
generation capacity, transmission,
and distribution networks.

2. Construct and strengthen natural gas
supply infrastructure for domestic,
industrial and transport use.

3. Develop renewable energy technologies

and projects particularly for rural
households.

4. Strengthen sustainable use and

management of oil and natural gas.

5. Develop renewable energy sources for
cooking to mitigate climate change.

6. Strengthen the availability of oil and
natural gas by enhancing petroleum
exploration and development.

Orca Energy Group Inc. Annual Report & Accounts 2021Physical Risk

We utilize a third-party 207km onshore pipeline that
transports gas from Songo Songo Island to Dar es
Salaam. We also operate a 50km downstream high and
low pressure gas distribution network. However, the
vast majority of all pipelines are buried and protected in
vulnerable areas. Thus they are not particularly exposed
to climate change induced extreme weather events.

Other physical infrastructure such as offshore and
onshore wells may be more vulnerable to extreme
weather events.

We are committed to ensuring all onshore gas
transportation pipelines, rigs, and wells are assessed for
their ability to withstand extreme weather events by 2026.

Transition Risk

Since Tanzania’s five-year development plan references
the need to “strengthen the availability of natural gas
by enhancing petroleum exploration and development
activities”, the Company is unlikely to be impacted by this
risk directly. Nevertheless, sentiment around fossil fuels
generally is changing and there is a risk of losing access
to financing if the Company fails to demonstrate how it is
working towards alignment with a low-carbon economy.
As such, we want to ensure that we are transparent about
our impact and contribution.

We are committed to reducing our negative environmental
impact as much as possible while focusing on business
growth. We see natural gas as a transitional fuel that will
further reduce Tanzania’s overall GHG emissions.

Innovation and Partnerships

We are in the process of examining opportunities
to support local universities in research directed at
innovative solutions around the climate related impacts
of natural gas. Similarly, we are investigating options to
produce LPG, small scale LNG and CNG alongside our
existing gas production operations.

While this would not reduce the amount of natural gas that
we produce, it would reduce the amount of CO2 produced
as a result of reduced flaring, whilst also further reducing
Tanzania’s reliance on coal and imported products.

GHG Emissions

We are committed to further measure and improve our
reporting of our GHG emissions during the next reporting
year and will assess the possibility of setting net-zero
ambitions and creating an action plan to align with the
Paris Agreement.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Sustainability & Responsibility cont.

Supporting our community

Our business strives to improve access
to affordable, reliable, and modern
energy services in Tanzania. We believe
we contribute positively to the following
targets:

United Nation’s SDG 7 Affordable and
Clean Energy

7.1 Universal access to modern energy

7.3 Double the improvement in energy
efficiency

7.A Promoting access to research technology
and investments in clean energy

7.B Expand and upgrade energy services for
developing countries

Given that we operate a natural gas business,
we do not directly contribute to ‘Target 7.2
Increase Global Percentage of Renewable
Energy’, as set out in the SDGs. However, our
business contributes to reducing Tanzania’s
reliance on coal, and heavy liquid fuels and
thereby to the movement towards a lower
carbon economy.

Focus Area: Kilwa District, Songo Songo
Island.

Graph 1: Amount Invested in Community Related Development Projects

1,000

900

800

700

600

500

400

300

200

100

)
s
0
0
0
(
D
S
U
t
n
u
o
m
A

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Year

Graph 2: Pupils enrolled at Songo Songo Island Kindergarten

s
l
i

p
u
p
f
o
r
e
b
m
u
N

180

160

140

120

100

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Year

2015

2016

2017

2018

2019

2020

2021

Total

Number of students using
Science Lab at the Songo Songo
Island Secondary School

114

193

194

786

Number of female students
using the Songo Songo
Island girls dormitory

239

Our four focus areas

Education

Health

Scholarships

Life Skills Program

Year

2015

2016

2017

2018

2019

2020

2021

Total

Orca Energy Group Inc. Annual Report & Accounts 2021

We work hard to ensure that the benefits of
our operations are not only for our customers
and employees, but also to surrounding
communities. The Government of Tanzania
recognizes that education is the cornerstone
of achieving the country’s development goals,
and accordingly the Government of Tanzania
invests heavily in education. PAET feels
similarly and the Company continues to
focus on the community’s educational and
health requirements.

Education

Investing in early childhood development

The Company funded the construction of
the kindergarten on the Songo Songo Island
which opened in September 2011. Since
opening, we have continued to provide
support with books and other items to
enhance learning. The kindergarten proves
to be a fundamental first step in improving
the educational prospect for children within
Songo Songo Island’s remote community,
delivering a significant increase in the
availability of first stage education. To date,
over 1,200 of the island’s children have
attended, with record attendance figures
throughout 2021.

Secondary Education

The Company continues to support the girl’s
dormitory, able to accommodate 55 students
within a learning orientated environment.
The dormitory was opened in 2013 and has
seen over 200 students utilize this facility.

In 2015 PAET funded the construction of a
multi-purpose science laboratory for the SSI
secondary school. The facility has helped the
district achieve the national target, which
requires every secondary school to have a
science laboratory. To date we have seen
over 750 students using this laboratory.

The Company makes significant social
investment. Implementing innovative,
effective and sustainable projects
that deliver genuine and measurable
benefit to Tanzania.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Sustainability & Responsibility cont.

Health

Tumaini La Maisha (Hope for Life)

The Company has continued to make
significant investment to develop
accessible, clean, well equipped and well
staffed medical facilities in the areas
surrounding our operations.

Kilwa is one of the five districts of the Lindi
Region of Tanzania. It is bordered to the north
by the Pwani Region, to the east by the Indian
Ocean, to the south by the Lindi Rural District
and to the west by the Liwale District.

The Company continues to support Tumaini La Maisha (“TLM”), TLM
is a Tanzanian based NGO who provide care for children with cancer.
TLM aim to reach every child in Tanzania who develops cancer, and
provides high quality cancer treatment free of charge with the hope
for a continued and healthy life. The charity is dedicated to caring for
not only the children with cancer, but also supporting their families.

In collaboration with TLM, the Company provided support for the expansion of childhood
cancer services in Sokoine Referral Hospital in Lindi Region, funding a new treatment,
contributing to the improving survival rates of children suffering with cancer.

In October 2021 TLM began the second intake of paediatric oncology fellows at Muhimbili
National Hospital (“MNH”) and has added two more sites to its network.

In 2021, the Company’s support has enabled the following:

• 28 children treated with childhood cancer from Lindi

• 500 arc lights to aid early diagnosis of children with certain cancers

• 250 courses of chemotherapy supplied to Sokoine Lindi Regional Hospital

• Purchase and delivery of personal protective equipment, including gloves, N95 masks and

gowns at MNH and Sokoine Hospital in Lindi

• Bone marrow aspirate needles and bone marrow biopsy needles provided for every child

• Diagnostic testing at alternative medical centres, when not accessible at the

treatment center

• Provision of antibiotics and other essential medication

• Transport provided for children and their families for journeys to and from the hospital

• Computers and software licenses

•

189 health professionals given training on childhood cancer treatment in the Lindi Region

Survival Rate

60%

Current

2005 5%

+55%

60%

People Treated

+730

850

2021

2005 120

850

Source: www.wearetlm.org

PAET Managing Director, Andy J Hanna (right) and TLM Board Chairman, Gerald Mongella (left) signing the MOU

Orca Energy Group Inc. Annual Report & Accounts 2021Case Study

Construction of Songo Songo Island Health Centre

Songo Songo Island has a population of approximately 7,000. Currently,
the Island has one dispensary that provides primary health care services
lacking specialist services such as surgery, cardiologists, dermatologists,
urologists and other specialists.

The nearest referral facility for the islanders is on the mainland at Kinyonga District Hospital,
some 27km and a boat ride away.

The Company is currently funding the construction of an outpatient department, maternity
ward, surgical theatre, laboratory, mortuary, and laundry facilities on Songo Songo Island.

Once completed in Q2 2022, the facility will be equipped and staffed to provide transformative
primary and secondary health care to the Songo Songo islanders, across a broad and vital
range of medical capabilities.

New medical center feature

Construction of Dispensary Building at Nahama Village,
Namayuni Ward

The Namayuni ward comprises five villages with a population of
approximately 10,000. The area has no public health facility and the
nearest hospital is at Kipatimu, some 30km away.

The Company has funded the construction of a building that will include

Case Study

Construction of Chumo
Health Centre in Kilwa

Chumo is one of the most densely
populated wards in Kilwa District.
The area has five villages with a
population of around 14,000.

The construction of a health centre will
allow community members to access high
quality health care. Due for completion in Q2
2022, the facility will ensure more immediate
medical support is available to community
members, and surrounding communities.

The facility will be constructed with the same
capabilities of the health center completed by
the Company in Somanga.

The Company is utilizing a local contractor
who has employed local artisans in completing
the project. All building materials and the
logistical delivery is being procured through
local Tanzanian suppliers. For example,
cement, a key construction material is being
procured from a local factory in Mtwara.

• Out-Patients Department,

• Maternal & Child Health Ward,

• Maternity Wing,

•

Incinerator

This facility will ensure more immediate medical support is available to the village, along
with other surrounding communities. The completed building will be handed over to Kilwa
District Council for use in 2022.

Dispensary Building at Nahama Village

Construction in progress at Chumo Health Center

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Sustainability & Responsibility cont.

Our People

Our Workforce

Our employees are our core asset. We aim
to inspire, protect, and nurture exceptional
people. Additionally, we believe it is important
that we provide support and shared value for
the local communities that we serve. Given
that our focus is on Tanzania, we have a great
opportunity to contribute positively to the
local communities and economy.

SDG 8 Decent Work and Economic
Growth

We are proud that our workforce and
leadership teams reflect the community
and culture where we operate. Our
approach to material social issues is tied
to the contribution towards SDG 8 and
its underlying targets. We have identified
the following targets that our business
contributes to positively:

8.4 Improve resource efficiency in
consumption and production

8.5 Full employment and decent work with
equal pay

8.6 Promote youth employment, education
and training

8.7 End modern slavery, trafficking and child
labor

8.8 Protect labor rights and promote safe
working environments

Employee Wellbeing

At present, our employee wellbeing
strategy consists of three key dimensions:
physical wellbeing, mental wellbeing, and
our COVID-19 response. We recognise that
the success of our business hinges on our
employees, thus all dimensions must be
adequately addressed.

Physical Wellbeing

To ensure physical wellbeing, we have
conducted a variety of training programs to
inform our employees on key topics such as
emergency preparedness and response, as
well as health and safety.

We have a zero-tolerance attitude towards
discrimination on the grounds of sex, political
affiliation, gender, religion and promotes
an inclusive culture in all areas, which is
covered in our Employee Handbook. As a
result, we have not recorded any incidents
of discrimination throughout 2018-2021. This
is an area we will continue to monitor going
forward, and will ensure all new employees
are fully aware of our zero-tolerance attitude.

Mental Wellbeing

Mental health is a topic that we take seriously.
In 2021, we sent a questionnaire around
mental wellbeing which received a 99%
employee response rate. As mental health
has been identified as a strategic priority of
ours, we are committed to launch a campaign
around mental health in 2022, whilst also
introducing confidential mental health
counselling for our employees.

COVID-19

Throughout the COVID-19 pandemic, we have taken action to ensure the safety of our
workforce in both operational and office-based capacities. In 2020, for our office workers,
initially we moved to a 50:50 home office split before moving to a 100% working from
home policy.

For our operational workers, we rigidly enforced personal hygiene and other protective
measures, social distancing and compulsory quarantine for 13 days for anyone returning to
work or who visit the island. We deferred several projects, including the workovers of three
onshore wells, and all non-essential maintenance tasks were delayed whenever a consultant
or service company was unable to travel or adhere to our defensive posture. Staff who had
to go into the office were also provided with sanitized Company transport allowing them to
avoid public transportation.

The COVID-19 Omicron variant saw a number of personnel return positive or inconclusive
tests. The impact on operations was minimal, although several staff were required to work
unexpected overtime to back-fill resultant personnel gaps. We will continue to provide free
lateral flow test kits for all employees when required.

Case Study
Revocatus Kasheshi
Reservoir Engineer – PAET, Tanzania

Revocatus has a bachelor’s degree in chemical
and process engineering from the University
of Dar es Salaam and a master’s degree in
petroleum engineering from the Norwegian
University of Science and Technology.
Revocatus joined PAET in September 2015,
as a trainee reservoir engineer and began
working closely with the well service engineer
on a downhole data retrieval campaign and
well test analysis. PAET quickly identified
Revocatus’ capabilities and potential, and
the Company sought to expand on these
and provided further international training to
advance his knowledge and help him obtain
additional skills.

Revocatus has progressed through the
Company, having been promoted to reservoir
engineer. Revocatus uses his skills to monitor
and develop the Company’s assets, maintain
long-term surveillance plans, and supports the
annual reserves audit. Additionally, Revocatus
provides support to the operations team on
various tasks and participates on workover
and drilling projects.

Revocatus commented: “When a well has
finished being drilled, I ensure that it is
monitored carefully, particularly in the first
few days to make sure the amount of gas
extracted meets expectations. When these
sorts of project come to life and contribute
positively to the organization and community,
I feel a lot of career satisfaction”.

Revocatus is an extremely valued member
of the team. Revocatus commented: “The
Company provides a safe and happy
working environment. Individuals within the
organization are very welcoming, collaborative
and at times go above and beyond to make
things happen. I am given space to lead and
take as much responsibility as needed, this
gives me joy and confidence at work”.

Orca Energy Group Inc. Annual Report & Accounts 2021Q&A
Stella Ndossi

“PAET provides
opportunities to develop
its employees skills by
investing in training, in-
house coaching and the
Company has internal
policies to promote
within where possible.”

Stella Ndossi
Logistics Manager, PAET Tanzania
April 20, 2022

When did you join PAET and what
experience did you have prior to joining?

I joined PAET in March 2011. I previously
worked in the telecommunications industry
at Vodacom Tanzania and prior to that in the
mining industry at Barrick Gold.

What attracted you to the role and
the Company?

PAET’s mission and plans attracted me to the
Company. Being involved in the contribution
to national power generation and being a part
of the Company’s success story.

I love being challenged and I am a passionate
problem solver. It feels refreshing getting
things done in a timely manner, whilst
continuing to learn.

How long have you worked for PAET
and how have you progressed through
the Company?

I am in my 11th year since joining PAET.
Despite the number of years working for the
Company, I still feel motivated, every day feels
like the first day.

PAET provides opportunities to develop
its employees skills by investing in training,
in-house coaching and the Company has
internal policies to promote within where
possible. I am a living example of this. Over
the past 11 years I have had the opportunity
to work in three different job roles. I joined
as an Executive Assistant, responsible for
administrative activities such as taking
minutes at meetings, creating action points
and following up on these points until
completion, amongst various other tasks.

In 2012, an Office Administration Manager
role became available, I felt that my skills had
developed, and I was well suited to the role.
I was successful and promoted to this position
which came with additional responsibilities,
including further administrative tasks, a
responsibility to manage office supplies along
with a logistical element; looking after expats’
housing, flights, hotels and vehicle and driver
management.

In 2013, PAET had a change in management,
which lead to an internal restructure. A new
Logistics Manager role was created. The
exposure that I had in my previous two roles
along with my work ethic pushed me to apply
for the post, I was successful.

In each role, PAET has given me the
opportunity to progress both within the
Company and at a personal level. I am
grateful for the trust and willingness that
the Company has given me, to invest in
myself.

Can you give an example of your daily
activities?

My daily activities start with toolbox
meetings with the operations team where
I identify logistical needs against projected
projects, along with reviewing what is in
the pipeline. The planning process of this
includes advising departmental managers
on the best modes of transport based
on the environment and cost efficiency
versus the needs at the field. I also
coordinate the collection and shipping
of PAET orders and the movement of
personnel, whilst adhering to the rules and
regulations governing the imports and
exports of both. I am able to manage all
activities, which is also down to the highly
skilled and cooperative team around me.

What is the most enjoyable part of
your role?

• Challenge – Every task comes with a
new challenge, which ultimately leads
to new knowledge, improving my skills
and growing with each. These challenges
make me look forward to coming to
work each day.

• Fitting pieces of the puzzle together
and accomplishing tasks in a timely
manner. These make my job enjoyable
and satisfying.

• Working as part of a team.

Do you feel supported and valued by
the Company?

Yes, I do feel trusted, valued and
supported.

This trust has given me the opportunity
to lead the Logistics Department. I feel
valued when listened to, particularly in
my area of expertise. Decisions are made
based on the guidance I provide.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Our Workforce

Jay Lyons
Executive Director
Chief Executive Officer

Lisa Mitchell
Chief Financial Officer

Andrew Hanna MBE
Managing Director
PanAfrican Energy Tanzania
Limited

Lloyd Herrick
Advisor to the Board and
Management

Appointed 2019

Appointed 2021

Appointed 2012

Appointed 2020

Experience
Jay Lyons joined the Company
in May 2019 as a Non-Executive
Director and took on the role of
Interim Chief Executive Office
in 2020 and Chief Executive
Officer in June 2021. Jay is a
private investor with considerable
experience in the oil and gas
industries in both Canada and
the United States. He has worked
in a range of roles for both
private and public companies in
the upstream and downstream
sectors. Jay has a strong
familiarity and understanding of
the Songo Songo project and the
Tanzanian operating environment.

Experience
Lisa Mitchell joined the Company
as Chief Financial Officer in
November, 2021. Lisa was the
CFO and Executive Director of
San Leon Energy plc (AIM: LSE),
a Nigeria focused oil and gas
company listed in London, and
previously the CFO and Executive
Director of Lekoil Limited (AIM:
LEK), an Africa focused oil and
gas Company with interests in
Nigeria. Lisa has also held senior
roles at Ophir Energy plc (LSE:
OPHR), a former FTSE 250
energy Company, CSL Limited
(ASX top 50) and Mobil Oil
Australia.

Lisa is a FCPA (Australia) and
holds a Bachelor of Economics
from La Trobe University,
Melbourne and a Graduate
Diploma in Applied Corporate
Governance from the Governance
Institute of Australia.

Experience
Andrew Hanna has worked
with Orca and PAET in various
management roles for the past
ten years, being appointed
Managing Director of PAET in
2019. He joined the Company
following a career in the public
sector where he led engineering,
logistics and security projects
around the world. Since joining,
he has played an integral role in
the development and delivery
of strategic and operational
plans for PAET, while taking a
lead role in the management
of complex senior stakeholder
issues in Tanzania. Andrew has a
strong background in electronic
and civil engineering and has
a Master’s Degree in Military
Science from Cranfield University.
He is a Fellow of the Chartered
Management Institute and a
Member of the Institute of Royal
Engineers.

Andrew is pursuing a Master’s
in Business Administration,
specializing in Oil and Gas
Management, through Robert
Gordon University, Aberdeen.

Experience
Lloyd Herrick brings over four
decades of international energy
experience following a 20 year
career at TransGlobe Energy
Corporation (“TransGlobe”)
where he was Vice President,
Chief Operating Officer and
Director. Prior to TransGlobe,
he served as President, Chief
Executive Officer and member
of the board of Moiibus Resource
Corporation, which was acquired
by TransGlobe. Earlier in his
career, Lloyd worked at Ranger
Oil Limited, holding technical,
management and executive
positions, and was a petroleum
engineer with Rupertsland
Resources Ltd. and Hudson’s
Bay Oil & Gas Ltd.

During his time as a member
of the TransGlobe executive team
and board, Lloyd acquired a wealth
of experience in direct government
negotiations, including concession
agreement amendments and
extensions to achieve optimum
resource development.

Orca Energy Group Inc. Annual Report & Accounts 2021

The Company is proud to maintain an
in-country workforce of 99% local
Tanzanian staff

Bizimana Ntuyabaliwe
Deputy Managing
Director

Mwinshehe Said
Finance Director

Shuli Mrengo
HSE Manager

Stella Ndossi
Logistics Manager

Rehema Shija
Local Content
Compliance Manager

Gasper Mkomba
HR/Office Manager

Peter Sololo
Operations Manager

Andrew Kashangaki
CSR/ESG Manager

Sabas Oisso
Downstream Manager

Ritha Mohele
Legal and Document
Control Manager

John Samwel
Downstream
Stakeholder Relations
Manager

Tanzanian Management Team

We remain focused on ensuring our
workforce and leadership teams reflect the
community and culture where we operate.

Our operational workforce in 2021 remained
at 99% local staff, with 27% of our in-country
management team being female. We are proud
of our continued progress in diversifying our
workforce, something that we monitor regularly.

We celebrate our workers and their dedication to
achieving excellence, which has led to the success
of PAET and the Songo Songo Gas to Electricity
Project. It is through their professionalism, skill
and diligence that we are able to continue to
raise our standards and quality.

Welcoming Mwinshehe Said to
the PAET Board of Directors

CPA Mwinshehe Said has been the Finance
Director of PanAfrican Energy Tanzania
Limited since he joined the Company in
2004. He is a professional accountant,
having spent over 29 years in the fields
of accounting, assurance, taxation and
advisory services. Before joining PanAfrican
Energy, Mwinshehe was privileged to have
worked with a multinational assurance
and accounting firm, and later a telecom
company in different territories including
Mauritius, Saudi Arabia, Botswana and, of
course, at home in Tanzania. As a Finance
Director, he is responsible for the day to
day running of the finance operations of
PAET, which include ensuring compliance
to all statutory, IFRS and contractual
requirements and financial stewardship.
His role involves working with several
stakeholders, including government
regulators, tax authorities, contracting
partners, statutory auditors and contractors
amongst others. Mwinshehe holds first
degrees in Accounting and Law, and a
Master of Science degree in Finance from
the University of Strathclyde. He is also
a Certified Public Accountant in Public
Practice by the Tanzanian National Board
of Accountants and Auditors (NBAA).

Mwinshehe has a passion in delivering
quality work in all his engagements and
responsibilities. He is achieving this by
developing and empowering his team
members to deliver their best whilst also
ensuring full compliance to applicable laws,
standards and regulations. He sets time for
his family and friends and for his interest in
walking, reading and watching football.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Board of Directors

David W. Ross
Chairman
Non-Executive Director and
Chair of Remuneration/
Compensation Committee

Jay Lyons
Executive Director
Chief Executive Officer and
Chair of Reserves Committee

Dr Frannie Léautier
Non-Executive Director
Chair of ESG Committee

Linda Beal
Non-Executive Director
Chair of Audit and Risk
Committee

Appointed 2004

Appointed 2019

Experience
David Ross has extensive
experience in international
tax law and is a partner in the
Calgary-based law firm of Burnet
Duckworth & Palmer. He has
served as Secretary to the Board
since the Company was formed
in 2004.

Experience
Linda Beal was a tax partner
with PricewaterhouseCoopers
in the UK for 16 years and then
with Grant Thornton UK LLP.
Linda has significant experience
of advising natural resources
groups operating in Africa and
internationally.

Experience
Jay Lyons joined the Company
in May 2019 as a Non-Executive
Director and took on the role of
Interim Chief Executive Office
in 2020 and Chief Executive
Officer in June 2021. Jay is a
private investor with considerable
experience in the oil and gas
industries in both Canada and
the United States. He has worked
in a range of roles for both
private and public companies in
the upstream and downstream
sectors. Jay Lyons has a strong
familiarity and understanding of
the Songo Songo project and the
Tanzanian operating environment.

Experience
Dr Léautier is a globally respected
development expert and has
extensive African and global
experience in the public and
private sectors. Dr Léautier is a
Senior Partner at SouthBridge
Group, she is also the Founder and
Managing Partner of the Fezembat
Group and was previously Senior
Vice President of the African
Development Bank, where she
led efforts to improve the bank’s
overall operational effectiveness.
Other roles include: Chief
Operating Officer for the Trade
and Development Bank based in
Nairobi, Infrastructure Director,
World Bank, Vice President and
Head of the World Bank Institute.

Dr Léautier holds a PhD in
Infrastructure Systems and a
Master’s in Transportation from
the Massachusetts Institute of
Technology.

Committee Membership
A RC

Committee Membership
R E

Committee Membership
A E

Committee Membership
A RC

Committee membership key

Experience

A Audit and Risk Committee
E ESG Committee
RC Remuneration/
Compensation Committee
R Reserves Committee

• Oil & Gas
• Finance
• Developing Economies
• Engineering

•
Infrastructure
• Management
• Mergers & Acquisitions
• Project Finance

Orca Energy Group Inc. Annual Report & Accounts 2021

How we manage our Company

The Board

Executive Management

• Provides independent oversight that ensures the integrity

• Responsible for managing the Company’s core operations

of the business

at the Songo Songo field

• Provides the Company with strategic direction

• Delivering value for all stakeholders

• Responsible for monitoring risk management framework

• Ensure the successful implementation of the Company’s

for the Company

corporate strategy

Audit and Risk Committee

ESG Committee

Remuneration/
Compensation Committee

Reserves Committee

• Responsible for providing
oversight of the financial
reporting process

• Provide independent
assessment of audit
process

• Ensure compliance with
laws and regulations

• Responsible for overseeing

the management of
internal controls and risk
management

• Ensures best in class ESG
principles are adopted

• Provides guidance for the
implementation of ESG
principles

• Provides a systems check
on safety, environmental
and governance associated
risks

• Reviews and decides the
overall remuneration of
Executive Management and
other key employees

Board structure and diversity

ESG oversight

We believe our Board and
management have a critical
role to play in driving our
sustainability strategy and
the solutions to meet the
expectations of our stakeholders.

Given the combination of our local presence, global leadership,
and exposure to complex sustainability factors, having oversight
of ESG from the Board is fundamental for driving our strategy. We
have a dedicated ESG Committee that is responsible for overseeing
the Company’s strategies, policies and practices when it comes to
sustainability. The Committee’s responsibilities and primary duties
are outlined in the Mandate and Terms of Reference for Orca’s ESG
Committee, which are available on request. The responsibilities of the
Committee include the review and oversight of ESG and sustainability
related matters as it relates to:

• Policies and strategies.

• Performance, communications, and engagement.

• Oversight of ESG risk management as well as proper interface

with other committees.

The committee is headed by Dr Frannie Léautier.

• Reviews the Company’s

procedures to ensure that
disclosure of reserves
complies with security
regulation

• Meets with the

independent reserves
evaluator to determine
there have been no
restrictions placed by
management on the ability
to report the reserves and
associated valuations

• Ensure oversight of the
Songo Songo gas field
reserves and to review
associated reservoir and
technical risk associated
with extraction of reserves
and the ability to report the
reserves and associated
valuations

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Forward Looking Information Statement

This annual report contains forward-looking statements or information (collectively, “forward looking
statements”) within the meaning of applicable securities legislation.

More particularly, this annual report contains, without limitation, forward looking statements pertaining to: the Company’s expectations
regarding timing for commencing the 3D seismic acquisition program; the Company’s ability to obtain a license renewal beyond 2026; the
expected expenditures required to complete the installation of the compression on the Songas infrastructure; increased production potential
as a result of the installation of compression on the Songas infrastructure; the expected increase in demand for gas; the expected timing
for completing the three well workover program; increased production potential as a result of the well workover program; the Company’s
expectations regarding average gross gas sales; the Company’s expectations regarding timing for the commissioning of new power generation
facilities; the Company’s targets and ability to reduce its environmental impact and the emission intensity of its operations; the Company’s
belief that it is positioned to meet increases in demand; the Company’s beliefs regarding its position for growth; the Company’s ability to
maintain a regular dividend; the Company’s ability to access infrastructure and increase processing capacity; the role of natural gas in achieving
Tanzania’s goal of a low carbon economy; the impact of the COVID-19 pandemic on the demand for and price of natural gas, volatility in the
financial markets, disruptions to global supply chains and the Company’s business, operations, access to customers and suppliers, availability
of employees to carry out day-to-day operations and other resources; the Company’s beliefs regarding its position to overcome current macro-
economic challenges; the Company’s ability to enter into gas sales agreements with new industrial customers; Tanzania’s growth plans; the
increase in CNG fuel stations over the next one to three years; and the Company’s plans to consider setting net-zero GHG emission goals. In
addition, statements relating to “reserves” are by their nature forward-looking statements, as they involve the implied assessment, based on
certain estimates and assumptions that the reserves described can be profitably produced in the future. The recovery and reserve estimates
of the Company’s reserves provided therein are estimates only and there is no guarantee that the estimated reserves will be recovered. As a
consequence, actual results may differ materially from those anticipated in the forward-looking statements. 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.

The forward-looking statements contained in this annual report are made as of the date hereof and the Company 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.

Oil and Gas Advisory

The recovery and reserves estimates of the Company’s conventional natural gas reserves provided herein are estimates only and there is no
guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein. All
of the reserves presented herein are conventional natural gas reserves. “BOEs” may be misleading, particularly if used in isolation. A BOE
conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 Bbl) is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value ratio between
natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an indication of value. It should not be assumed that the undiscounted or discounted
net present value of future net revenue attributable to the Company’s reserves estimated by McDaniel represent the fair market value of those
reserves. Such amounts do not represent the fair market value of the Company’s reserves. All of the reserves referenced herein are based on
McDaniel’s forecast pricing as at December 31, 2021 and December 31, 2020, as applicable. For certainty, all references herein to “production”,
“gross daily sales”, “gas sales”, “Additional Gas sales” and “Protected Gas Sales” are references to conventional natural gas production,
conventional natural gas daily sales, conventional natural gas sales and conventional natural gas sales, which are classified as Additional Gas
or Protected Gas in accordance with the PSA, respectively. The PSA defines the gas produced from the SS gas field as “Protected Gas” and
“Additional Gas”. The Protected Gas is owned by TPDC and is sold under a 20-year gas agreement (until July 31, 2024) to Songas and Tanzania
Portland Cement PLC. Songas is the owner of the infrastructure that enables the gas to be processed and delivered to Dar es Salaam, which
includes a gas processing plant on SS Island. Additional Gas is all gas that is produced from the SS gas field in excess of Protected Gas.

Non-GAAP Measures

This annual report contains non-GAAP financial measures, non-GAAP ratios and supplementary financial measures. Readers are
cautioned that this annual report should be read in conjunction with the disclosure contained under the heading “Non-GAAP Financial
Measures and Ratios”, included in the MD&A, which information is incorporated by reference herein.

Orca Energy Group Inc. Annual Report & Accounts 2021 In this section

Management’s Discussion
& Analysis

Glossary

Financial Statements

Management’s Report to
Shareholders

Independent Auditors’ Report

Consolidated Statements
of Comprehensive Income

Consolidated Statements
of Financial Position

Consolidated Statements
of Cash Flows

Consolidated Statements
of Changes in Shareholders’ Equity 73

Notes to the Consolidated
Financial Statements

Corporate Information

Strategic ReportManagement’s Discussion & AnalysisFinancial StatementsOrca Energy Group Inc. Annual Report & Accounts 2021 Management’s Discussion & Analysis

THIS MANAGEMENT’S DISCUSSION AND ANALYSIS (“MD&A”) OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SHOULD BE READ IN CONJUNCTION WITH THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES FOR THE YEAR ENDED
DECEMBER 31, 2021. THIS MD&A IS BASED ON THE INFORMATION AVAILABLE ON APRIL 20, 2022. ALL AMOUNTS ARE REPORTED IN
US DOLLARS (“$”) UNLESS OTHERWISE NOTED.

THIS MD&A CONTAINS NON-GAAP FINANCIAL MEASURES AND RATIOS AND FORWARD-LOOKING INFORMATION. READERS ARE
CAUTIONED THAT THIS MD&A SHOULD BE READ IN CONJUNCTION WITH THE DISCLOSURE BELOW UNDER THE HEADINGS “NON-GAAP
FINANCIAL MEASURES AND RATIOS”, “FORWARD-LOOKING STATEMENTS” AND “GLOSSARY” INCLUDED AT THE END OF THIS MD&A.

Nature of Operations

The principal asset of Orca Energy Group Inc. (“Orca” or the “Company”) is its interest in the Production Sharing Agreement (“PSA”) with the
Tanzanian Petroleum Development Corporation (“TPDC”) and the Government of Tanzania (“GoT”) in the United Republic of Tanzania. This
PSA covers the production and marketing of natural gas from the Songo Songo license offshore Tanzania. The PSA defines the gas produced
from the Songo Songo gas field as “Protected Gas” and “Additional Gas”. The Protected Gas is owned by TPDC and is sold under a 20-year
gas agreement (until July 31, 2024) to Songas Limited (“Songas”) and Tanzania Portland Cement PLC (“TPCPLC”). Songas is the owner of the
infrastructure that enables the gas to be treated and delivered to Dar es Salaam, which includes a gas processing plant on Songo Songo Island
(collectively, the “Songas Infrastructure”).

Songas utilizes the Protected Gas as fuel for its gas turbine electricity generators and for onward sale to customers while TPCPLC uses
the Protected Gas to fire kilns for the production of cement. A small amount of Protected Gas is also reserved for village electrification.
The Company receives no revenue for the Protected Gas delivered to Songas or other recipients and operates the original wells and gas
processing plant on a ‘no gain no loss’ basis. Under the PSA, the Company has the right to produce and market all gas in the Songo Songo
gas field in excess of the Protected Gas requirements set forth in the PSA (“Additional Gas”) until the PSA expires in October 2026.

The Tanzanian Electric Supply Company Limited (“TANESCO”) is a parastatal organization wholly owned by the GoT with oversight by the
Ministry of Energy (“MoE”). TANESCO is responsible for the majority of electricity generation, transmission and distribution throughout Tanzania.
Natural gas has become an integral component of TANESCO’s power generation fuel mix as a more reliable source of supply over seasonal
hydropower as well as a more cost-effective and lower CO2 intensive alternative to liquid fuels. The Company and TPDC as joint sellers currently
supply Additional Gas directly to TANESCO by way of the Portfolio Gas Supply Agreement (“PGSA”) and indirectly through the supply of
Protected Gas and Additional Gas to Songas, which in turn generates and sells power to TANESCO. The Company also supplies Additional Gas
to TPDC through a long-term gas sales agreement (“LTGSA”) utilizing the National Natural Gas Infrastructure (“NNGI”). The gas the Company
supplied during 2021 to Songas, TANESCO and TPDC generated approximately 45% (2020: 40%) of the electrical power and approximately
63% (2020: 66%) of all gas utilized for power generation in Tanzania.

In addition to supplying gas to TPDC, Songas and TANESCO, the Company has developed over 50 contracts to supply gas to Dar es Salaam’s
industrial market and is in the process of negotiating several more.

Outlook – COVID-19

There has been no significant change in the Company’s business during 2021 as a result of the ongoing coronavirus pandemic (“COVID-19”).
The Tanzanian government introduced new restrictions and started a vaccination program in an effort to control the spread of COVID-19
however given the steps already taken by the Company, while logistic supply chains have been stretched and delays incurred no significant
impact on our operations or business results were experienced as a result of the new restrictions. The current situation is dynamic and the
ultimate duration and magnitude of the impact on the Tanzanian economy and the financial effect on the Company are not known at this time.

There was a decrease in industrial sales in 2020 during the commencement of COVID-19 however there has not been a significant impact on
Company operations in 2021. The Company took precautions including testing before allowing workers on site and limiting the number of people
in the office at any one time and allowing employees to work from home. More recently the Company has returned to normal working practices,
although lateral flow testing remains in place for visitors to the operational site on Songo Songo Island.

Estimates and judgments made by management in the preparation of these consolidated financial statements are subject to a higher degree
of measurement uncertainty during this volatile period. The current volatility in commodity prices and uncertainty regarding the timing for
recovery creates inherent challenges with the preparation of financial forecasts (see “Business Risks”).

Orca Energy Group Inc. Annual Report & Accounts 2021Financial and Operating Highlights for the Three Months and Year Ended December 31, 2021

(Expressed in $’000 unless indicated otherwise)

2021

2020

Three Months
ended December 31

% Change

Q4/21 vs
Q4/20

Year ended
December 31

2021

2020

% Change

Ytd/21 vs
Ytd/20

OPERATING

Daily average gas delivered and sold (MMcfd)

Industrial

Power

Average price ($/mcf)

Industrial

Power

Weighted average

Operating netback ($/mcf)1

FINANCIAL

Revenue

Net income attributable to shareholders

per share – basic and diluted ($)

Net cash flows from operating activities

per share – basic and diluted ($)1

Capital expenditures1

Weighted average Class A and Class B shares (’000)

71.1

14.9

56.2

8.58

3.41

4.50

3.08

62.8

12.4

50.4

7.56

3.52

4.32

3.22

24,819

21,980

1,548

0.08

18,521

0.93

12,496

19,969

7,375

0.28

19,369

0.74

16,315

26,138

13%

20%

12%

13%

(3)%

(4)%

13%

(79)%

(71)%

(4)%

26%

(23)%

(24)%

61.1

13.4

47.7

8.09

3.47

4.48

2.93

57.7

12.7

45.0

7.44

3.47

4.34

2.85

86,022

16,370

0.81

77,874

27,761

1.00

40,110

46,505

1.97

26,610

20,317

1.67

27,141

27,818

10%

(41)%

(19)%

(14)%

18%

(2)%

(27)%

Working capital (including cash)1

Cash and cash equivalents

Long-term loan

Outstanding shares (‘000)

Class A

Class B

Total shares outstanding

RESERVES2

Gross Reserves (Bcf)

Proved

Probable

Proved plus probable

Net Present Value, discounted at 10% ($ million)3

Proved

Proved plus probable

December 31,
2021

As at
December 31,
2020

% Change

41,776

72,985

49,603

1,750

18,203

19,953

160

188

178

210

74,236

104,190

54,246

1,750

24,388

26,138

203

230

216

241

(44)%

(30)%

(9)%

(25)%

(24)%

(21)%

(18)%

(13)%

Please refer to the Non-GAAP Financial Measures and Ratios section of the MD&A for additional information.

1
2 Please refer to the Oil and Gas Advisory section of the MD&A for additional information.
3

In accordance with the PSA with the TPDC and the GoT in the United Republic of Tanzania, the Company is able to recover income tax and consequently there is no significant
difference between the NPV of reserves on a before and after tax basis. Any capitalized terms otherwise not defined within the Financial and Operating Highlights are defined
in the MD&A.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements

Management’s Discussion & Analysis cont.

Financial and Operating Highlights for 2021 and Q4 2021

• Revenue increased by 13% for Q4 2021 and by 10% for the year ended December 31, 2021 compared to the same prior year periods. The

increase for Q4 2021 was primarily a result of the increased sales to the industrial sector. The increase for the year ended December 31, 2021
was a result of the increased sales to both the industrial sector and power sector. Gas deliveries increased by 13% for Q4 2021 and by 6%
for the year ended December 31, 2021 compared to the same prior year periods. The Q4 2021 increase is due to the 20% increase in gas
deliveries to the industrial sector and the 12% increase in gas deliveries to the power sector. The increase for the year ended December 31,
2021 reflects the increase in gas deliveries of 6% to both the power and the industrial sector.

• Net income attributable to shareholders decreased by 79% for Q4 2021 and by 41% for the year ended December 31, 2021 compared to the
same prior year periods. The decreases are primarily related to decreases in the reversal of loss allowances related to the lower collection of
arrears from TANESCO.

• Net cash flows from operating activities decreased by 4% for Q4 2021 and by 14% for the year ended December 31, 2021 compared to the

same prior year periods, primarily reflecting the changes in net income and non-cash working capital.

• Capital expenditures decreased by 23% for Q4 2021 and by 2% for the year ended December 31, 2021 compared to the same prior year
periods. The capital expenditures in 2021 primarily relate to the continuation of the compression project and the commencement of the
well workover program for the SS-3, SS-4 and SS-10 wells. The capital expenditures in 2020 primarily related to the flowline decoupling
project and the compression project. The Company installed feed gas compression on the Songas gas processing facility to allow production
volumes through the Songas Infrastructure to be sustained at approximately 102 MMcfd in the near term (3-5 years). The drilling rig was
released on April 8, 2022 having completed the planned three well (SS-3, SS-4 and SS-10) workover program. The $31.6 million program
included the reactivation of the SS-3 and SS-4 wells along with the installation of corrosion resistant production tubing on all three of the
wells. The SS-3 well was placed on production on February 15, 2022 and the SS-10 well was returned to production on April 18, 2022 after
a 36 day shut in period to accommodate the installation of down hole sand mitigation equipment and replacement production tubing.
The SS-4 well remains shut in following the drilling and completion of a planned side-track wellbore to replace the original wellbore, which
had been compromised by excessive sand production. Currently the SS-4 well is unable to flow naturally due to suspected excessive liquid
loading associated with extensive circulating time while waiting on necessary services and equipment. The Company is sourcing a coiled
tubing nitrogen unit to safely unload the excess liquid, potentially allowing the well to flow naturally. Subject to logistics and transportation
from Poland, it is expected the coiled tubing equipment will be on location in Q3 2022. Together with compression facilities, and subject to
demand volumes and associated natural reservoir pressure decline, the current well stock now provides the opportunity to initially increase
production potential to within a range of 150 MMcfd to 160 MMcfd by also producing through the adjacent NNGI facilities on Songo Songo
Island. If successful in lifting fluids from the SS-4 well, production potential will further increase.

• The Company exited the period in a strong financial position with $41.8 million in working capital (December 31, 2020: $74.2 million),

cash and cash equivalents of $73.0 million (December 31, 2020: $104.2 million) and long-term debt of $49.6 million (December 31, 2020:
$54.2 million). The decrease in working capital, cash and cash equivalents was primarily related to the substantial issuer bid completed in
January 2021 (“2021 SIB”) and the reclassification of $5.0 million of long-term debt into current liabilities as it becomes due in 2022.

• Total proved conventional natural gas reserves (“1P”) and total proved plus probable conventional natural gas reserves (“2P”) decreased
by 21% and 18%, respectively, at December 31, 2021 compared to the prior year. The decrease is due to gross property Additional Gas
production in 2021 of 22.0 Bcf (2020: 21.1 Bcf) and lower forecasted sales over the remaining life of the Songo Songo license, predominately
due to the delay in new power plants coming on stream. The net present value of estimated future cash flows from 2P reserves at a 10%
discount rate decreased by 13% compared to the previous year. This is mainly the result of the decrease in the time remaining to the end
of the Songo Songo license together with a moderate increase in forecasted capital costs. The reserves and estimated future cash flows
are based on forecasted gross property 1P Additional Gas sales volumes of 77.1 MMcfd for 2022 compared to actual results of 71.1 MMcfd
for Q4-2021. Under the terms of the PSA, the Company is required to pay Tanzanian income tax which is fully recovered through the profit
sharing arrangements with TPDC. Income tax has no material impact on the cash flows emanating from the PSA and accordingly there is no
significant difference between the net present value of reserves on a before and after tax basis.

• As at December 31, 2021 the current receivable from TANESCO was $2.0 million (December 31, 2020: $ nil). TANESCO’s long-term trade

receivable as at December 31, 2021 was $26.5 million with a provision of $26.5 million compared to $27.6 million (provision of $27.6 million)
as at December 31, 2020. Subsequent to December 31, 2021 TANESCO paid the Company $8.2 million and the Company invoiced TANESCO
$5.5 million for 2022 gas deliveries.

• On February 23, 2021, June 4, 2021, September 9, 2021 and November 19, 2021 the Company declared dividends of CDN$0.10 per share
on each of its Class A common voting shares (“Class A Shares”) and Class B subordinate voting shares (“Class B Shares”) for a total of
$6.4 million to the holders of record as of March 31, 2021, June 30, 2021, September 29, 2021 and December 31, 2021 (paid on April 15, 2021,
July 15, 2021, October 15, 2021 and January 14, 2022, respectively).

Orca Energy Group Inc. Annual Report & Accounts 2021Financial and Operating Highlights for 2021 and Q4 2021 cont.

• On January 22, 2021 the Company announced the final results of the 2021 SIB whereby the Company repurchased and cancelled 6,153,846
Class B Shares at a price of CDN$6.50 per Class B Share representing an aggregate purchase price of CDN$40.0 million and 25.2% of
the total number of the Company’s issued and outstanding Class B Shares and 23.5% of the total number of the Company’s issued and
outstanding shares.

• On June 21, 2021 the Company commenced a normal course issuer bid (“NCIB”) to purchase Class B Shares through the facilities of the
TSXV and alternative trading systems in Canada. Purchases pursuant to the NCIB will not exceed 500,000 Class B Shares, representing
approximately 2.74% of the total outstanding Class B Shares. The NCIB will be in effect until June 21, 2022 (or until such time as the maximum
number of Class B Shares have been purchased). As at April 20, 2022, 41,200 Class B Shares have been purchased and canceled by the
Company pursuant to the NCIB.

• On February 24, 2022 the Company declared a dividend of CDN$0.10 per share on each of its Class A Shares and Class B Shares for a total

of $1.6 million to the holders of record as of March 31, 2022 paid on April 15, 2022.

• 2022 production started strongly, with gross sales of Additional Gas averaging 74 MMcfd in January.

• The Company forecasts average gross gas sales of 70-76 MMcfd during 2022 representing a 10 MMcfd, or approximately 16%, increase
to the prior forecasts of 60-66 MMcfd. The increased gas demand forecast is primarily driven by encouraging discussions with the MoE,
TPDC and TANESCO to increase gas supply to new power generation facilities expected to be commissioned in 2022.

Oil and Gas Advisory

The Company’s conventional natural gas reserves as at December 31, 2021 disclosed herein were evaluated by McDaniel & Associates
Consultants Ltd. (“McDaniel”), independent petroleum engineering consultants, in accordance with the definitions, standards and procedures
contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for
Oil and Gas Activities (“NI 51-101”).

The independent reserves evaluations prepared by McDaniel had an effective date of December 31, 2021 and December 31, 2020 and preparation
date of February 24, 2022 and February 23, 2021 respectively. All of the reserves presented herein are conventional natural gas reserves. The
net present value of future net revenue attributable to the Company’s reserves is stated without provision for interest costs and out of country
general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income and future
capital expenditures for only those wells assigned reserves by McDaniel. It should not be assumed that the undiscounted or discounted net
present value of future net revenue attributable to the Company’s reserves estimated by McDaniel represent the fair market value of those
reserves. Such amounts do not represent the fair market value of the Company’s reserves. The recovery and reserve estimates of the Company’s
conventional natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.
Actual reserves may be greater than or less than the estimates provided herein. All of the reserves referenced herein are based on McDaniel’s
forecast pricing as at December 31, 2021 and December 31, 2020, as applicable.

All the Company’s reserves are located in Tanzania. Reserves included herein are stated on a Company gross reserves basis unless noted
otherwise. Company gross reserves are the total of the Company’s working interest share in reserves before deduction of royalties owned
by others and without including any royalty interests of the Company, and are based on the Company’s 92.07% ownership interest in the
reserves following the transaction with Swala Oil & Gas (Tanzania) plc. Additional reserves information required under NI 51-101 is included in
Orca’s reports relating to reserves data and other oil and gas information under NI 51-101, which are filed on its profile on SEDAR at
www.sedar.com.

“BOEs” may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel of oil
equivalent (6 Mcf: 1 Bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil
is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

For certainty, all referenced herein to “production”, “gross daily sales”, “gas sales” and “Additional Gas sales” are references to conventional
natural gas production, conventional natural gas daily sales, conventional natural gas sales and conventional natural gas sales, which are
classified as Additional Gas in accordance with the PSA, respectively.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Operating Volumes

The average gross daily sales volume increased by 13% for Q4 2021 and by 6% for the year ended December 31, 2021 over the comparable prior
year periods. The increase in gross sales volume was primarily due to increased sales to both the power and the industrial sectors.

The Company’s gross sales volumes were split between the Industrial and Power sectors as detailed in the table below:

Gross sales volume (MMcf)

Industrial sector

Power sector

Total volumes

Gross daily sales volume average (MMcfd)

Industrial sector

Power sector

Gross daily sales volume average total

Industrial Sector

Three Months ended
December 31

Year ended
December 31

2021

2020

2021

2020

1,371

5,168

6,539

14.9

56.2

71.1

1,137

4,640

5,777

12.4

50.4

62.8

4,882

17,430

22,312

13.4

47.7

61.1

4,633

16,484

21,117

12.7

45.0

57.7

Industrial sector gross daily sales volumes increased by 20% for Q4 2021 and by 6% for the year ended December 31, 2021 over the comparable
prior year periods. The increases were a result of increased consumption due to an overall increase in demand for services and products and
by an increase in the number of industrial customer contracts entered into during the year.

Power Sector

Power sector sales gross daily sales volumes increased by 12% for Q4 2021 and by 6% for the year ended December 31, 2021 over the
comparable prior year periods. The increases were primarily due to increased gas sales to TPDC though the NNGI.

Protected Gas Volumes

Protected Gas volumes increased by 16% to 3,854 MMcf (41.9 MMcfd) for Q4 2021 compared to 3,335 MMcf (36.3 MMcfd) for Q4 2020 and by
9% to 13,255 MMcf (36.3 MMcfd) for the year ended December 31, 2021 compared to 12,138 MMcf (33.2 MMcfd) for the year ended December 31,
2020. The Company receives no revenue for Protected Gas volumes, however the volumes are required to calculate total gas produced from the
reservoir and the allocation of certain production, distribution and transportation expenses between Protected Gas and Additional Gas.

Commodity Prices

The commodity prices achieved in the different sectors during the year are detailed in the table below:

Three Months ended
December 31

Year ended
December 31

2021

2020

2021

2020

8.58

3.41

4.50

7.56

3.52

4.32

8.09

3.47

4.48

7.44

3.47

4.34

$/mcf

Average sales price

Industrial sector

Power sector

Weighted average price

Orca Energy Group Inc. Annual Report & Accounts 2021Commodity Prices cont.

Industrial Sector

The average industrial sales price increased by 13% for Q4 2021 and by 9% for the year ended December 31, 2021 over the comparable prior
year periods. The increase in prices is primarily due to the underlying increase in the price of heavy fuel oil against which most of the industrial
customer contracts are priced.

Power Sector

The average power sector sales price decreased by 3% for Q4 2021 and remained unchanged for the year ended December 31, 2021 compared
to the same prior year periods. The average power sector sales price varies depending on whether gas is delivered and sold through the NNGI
or the Songas Infrastructure. Sales through the NNGI are to TPDC and do not include processing and transportation tariffs which are included
in gas delivered through the Songas Infrastructure.

Revenue

Under the terms of the PSA the Company is responsible for invoicing, collecting and allocating the revenue from Additional Gas sales
(See “Principal Terms of the PSA and Related Agreements”).

The Company is entitled to recover all costs incurred on the exploration, development and operations of the project (“Cost Gas revenue”) up to
a maximum of 75% of the net field revenue (gross field revenue less the tariff for processing and pipeline infrastructure) prior to allocating the
remaining net field revenue between TPDC and the Company (“Profit Gas revenue”). Any costs not recovered in a period are carried forward
for recovery out of future revenues. Once the Cost Gas revenue has been recovered, TPDC is able to recover any pre-approved marketing costs.
Currently there are no pre-approved marketing costs for TPDC.

The reconciliation of gross field revenue to Company operating revenue and revenue is detailed below:

$’000

Industrial sector

Power sector

Gross field revenue

TPDC share of revenue

Company operating revenue

Current income tax adjustment

Three Months ended
December 31

Year ended
December 31

2021

11,764

17,649

29,413

2020

8,589

16,347

24,936

2021

39,477

60,445

99,922

2020

34,485

57,267

91,752

(6,010)

(2,822)

(22,285)

(19,685)

23,403

1,416

24,819

22,114

(134)

21,980

77,637

8,385

86,022

72,067

5,807

77,874

Revenue increased by 13% for Q4 2021 and by 10% for the year ended December 31, 2021 over the comparable prior year periods. The increases
are primarily a result of increased sales to both the industrial and the power sectors together with increase in the weighted average price in
relation to sales to the industrial sector.

The average Additional Gas sales volumes for the quarters and for the years ended December 31, 2021 and December 31, 2020 were above
50 MMcfd, which entitled the Company to a 55% share of Profit Gas revenue. The Company was allocated a total of 76% of the Additional Gas
net field revenue for Q4 2021 (Q4 2020: 88%) and a total of 75% of the Additional Gas net field revenue for the year ended December 31, 2021
(year ended December 31, 2020: 77%).

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Production, Distribution and Transportation Expenses

The production, distribution and transportation costs are detailed in the table below:

$’000

Operating costs

Tariff for processing and pipeline infrastructure

Ring-main distribution costs

Three Months ended
December 31

Year ended
December 31

2021

560

2,437

259

3,256

2020

844

2,056

620

3,520

2021

2,042

8,222

1,989

12,253

2020

2,539

7,009

2,356

11,904

Included in operating costs are well maintenance costs, PSA license costs, regulatory fees, insurance, certain costs associated with evaluation
of the reserves and the costs of personnel not recoverable from Songas. Operating costs are allocated between Protected Gas (recoverable
from Songas) and Additional Gas in proportion to their respective volumes during the period. Operating costs decreased by 34% for Q4 2021
and by 20% for the year ended December 31, 2021 compared to the same prior year periods, primarily due to decreased expenditure on reserve
and resource evaluation. The amount paid under the tariff for processing and pipeline infrastructure increased by 19% for Q4 2021 and by 17% for
the year ended December 31, 2021 compared to the same prior year periods, primarily as result of increased volumes processed and delivered
through the Songas Infrastructure. Ring-main distribution costs decreased by 58% for Q4 2021 and by 16% for the year ended December 31, 2021
compared to the same prior year periods, primarily as a result of reduced spending on expansion and lower maintenance costs associated with
the ring-main which transports the gas primarily to industrial customers.

Operating Netback

The operating netback per mcf before general and administrative expenses, tax and APT is detailed in the table below (see “Non-GAAP financial
measures and ratios”):

$/mcf

Gas price – Industrial

Gas price – Power

Weighted average price for gas

TPDC Profit Gas entitlement

Production, distribution and transportation expenses

Operating netback

Three Months ended
December 31

Year ended
December 31

2021

8.58

3.41

4.50

(0.92)

(0.50)

3.08

2020

7.56

3.52

4.32

(0.49)

(0.61)

3.22

2021

8.09

3.47

4.48

(1.00)

(0.55)

2.93

2020

7.44

3.47

4.34

(0.93)

(0.56)

2.85

The operating netback decreased by 4% for Q4 2021 and increased by 3% for the year ended December 31, 2021 over the comparable prior year
periods. The decrease in Q4 2021 is the result of lower capital expenditure than in Q4 2020 resulting in a higher TPDC Profit Gas entitlement,
partially offset by the increase in gas prices to the industrial sector. The increase for the year ended December 31, 2021 over the comparable
prior year period is mainly due to the increase in gas price to the industrial sector.

Orca Energy Group Inc. Annual Report & Accounts 2021General and Administrative Expenses

General and administrative expenses are split between the Company’s head office and Tanzania. A significant percentage of general and
administration expenses relate to office and management costs that support the Company’s operations in Tanzania and are cost recoverable
under the PSA.

$’000

Tanzania

Corporate

General and administrative expenses are detailed in the table below:

$’000

Employee and related costs

Office costs

Marketing and business development costs

Reporting, regulatory and corporate

Three Months ended
December 31

Year ended
December 31

2021

1,891

1,423

3,314

2020

2,184

943

3,127

2021

6,946

5,042

11,988

Three Months ended
December 31

Year ended
December 31

2021

1,833

785

327

369

3,314

2020

1,600

1,206

130

191

3,127

2021

6,919

2,716

967

1,386

11,988

2020

7,052

6,540

13,592

2020

7,499

4,006

879

1,208

13,592

General and administrative expenses averaged $1.1 million per month during Q4 2021 (Q4 2020: $1.0 million) and $1.0 million per month for the
year ended December 31, 2021 (year ended December 31, 2020: $1.1 million). The 8% decrease in employee and related costs for the year ended
December 31, 2021 over the comparable prior year period was mainly due to termination payments to senior management in 2020. The 32%
decrease in office costs for the year ended December 31, 2021 over the comparable prior year period was a result of the decision in Q3 2020
to focus on Tanzanian operations by reducing head office staff, office space and related costs. The 10% increase in marketing and business
development costs for the year ended December 31, 2021 over the comparable prior year period was a result of expanding the corporate social
responsibility program in Tanzania. The 15% increase in reporting, regulatory and corporate costs for the year ended December 31, 2021 over the
comparable prior year period was due to increase in costs related to professional and legal services.

Stock Based Compensation

The breakdown of the costs incurred in relation to stock based compensation is detailed in the table below:

$’000

Stock appreciation rights (“SARs”)

Restricted stock units (“RSUs”)

Three Months ended
December 31

Year ended
December 31

2021

(123)

(99)

2020

681

146

827

2021

(585)

(576)

2020

671

403

1,074

As at December 31, 2021 a total of 746,166 SARs were outstanding (December 31, 2020: 1,242,166). No new SARs were issued, 412,667 SARs were
exercised, and 83,333 SARs were forfeited during 2021. As at December 31, 2021 a total of 76,366 RSUs were outstanding (December 31, 2020:
133,200). No new RSUs were issued, 47,501 RSUs were exercised, and 9,333 RSUs were forfeited during 2021.

As SARs and RSUs are settled in cash, they are re-valued at each reporting date using the Black-Scholes option pricing model with the resulting
liability being recognized in trade and other liabilities. In the valuation of SARs and RSUs at the reporting date, the following assumptions have
been made: a risk-free rate of interest of 1.0%, stock volatility of 26.6% to 37.8%, 5% forfeiture and a closing price of CDN$5.40 per Class B Share.
The valuation of outstanding SARs and RSUs awards is increased to reflect the dividends paid between the award date and the exercise date.

As at December 31, 2021 a total accrued liability of $1.1 million (December 31, 2020: $2.2 million) has been recognized in relation to SARs
and RSUs. The Company recognized $0.1 million for Q4 2021 as stock based compensation recovery (Q4 2020: $0.8 million as stock based
compensation expense) and $0.6 million for the year ended December 31, 2021 as stock based compensation recovery (year ended December
31, 2020: $1.1 million as stock based compensation expense).

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Depletion and Depreciation

Natural gas properties are depleted using the unit of production method based on the production for the period as a percentage of the total
future production from the Songo Songo proved reserves. As at December 31, 2021 the estimated proved reserves remaining to be produced
over the term of the PSA as determined by McDaniel in their report dated February 24, 2022 with an effective date of December 31, 2021 and
prepared in accordance with NI 51-101 and the COGE Handbook were 160 Bcf (December 31, 2020: 203 Bcf). The average depletion rate was
$0.71/mcf for the year ended December 31, 2021 compared to $0.69/mcf for the comparable prior year.

$’000

Oil and natural gas interests

Office and other

Right-of-use assets

Three Months ended
December 31

Year ended
December 31

2021

4,646

2020

4,078

2021

15,779

290

2020

14,830

397

4,724

4,162

16,106

15,321

The depletion charge for natural gas interests increased by 14% for Q4 2021 and by 6% for the year ended December 31, 2021 over the
comparable prior year periods. The increases were due to increased gas produced and sold, additional capital expenditure, and a reduction
in estimated proved reserves.

Finance Income and Expense

Finance income is detailed in the table below:

$’000

Interest income

Investment income

Three Months ended
December 31

2021

2020

–

124

–

124

Year ended
December 31

2021

133

–

133

2020

844

305

1,149

At December 31, 2021 and December 31, 2020 the Company did not have investments in short-term bonds. The $0.3 million investment income
for 2020 relates to the interest earned on short-term investment bonds.

Finance expense is detailed in the table below:

Three Months ended
December 31

Year ended
December 31

2021

1,476

372

1,857

274

588

212

2,931

2020

1,467

889

2,370

–

203

2,631

2021

5,982

920

6,945

628

588

1,826

9,987

2020

5,830

1,971

7,887

(438)

–

1,873

9,322

$’000

Base interest expense

Participation interest expense

Lease interest expense

Interest expense

Net foreign exchange loss (gain)

Interest on tax assessment

Indirect tax

Orca Energy Group Inc. Annual Report & Accounts 2021
Finance Income and Expense cont.

Base and participation interest expense relate to the long-term loan (“Loan”) from the International Finance Corporation (“IFC”) to the
Company’s subsidiary operating in Tanzania, PanAfrican Energy Tanzania Limited (“PAET”). Base interest on the Loan is payable quarterly
in arrears at 10% per annum on a “pay-if-you-can-basis” using a formula to calculate the net cash available for such payments as at any given
interest payment date. The participation interest expense is paid annually in arrears. It equates to 6.4% of PAET’s net cash flows from operating
activities less the net cash flows used in investing activities for the year. Such participation interest will continue until October 15, 2026
regardless of whether the Loan is repaid prior to its contractual maturity date. The decrease in participation interest expense for the year
ended December 31, 2021 over the comparable prior year period is primarily a consequence of PAET’s capital expenditure program, which
has reduced the net cash flows on which the participation interest expense is based compared to the same prior year period.

Net foreign exchange gains and losses are the result of transactions in foreign currencies recorded at the rate of exchange prevailing on the date
of such transactions. Monetary assets and liabilities in foreign currencies are translated at period-end rates. Non-monetary items are translated
at historic rates, unless such items are carried at market value, in which case they are translated using the exchange rates that existed when the
values were determined. These foreign exchange gains and losses are recorded in finance expense.

The interest on tax assessment represents the Company’s share of the amount in dispute with respect to interest on depreciation disallowed by
the TRA for expenditures in relation to completing well SS-10 in 2009 and 2010 and well SS-12 in 2015 and 2016 (see “Contingencies – Taxation”).
The indirect tax is for value added tax (“VAT”) associated with invoices to TANESCO under the take or pay provisions within the PGSA and for
interest on late payments.

(Reversal of) Loss Allowance

$’000

Reversal of loss allowance

Loss allowance

Three Months ended
December 31

Year ended
December 31

2021

–

1,188

2020

(3,478)

–

2021

(3,762)

1,188

2020

(20,951)

5,337

(3,478)

(2,574)

(15,614)

The reversal of loss allowance of $3.8 million during 2021 (2020: $21.0 million) follows collection of: (i) TANESCO arrears of $1.1 million
(2020: $19.9 million) which had been previously allowed for and represents the excess of receipts over gas sales invoiced during the year;
(ii) Songas operatorship arrears of $1.9 million (2020: $1.1 million) which had been previously allowed for; and (iii) collection of $0.8 million
(2020: $ nil) of indirect taxes related to the receipt of funds for the TANESCO 2016 take or pay invoice that had been previously allowed for.

The loss allowance of $1.2 million during 2021 is for: (i) $0.5 million, being the amount in dispute with the Tanzanian Revenue Authority (“TRA”)
with respect to withholding tax on services performed outside Tanzania by non-resident persons in 2010 and 2015-16; and (ii) $0.7 million with
respect to impairment of Swala convertible preference shares. The loss allowance for 2020 related to $5.3 million the TRA collected via an
Agency Notice which obligated the Company’s bank in Tanzania to release funds in favor of the TRA. This $5.3 million was initially considered
recoverable, however in 2021 the Tanzanian Court of Appeal (“CAT”) ruled against an appeal filed by the Company in 2020 and the Company,
with advice from its legal counsel, decided not to proceed further on this matter.

For additional context regarding the reversal of loss allowance and the loss allowance for receivables, please see the Company’s audited
financial statements for the fiscal year ended December 31, 2020, and the Company’s Q3 2020 MD&A and Q3 2020 interim financial statements
and notes available on SEDAR at www.sedar.com or the Company’s website.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Tax

Income Tax

$’000

Current tax

Deferred tax

Three Months ended
December 31

Year ended
December 31

2021

3,736

2,743

6,479

2020

816

2,296

3,112

2021

10,192

6,534

16,726

2020

7,384

3,356

10,740

Under the terms of the PSA with TPDC and the GoT, the Company is liable for income tax in Tanzania at the corporate tax rate of 30%.
However, the PSA provides a mechanism by which income tax payable is recovered from TPDC by reducing TPDC’s share of Profit Gas revenue
and increasing the allocation to the Company. This is reflected in the accounts by increasing the Company’s share of revenue by an amount
equivalent to current year income taxes payable grossed up by 30%.

As at December 31, 2021 there were temporary differences between the carrying value of the assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes under the Income Tax Act 2004. Applying the 30% Tanzanian tax rate, the Company
has recognized a deferred tax liability of $25.0 million (December 31, 2020: $18.5 million). The deferred tax has no impact on cash flow until it
becomes a current income tax, at which point the tax is paid and recovered from TPDC’s share of Profit Gas revenue.

Additional Profits Tax (“APT”)

$’000

APT

Three Months ended
December 31

Year ended
December 31

2021

1,214

2020

589

2021

4,609

2020

4,054

Under the terms of the PSA, APT is payable when the Company has recovered its costs plus a specified return out of Cost Gas revenue
and Profit Gas revenue. As a result: (i) no APT is payable until the Company recovers its costs out of Additional Gas revenue plus an annual
operating return under the PSA of 25% plus the percentage change in the United States Industrial Goods Producer Price Index (“PPI”); and (ii)
the maximum APT rate is 55% of the Company’s Profit Gas revenue when costs have been recovered with an annual return of 35% plus the
percentage change in PPI.

The timing and the effective rate of APT depends on the realized value of Profit Gas revenue which in turn depends on the level of expenditure.
The Company provides for APT by annually forecasting the total APT payable in the future as a proportion of the forecast Profit Gas revenues
over the term of the PSA. The forecast takes into account the timing of future development capital spending. As at December 31, 2021 the
current portion of APT payable was $8.5 million (December 31, 2020: $11.5 million) with a long-term APT payable of $20.9 million (December 31,
2020: $24.8 million). APT of $11.5 million was paid in Q1 2021 based on the 2020 results (Q1 2020: $11.9 million based on 2019 results).

The effective APT rate of 17.3% (Q4 2020: 17.1%) has been applied to the Company’s share of Profit Gas revenue of $6.8 million for Q4 2021
(Q4 2020: $3.4 million), and an average effective rate of 17.3% (2020: 16.8%) has been applied to Company’s share of Profit Gas revenue of $26.7
million for the year ended December 31, 2021 (year ended December 31, 2020: $24.1 million). Accordingly, $1.2 million for the quarter ended
December 31, 2021 (Q4 2020: $0.6 million) and $4.6 million for the year ended December 31, 2021 (year ended December 31, 2020: $4.1 million)
of APT has been recorded in the Consolidated Statements of Comprehensive Income.

Orca Energy Group Inc. Annual Report & Accounts 2021Working Capital

Working capital as at December 31, 2021 was $41.8 million (December 31, 2020: $74.2 million) and is detailed in the table below (also see “Non-
GAAP financial measures and ratios”):

$’000

Cash and cash equivalents

Trade and other receivables

Songas

TPDC

TANESCO

TRA

Industrial customers and other receivables

Loss allowance

Prepayments

Trade and other liabilities

TPDC share of Profit Gas revenue1

Songas

Deferred income – take or pay contracts

Other trade payables and accrued liabilities

Current portion of long-term loan

Current portion of APT

Tax payable

Working capital

8,776

5,603

2,042

–

15,487

(1,177)

21,911

1,899

5,215

17,751

5,000

8,461

As at December 31

2021

72,985

2020

104,190

6,624

7,417

–

5,337

10,960

30,731

1,133

104,849

(8,458)

21,880

898

126,968

25,570

2,062

–

11,655

–

11,489

50,776

1,956

52,732

74,236

60,237

2,836

63,073

41,776

The balance of $21.9 million payable to TPDC is the liability for TPDC’s share of Profit Gas revenue, primarily related to unpaid gas deliveries to TANESCO. The majority of the
settlement of this liability is dependent on receipt of payment from TANESCO for arrears. For their allocation of Profit Gas revenue, the Company paid TPDC $15.6 million in 2021
(2020: $14.9 million).

Financial Instruments

Current financial instruments of the Company include cash and cash equivalents, trade and other receivables, trade and other liabilities and
tax payable. The carrying values of the financial instruments approximate fair values due to their relatively short periods to maturity. The risks
associated with the Company’s financial instruments are primarily attributed to the inherent riskiness of cash, and the risk that trade and other
receivables may not be paid when due. The Company mitigates these risks by (i) holding the majority of its cash outside of Tanzania in reputable
international financial institutions primarily in Jersey and Mauritius which reduces geo-political risk; and (ii) monitoring and reviewing the trade
and other receivables on a regular basis to determine if allowances are required for overdue amounts or action is required to restrict deliveries
on past due accounts to reduce exposure on outstanding receivables. There are no restrictions on the movement of cash from Jersey, Mauritius
or Tanzania.

Working Capital Requirements

The Company expects to have sufficient cash flow from operating activities to maintain adequate working capital to cover both short-term
and long-term obligations, including forecast debt and interest payments ($11.1 million) and capital expenditure ($50.0 million) for 2022. The
Company hasn’t incurred any losses from debtors in 2021 and does not expect to incur any losses from debtors in 2022. The Company maintains
adequate cash and cash equivalents on hand to ensure it can meet all its capital expenditure obligations and deal with possible fluctuations in
liquidity from operational problems including any potential impact from COVID-19. The Company does not anticipate any circumstances that are
reasonably likely to occur that could significantly impact the Company’s cash flows and liquidity.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements
Management’s Discussion & Analysis cont.

Working Capital cont.

TANESCO Receivable

As at December 31, 2021 the current receivable from TANESCO was $2.0 million (December 31, 2020: $ nil), which was subsequently paid
in 2022. During 2021 the Company invoiced TANESCO $23.9 million (2020: $23.3 million) for gas deliveries and received $22.9 million (2020:
$43.2 million) in payments. Based on the consistent payments from TANESCO, the Company: (i) recognized all amounts invoiced for gas
deliveries in 2021 and 2020 as revenue; and (ii) recognized $1.1 million during the year (2020: $19.9 million) as a reversal of loss allowance relating
to the amounts collected during the year that were applied towards the long-term TANESCO receivables previously allowed for.

The TANESCO long-term receivable as at December 31, 2021 was $26.5 million with a provision of $26.5 million compared to $27.6 million
(with a provision of $27.6 million) as at December 31, 2020. In 2021 the Company invoiced TANESCO $6.7 million (2020: $6.5 million) under
the take or pay provision within the PGSA; this invoice has not been recognized as it does not meet revenue recognition criteria with respect
to assurance of collectability. Subsequent to December 31, 2021 the Company has invoiced TANESCO $5.5 million for 2022 gas deliveries and
TANESCO has paid the Company $8.2 million.

Capital Expenditures

The capital expenditures (see “Non-GAAP financial measures and ratios”) in 2021 primarily related to the installation of compression facilities and
well workover planning and design. The capital expenditures in 2020 primarily related to the flowline construction and the compression project.

$’000

Pipelines, well workovers and infrastructure

Other capital expenditures

Capital Requirements

Three Months ended
December 31

Year ended
December 31

2021

12,494

12,496

2020

16,310

16,315

2021

26,596

26,610

2020

27,117

27,141

Except as described below, there are no contractual commitments for exploration or development drilling or other field development, either in
the PSA or otherwise agreed, which would give rise to significant capital expenditure at Songo Songo Island. Any additional significant capital
expenditure in Tanzania is discretionary.

As at the date of this report, the Company’s only significant contractual commitment is in relation to contracts for the workover program. The
Company concluded the onshore well remediation program comprising three wells (SS-3, SS-4 and SS-10) in April 2022. The SS-3 well was
shut in 2012 due to excessive corrosion and sustained annulus pressure. Having returned to production on February 15, 2022, the SS-3 well has
since been continually producing an average of 10 MMcfd. The SS-4 well was suspended in 2019 after it started producing sand. Currently not
producing due to excessive liquid loading, the Company intends to mobilize a coiled tubing unit to lift the liquids and allow the SS-4 well to
flow naturally. However, a recent upturn in industry activity means a suitable unit is unlikely to be available in Tanzania until Q3 2022. The SS-10
well was still producing prior to the workover program, but was also affected by progressive corrosion of its production tubing which would
have ultimately threatened its safe operation. Following considerable delays due to downhole complications necessitating extensive milling
and fishing, the workover of the well was completed on April 7, 2022, and was successfully returned to production on April 18, 2022. The total
estimated gross cost for the workovers was $21.4 million. However, following considerable logistical and customs delays, increased service
company costs against estimates, and surface and down hole technical issues, the total cost of the program increased to $31.6 million. As of
December 31, 2021, $13.9 million was incurred with $9.7 million incurred in Q1 2022 and the remaining $8.0 million forecasted to be paid by the
end of Q2 2022. Subject to ongoing negotiations and approvals, further expenditure may be necessary in mobilizing the coiled tubing nitrogen
unit to restart production from the SS-4 well.

In March 2022, one month ahead of schedule, the Company completed construction and commissioning of feed gas compression facilities
on the Songas gas processing facility. The installation of three 35 MMcfd reciprocating compressors was designed to ensure maximum gas
throughput of the Songas gas processing plant at arrival pressures as low as 38 bar. The sustainability of such production is subject to gas
demand in the forthcoming years, however internal forecasts predict this may be achievable to October 2026 (the end of the current PSA). The
original lump sum turnkey price for the contract was $38.0 million, however price variations due to increased costs of sea freight, a requirement
to increase on site power generation capacity, design changes and brief scheduling delays to avoid an extended plant shut down over the 2021
Christmas and New Year period, have seen the total project costs increase to $41.7 million, of which $40.5 million was incurred as of December
31, 2021 with forecast outstanding expenditures of $1.2 million expected to be paid in Q2 2022.

In order to de-risk both the future development drilling and potential exploration drilling of prospective resources, the Company intends to
carry out a 3D seismic acquisition program in 2022, budgeted at $20.0 million. Following an open tender process, the Company has issued
a recommendation for award of contract and is in the process of negotiating terms and program timing with the preferred service provider.
Physical execution of the acquisition is planned for Q3 2022, but is dependent on obtaining environmental approvals in time to take advantage
of suitable weather windows.

Orca Energy Group Inc. Annual Report & Accounts 2021Long-term Receivables

$‘000

VAT – Songas workovers

Lease deposit

As at December 31

2021

2,205

2,215

2020

2,205

2,214

In 2017, based on agreement with TPDC, $12.3 million relating to the Songas share of workover costs of the SS-5 and SS-9 wells was transferred
to the cost pool enabling the Company to recover the costs via the PSA cost recovery mechanism. This resulted in $2.2 million relating to VAT on
the workovers that had already been paid being reclassified as a long-term receivable. The Company continues to take formal action to collect
the workover costs and filed an initial arbitration claim in October 2021, on behalf of the Company and its partner, TPDC, in accordance with the
agreement. Amounts not collected will be pursued through the mechanisms provided in the agreements with Songas.

The following table details the amounts receivable from TANESCO that do not meet revenue recognition criteria and therefore are not recorded
in the consolidated financial statements:

$‘000

Total amounts invoiced to TANESCO

Trade receivable – TANESCO

Unrecognized amounts not meeting revenue recognition criteria1

Loss allowance

As at December 31

2021

119,168

(2,042)

2020

111,234

–

(90,634)

(83,685)

(26,492)

(27,549)

–

1 The amount includes invoices for interest on late payments and invoices relating to differences between natural gas contracted for delivery versus gas taken by TANESCO.

Long-term Loan

In 2015 PAET took out the Loan with the IFC, a member of the World Bank Group, for $60 million. The Loan was fully drawn down in 2016.

The Loan is to be paid out through six semi-annual payments of $5.0 million starting October 15, 2022 and one final payment of $25.2 million
due on October 15, 2025. The Company may voluntarily prepay all or part of the Loan but must simultaneously pay any accrued base interest
costs related to the principal amount being prepaid. The Loan is an unsecured subordinated obligation of PAET and was guaranteed by the
Company to a maximum of $30.0 million. The guarantee may only be called upon by IFC at maturity in 2025 and, subject to IFC approval
and receipt of all required regulatory approvals, the Company, at its discretion, may issue shares in fulfillment of all or part of the guarantee
obligation in 2025. Pursuant to the sale of a non-controlling interest in PAE PanAfrican Energy Corporation (“PAEM”), the parent company of
PAET, the Company agreed with the IFC to reduce the outstanding amount of the Loan by the percentage interest sold of 7.9% ($4.8 million)
before the fourth anniversary of the first drawdown. PAET made this payment on October 16, 2019.

Dividends and distributions from PAET to PAEM are restricted at any time whenever amounts of interest, principal or participating interest are
due and outstanding. All amounts under the Loan have been paid when due.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Outstanding Shares

The Class A Shares are convertible at any time at the option of the holder into Class B Shares on a one-for-one basis. Subject to the terms
and conditions of conversion specified in the memorandum of association and articles of association of the Company, the Class B Shares are
convertible into Class A Shares on a one-for-one basis if an offer is made to purchase Class A Shares that: (i) must, by reason of applicable
securities legislation or the requirements of a stock exchange on which the Class A Shares are listed, be made to all or substantially all of the
holders of Class A Shares; and (ii) is not made concurrently with an offer to purchase Class B Shares that is identical to the offer to purchase
Class A Shares and that has no condition attached other than the right not to take up and pay for shares tendered if no shares are purchased
pursuant to the offer for Class A Shares. The conversion right does not come into effect under certain events specified in the memorandum
of association of the Company, including, without limitation, the prior delivery to the Company’s transfer agent and to the Secretary of the
Company of a certificate signed by one or more shareholders owning more than 50% of the then outstanding Class A Shares.

Pursuant to the 2021 SIB of CDN$40.0 million in January 2021 (CDN$50.0 million pursuant to the substantial issuer bid completed in 2020
(“2020 SIB”)) the Company purchased and canceled 6,153,846 Class B Shares (2020: 7,692,297 Class B Shares). Pursuant to the NCIB
commenced on June 21, 2021, the Company has purchased and canceled 30,900 Class B Shares as of December 31, 2021 and 41,200 Class B
Shares as of April 20, 2022. 1,750,495 Class A Shares and 18,202,714 Class B Shares were outstanding as at December 31, 2021 and 1,750,495
Class A Shares and 18,192,414 Class B Shares were outstanding as at April 20, 2022. See “Substantial Issuer Bid, Normal Course Issuer Bid and
Dividends” in this MD&A.

Cash Flow Summary

$’000

Operating activities

Net income

Non-cash adjustments

Interest expense

Changes in non-cash working capital1

Net cash flows from operating activities

Net cash (used in) from investing activities

Net cash used in financing activities

Increase (decrease) in cash

1 See Consolidated Statements of Cash Flows.

Three Months ended
December 31

Year ended
December 31

2021

2020

2021

2020

1,915

12,016

1,857

2,733

18,521

(13,629)

7,698

2,791

2,370

6,510

19,369

28,633

17,963

30,074

6,945

29,121

25,637

7,887

(14,872)

(16,140)

40,110

(24,985)

46,505

17,720

(3,269)

(42,386)

(45,949)

(54,408)

1,623

5,616

(30,824)

9,817

The Company’s net cash flows from operating activities decreased by 4% for Q4 2021 and by 14% for the year ended December 31, 2021 over
the comparable prior year periods. The decreases were primarily a result of a decrease in the reversal of loss allowances for receivables due
to lower payments from TANESCO. The decrease in net cash (used in) from investing activities for the year ended December 31, 2021 over the
comparable prior year period was mainly a result of the conversion of $44.8 million short-term bonds to cash in 2020. The decrease in net cash
used in financing activities for the year ended December 31, 2021 over the comparable prior period was primarily a result of difference in the
amount of the 2021 SIB of $31.9 million compared to the 2020 SIB of $38.2 million.

Related Party Transactions

The Chair of the Company’s Board of Directors is counsel to Burnet, Duckworth & Palmer LLP, a law firm that provides legal advice to the
Company and its subsidiaries. Fees for services provided by this firm totaled $65 thousand for the quarter ended December 31, 2021 (Q4 2020:
$0.3 million) and $0.3 million for the year ended December 31, 2021 (year ended December 31, 2020: $1.0 million). As at December 31, 2021 the
Company had a total of $0.1 million (December 31, 2020: $0.1 million) recorded in trade and other liabilities in relation to this related party.

Orca Energy Group Inc. Annual Report & Accounts 2021Substantial Issuer Bid, Normal Course Issuer Bid and Dividends

During Q1 2021 the Company repurchased and canceled 6,153,846 Class B Shares (Q1 2020: 7,692,297) at a weighted average price of CDN$6.50
per Class B Share under the 2021 SIB (2020 SIB: CDN$6.50). This resulted in an aggregate purchase of CDN$40.0 million (2020 SIB: CDN$50.0
million) of Class B Shares representing 25.2% (2020 SIB: 23.6%) of the Company’s issued and outstanding Class B Shares and 23.5% (2020 SIB:
22.4%) of the total number of the Company’s issued and outstanding shares. Total cash payments of $31.9 million (2020 SIB: $38.2 million) were
applied to the capital stock and accumulated income accounts.

On June 21, 2021 the Company commenced a NCIB to purchase Class B Shares through the facilities of the TSXV and alternative trading systems
in Canada. Purchases pursuant to the NCIB are made by Research Capital Corporation (“Research Capital”) on behalf of the Corporation and will
not exceed 500,000 Class B Shares, representing approximately 2.74% of the total outstanding Class B Shares. The NCIB will be in effect until
June 21, 2022 (or until such time as the maximum number of Class B Shares have been purchased). Purchases of Class B Shares are made by
Research Capital based on the parameters prescribed by the TSXV and applicable securities laws. The acquisition price of Class B Shares under
the NCIB will not exceed the market price of the Class B Shares at the time of acquisition and the funds available to acquire the Class B Shares
will come from the Company’s working capital and cash flow. All Class B Shares purchased under the NCIB will be canceled. As of December 31,
2021 30,900 Class B Shares were repurchased by the Company pursuant to the NCIB at an average price per Class B Share of CDN$5.17 and as
of April 20, 2022, 41,200 Class B Shares have been purchased by the Company pursuant to the NCIB at an average price per Class B Share of
CDN$5.20. Shareholders may obtain a copy of the notice regarding the NCIB filed with the TSXV from the Company without charge.

All issued capital stock is fully paid.

Dividend Summary

Declaration date

February 24, 2022

November 9, 2021

September 9, 2021

June 4, 2021

February 23, 2021

November 19, 2020

September 17, 2020

June 22, 2020

February 25, 2020

Consolidation

Record date

March 31, 2022

December 31, 2021

September 29, 2021

June 30, 2021

March 31, 2021

Payment date

April 15, 2022

January 14, 2022

October 15, 2021

July 15, 2021

April 15, 2021

December 31, 2020

January 15, 2021

September 30, 2020

October 15, 2020

June 30, 2020

March 31, 2020

July 15, 2020

April 30, 2020

The companies which are being consolidated for the purposes of this MD&A are:

Subsidiary

Orca Energy Group Inc.

Orca Exploration Italy Inc.1

Orca Exploration Italy Onshore Inc.1

PAE PanAfrican Energy Corporation (“PAEM”)

PanAfrican Energy Tanzania Limited

Incorporated

British Virgin Islands

Mauritius

Jersey

Orca Exploration UK Services Limited

United Kingdom

1 The companies were wound up during 2020.

Amount per share (CDN$)

0.10

0.08

0.06

Holding

Parent Company

100%

92%

100%

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Non-Controlling Interest

The Company sold 7.9% (7,933 Class A common shares) of PAEM to a wholly owned subsidiary of Swala Oil & Gas (Tanzania) plc. (“Swala”)
in 2018 for $15.4 million cash and $4.0 million of Swala convertible preference shares (“Preference Shares”) pursuant to a share purchase
agreement. The Preference Shares entitle the Company to a 10% per annum distribution payable 15 days after each quarter end, commencing
from the closing date, January 16, 2018. Payment of the quarterly distributions is at the discretion of Swala based on funds available, however,
the liability accrues if any amount is unpaid when due. If any distributable amount remains unpaid after December 31, 2021, the Company may
demand settlement and Swala is obligated to comply by transferring and returning the Class A common shares of PAEM sold to Swala. The
aggregate value of these shares will equal the amount of the outstanding distributions. As at December 31, 2021, the Company has not received
any distributions or recorded any amount receivable related to the Preference Shares.

Swala is obligated to redeem 20% of the Preference Shares for cash annually starting from December 31, 2021 until all shares are redeemed. If
at any time Swala does not redeem the required number of Preference Shares for cash, Swala is obligated to redeem the Preference Shares by
transferring and returning the Class A common shares of PAEM sold to Swala’s wholly owned subsidiary. The aggregate value of these Class A
common shares will equal the amount of any outstanding redemption. As of December 31, 2021, the Company recorded $0.7 million as a loss
allowance with respect to Preference Shares.

A reconciliation of the non-controlling interest is detailed below:

As at December 31

2021

1,523

1,593

3,116

2020

163

1,360

1,523

As at December 31

2021

Total

0.3(1)

1.6(2)

2020

Total

1.6

8.7

Reason for dispute

Principal

Interest

0.3

1.0

–

0.6

PAYE tax on grossed-up amounts
in staff salaries which are contractually
stated as net.

WHT on services performed outside
of Tanzania by non-resident persons.

Deductibility of capital expenditures and
expenses (2012, 2015 and 2016), additional
income tax (2008, 2011 and 2012), tax on
repatriated income (2012 to 2016), foreign
exchange rate application (2013, 2014 and
2015), underestimation of tax due (2014
and 2016) and methodology of grossing up
income taxes paid (2015 to 2017).

VAT already paid (2012 to 2014), VAT on
imported services (2015 and 2016); interest
on VAT decreasing adjustments and input
VAT on services (2017 and 2018).

34.2

17.5

51.7(3)

52.1

0.2

35.7

1.2

19.3

1.4(4)

55.0

6.8

69.2

$’000

Balance, beginning of year

Share of post-disposition income

Balance, end of year

Contingencies

Taxation

Amounts in $’millions

Area

Pay-As-You-Earn
(“PAYE”) tax

Period

2008-10

Withholding tax
(“WHT”)

Income tax

2005-09

2008-09,
2011-17

VAT

2012-18

Orca Energy Group Inc. Annual Report & Accounts 2021
Contingencies cont.

Taxation cont.

During Q2 2021 the Company paid the TRA $1.8 million as a deposit against the disputed taxes including PAYE tax, WHT, income tax and VAT for
the years 2012-16, an amount agreed upon in order for TRA to admit the outstanding tax objections. In Q3 2021, the CAT delivered its judgment
on an appeal instituted by the Company on the appealability of a one-third deposit required to admit objections for the 2012 year of income.
The CAT decided that the matters are not tax decisions and are therefore not appealable. The Company filed a notice of motion for review of
the decision at the same court and is awaiting a hearing. The decision, however, will not affect the position on admission of objections for the
years of 2012-16.

During 2020 the TRA issued an Agency Notice for $5.3 million, obligating PAET’s commercial bank in Tanzania to release funds in favor of
the TRA with regards to the output VAT on SSI operatorship services (2008-10). In Q3 2020, the Company filed an appeal with the CAT and
recorded the $5.3 million as other receivables and fully allowed for the amount on the Company’s financial statements. Subsequently, during
Q3 2021, the CAT ruled in favor of the TRA on the Company’s appeal. Management, with advice from its legal counsel, decided not to proceed
further on this matter.

During Q4 2021 the TRA issued a new assessment with regards to 2017 income tax ($6.4 million). The Company has objected TRA’s incorrect
methodology of grossing up income taxes already paid ($6.4 million) and the issue of imposing interest on deemed delayed payment
($0.1 million) and is awaiting a TRA response.

In Q4 2021, the Company recorded an allowance of $0.6 million with respect to interest on depreciation of disallowed costs of completion
of wells SS-10 (2009-10) and SS-12 (2015-16). In addition, the Company recorded an allowance of $0.5 million with respect to WHT on services
performed outside Tanzania by non-resident persons (2010 and 2015-16). These disputes are no longer represented in the table above.

In Q4 2021, the Company recorded an additional provision of approximately $2.2 million.

In Q4 2021, further to issuing its objections to TRA’s 2015-16 assessments, the Company received determination letters whereby the TRA
agreed to drop their claims with regards to WHT on interest on the IFC Loan and management fees (2015-16) and PAYE on grossed up salaries
(2015-16) in the amounts of $0.9 million and $1.4 million, respectively. The aforementioned disputes are no longer represented in the table above.
Additionally, with the advice from its legal and tax counsels, it was established that four of the assessments with respect to 2011 ($0.2 million),
2013 ($0.2 million), 2014 ($3.3 million) and 2015-16 ($0.4 million) income tax, which were previously presented as contingencies, were overridden
by four other assessments, effectively presenting duplicating assessments, for the respective years of income. This has now been amended
accordingly in the taxation contingency table above.

Subsequent to December 31, 2021, following the expiry of the statutory deadline for the TRA to respond to the Company’s objections, the
Company filed notices of intention to appeal to the Tanzania Revenue Appeals Board (“TRAB”) against the corporate income tax assessments
for the years of 2012-16, tax on repatriated income for the years of 2012 and 2013, and VAT for the years of 2015-16. In Q2 2022, these matters
came for hearing and, at the request from the TRA, the TRAB granted an order that these matters be withdrawn to allow the TRA to further
review and issue determination letters. The matters are expected to appear for a status review in May 2022. In addition, the Company paid the
TRA $0.7 million as a deposit against disputed income tax for the year of income of 2017.

During 2020, the TRA conducted audits of 2017 and 2018 and issued two assessments with regards to VAT ($1.2 million) and WHT ($0.01
million). The Company has conceded to the TRA with respect to the WHT assessment ($0.01 million) and a portion of the VAT assessment
($0.06 million). However, the Company has objected to the incorrect imposition of interest on VAT decreasing adjustments on TANESCO
payments ($1.1 million) and disallowing input VAT claimed in certain services ($0.1 million). No final assessments have been issued to date with
respect to corporation tax, excise duty or payroll tax for 2017 and no preliminary assessment has yet been received for 2018. During 2020, the
Company filed an application for judicial review at the CAT with regards to the 2008-10 PAYE case ($0.3 million). During the year, again acting
under instructions from the TRA, PAET’s commercial bank in Tanzania transferred the full principal tax amount in dispute ($0.3 million) to the
TRA. The Company has filed an appeal for review with the CAT.

Management, with the advice from its legal counsel, has reviewed the Company’s position on the objections and appeals related to the disputed
amounts and has concluded that no further provision is required. However, if the TRA reassesses the Company’s tax returns for open taxation
years on a similar basis, the Company may be required to make future deposits to object such assessments.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Contingencies cont.

Taxation cont.

The process of appealing assessments issued by the TRA starts by initially filing an appeal with the TRA. If this is not successful, claims can be
taken to higher authorities starting with the TRAB, followed by an appeal to the Tax Revenue Appeals Tribunal (“TRAT”) and finally to the CAT.
Below is a summary of the status of the various assessments:

(1) (a) 2008-10 ($0.3 million): In 2020, the Company lost an appeal with CAT on the principal amount of PAYE tax and filed an application for judicial review at CAT. The TRA

instructed PAET’s commercial bank to transfer the full principal amount in dispute to TRA;

(2) (a) 2005-2009 ($1.6 million): In 2018 the CAT ruled in favor of the Company that no WHT was required on services performed outside Tanzania by non-resident persons.

It is unknown whether TRA will file an application objecting to the CAT ruling;

(3) (a) 2008 ($0.6 million): The Company objected to a TRA assessment that did not recognize a tax loss carried forward and is awaiting a response;

(b) 2009 ($0.8 million): The Company objected to an amended assessment from the TRA for being time-barred and arbitrary and is awaiting a TRA response;

(d) 2012 ($13.6 million): The Company objected to the TRA assessments with respect to understated revenue, timing of deductibility of capital expenditures, expenses and tax

on repatriated income. Following expiry of the statutory deadline for the TRA to respond to its objection, the Company filed an appeal at the TRAB and is awaiting
a hearing;

(e) 2013 ($9.3 million): The Company objected to two assessments as being time-barred and without merit ($1.9 million) and tax on repatriated income ($7.4 million) and

is awaiting the TRA’s response;

(f) 2014 ($8.0 million): The TRA issued two assessments for corporation tax ($4.9 million) and tax on repatriated income ($3.1 million). The Company field objections to the

assessments and is awaiting the TRA’s response;

(g) 2015-16 ($11.2 million): The TRA issued two assessments for corporation tax ($5.8 million) and tax on repatriated income ($5.4 million). The Company appealed to the

TRAB against the assessments following the TRA failure to determine the matters within the statutorily allowed period and is awaiting a response;

(h) 2017-18 ($6.5 million): The TRA issued an assessment for corporation tax including questioning the Company’s methodology of grossing up already paid corporation tax
($6.4 million) and raising the issue of imposing interest on deemed delayed payment ($0.1 million). The Company filed an objection and is awaiting the TRA’s response;

(4) (a) 2012-16 ($0.2 million): The Company has filed an objection to a TRA assessment with respect to disallowing VAT on certain services and is awaiting a response;

(b) 2017-18 ($1.2 million) The Company has filed an objection to a TRA assessment and is awaiting a response. The Company has objected to incorrect imposition of interest

on VAT decreasing adjustments in respect of delayed TANESCO payment ($1.1 million) and disallowing input VAT claimed in certain services ($0.1 million).

In 2016, the TRA introduced significant changes in relation to the income tax treatment of the extractive sector with separate new chapters
in Part V of the Income Tax Act 2004 (“ITA, 2004”) for mining and for petroleum to be effective commencing in 2018. Further changes were
subsequently made by the Written Laws (Miscellaneous Amendments) Act, 2017 (“WLMAA, 2017”) and in particular section 36(a)(ii) of the
WLMAA, 2017. The WLMAA, 2017 amended section 65M and 65N of the ITA, 2004 to exclude cost oil/cost gas from inclusion in both income
and expenditure. The Company continues to review the tax effects of the changes as there are a number of uncertainties and ambiguities as
to the interpretation and application of certain provisions of the WLMAA, 2017. In the absence of guidance on these matters, the Company has
used what it believes are reasonable interpretations and assumptions in applying the WLMAA, 2017 for purposes of determining its tax liabilities
and the results of operations, which may change as it receives additional clarification and implementation guidance. The Company does not
expect a significant impact from the changes as it is able to recover taxes payable from the TPDC Profit Gas revenue entitlement under the
terms of the PSA.

Accounting Changes

The following pronouncements from the International Accounting Standards Board (the “IASB”) became effective or were amended for financial
reporting periods beginning on or after January 1, 2021.

COVID-19 Related Rent Concessions amendment to IFRS 16 has been adopted. There has been no impact on the Company’s financial statements
or business.

The Interest Rate Benchmark Reform, Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16). The Company has adopted the
amended standards. However, the Company has contracts using US Dollar LIBOR, this rate has yet to be discontinued, and these contracts
have yet to transition to an alternative rate. The Company does not expect transitioning to have any material impact on the Company’s financial
statements.

The following standards have been issued but are not yet effective:

• Onerous contracts – Cost of fulfilling a contract (Amendments to IAS 37).

• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

• Reference to the Conceptual Framework (Amendments to IFRS 3).

• Annual Improvements to IFRS Standards 2018-2020.

The Company intends to adopt these standards when they become effective and is currently evaluating the potential impact.

Orca Energy Group Inc. Annual Report & Accounts 2021

Disclosure Controls and Procedures and Internal Controls over Financial Reporting

The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have designed, or caused to be designed under their
supervision, disclosure controls and procedures (“DC&P”) for Orca. DC&P, as defined in National Instrument 52-109, Certification of Disclosure
in Issuers’ Annual and Interim Filings, are designed to provide reasonable assurance that information required to be disclosed in reports filed
with, or submitted to, securities regulatory authorities is recorded, processed, summarized and reported within the time periods specified under
Canadian securities law and include controls and procedures designed to ensure that information required to be so disclosed is accumulated
and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. The
CEO and CFO of Orca evaluated the effectiveness of the design and operation of the Company’s DC&P. Based on the evaluation, the officers
concluded that Orca’s DC&P were effective as at December 31, 2021.

Quarterly Results Summary

The following is a summary of key results for the Company for the last eight quarters:

2021

2020

Figures in $’000
except where otherwise stated

Revenue

24,819

22,271

20,301

Net income attributable to shareholders

1,548

7,613

3,246

Earnings per share

– basic and diluted ($)

Net cash flows from operating activities

Capital expenditures

0.08

18,521

12,496

0.38

12,132

3,715

0.17

10,251

10,167

18,631

3,963

0.18

(794)

232

21,980

20,859

7,375

1,487

0.28

19,369

16,315

0.06

12,793

9,412

17,320

6,254

0.27

13,516

1,005

17,715

12,645

0.39

827

489

Revenue decreased in the Q2 2020 as a result of increased use of hydropower during an extended rainy season, which led to a fall in sales to the
power sector. Revenue increased during Q3 2020 and Q4 2020 as the power sector demand for gas increased to compensate for a reduction
in the availability of hydropower. Revenue decreased during Q1 2021 as a result of decreased deliveries to TANESCO and TPDC due to increased
availability of hydropower with the onset of the seasonal rains resulting in a decrease in demand for gas power generation. Revenue increased
during Q2 2021 as a result of increased sales to the industrial sector and lower TPDC share of revenue as an outcome of increased capital
expenditures and higher Cost Gas revenue recoveries by the Company. Revenue increased during Q3 2021 as a result of increased sales to the
power sector which was partially offset by increased TPDC share of revenue as an outcome of reduced capital expenditures and lower Cost Gas
revenue recoveries by the Company. Revenue increased during Q4 2021 as a result of increased sales to the industrial sector which was partially
offset by decreased TPDC share of revenue as a result of increased capital expenditures.

Net income attributable to shareholders was affected by several factors, other than changes in revenue, including:

• the decrease in Q2 2020 was partially due to lower revenue and a lower collection of TANESCO arrears as compared to Q1 2020;

• the decrease in Q3 2020 was primarily a result of a loss allowance of $5.3 million in respect of the disputed 2008-10 output VAT case with

the TRA;

• the increase in Q4 2020 was partially due to the collection of $3.5 million of TANESCO long-term arrears resulting in an increase in the

reversal of loss allowances;

• the decrease in Q1 2021 and Q2 2021 was a result of a lower collection of TANESCO arrears as compared to Q4 2020;

• the increase in Q3 2021 was a result of lower general and administrative expenses and lower indirect tax as compared to Q2 2021; and

• the decrease in Q4 2021 was a result of higher general and administrative expenses and higher loss allowance for receivables compared to

Q3 2021.

In addition to the factors impacting net income attributable to shareholders, net cash flows from operating activities were primarily affected
by the timing and amount of payments received from TANESCO. The increase in Q2 2020 was primarily a result of the annual payment of the
2019 current liability associated with APT paid in Q1 2020. The decrease in Q3 2020 resulted from a combination of decreased collections from
TANESCO compared to prior periods and a $5.3 million payment to the TRA. Correspondingly, the increase in Q4 2020 resulted from higher
collections from TANESCO compared to the previous quarter. The decrease in Q1 2021 and consequent increases in Q2, Q3 and Q4 2021 were
mainly a result of the annual 2020 current liability associated with APT paid in Q1 2021.

Capital expenditures in Q1 2020 and Q2 2020 primarily relate to the refrigeration project and flowline decoupling and construction work. Capital
expenditures in Q3 2020 and Q4 2020 mainly relate to the installation of compression. Capital expenditures in Q1 2021 were mainly related to
well workover planning and design. Capital expenditures in Q2 2021 mainly relate to the installation of compression. Capital expenditures in Q3
and Q4 2021 were mainly related to the well workover program.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Selected Annual Financial Information

Selected annual financial information derived from the audited consolidated financial statements for the years ended December 31, 2021, 2020
and 2019 is set out below:

Figures in $’000 except per share amount

Revenue

Net income attributable to shareholders

Earnings – basic and diluted ($ per share)

Cash dividends declared (CDN$ per Class A and B Shares)

Net cash flows from operating activities

Total non-current liabilities

Total assets

2021

86,022

16,370

0.81

0.40

40,110

95,744

230,271

2020

77,874

27,761

1.00

0.28

46,505

98,008

242,612

2019

85,595

24,718

0.71

0.23

34,873

102,603

271,772

Revenue decreased by 9% in 2020 compared to 2019 primarily due to lower power sales volumes and a lower current income tax adjustment.
The 10% increase of revenue in 2021 compared to 2020 was a result of increased sales to TANESCO, TPDC and industrial customers as well
as a higher current income tax adjustment.

The increase in net income attributable to shareholders in 2020 was primarily due to increased reversal of loss allowances related to the
collection of TANESCO arrears. The decrease in net income attributable to shareholders in 2021 was primarily a result of decreased reversal of
loss allowances related to the collection of TANESCO arrears.

In 2019 the Company approved quarterly dividends, CDN$0.05 per share for Q1 and CDN$0.06 per share for Q2, Q3 and Q4. In 2020 the
Company approved quarterly dividends, CDN$0.06 per share for Q1 and Q2 and CDN$0.08 per share for Q3 and Q4. In 2021 the Company
approved quarterly dividends, CDN$0.10 per share for Q1, Q2, Q3 and Q4. Please refer to the table in the Substantial Issuer Bid, Normal Course
Issuer Bid and Dividends section of this MD&A.

The changes in net cash flows from operating activities are primarily related to the changes in non-cash working capital primarily associated
with variations in prepayments and in trade and other receivables.

Total non-current liabilities did not change significantly between the years. The $4.6 million decrease in 2020 compared to 2019 and the
$2.3 million decrease in 2021 compared to 2020 were primarily a result of the repayment of a portion of the APT and the reclassification
of $5.0 million of the IFC loan as a current liability in 2021.

Total assets decreased by 11% in 2020 compared to 2019 and 5% in 2021 compared to 2020. These decreases were mainly a result of the 2020
SIB and 2021 SIB, respectively. Please refer to the Substantial Issuer Bid, Normal Course Issuer Bid and Dividends section of this MD&A.

Non-GAAP Financial Measures and Ratios

In this MD&A, the Company has disclosed the following non-GAAP financial measures, non-GAAP ratios and supplementary financial measures:
capital expenditures, operating netback, operating netback per mcf, working capital and net cash flows from operating activities per share.

These non-GAAP financial measures and ratios disclosed in this MD&A do not have any standardized meaning under IFRS and may not be
comparable to similar financial measures disclosed by other issuers. These non-GAAP financial measures and ratios should not, therefore, be
considered in isolation or as a substitute for, or superior to, measures and ratios of Company’s financial performance defined or determined in
accordance with IFRS. These non-GAAP financial measures and ratios are calculated on a consistent basis from period to period.

Orca Energy Group Inc. Annual Report & Accounts 2021

Non-GAAP Financial Measures and Ratios cont.

Capital expenditures

Capital expenditures is a useful measure as it provides an indication of our investment activities. The most directly comparable financial measure
is net cash from (used in) investing activities. A reconciliation to the most directly comparable financial measure is as follows:

$’000

Pipelines, well workovers and infrastructure

Other capital expenditures

Capital expenditures

Change in non-cash working capital

Proceeds from sale of investments in bonds, net

Net cash (used by) from investing activities

Operating netback

Three Months ended
December 31

Year ended
December 31

2021

(12,494)

(2)

2020

(16,310)

(5)

2021

(26,596)

(14)

2020

(27,117)

(24)

(12,496)

(16,315)

(26,610)

(27,141)

(1,133)

–

(13,629)

192

44,756

28,633

1,625

–

(24,985)

105

44,756

17,720

Operating netback is calculated as revenue less processing and transportation tariffs, TPDC’s revenue share, and operating and distribution costs
(see “Operating Netback”). The operating netback summarizes all costs that are associated with bringing the gas from the Songo Songo Gas
field to the market, it is a measure of profitability. A reconciliation to the most directly comparable financial measure is as follows:

$’000

Revenue

Production, distribution and transportation expenses

Net Production Revenue

Less current income tax adjustment (recorded in revenue)

Operating net back

Sales volumes MMcf

Netback $/mcf

Non-GAAP Ratios

Operating netback per mcf

Three Months ended
December 31

Year ended
December 31

2021

24,819

(3,256)

21,563

(1,416)

20,147

6,539

3.08

2020

21,980

(3,520)

18,460

134

18,594

5,777

3.22

2021

86,022

2020

77,874

(12,253)

(11,904)

73,769

(8,385)

65,384

22,312

2.93

65,970

(5,807)

60,163

21,117

2.85

Operating netback per mcf represent the profit margin associated with the production and sale of Additional Gas and is calculated by taking
the operating netback and dividing it by the volume of Additional Gas delivered and sold. This is a key measure as it demonstrates the profit
generated from each unit of production.

Supplementary Financial Measures

Working capital

Working capital is defined as current assets less current liabilities, as reported in the Company’s Consolidated Statements of Financial Position.
It is an important measure as it indicated the Company’s ability to meet its financial obligations as they fall due.

Net cash flows from operating activities per share

Net cash flows from operating activities per share is calculated as net cash flows from operating activities divided by the weighted average
number of shares, similar to the calculation of earnings per share. Net cash flow from operations is an important measure as it indicates
the cash generated from the operations that is available to fund ongoing capital commitments.

Use of Estimates and Judgments

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The reader
is referred to Orca’s December 31, 2021 audited consolidated financial statements for a description of estimates and judgments.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Business Risks

Industry and Business Conditions

Competition and operational risk

The natural gas industry is intensely competitive and the Company competes with other companies which possess greater technical and
financial resources. Natural gas drilling and production operations are subject to all the risks typically associated with such operations, including
but not limited to risks of fires, blowouts, spills, cratering and explosions, mechanical and equipment problems, uncontrolled flows or leaks
of oil, well fluids, natural gas, brine, toxic gas or other pollutants or hazardous materials, marine hazards with respect to offshore operations,
formations with abnormal pressures, adverse weather conditions, natural or man-made disasters, premature decline of reservoirs and invasion
of water into producing formations.

Drilling wells is speculative and involves significant costs that may be more than estimated and may not result in any discoveries or additions
to our future production or reserves. Operational activities have numerous inherent risks and our license area is located on an island, 25km
offshore mainland Tanzania, and partially in shallow water. This generally increases the operating costs, chances of delay, planning time, technical
challenges and risks associated with production activities. Our inability to access appropriate equipment and infrastructure in a timely manner
may hinder our access to natural gas markets or delay our natural gas production.

The development of oil and natural gas projects, including the availability and cost of drilling rigs, equipment, supplies, personnel and
oilfield services, is subject to delays and cost overruns. The Company may be affected by the inability to respond to changing technological
developments and remain competitive. Slower economic growth rates may materially adversely impact our operating results and financial
position. Any material inaccuracies in drilling costs, estimates or underlying assumptions will materially affect our business.

COVID-19

The emergence of COVID-19 resulted in travel bans, mandatory and self-imposed quarantines and isolations, social distancing and the closing
of non-essential businesses which has had a negative impact on economies world-wide. The Company originally took appropriate action to
protect employees such as social distancing, working from home where possible and ensuring staff who work on rotation at our operational
site on Songo Songo Island are tested for COVID-19, and placed into quarantine prior to receiving their results and before resuming regular
duties. The Company has since returned to office based working but continues to observe social distancing wherever possible. Staff traveling to
Songo Songo Island are now subject to lateral flow testing and may only travel if the result is negative. The Company’s business, operations and
financial condition have not been significantly adversely affected by COVID-19, however there has been a decline in revenue from gas deliveries
as a result of temporary business slowdowns, closures and expansion delays. Although the Company has lived with the impact of COVID-19
for almost two years, the full extent of the risks surrounding the long-term impact and severity of the COVID-19 pandemic remains unclear at
this time. The further spread of COVID-19 could result in volatility and disruptions in regular business operations including disruption of supply
chains that could impact operations and performance of counter-parties, volatility in foreign exchange rates, payment delays from customers,
additional cyber-security and internal control risk as a result of more employees working remotely as well as declining trade and market
sentiment. COVID-19 poses a risk on the financial capacity of the Company’s contract counterparties and potentially their ability to perform
contractual obligations and the Company’s ability to implement planned capital projects. Although the Company’s production and reserves
are entirely comprised of natural gas, a prolonged decline in world oil prices could impact the competitiveness and demand for natural gas in
Tanzania and negatively impact Company revenues, collectability of receivables and cash flow.

Key staff

Our performance and success are largely dependent on the ability, expertise, judgment and discretion of our management and the ability of our
technical team to identify, discover, evaluate and develop reserves. We are dependent on members of our management and technical team that
may not be easily replaced.

Effects of climate change

Risks related to climate change may have an impact on the Company’s operations and the Company may be subject to additional disclosure
requirements in the future. The International Sustainability Standards Board issued an IFRS Sustainability Disclosure Standard with the objective
to develop a global framework for environmental sustainability disclosure. In addition, the Canadian Securities Administrators also issued a
proposed National Instrument 51-107 Disclosure of Climate-related Matters which sets forth additional reporting requirements for Canadian
reporting issuers. We continue to monitor developments on these reporting requirements and the impact they may have on the Company’s
financial position and results of operating activities in future periods.

The oil and natural gas industry is subject to varying environmental regulations and evolving views on climate change in each of the jurisdictions
in which the Company may operate. Environmental regulations place restrictions and prohibitions on emissions of various substances produced
concurrently with oil and natural gas and can impact the selection of drilling sites and facility locations, potentially resulting in increased capital
expenditures.

Orca Energy Group Inc. Annual Report & Accounts 2021Business Risks cont.

Industry and Business Conditions cont.

Effects of climate change cont.

The Company operates in Tanzania, where extreme hot weather, heavy rains and floods or other severe weather conditions may cause
operational difficulties, including downtime and increased costs of maintenance and construction. Extreme weather conditions may also impact
workovers of existing wells and drilling of new wells.

As of the date of this report, it is difficult to estimate the effect of the climate change-related legislations (including the Glasgow Climate Pact,
which was recently signed by nearly 200 countries), on our business or whether additional evolving climate-change legislation, regulations or
other measures will be adopted in Tanzania. There are uncertainties regarding timing and effects of the emerging climate-change regulations,
making it difficult to accurately determine the cost impacts and effects on the Company’s operations.

Contractual

We operate in a litigious environment which could result in title or contractual disputes during the ordinary course of business. The inability
of one or more third parties who contract with us to meet their obligations to us may adversely affect our financial results.

Marketability and pricing

The marketability and price of natural gas which may be acquired, discovered or marketed by the Company will be affected by numerous
factors beyond its control. The natural gas market in Tanzania is developing and there is currently limited access to infrastructure with which
to serve potential new markets beyond that being constructed by the Company, Songas and TPDC, which now includes the NNGI. The ability
of the Company to market any natural gas from current or future reserves in Tanzania may depend upon its ability to develop natural gas
markets in Tanzania and the surrounding region, obtain access to the necessary infrastructure to process gas and to deliver sales gas volumes,
including acquiring capacity on pipelines which deliver natural gas to commercial markets. The Company is also subject to market fluctuations
in the prices of natural gas, uncertainties related to the delivery and proximity of its reserves to pipelines and processing facilities and extensive
government regulation relating to prices, taxes, royalties, land tenure, allowable production, the export of oil and gas and many other aspects
of the oil and gas business.

The prices that the Company receives for its natural gas affect the Company’s revenue, profitability, access to capital and future growth rate.
Historically, the oil and natural gas markets have been volatile and will likely continue to be volatile in the future. Oil prices have experienced
significant and sustained declines in the past few years and may continue to be volatile in the future; though gas prices are less volatile, they
may also be significantly affected in the longer run.

The natural gas prices the Company receives from its industrial customers fluctuate with the price of heavy fuel oil against which most of the
Company’s industrial customer contracts are priced. Prices can also be affected by gas on gas competition from other producers in Tanzania.
There have been significant onshore and offshore discoveries of gas in Tanzania over the last ten years and it is expected that the development
of these discoveries will increase competition in the future. There is also scope for greater government intervention on gas prices as TPDC owns
and operates the majority of the gas processing and pipeline infrastructure in Tanzania.

A substantial or extended decline in both global and local oil and natural gas prices may adversely affect our business, financial condition and
results of operations. Localized competition with other gas producers and alternative power sources such as hydropower could adversely
impact our financial results.

Cyber attack

The oil and gas industry has become increasingly dependent on digital technologies to conduct day-to-day operations including certain
exploration, development and production activities. For example, software programs are used to interpret seismic data, manage drilling rigs,
conduct reservoir modeling and reserves estimation, and to process and record financial and operating data. A cyber incident could result in
information theft, data corruption, operational disruption, and/or financial loss. There can be no assurance that we will not be the target of
cyber-attacks in the future or suffer such losses related to any cyber-incident.

Financial

Cost of capital

Our business plan requires substantial additional capital that we may be unable to fund out of working capital and cash flow generated from
operations or raise on acceptable terms or at all in the future and which may in turn limit our ability to develop our appraisal, development and
production activities. The Company’s ability to meet its financing obligations or to arrange financing in the future will depend in part upon the
prevailing capital market conditions as well as the Company’s business performance. There can be no assurance that the Company would be
successful in its efforts to meet its current commitments or arrange additional financing on terms satisfactory to the Company.

Collectability of receivables

The Company evaluates the collectability of its receivables on the basis of payment history, frequency and predictability, as well as
Management’s assessment of the customer’s willingness and ability to pay. In the past, the Company has recorded loss allowances for
receivables that did not meet the criteria for revenue recognition however no allowances have been recorded for the past two years relating
to revenue.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Business Risks cont.

Industry and Business Conditions cont.

Foreign exchange

The Company operates internationally and is exposed to foreign exchange risk arising from currency fluctuations against the US dollar when
transactions and recognized assets and liabilities of the Company are denominated in a currency that is not the US dollar functional currency.
The main currencies to which the Company has an exposure are Tanzanian shillings, British pounds sterling, Euros and Canadian dollars.

The majority of the expenditure associated with the operation of the gas distribution system is denominated in Tanzanian shillings. Whilst
conversion of Tanzanian shillings into US dollars is unrestricted, the foreign exchange market for Tanzanian shillings is limited and not highly
liquid, reducing the Company’s ability to convert large amounts of Tanzanian shillings into US dollars at any given time. To mitigate the risk of
Tanzanian shilling devaluation, the Company regularly converts Tanzanian shilling receipts into US dollars to the extent practicable. Capital stock,
equity financing and any associated stock based compensation are denominated in Canadian dollars. The operational revenue and the majority
of capital expenditures are denominated in US dollars.

Fluctuations in currency exchange rates could adversely impact the Company’s financial results.

Debt financing

From time to time the Company may enter into transactions to acquire assets or the shares of other companies. These transactions may
be financed in part or in whole with debt, which may temporarily increase the Company’s debt levels above industry standards. PAET, the
Company’s subsidiary operating in Tanzania currently has a long-term loan that includes covenants that, among other things, restrict the
incurrence of additional indebtedness, payment of dividends under certain conditions, granting of liens, mergers and sale of all or a substantial
part of our business or license.

Foreign operations and concentration risk

Asset concentration

The Company’s natural gas reserves are currently limited to one producing property, the Songo Songo gas field, and the productive potential
from this field is limited. There is no assurance that the Company will have sufficient deliverability through the existing wells to provide Protected
and Additional Gas volumes, and there may be significant capital expenditures associated with any remedial work, workovers, or new drilling
required to achieve optimal deliverability. In addition, any difficulties relating to the operation or performance of the Songo Songo gas field
would have a material adverse effect on the Company. A loss or material reduction in production capabilities will have a material adverse effect
on the total production and funds flow from operating activities of the Company.

Access to infrastructure

The Company is dependent upon access to the Songas Infrastructure and the GoT owned NNGI to deliver gas to customers. The Company
operates the Songas Infrastructure however Songas is the owner of the facilities including the 12-inch subsea and the 16-inch surface pipeline
systems which transport natural gas from Songo Songo Island to Dar es Salaam. There are agreements in place to allow the Company to process
and transport gas, but there is no assurance that these rights could not be challenged or access curtailed. The inability to access infrastructure
would materially impair the Company’s ability to realize revenue from natural gas sales.

Reputational

Our Tanzanian operations are anticipated to be the sole source of the Company’s near-term revenue earnings. Due to our asset concentration,
the success of our operations is dependent on positive commercial relationships with a small number of organizations (including states
and parastatal organizations) and certainty with respect to our rights and obligations arising from those relationships. Any damage to our
reputation due to the actual or perceived occurrence of any number of events, such as environmental incidents, could negatively impact the
Company. Reputation loss may result in negative publicity and diminished or adversarial stakeholder relationships, which could lead to increased
challenges in developing and maintaining community relations, decreased investor confidence, and would likely impede our overall ability to
advance our projects, thereby having a material adverse impact on financial performance, cash flows and growth prospects.

Orca Energy Group Inc. Annual Report & Accounts 2021Business Risks cont.

Foreign operations and concentration risk cont.

Country risk

The geographic location of the Songo Songo license offshore Tanzania exposes us to an increased risk of loss of revenue or curtailment of
production as a result of factors generally associated with foreign operations or arising from factors specifically affecting the area in which we
operate or may operate. Tanzania may be considered to be politically and/or economically unstable. Development and operational activities in
Tanzania may require protracted negotiations with host governments, national oil companies and third parties, and are frequently subject to
economic and political considerations, such as, the risks of war, actions by terrorist or insurgent groups, expropriation, nationalization, creeping
nationalization, renegotiation or nullification of existing contracts and production sharing agreements, taxation policies, foreign exchange
restrictions, changing political conditions, international monetary fluctuations, currency controls and foreign governmental regulations that
favor or require the awarding of drilling and construction contracts to local contractors or require foreign contractors to employ citizens of,
or purchase supplies from, a particular jurisdiction. In addition, if a dispute arises with foreign operations, the Company may be subject to the
exclusive jurisdiction of foreign courts.

In Tanzania the state retains ownership of its minerals and consequently retains control of the exploration and production of hydrocarbon reserves.

The GoT has historically been supportive of foreign investment in resource development projects in Tanzania however it has recently adopted
a more conservative approach toward foreign involvement in the extractive sector, including the production, transmission, processing and
marketing of natural gas. Factors such as changes in government, an increased nationalist sentiment and pressure to preserve development
opportunities for local enterprises can result in legal and regulatory changes that can impact our ability to maintain our business operations.

Countries in Africa are susceptible to outbreaks of disease and may lack the resources to effectively contain such an outbreak quickly. Such
outbreaks may impact our ability to explore for natural gas, develop or produce our license areas by limiting access to qualified personnel,
increase costs associated with ensuring the safety and health of our personnel, restricting transportation of personnel, equipment, supplies and
natural gas production to and from our areas of operation and diverting the time, attention and resources of government agencies which are
necessary to conduct our operations. In addition, any losses we experience as a result of such outbreaks of disease which impact sales or delay
production may not be covered by our insurance policies. If travel bans are implemented or extended to the countries in which we operate, or
contractors or personnel refuse to travel there, we could be adversely affected. If services are obtained, costs associated with those services could
be significantly higher than planned which could have a material adverse effect on our business, results of operations, and future cash flow.

Corruption

Tanzania ranks 87 out of 180 on the 2021 Transparency International Corruption Index (2020: 94 out of 180). Having assessed the Company’s
exposure to corruption in Tanzania, it has been concluded that the risk of the Company and/or its subsidiaries violating applicable laws
prohibiting corrupt activities are mitigated or unlikely given the Company’s controls relating to such risks and their effective operation. However,
there is exposure to liabilities under anti-money laundering and/or anti-corruption laws, and any determination that we violated such laws could
have a material adverse effect on our business. There can be no assurance that corruption may not indirectly affect or otherwise impair the
Company’s ability to operate in Tanzania and effectively pursue its business plan in that country.

Contractual, regulatory and legislation risk

Contracts and regulations

The Company’s operations are subject to regulation and control by the GoT (see “Principal Terms of the PSA and Related Agreements”). The
Company has operated in Tanzania for a number of years and believes that it has had reasonably good relations with the current GoT. Under the
principal agreements the Company has the right to market and sell Additional Gas provided that such sales do not jeopardize the priority right
of Songas to sell or otherwise dispose of Protected Gas. There is a risk that Songas could exercise its contractual rights, which may curtail our
ability to sell Additional Gas if there is insufficient natural gas available for the required volumes of Protected Gas. There can be no assurance
that present or future administrations in Tanzania will honor all principal agreements which could materially adversely affect the Company’s
operations or future cash flows.

PSA operations are regulated by national and parastatal organizations including the energy regulators (the Petroleum Upstream Regulatory
Authority (“PURA”) and the Energy and Water Utilities Regulatory Authority (“EWURA”)), and TPDC. Under the terms of the Gas Agreement
(as defined below) with the GoT, TPDC and Songas, the Company has the right to market and sell Additional Gas. The ARGA (as defined below)
provided clarification of the Protected Gas volumes and removes all terms dealing with the security of the Protected Gas. The ARGA was
initialed by all parties but remains unsigned as at the date of this report. In certain respects, the parties thereto are conducting themselves as
though the ARGA is in effect. In 2017 the AGP2 (as defined below) was signed further delineating the rights of the Company to market and sell
Additional Gas. If our relationships with these counterparties were to deteriorate, then they might choose to exercise their contractual rights
under our agreements differently and in a manner that is adverse to our interests. Management does not foresee a material risk with the conduct
of the Company’s business with an unsigned ARGA at this time (see “Principal Terms of the PSA and Related Agreements”).

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Business Risks cont.

Contractual, regulatory and legislation risk cont.

Contracts and regulations cont.

We have had, and continue to have, disagreements with TPDC and the GoT regarding certain of our rights and responsibilities under the
PSA. Pursuant to the PSA, the Company plans for development and annual work programs must be submitted to TPDC for comment and
subsequently to PURA who, under the Petroleum Act, 2015 (“Petroleum Act”), insist on the right to approve the budget. TPDC has also
challenged our rights to cost recover a number of items under the PSA including the costs of our downstream operations; however, there are
currently no disagreements that have risen to the level of a formal dispute.

There can be no assurance that all of these disagreements will be resolved in our favor or that future disagreements will not arise in Tanzania or
with any host government and/or national oil companies in future projects elsewhere that may have a material adverse effect on our exploration
or development activities, ability to operate, rights under our licenses and local laws or rights to monetize our interests.

Legislation

The GoT has passed several new laws in the past five years impacting the Company’s operation in Tanzania.

The National Energy Policy (2015) and the Petroleum Act, passed in 2015 provided regulatory framework over upstream, mid-stream and
downstream gas activity. The Petroleum Act created PURA, a new regulator to oversee the upstream sectors and conferred upon TPDC the
status of “National Oil Company” as the sole aggregator of natural gas in the country. Article 260(3) of the Petroleum Act preserves the
Company’s pre-existing right with TPDC to market and sell Additional Gas together or independently on terms and conditions (including prices)
negotiated with third party natural gas customers. There remain differences of opinion between the Company and TPDC on the effect of certain
provisions within the Petroleum Act and their application to the Company.

On October 7, 2016, the GoT issued the Petroleum (Natural Gas Pricing) Regulation made under Sections 165 and 258(I) of the Petroleum Act,
which may give rise to additional uncertainty. Changes resulting from this regulation could impact the Company’s ability to set gas pricing
and the introduction of regulated gas pricing could result in operations becoming uneconomical and anticipated revenues could be materially
affected. While the PSA has been grandfathered under the Petroleum Act, we can provide no assurances that this situation will remain
unchanged in the future.

On July 15, 2017 the GoT passed into law the Natural Wealth and Resources (Permanent Sovereignty) Act, 2017, the Written Laws (Miscellaneous
Amendments) Act, 2017, and the Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) Act, 2017
(“NWRCA”). The first and second of these acts are forward looking and only apply to agreements entered into on or after July 15, 2017. The
GoT may argue that the NWRCA has retrospective effect in terms of its ability to renegotiate pre-existing contracts. On January 31, 2020, the
Government released the Natural Wealth and Resources Contracts (Review and Renegotiation of Unconscionable Terms) Regulations, 2020
which set out further guidance as to how contracts may be renegotiated. These acts contain new regulations including but not limited to
regulations that all arbitration processes must be heard within Tanzania and potentially restrict the ability to move funds out of Tanzania.

In 2016, the TRA introduced significant changes to the income tax treatment of the extractive sector with separate new chapters in Part V
of the ITA, 2004 for mining and for petroleum to be effective commencing in 2018. Subsequent to this, further changes were made by the
WLMAA, 2017 to exclude cost oil/cost gas from inclusion in both income and expenditure. We are still evaluating the tax effects of the changes
as there are a number of uncertainties and ambiguities as to the interpretation and application of certain provisions of the WLMAA, 2017
as there is an absence of regulations and guidance from TRA on the implementation of the changes. In the absence of guidance on these
matters, we will continue to use what we believe are reasonable interpretations and assumptions in applying the WLMAA, 2017 for purposes of
determining our tax liabilities and filing our tax returns, which interpretations and assumptions may change as we receive additional clarification
and implementation guidance. As necessary, we will seek adjustments to the PSA to preserve our economic benefits. In addition, the Natural
Wealth and Resources (Permanent Sovereignty) Act, 2017 (the “Permanent Sovereignty Act, 2017”) and the WLMAA 2017 restrict the ability of
companies to repatriate funds out of Tanzania and it is possible that the GoT will seek to argue at some stage that these provisions apply to the
Company even though the Company’s contracts with the GoT permit the repatriation of funds out of Tanzania.

Intervening policy and legislative changes such as those described above may conflict with our pre-existing rights under the PSA and other
agreements, though it remains unclear how such legislative actions will be implemented and whether and to what extent they will impact us. We
are unable to predict what legislation may be proposed that might affect our business or when any such proposals, if enacted, might become
effective. Such changes could require increased capital and operating expenditure and could prevent or delay certain of our operations. If, for
reasons beyond our control, we are unable to maintain compliance with any legislative changes, whether in the future or past, we may have to
cease operations in certain locations.

Orca Energy Group Inc. Annual Report & Accounts 2021Principal Terms of the PSA and Related Agreements

The principal terms of the PSA and related agreements are as follows:

Obligations and Restrictions

(a) The PSA covers two blocks within the Songo Songo gas field where there are gas reserves (“Discovery Blocks”). The Company has the right
to conduct petroleum operations on the Discovery Blocks, market and sell all Additional Gas produced and share the net revenue with TPDC
for a term of 25 years, expiring in October 2026.

(b) No sale of Additional Gas may be made from the Discovery Blocks if in the Company’s reasonable judgment such sales would jeopardize

the supply of Protected Gas. Any Additional Gas contracts entered into are subject to interruption. Songas has the right to request that the
Company and TPDC obtain security reasonably acceptable to Songas prior to making any sales of Additional Gas from the Discovery Blocks
to secure the Company’s and TPDC’s obligations in respect of Insufficiency (as defined in (c) below).

(c) “Insufficiency” occurs if there is insufficient gas from the Discovery Blocks to supply the Protected Gas requirements or if the gas is so

expensive to develop that its cost exceeds the market price of alternative fuels at Ubungo.

Where there have been third party sales of Additional Gas by the Company and TPDC from the Discovery Blocks prior to the occurrence of
the Insufficiency, the Company and TPDC shall be jointly liable for the Insufficiency and shall satisfy their related liability by either replacing
the Indemnified Volume (as defined in (d) below) at the price for Protected Gas with natural gas from other sources; or by paying monetary
damages equal to the difference between: (a) the market price for a quantity of alternative fuel that is appropriate for the five gas turbine
electricity generators at Ubungo without significant modification together with the costs of any modification; and (b) the sum of the price
for such volume of Protected Gas (at $0.55/MMbtu escalated) and the amount of transportation revenues previously credited by Songas to
the state electricity utility, TANESCO, for the gas volumes.

(d) The “Indemnified Volume” means the lesser of the total volume of Additional Gas sales supplied from the Discovery Blocks prior to an

Insufficiency and the Insufficiency Volume. “Insufficiency Volume” means the volume of natural gas determined by multiplying the average
of the annual Protected Gas volumes for the three years prior to the Insufficiency by 110% and multiplied by the number of remaining years
(initial term of 20 years) of the power purchase agreement entered into between Songas and TANESCO in relation to the five gas turbine
electricity generators at Ubungo from the date of the Insufficiency.

Access and Development of Infrastructure

(e) The Company is able to utilize the Songas Infrastructure including the gas processing plant and main pipeline to Dar es Salaam. Access to

the Songas Infrastructure is open and can be utilized by any third party that wishes to process or transport gas.

Revenue Sharing Terms and Taxation

(f) 75% of the gross field revenues derived from the Discovery Blocks, less processing and pipeline tariffs and direct sales taxes in any year

(“field net revenue”), can be used to recover past costs incurred. Costs recovered out of field net revenue are termed “Cost Gas”.

The Company pays and recovers costs of exploring, developing and operating the Additional Gas with two exceptions: (i) TPDC may recover
reasonable market and market research costs as defined under the PSA; and (ii) TPDC has the right to elect to participate in the drilling
of at least one well for Additional Gas in the Discovery Blocks for which there is a development program as detailed in an Additional Gas
plan (“Additional Gas Plan”) as submitted to the MoE, provided that TPDC may to elect to participate in a development program only once
and TPDC pays a proportion of the costs of such development program by committing to pay between 5% and 20% of the total costs
(“Specified Proportion”). If TPDC does not notify the Company within 90 days of notice from the Company that the MoE has approved the
Additional Gas Plan, then TPDC is deemed not to have elected to participate. If TPDC elects to participate, then it will be entitled to a ratable
proportion of the Cost Gas and their profit share percentage increases by the Specified Proportion for that development program.

To date, TPDC has neither elected to back in within the prescribed notice period nor contributed any costs associated with backing in.
The Company has therefore determined that to date there has been no working interest earned by TPDC. For the purpose of the reserves
certification as at December 31, 2021, there are no planned drilling activities to the end of the license.

(g) The Company’s long-term gas price to the Power sector as set out in the ARGA between the GoT, TPDC and Songas and the PGSA is based
on the price of gas at the wellhead. As at the date of this report, the ARGA remains an initialed agreement only and the parties are not in
agreement with all the terms in the ARGA, however the parties are conducting themselves in terms of pricing as though the ARGA is in
force.

In Q3 2017 the Company received approval of the Additional Gas Plan 2 (“AGP2”) from the MoE to produce and sell increased volumes of
Additional Gas. Currently the SS-10, SS-11 and SS-12 wells are connected to the NNGI and the SS-12 well started flowing gas through the NNGI
in December 2018.

In May 2019 the Company and TPDC signed the LTGSA, initially for volumes up to 20 MMcfd which was increased subsequently to 30 MMcfd
on a best endeavors basis. In 2020 the parties established a 12-month renewable agreement for the supply of volumes above 30MMcfd on
an ad hoc basis, allowing TPDC to meet fluctuating demand and compensate for shortfalls in production from their Madimba plant without
being penalized due to a higher, fixed contractual limit and the subsequent take-or-pay penalties should the demand reduce again. The
agreement has allowed the Company to supply volumes in excess of 50MMcfd on occasion, increasing average sales volumes and revenues.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements

Management’s Discussion & Analysis cont.

Principal Terms of the PSA and Related Agreements cont.

Revenue Sharing Terms and Taxation cont.

(h) Profits on sales from the Proven Section (“Profit Gas”) are shared between TPDC and the Company, the proportion of which is dependent on

the average daily volumes of Additional Gas sold or cumulative production.

The Company receives a higher share of the field net revenue after cost recovery, based on the higher of the cumulative production or the
average daily sales. The Profit Gas share available to the Company is a minimum of 25% and a maximum of 55%.

Average daily sales of
Additional Gas
MMcfd

0 – 20

> 20 <= 30

> 30 <= 40

> 40 <= 50

> 50

Cumulative sales of
Additional Gas
Bcf

0 – 125

> 125 <= 250

> 250 <= 375

> 375 <= 500

> 500

TPDC’s share of
Profit Gas
%

Company’s share of
Profit Gas
%

For Additional Gas produced outside of the Proven Section, the Company’s Profit Gas share is 55%.

Where TPDC elects to participate in a development program, its profit share percentage increases by the Specified Proportion (for that

development program) with a corresponding decrease in the Company’s percentage share of Profit Gas.

The Company is liable for income tax in Tanzania. Where income tax is payable, the Company pays the tax and there is a corresponding
deduction in the amount of the Profit Gas payable to TPDC.

(i) “Additional Profits Tax” (or “APT”) is payable when the Company recovers its costs out of Additional Gas revenues plus an annual operating
return under the PSA of 25%, plus the percentage change in the United States Industrial Goods Producer Price Index (“PPI”). The maximum
APT rate is 55% of the Company’s Profit Gas when costs have been recovered with an annual return of 35% plus PPI return. The PSA is,
therefore, structured to encourage the Company to develop the market and the gas fields with the knowledge that the Profit Gas share can
increase with larger daily gas sales and that the costs will be recovered with a 25% plus PPI annual return before APT becomes payable. APT
can have a significant negative impact on project economics if only limited capital expenditure is incurred.

(j) The Company is appointed to develop, produce and process Protected Gas and operate and maintain the Songas Infrastructure, including

the staffing, procurement, capital improvements, contract maintenance, maintenance of books and records, preparation of reports,
maintenance of permits, waste handling, liaison with the GoT and taking all necessary safety, health and environmental precautions, all in
accordance with good oilfield practices. In return, the Company is paid or reimbursed by Songas so that it neither benefits nor suffers a loss
as a result of its performance.

(k) In the event of loss arising from Songas’ failure to perform, and the loss is not fully compensated by Songas or through insurance coverage,

then the Company is liable to a performance and operational guarantee of $2.5 million when (i) the loss is caused by the gross negligence
or willful misconduct of the Company, its subsidiaries or employees, and (ii) Songas has insufficient funds to cure the loss and operate the
project.

Protected Gas

Under the terms of the Gas Agreement for the Songo Songo project (“Gas Agreement”), in the event that there is a shortfall/insufficiency in
Protected Gas as a consequence of the sale of Additional Gas, the Company is liable to pay the difference between the price of Protected Gas
($0.55/MMbtu escalated) and the price of an alternative feedstock multiplied by the volumes of Protected Gas up to a maximum of the volume
of Additional Gas sold (257 Bcf as at December 31, 2021). The Company did not have a shortfall during the reporting period and does not
anticipate a shortfall arising during the term of the Protected Gas delivery obligation to July 2024.

Orca Energy Group Inc. Annual Report & Accounts 2021

Principal Terms of the PSA and Related Agreements cont.

Re-Rating Agreement

In 2011 the Company, TPDC and Songas signed the Re-Rating Agreement which evidenced an increase to the gas processing capacity of the
Songas Infrastructure to a maximum of 110 MMcfd (the pipeline and delivery pressure requirements at the Ubungo power plant restrict the
infrastructure capacity to a maximum of 102 MMcfd). Under the terms of the Re-Rating Agreement, the Company paid additional compensation
of $0.30/mcf for sales between 70 MMcfd and 90 MMcfd and $0.40/mcf for volumes above 90 MMcfd by issuing credit notes to TANESCO. This
was in addition to the tariff of $0.59/mcf payable to Songas as set by the energy regulator, EWURA.

Although Songas notified the Company in 2014 that the Re-Rating Agreement was terminated, the parties have continued to produce, transport
and sell gas volumes in line with the re-rated plant capacity. In May 2016 the Company notified TANESCO and Songas that the additional
compensation for sales over 70 MMcfd would no longer be paid effective June 2016. The additional compensation was always intended to be
temporary in nature until the expansion of the Songas Infrastructure, at which time Songas would apply to EWURA to obtain approval of a new
tariff for the processing of volumes over 70 MMcfd. The PGSA provides for passing on to TANESCO any tariff charged to the Company should a
new tariff be approved.

The parties to the Re-Rating Agreement are in the process of negotiating a replacement agreement which may address the additional
compensation paid. In the interim, the processing capacity at the Songas Infrastructure remains unaltered and is fully available for utilization
by the Company. This capacity is in addition to the capacity available within the NNGI.

Portfolio Gas Supply Agreement

In June 2011 the PGSA was signed (term to June 30, 2023) between TANESCO (as the buyer) and the Company (through its subsidiary PAET)
and TPDC (collectively as the seller). TANESCO requested a change to the PGSA maximum daily quantity which PAET and TPDC approved
effective January 29, 2018. The seller is now obligated, subject to infrastructure capacity, to sell a maximum of approximately 26 MMcfd
(previously 36 MMcfd) for use in any of TANESCO’s current power plants, except those operated by Songas at Ubungo. Under the agreement,
the basic wellhead price of approximately $2.98/mcf increased to $3.04/mcf on July 1, 2018, to $3.10/mcf on July 1, 2019, $3.14/mcf on July 1,
2020 and $3.20/mcf on July 1, 2021.

Long-term Gas Sales Agreement

On May 14, 2019 the Company and TPDC signed the LTGSA for an initial delivery of 20 MMcfd through the NNGI, at a price of $3.10/MMbtu
as at January 1, 2019, (escalating 2% per annum) exclusive of any processing and transportation tariff associated with the NNGI. The LTGSA
was amended on September 24, 2019 to increase the volumes supplied through the NNGI up to a maximum daily quantity of 30 MMcfd. In
2020 the parties established a 12-month renewable agreement for the supply of volumes above 30 MMcfd on an ad hoc basis, allowing TPDC
to meet fluctuating demand and compensate for shortfalls in production from their Madimba plant without being penalized due to a higher,
fixed contractual limit and the subsequent take-or-pay penalties should the demand reduce again. The agreement has allowed the Company to
supply volumes in excess of 50 MMcfd on occasion, increasing average sales volumes and revenues. All volumes above 20 MMcfd are supplied
on a best endeavors basis until compression facilities are added to the Songas Infrastructure.

TPDC Back-in

TPDC has the rights under the PSA to “back in” to the Songo Songo field development and to convert this into a carried working interest in
the PSA. The current terms of the PSA require TPDC to provide formal notice in a defined period and contribute a proportion of the costs of
any development, sharing in the risks in return for an additional share of the gas. To date, TPDC has neither provided notice nor contributed
any costs.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Management’s Discussion & Analysis cont.

Forward-Looking Statements

This MD&A contains forward-looking statements or information (collectively, “forward-looking statements”) within the meaning of applicable
securities legislation. All statements, other than statements of historical fact included in this MD&A, which address activities, events or
developments that Orca expects or anticipates to occur in the future, are forward-looking statements. Forward-looking statements often
contain terms such as may, will, should, anticipate, expect, continue, estimate, believe, project, forecast, plan, intend, target, outlook, focus,
could and similar words suggesting future outcomes or statements regarding an outlook. More particularly, this MD&A contains, without
limitation, forward-looking statements pertaining to the following: the ability for the SS-4 well to flow naturally following the installation of
a coiled nitrogen unit; the timing of when the coiled nitrogen unit and other equipment will be on location; the demand for gas and Orca’s
average gross gas sales are in line with the Company’s forecasts; the results of discussions with the MoE, TPDC and TANESCO relating to the
increase in gas supply; the timing for when new power generation facilities are commissioned; the amount of debt and interest payments and
capital expenditures are in line with the Company’s forecasts; the Company’s expectations regarding supply and demand of natural gas; the
Company’s expectations regarding timing and cost for the completion of installation of compression on the Songas Infrastructure and the
well workover program; the Company’s expectations as to the efficacy of the compression and its ability to sustain gas production at existing
levels to the end of our license; anticipated production volumes and increased well deliverability as a result of the installation of compression
on the Songas Infrastructure and the completion of the well workover program; the Company’s expectations regarding timing and cost for
the completion of the 3D seismic acquisition program; the results of negotiations with Orca’s preferred service provider to conduct the 3D
seismic acquisition program; the ability for the Company to obtain environmental approvals and the availability of suitable weather windows
to conduct the 3D seismic acquisition program; current and potential production capacity of the Songo Songo gas field; the receipt of the
payment of arrears from TANESCO; the Company’s expectation that there will continue to be no restrictions on the movement of cash from
Jersey, Mauritius or Tanzania; expected timing, cost and ability to remediate one onshore well, SS-4; the Company’s expectation that it will
not incur any losses from debtors; the Company’s expectation that all planned capital expenditures be funded out of existing working capital
and cash flow generated by current operations; the timing and effective rate of the APT payable by the Company; the Company’s ability to
produce additional volumes; the Company’s expectation that it can expand and maintain the deliverability of gas volumes in excess of the
existing Songas Infrastructure; the potential impact on the Company resulting from the further spread of COVID-19; the Company’s expectations
regarding the impact on operations resulting from the GoT’s new restrictions in response to COVID-19; the Company’s expectations regarding
changes to its tax liabilities and the results of its operations as a result of amendments made to the ITA, 2004, the WLMAA, 2017 and the
implementation of further legislation; expectations in respect of its appeals on the decisions of the TRAB, TRAT and CAT and other statements
under “Contingencies – Taxation”; the Company’s expectations that the IASB pronouncements will not have any impact on the Company’s
consolidated financial statements; the availability of additional debt financing; the ability of the Company to compete with other companies in
the industry; the Company’s ability to access appropriate equipment and infrastructure in a timely manner; the Company’s ability to respond to
changing technological developments; the Company’s ability to attract and retain key personnel; the timing and effect of additional reporting
requirements as a result of new environmental and climate-change related legislation; the ability of third parties who contract with the
Company to meet their obligations; and the Company’s ability to maintain positive commercial relationships with the GoT and other state and
parastatal organizations. In addition, statements relating to “reserves” are by their nature forward-looking statements, as they involve the implied
assessment, based on certain estimates and assumptions that the reserves described can be produced profitably in the future. The recovery
and reserve estimates of the Company’s reserves provided herein are estimates only and there is no guarantee that the estimated reserves
will be recovered. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Although
management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels
of activity, access to resources and infrastructure, performance or achievement since such expectations are inherently subject to significant
business, economic, operational, competitive, political and social uncertainties and contingencies.

These forward-looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company’s
control, and many factors could cause the Company’s actual results to differ materially from those expressed or implied in any forward-looking
statements made by the Company, including, but not limited to: failure to receive payments from TANESCO; risks related to the implementation
of potential financing solutions to resolve the TANESCO arrears; risk that the well workovers are unsuccessful or determined to be unfeasible;
risk of a lack of access to Songas processing and transportation facilities; risk that the Company may be unable to complete additional field
development to support the Songo Songo production profile through the life of the license; risk that the Company may be unable to develop
additional supply or increase production values; risks associated with the Company’s ability to complete sales of Additional Gas; potential
negative effect on the Company’s rights under the PSA and other agreements relating to its business in Tanzania as a result of the Petroleum
Act, 2015 and other recently enacted legislation, as well as the risk that such legislation will create additional costs and time connected with
the Company’s business in Tanzania; risks regarding the uncertainty around evolution of Tanzanian legislation; risk that the Company will not
be successful in appealing claims made by the TRA and may be required to pay additional taxes and penalties; the impact of general economic
conditions in the areas in which the Company operates; civil unrest; the susceptibility of the areas in which the Company operates to outbreaks
of disease; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations, impact of
local content regulations and variances 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, oil and gas field services and skilled personnel; failure to obtain required equipment for field development; delays in
development plans; failure to obtain expected results from the drilling or workover of wells; effect of changes to the PSA on the Company as
a result of the implementation of new government policies for the oil and gas industry; changes in laws; imprecision in reserve estimates; the
production and growth potential of the Company’s assets; obtaining required approvals of regulatory authorities; failure to install compression
on the Songas Infrastructure or complete the well workover program and 3D seismic acquisition program on the timelines or at the costs
anticipated; risks associated with negotiating with foreign governments; inability to satisfy debt conditions of financing; failure to successfully

Orca Energy Group Inc. Annual Report & Accounts 2021Forward-Looking Statements cont.

negotiate agreements; risk that the Company will not be able to fulfill its contractual obligations; reduced global economic activity as a result
of COVID-19, including lower demand for natural gas and a reduction in the price of natural gas; the potential impact of COVID-19 on the health
of the Company’s employees, contractors, suppliers, customers and other partners and the risk that the Company and/or such persons are or
may be restricted or prevented (as a result of quarantines, closures or otherwise) from conducting business activities for undetermined periods
of time; and the impact of actions taken by governments to reduce the spread of COVID-19, including declaring states of emergency, imposing
quarantines, border closures, temporary business closures for companies and industries deemed non-essential, significant travel restrictions and
mandated social distancing, and the effect on the Company’s operations, access to customers and suppliers, availability of employees and other
resources; and such additional risks listed under “Business Risks” in this report. In addition, there are risks and uncertainties associated with oil
and gas operations, therefore the Company’s actual results, performance or achievement could differ materially from those expressed in, or
implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by these forward-
looking statements will transpire or occur, or if any of them do so, what benefits the Company 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 the Company in light of its experience and perception of
historical trends, current conditions and expected future developments, as well as other factors the Company believes are appropriate in the
circumstances, including, but not limited to, the ability of the Company to negotiate Additional Gas sales contracts; the ability of the Company
to complete additional developments and increase its production capacity; the actual costs to complete the Company’s workover program,
the installation of compression and the 3D seismic acquisition program are in line with estimates; that there will continue to be no restrictions
on the movement of cash from Mauritius, Jersey or Tanzania; the impact of COVID-19 on the demand for and price of natural gas, volatility in
financial markets, disruptions to global supply chains and the Company’s business, operations, access to customers and suppliers, availability of
employees to carry out day-to-day operations, and other resources; 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 successfully
negotiate agreements; receipt of required regulatory approvals; the ability of the Company to increase production as required to meet demand;
infrastructure capacity; commodity prices will not deteriorate significantly; the ability of the Company to obtain equipment and services in
a timely manner to carry out exploration, development and exploitation activities; future capital expenditures; availability of skilled labor;
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; that the Company’s appeal of various tax assessments will be
successful; current or, where applicable, proposed industry conditions, laws and regulations will continue in effect or as anticipated as described
herein; the effect of new environmental and climate-change related regulations will not negatively impact the Company; the Company is able
to maintain strong commercial relationships with the GoT and other state and parastatal organizations; the current and future administration in
Tanzania continues to honor the terms of the PSA and the Company’s other principal agreements; the IASB pronouncements will not have any
impact on the Company’s consolidated financial statements; the new power generation facilities are commissioned on the expected timelines;
and other matters.

The forward-looking statements contained in this MD&A are made as of the date hereof and the Company 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.

Additional Information

Additional information relating to the Company is available on SEDAR at www.sedar.com.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Glossary

mcf

Thousand standard cubic feet

MMcf

Million standard cubic feet

Bcf

Tcf

Billion standard cubic feet

Trillion standard cubic feet

MMcfd

Million standard cubic feet per day

Proven reserves

Proven and probable reserves

kWh

Kilowatt hour

Megawatt

US dollars

MMbtu

Million British thermal units

CDN$

Canadian dollars

Orca Energy Group Inc. Annual Report & Accounts 2021 Management’s Report to Shareholders

The accompanying consolidated financial statements of Orca Energy Group Inc. are the responsibility of Management. The financial and
operating information presented in this annual report is consistent with that shown in the consolidated financial statements.

The consolidated financial statements have been prepared by Management, on behalf of the Board, in accordance with the accounting policies
disclosed in the notes to the consolidated financial statements. Where necessary, management has made informed judgments and estimates
in accounting for transactions which were not complete at the balance sheet date. In the opinion of management, the consolidated financial
statements have been prepared within acceptable limits of materiality and are in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the International Accounting Standards Board (“IASB”) appropriate in the circumstances.

Management maintains appropriate systems of internal controls. Policies and procedures are designed to give reasonable assurance that
transactions are properly authorised, assets are safeguarded and financial records are properly maintained to provide reliable information for
the preparation of financial statements. An independent firm of Chartered Professional Accountants, as appointed by the Shareholders, audited
the consolidated financial statements in accordance with the Canadian Generally Accepted Auditing Standards to enable them to express an
opinion on the fairness of the consolidated financial statements in accordance with IFRS as adopted by the IASB.

The Board of Directors carries out its responsibility for the financial reporting and internal controls of the Company principally through an
Audit Committee. The committee has met with the independent auditors and Management in order to determine if Management has fulfilled its
responsibilities in the preparation of the consolidated financial statements. The consolidated financial statements have been approved by the
Board of Directors on the recommendation of the Audit Committee.

Jay Lyons
Chief Executive Officer
April 20, 2022

Lisa Mitchell
Chief Financial Officer
April 20, 2022

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial StatementsXLisa Mitchell Independent Auditors’ Report

To the Shareholders of Orca Energy Group Inc.

Opinion

We have audited the consolidated financial statements of Orca Energy Group Inc. (the Entity), which comprise:

• the consolidated statements of financial position as at December 31, 2021 and December 31, 2020

• the consolidated statements of comprehensive income for the years then ended

• the consolidated statements of changes in shareholders’ equity for the years then ended

• the consolidated statements of cash flows for the years then ended

• and notes to the consolidated financial statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity
as at December 31, 2021 and December 31, 2020, and its consolidated financial performance and its consolidated cash flows for the years then
ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are
further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements
in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. Other information comprises the information included in Management’s Discussion
& Analysis and in the document entitled “Annual Report” filed with the relevant Canadian Securities Commissions.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance
conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and
remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion & Analysis and in the Annual Report filed with the relevant Canadian
Securities Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude
that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report.

We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate
the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

Orca Energy Group Inc. Annual Report & Accounts 2021Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit.

We also:

•

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve

collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by

management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity’s ability to continue as
a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue
as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial

statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and

significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

• Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entity
to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.

The engagement partner on the audit resulting in this auditors’ report is Petre Gueorguiev Kotev.

Chartered Professional Accountants
Calgary, Canada
April 20, 2022

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Consolidated Statements of Comprehensive Income

$’000

Revenue

Production, distribution and transportation

Net production revenue

Operating expenses

General and administrative

Stock based compensation (recovery) expense

Depletion

Reversal of loss allowance

Finance income

Finance expense

Income before tax

Income tax expense – current

Income tax expense – deferred

Additional Profits Tax

Net income

Net income attributable to non-controlling interest

Net income attributable to shareholders

Foreign currency translation (loss) gain from foreign operations

Comprehensive income

Net income attributable to shareholders per share ($)

Basic and diluted

See accompanying notes to the consolidated financial statements.

Note

Years ended December 31

2021

86,022

12,253

73,769

11,988

(576)

15,779

(2,574)

(133)

9,987

39,298

10,192

6,534

4,609

17,963

1,593

16,370

(6)

2020

77,874

11,904

65,970

13,592

1,074

14,830

(15,614)

(1,149)

9,322

43,915

7,384

3,356

4,054

29,121

1,360

27,761

16,364

27,800

0.81

1.00

Orca Energy Group Inc. Annual Report & Accounts 2021

Consolidated Statements of Financial Position

$’000

ASSETS

Current assets

Cash and cash equivalents

Trade and other receivables

Prepayments

Non-current assets

Long-term receivables

Investments

Capital assets

Total assets

EQUITY AND LIABILITIES

Current liabilities

Trade and other liabilities

Tax payable

Current portion of long-term loan

Current portion of Additional Profits Tax

Non-current liabilities

Deferred income taxes

Lease liabilities

Long-term loan

Additional Profits Tax

Total liabilities

SHAREHOLDERS’ EQUITY

Capital stock

Accumulated other comprehensive loss

Accumulated income

Non-controlling interest

Total equity and liabilities

As at December 31

Note

2021

2020

72,985

30,731

1,133

104,190

21,880

898

104,849

126,968

2,215

3,240

119,967

125,422

230,271

46,776

2,836

5,000

8,461

63,073

25,043

176

49,603

20,922

95,744

158,817

2,214

3,967

109,463

115,644

242,612

39,287

1,956

–

11,489

52,732

18,509

423

54,246

24,830

98,008

150,740

47,454

63,243

(177)

(171)

21,061

3,116

71,454

27,277

1,523

91,872

230,271

242,612

See accompanying notes to the consolidated financial statements.

Nature of operations (Note 1); Contractual obligations and committed capital investment (Note 20); Contingencies (Note 21); Subsequent events
(Note 25). The consolidated financial statements were approved by the Board on April 20, 2022.

Jay Lyons
Chief Executive Officer
April 20, 2022

Linda Beal
Chair of Audit and Risk Committee
April 20, 2022

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Consolidated Statements of Cash Flows

$’000

OPERATING ACTIVITIES

Net Income

Adjustment for:

Depletion and depreciation

Loss on disposal of lease

Indirect tax

Stock based compensation (recovery) expense

Deferred income taxes

Additional Profits Tax

Loss allowance

Unrealized loss (gain) on foreign exchange

Interest expense

Change in non-cash operating working capital

Net cash flows from operating activities

INVESTING ACTIVITIES

Capital expenditures

Proceeds from sale of investments in bonds, net

Net cash (used in) from investing activities

FINANCING ACTIVITIES

Lease payments

Substantial issuer bid

Normal course issuer bid

Interest paid

Dividends paid to shareholders

Net cash used in financing activities

(Decrease) increase in cash

Cash and cash equivalents at the beginning of the year

Effect of change in foreign exchange on cash for the year

Cash and cash equivalents at the end of the year

See accompanying notes to the consolidated financial statements.

Years ended December 31

Note

2021

2020

17,963

29,121

16,106

–

1,826

(576)

6,534

4,609

1,188

387

6,945

15,321

293

1,873

1,074

3,356

4,054

–

(334)

7,887

(14,872)

(16,140)

40,110

46,505

(24,985)

(27,036)

–

(24,985)

44,756

17,720

(319)

(759)

(31,872)

(38,170)

(131)

(7,198)

(6,429)

(2,149)

(7,887)

(5,443)

(45,949)

(54,408)

(30,824)

104,190

(381)

9,817

93,899

474

72,985

104,190

Orca Energy Group Inc. Annual Report & Accounts 2021

Consolidated Statements of Changes in Shareholders’ Equity

$’000

Note

Balance as at December 31, 2020

Share repurchase

Share repurchase costs

Dividends declared

Foreign currency translation adjustment on foreign operations

Net income

Capital
stock

63,243

(15,789)

–

Balance as at December 31, 2021

47,454

Accumulated
other
comprehensive
loss

Accumulated
income

(171)

–

(6)

–

(177)

27,277

(16,012)

(202)

(6,372)

–

16,370

21,061

$’000

Note

Balance as at December 31, 2019

Share repurchase

Share repurchase costs

Dividends declared

Foreign currency translation adjustment
on foreign operations

Net income

Balance as at December 31, 2020

63,243

See accompanying notes to the consolidated financial statements.

Capital
stock

Contributed
surplus

Accumulated
other
comprehensive
loss

Accumulated
income

84,099

(20,856)

–

4,181

(4,181)

–

(210)

20,334

–

(171)

(14,460)

(822)

(5,536)

–

27,761

27,277

Non-
Controlling
Interest

1,523

–

1,593

3,116

Non-
Controlling
Interest

163

–

1,360

1,523

Total

91,872

(31,801)

(202)

(6,372)

(6)

17,963

71,454

Total

108,567

(39,497)

(822)

(5,536)

29,121

91,872

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements

Notes to the Consolidated Financial Statements

General Information

Orca Energy Group Inc. was incorporated on April 28, 2004 under the laws of the British Virgin Islands with its registered office located at Vistra
Corporate Service Center, Wickhams Cay II, Road Town, Tortola, British Virgin Islands, VG110. The Company produces and sells natural gas to the
power and industrial sectors in Tanzania.

The consolidated financial statements of the Company as at and for the year ended December 31, 2021 comprise accounts of the Company and
its subsidiaries (collectively, the “Company” or “Orca Energy”) and were authorized for issue in accordance with a resolution of the Directors on
April 20, 2022. The Company is controlled by Shaymar Limited who is the registered holder of 24.6% of the equity and controls 71.4% of the total
votes of the Company. The shares are held in a trust that is independently managed for the beneficiaries.

1. Nature of Operations

The Company’s principal operating asset is an interest held by a subsidiary, PanAfrican Energy Tanzania Limited (“PAET”) in a Production
Sharing Agreement (“PSA”) with the Tanzania Petroleum Development Corporation (“TPDC”) and the Government of Tanzania (“GoT”) in the
United Republic of Tanzania. This PSA covers the production and marketing of certain gas from the Songo Songo Block offshore Tanzania.

The PSA defines gas in the Songo Songo field as “Protected Gas” and “Additional Gas”. The “Protected Gas” is owned by TPDC and is sold under
a 20-year gas agreement until July 2024 (“Gas Agreement”) to Songas Limited (“Songas”) and Tanzania Portland Cement PLC. Songas is the
owner of the infrastructure that enables the gas to be delivered to Dar es Salaam, which includes a gas processing plant on Songo Songo Island
(“Songas Infrastructure”). The Company operates the gas processing plant and field on a “no gain no loss” basis and receives no revenue for the
Protected Gas delivered to Songas.

Under the PSA, the Company has the right to produce and market all gas in the Songo Songo Block in excess of the Protected Gas requirements
(“Additional Gas”).

The Tanzania Electricity Supply Company Limited (“TANESCO”) is a parastatal organization which is wholly-owned by the Government
of Tanzania, with oversight by the Ministry for Energy (“MoE”). TANESCO is responsible for the majority of electricity generation, transmission
and distribution throughout Tanzania. The Company and TPDC as joint sellers currently supply Additional Gas directly to TANESCO by way
of a Portfolio Gas Supply Agreement (“PGSA”) and indirectly through the supply of Protected Gas and Additional Gas to Songas. The Company
also delivers gas to TPDC through a long-term gas sales agreement (“LTGSA”) to the TPDC operated National Natural Gas Infrastructure
(“NNGI”) on Songo Songo Island where the natural gas is processed before being transported to Dar es Salaam for power and industrial use.

In addition to gas supplied to TPDC, Songas and TANESCO, the Company has developed and supplies an industrial gas market in the Dar es
Salaam area.

2. Basis of Preparation

Statement of Compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”).

Basis of Measurement

These consolidated financial statements have been prepared on a historical cost basis and have been prepared using the accrual basis of
accounting. The consolidated financial statements are presented in US dollars (“$”) unless otherwise stated.

Basis of Consolidation

Subsidiaries

Subsidiaries are those enterprises controlled by the Company. The following companies have been consolidated within the Orca Energy financial
statements:

Subsidiary

Orca Energy Group Inc.

Registered

Holding

Functional currency

British Virgin Islands

Parent Company

Orca Exploration UK Services Limited

United Kingdom

PAE PanAfrican Energy Corporation (“PAEM”)

PanAfrican Energy Tanzania Limited

Orca Exploration Italy Inc.1

Orca Exploration Italy Onshore Inc.1

1 The companies were wound up during 2020.

Mauritius

Jersey

British Virgin Islands

100%

92%

100%

US dollar

British pound

US dollar

Euro

Orca Energy Group Inc. Annual Report & Accounts 20212. Basis of Preparation cont.

Transactions Eliminated Upon Consolidation

Inter-company balances and transactions and any unrealized gains or losses arising from inter-company transactions are eliminated in preparing
the consolidated financial statements.

Foreign Currency

i) Foreign Currency Transactions

Transactions in foreign currencies are recorded at the rate of exchange prevailing at the date of the transaction. Monetary assets and liabilities in
foreign currencies are translated at period-end rates. Non-monetary items are translated at historic rates, unless such items are carried at market
value, in which case they are translated using the exchange rates that existed when the values were determined. Any resulting exchange rate
differences are recognized in earnings.

ii) Foreign Currency Translation

Foreign currency differences are recognized in comprehensive income and accumulated in the translation reserve. The assets and liabilities
of these companies are translated into the functional currency at the period-end exchange rate. The income and expenses of the companies
are translated into the functional currency at the average exchange rate for the period. Translation gains and losses are included in other
comprehensive income.

COVID-19

There has been no significant change in the Company’s business during the year ended December 31, 2021 as a result of the ongoing coronavirus
pandemic (“COVID-19”). The Tanzanian government has introduced new restrictions and continued with its vaccination program in an effort to
control the spread of COVID-19 however given the steps already taken by the Company, no significant impact on our operations or business
results is expected as a result of the new restrictions. The current situation is dynamic and the ultimate duration and magnitude of the impact on
the Tanzanian economy and the financial effect on the Company are not known at this time.

Climate change regulations

Risks related to climate change may have an impact on the Company’s operations and the Company may be subject to additional disclosure
requirements in the future. The International Sustainability Standards Board issued an IFRS Sustainability Disclosure Standard with the objective
to develop a global framework for environmental sustainability disclosure. In addition, the Canadian Securities Administrators also issued a
proposed National Instrument 51-107 Disclosure of Climate-related Matters which sets forth additional reporting requirements for Canadian
Public Companies. We continue to monitor developments on these reporting requirements and the impact they may have on the Company’s
financial position and results of operating activities in future periods.

3. Summary of Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

Capital Assets

i) Capital Assets

Capital assets comprises the Company’s tangible natural gas assets, development wells, leasehold improvements, computer equipment, motor
vehicles and fixtures and fittings carried at cost, right-of-use assets less any accumulated depletion, depreciation and accumulated impairment
losses. Cost includes purchase price and construction costs for qualifying assets. Depletion of these assets commences when the assets
are ready for their intended use. Only costs that are directly related to the discovery and development of specific oil and gas reserves are
capitalized. The cost associated with tangible natural gas assets are amortized on a unit of production method based on commercial proven
reserves. The calculation of the unit of production amortization takes into account the estimated future development cost associated with
proven reserves.

ii) Impairment of Property, Plant and Equipment

At each balance sheet date, the Company reviews the carrying amounts of its property, plant and equipment to determine if indicators of
impairment exist. Individual assets are grouped together as a cash generating unit (“CGU”) for impairment assessment purposes at the lowest
level at which there are identifiable cash flows that are independent from other group assets. If any such indication of impairment exists, the
Company makes an estimate of its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use.
Where the carrying amount of a CGU exceeds its recoverable amount, the CGU is considered impaired and is written down to its recoverable
amount. In assessing the value in use, the estimated future cash flows are adjusted for the risks specific to the CGU and are discounted to their
present value with a pre-tax discount rate that reflects the current market indicators. The fair value less costs to sell is the amount that would
be obtained from the sale of a CGU in an arm’s length transaction between knowledgeable and willing parties. Where an impairment loss
subsequently reverses, the carrying amount of the asset CGU is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized
for the CGU in prior years. A reversal of an impairment loss is recognized in earnings.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Notes to the Consolidated Financial Statements cont.

3. Summary of Significant Accounting Policies cont.

Operatorship

The Company operates the Songo Songo Gas Field, flowlines and gas processing plant. The Songas wells, flowlines and gas plant are operated
by the Company on behalf of Songas on a “no gain no loss” basis. The cost of operating and maintaining the wells and flowlines is paid for
by the Company and Songas in proportion to the respective volumes of Protected Gas and Additional Gas sales. The costs of operating and
maintaining the wells and flowlines are reflected in the accounts to the extent that the costs were incurred to accomplish Additional Gas sales.
The cost of operating the gas processing plant and pipeline to Dar es Salaam is paid by Songas. Costs incurred by the Company in connection
with the operatorship of the Songas plant are recorded as receivables which are re-charged to Songas. Subsequent payments received from
Songas are credited to receivables. When there are Additional Gas sales, a tariff is paid to Songas as compensation for using the gas processing
plant and pipeline.

Employment Benefits

i) Pension

The Company does not operate a pension plan, but it does make defined contributions to the statutory pension fund for employees in the
United Kingdom and Tanzania. Obligations for contributions to the statutory pension fund are recognized as an expense as incurred.

ii) Stock Appreciation Rights and Restricted Stock Units

Stock appreciation rights (“SARs”) and restricted stock units (“RSUs”) are issued to certain key managers, officers, Directors and employees.
The fair value of SARs and RSUs are recorded in earnings in accordance with the service period. The fair value of the SARs and RSUs is revalued
every reporting date with the change in the value recognized in earnings.

Asset Retirement Obligations

No provision has been made for future site restoration costs in Tanzania because the Company currently has no legal or contractual or
constructive obligation under the PSA to restore the fields at the end of their commercial lives, should such occur within the term of the PSA.
If an amendment to the PSA is agreed requiring the Company to restore the fields at the end of the commercial lives, a provision will be made
for future site restoration costs.

Revenue Recognition, Production Sharing Agreements and Royalties

Pursuant to the terms of the PSA, the Company has exclusive rights (i) to carry on Exploration Operations in the Songo Songo Gas Field; (ii) to
carry on Development Operations in the Songo Songo Gas Field and (iii) jointly with TPDC, to sell or otherwise dispose of Additional Gas.

The Company recognizes revenue related to Additional Gas sales to all customers at specified delivery points at benchmark and contractual
prices.

A good or service is transferred when the customer obtains control of that good or service. The transfer of control of natural gas occurs at
the metering points at the inlet to the customer’s facility. Under the terms of the PSA, the Company pays both its share and TPDC’s share of
operating, administrative and capital costs. The Company recovers all reasonably incurred operating, administrative and capital costs including
TPDC’s share of these costs from future revenues over several years (“Cost Gas”). TPDC’s share of operating and administrative costs is recorded
in operating and general and administrative costs when incurred and capital costs are recorded in capital assets. All recoveries are recorded as
Cost Gas revenue in the year of recovery.

The Company has gas sales contracts under which the customers are required to take, or pay for, a minimum quantity of gas. In the event that
a customer has paid for gas that was not delivered, the additional income received by the Company is carried on the balance sheet as deferred
revenue. If the customer consumes volumes in excess of the minimum, it will be charged at the current rate, but may receive a credit for volumes
paid but not delivered. At the end of each reporting period the Company reassesses the volumes for which the customer may receive credit, any
remaining balance is credited to income. As at December 31, 2021, future revenues from take or pay provisions of the LTGSA extending through
2026 are approximately $1.0 million, of which approximately $0.7 million is expected to be recognized in 2022. As at December 31, 2021, future
revenues from take or pay provisions of the PGSA extending through 2026 are approximately $4.2 million, of which $4.2 million is expected to
be recognized in 2022.

In any given year, the Company is entitled to recover as Cost Gas up to 75% of the net revenue (gross revenue less processing and pipeline
tariffs). Any net revenue in excess of the Cost Gas (“Profit Gas”) is shared between the Company and TPDC in accordance with the terms of the
PSA. Under the PSA the Profit Gas payable to TPDC is adjusted by the amount necessary to fully pay and discharge the Company’s liability for
taxes on income. Revenue represents the Company’s share of Profit Gas and Cost Gas during the period.

The Company records revenues for sales to TANESCO based on the expected amount to be collected, which represents a percentage of
the amounts invoiced to TANESCO determined by comparison of TANESCO’s payment history to the amounts invoiced by the Company.
Management believes this approach provides the best estimate of TANESCO’s ability to pay and remain reasonably current; it also reflects the
economic reality of the situation (see Notes 4 and 7).

Orca Energy Group Inc. Annual Report & Accounts 20213. Summary of Significant Accounting Policies cont.

Revenue Recognition, Production Sharing Agreements and Royalties cont.

The estimated percentage used to recognize TANESCO revenue will be reviewed periodically as circumstances require. If there is a significant
difference between the amount of revenue recorded and amounts received, the percentage used to record revenue as well as any existing
receivable or deferred revenue balance will be revised accordingly. For the years ended December 31, 2020 and 2021 the Company recognized
100% of amounts invoiced for TANESCO gas deliveries in revenue as payments from TANESCO for the past five years have consistently
been higher than amounts invoiced for gas deliveries apart from Q3 and Q4 2021. As of December 31, 2021, the Company had $2.0 million of
TANESCO current receivables which was settled in Q1 2022.

The Company sells its natural gas to power customers (TANESCO, TPDC and Songas) and one industrial customer (a cement manufacturer)
pursuant to fixed-price contracts. Sales to other industrial customers are at fixed-price discounts (subject to certain floors and ceilings) to the
lowest alternative fuel source in Dar es Salaam, Heavy Fuel Oil (“HFO”) and coal. Under all contracts, the Company is required to deliver volumes
of natural gas to the contract counterparty. Natural gas revenue is recognized when the Company gives up control of the natural gas which
occurs at metering points located at the inlets of customers’ facilities. The amount of production revenue recognized is based on the agreed
transaction price and the volumes delivered.

The Company has entered into contracts with customers with terms ranging from four to five years.

Additional Profits Tax

Under the terms of the PSA, in the event that all costs have been recovered with an annual return from the PSA of 25% plus the percentage
change in the United States Industrial Goods Producer Price Index, an Additional Profits Tax (“APT”) is payable to the Government of Tanzania.
APT is provided for by forecasting the total APT payable in the future as a proportion of the forecast Profit Gas over the term of PSA license.
The actual APT that will be paid is dependent on the achieved value of the Additional Gas sales and the quantum and timing of the operating
costs and capital expenditure program.

The PSA states that APT shall be calculated for each year and shall vary with the real rate of return earned by the Company on the net cash flow
from the Contract Area (as defined in the PSA). The calculation of APT includes a working capital adjustment reflecting the effect of the timing
of actual receipt of amounts owing from TANESCO on net cash flow.

Income Taxes

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to extent they relate to items recognized directly
in equity, in which case the tax is recognized in equity.

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustments to the tax payable
or receivable in respect to previous years. Where current income tax is payable, this is shown as a current tax liability. The amount of the current
tax payable is the best estimate of the tax amount expected to be paid that reflects uncertainty related to income taxes, if any. It is measured
using tax rates enacted or substantively enacted at the reporting date.

Deferred tax is recognized using the asset and liability method, providing for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the
expected manner of realization or settlement of carrying amounts of assets and liabilities using tax rates substantively enacted at the balance
sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available, against which the
asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realized.

Depreciation

Depreciation for non-natural gas properties is charged to earnings on a straight-line basis over the estimated useful economic lives of each class
of asset. The estimated useful lives are as follows:

Leasehold improvement

Over remaining life of the lease

Computer equipment

Vehicles

Fixtures and fittings

3 years

Leased assets and right-of-use assets

Over the remaining life of the lease

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Notes to the Consolidated Financial Statements cont.

3. Summary of Significant Accounting Policies cont.

Financial Instruments

All financial instruments are initially recognized at fair value on the consolidated statement of financial position. The Company has classified
each financial instrument into one of the following categories: (i) fair value through the statement of comprehensive income (loss), (ii) loans and
receivables, and (iii) other financial liabilities. Measurement in subsequent periods depends on the classification of the financial instrument as
described below:

• Fair value through profit or loss: financial instruments under this classification include cash and cash equivalents and derivative assets and

liabilities.

• Amortized cost: financial instruments under this classification include accounts receivable, investments in bonds, investments, accounts

payable and accrued liabilities, dividends payable, finance lease obligations, and long-term debt.

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial
assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has
transferred substantially all risks and rewards of ownership. Financial assets and liabilities are offset and the net amount is reported on the
statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle
on a net basis, or realize the asset and settle the liability simultaneously.

Financial Instruments Classification and Measurement

The Company’s financial instruments include trade and other receivables, long-term receivables, trade and other liabilities and long-term loan.
The Company classifies the fair value of these financial instruments according to the following hierarchy based on the amount of observable
inputs used to value the instrument.

• Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in

which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly

observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and
volatility factors, which can be substantially observed or corroborated in the marketplace.

• Level 3 – Valuation in this level are those with inputs for the asset or liabilities that are not based on observable market data.

The fair value of trade and other receivables and trade and other liabilities approximate their carrying amount due to the short-term nature
of those instruments. The fair value of long-term receivables also approximates their carrying amount.

The Company’s long-term loan is classified as Level 2 measurements. The long-term loan bears interest at a fixed rate which is close to the
current market rates and accordingly the fair market value of the long-term loan approximates the carrying value.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, term deposits and short-term highly liquid investments with the original term to maturity of
three months or less, which are convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant
risk of changes in value. The fair value of cash and cash equivalents approximates their carrying amount. There are no restrictions on the
movement of funds out of Tanzania.

Investments in Short-Term Bonds

Investments in short-term bonds includes highly liquid investments with the original term to maturity of 12 months or less which are convertible
to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of changes in value. The fair value of the
investments in short-term bonds approximates their carrying amount. At December 31, 2021 and December 31, 2020 the Company did not have
investments in short-term bonds.

Orca Energy Group Inc. Annual Report & Accounts 20213. Summary of Significant Accounting Policies cont.

Impairment of Financial Assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset
is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash
flows of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount
and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial
assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar
credit risk characteristics.

All impairment losses are recognized in earnings. An impairment loss is reversed if the reversal can be related objectively to an event occurring
after the impairment loss was recognized. For financial assets measured at amortized cost the reversal is recognized in earnings.

Leases

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured
at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset
or the site on which it is located, less any lease incentives received.

The right-of-use asset is depreciated using the straight-line method from its commencement date to the earlier of the end of the useful life of
the right-of-use asset or end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of
property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
re-measurements of the lease liability.

The lease liability is initially measured at the present value of the minimum lease payments that are not yet paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate
for that asset. Generally, the Company uses its incremental borrowing rate as the discount rate. The lease liability is subsequently increased by
the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, a change in estimate of the amount expected to be payable under a residual value guarantee, changes
in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain
not to be exercised.

Short-Term Leases and Leases of Low Value Assets

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less
and leases of low value assets defined as less than $5,000 or less. The Company recognizes the lease payments associated with these leases as
an expense when incurred, over the lease term.

Accounting Changes

The following pronouncements from the IASB became effective or were amended for financial reporting periods beginning on or after
January 1, 2021.

COVID-19 Related Rent Concessions amendment to IFRS 16 has been adopted. There has been no impact on the Company.

The following standards have been issued but are not yet effective:

• Onerous contracts – Cost of fulfilling a contract (Amendments to IAS 37).

• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

• Reference to the Conceptual Framework (Amendments to IFRS 3).

• Annual Improvements to IFRS Standards 2018-2020.

The Company intends to adopt these standards when they become effective and is currently evaluating the potential impact.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Notes to the Consolidated Financial Statements cont.

4. Use of Estimates and Judgments

The following are the critical judgments, apart from those involving estimations (see below), that management has made in the process
of applying the Company’s accounting policies and that have the most significant effect on the accounts recognized in these consolidated
financial statements.

Critical Judgments in Applying Accounting Policies:

A. Natural gas assets

The Company assesses its natural gas assets for impairment when events or circumstances indicate that the carrying amount of its assets may
not be recoverable. If any indication of impairment exists, the Company performs an impairment test on the CGU, which is the lowest level at
which there are identifiable cash flows. The carrying amount of the CGU is compared to its recoverable amount which is defined as the greater
of its fair value less cost to sell and value in use and is subject to management estimates. These estimates include quantities of reserves and
future production, future commodity pricing, development costs, operating costs, and discount rates. Any changes in these estimates may have
an impact on the recoverable amount of the CGU.

B. Collectability of receivables

The Company evaluates the collectability of its receivables on the basis of payment history, frequency and predictability, as well as
Management’s assessment of the customer’s willingness and ability to pay. Management performs impairment tests each period on the
Company’s current and long-term receivables.

C. Statutory taxes

The Company operates in a jurisdiction with complex tax laws and regulations, which are evolving over time. The Company has taken certain
tax positions in its tax filings and these filings are subject to audit and potential reassessment after the lapse of considerable time. Accordingly,
the actual income tax impact may differ significantly from that estimated and recorded by management.

The recognition or reversal of deferred tax assets requires judgment as to whether or not there will be sufficient taxable profits available to
offset the tax assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain.

Key Sources of Estimation of Uncertainty

A. Reserves

There are numerous uncertainties inherent in estimating quantities of proved and probable reserves and cash flows to be derived therefrom,
including many factors beyond the control of the Company. The reserves and estimated future net cash flow from the Company’s properties
have been evaluated by independent petroleum engineers. These evaluations include a number of assumptions relating to factors such as initial
production rates, production decline rates, ultimate recovery of reserves, timing and amount of capital expenditures, marketability of production,
crude oil price differentials to benchmarks, future prices of oil and natural gas, operating costs, transportation costs, cost recovery provisions
and royalties, TPDC “back-in” methodology and other Government levies that may be imposed over the producing life of the reserves. These
assumptions were based on price forecasts in use at the date the relevant evaluations were prepared and many of these assumptions are subject
to change and are beyond the control of the Company. To date, TPDC has neither elected to back in within the prescribed notice period nor
contributed any costs associated with backing in.

Reserves are integral to the amount of depletion and impairment test.

B. Cost Recovery

The Company is able to recover reasonable costs incurred on the development of the Songo Songo project out of 75% of the gross field
revenue less processing and pipeline tariffs (“field net revenue”). There are inherent uncertainties in estimating when costs have been recovered
as these costs are subject to Government audit and under certain circumstances a potential reassessment after the lapse of a considerable
period of time.

Orca Energy Group Inc. Annual Report & Accounts 20215. Risk Management

The Company, by its activities in oil and gas exploration, development and production, is exposed to the risk associated with the unpredictable
nature of the financial markets as well as political risk associated with conducting operations in an emerging market. The Company seeks
to manage its exposure to these risks wherever possible.

A. Foreign Exchange Risk

Foreign exchange risk arises when transactions and recognized assets and liabilities of the Company are denominated in a currency that
is not the US dollar functional currency.

The Company operates internationally and is exposed to foreign exchange risk arising from currency exposures to US dollars. The main
currencies to which the Company has an exposure are: Tanzanian shillings, British pounds sterling, Euros and Canadian dollars.

The majority of contracts with customers are based on US dollar prices for gas delivered however the majority of invoices and receipts are in
Tanzanian shillings. Invoices are priced and then converted to Tanzanian shillings at the time of invoicing however payments are based on the
US dollar invoiced amount translated to shillings at the time of payment. While conversion of Tanzanian shillings into US dollars is unrestricted,
the foreign exchange market for Tanzanian shillings is limited and not highly liquid, reducing the Company’s ability to convert large amounts
of Tanzanian shillings into US dollars at any given time. To mitigate the risk of Tanzanian shilling devaluation, the Company regularly converts
Tanzanian shilling receipts into US dollars to the extent practicable taking into consideration that the majority of operating expenditures are
denominated in Tanzanian shillings.

The majority of capital expenditures are denominated in US dollars. Capital stock, equity financing and any associated stock based
compensation are denominated in Canadian dollars.

There are no forward exchange rate contracts in place.

A 10% increase in the US dollar against the relevant foreign currency would result in an overall increase in working capital (defined as current
assets less current liabilities) of $1.8 million from $41.8 million to $43.8 million and an increase in the income before tax from $39.3 million
to $41.1 million.

The sensitivity includes only outstanding foreign currency denominated monetary items and adjusts their translation at period end for
a 10% change in the foreign currency rates. A 10% sensitivity rate is used when reporting foreign currency risk internally to key management
personnel and represents management’s assessment of the reasonable possible change in foreign exchange rates.

The following balances are denominated in foreign currency (stated in US dollars at period end exchange rates):

Balances as at December 31, 2021

$’millions

Cash

Trade and other receivables

Trade and other liabilities

Net

B. Commodity Price Risk

Canadian
dollars

Tanzanian
shillings

British
pounds

Other
currencies

0.1

–

(1.6)

(1.5)

13.7

8.7

(3.9)

18.5

0.9

–

0.9

–

(0.1)

Total

14.7

8.7

(5.6)

17.8

The Company negotiated industrial gas sales contracts with gas prices which, subject to certain floors and ceilings, are determined as a discount
to the lowest cost alternative fuels in Dar es Salaam, namely Heavy Fuel Oil (“HFO”) and coal. The price of HFO is exposed to the volatility in the
market price of crude oil.

C. Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company has minimal
exposure to interest rates as the long-term loan has a fixed interest rate, interest rates on short-term investments are fixed and interest received
on cash balances is not significant.

D. Concentration Risk

All the Company’s sales are currently made in Tanzania. The sales are made to the Power sector and the Industrial sector. In relation to sales
to the Power sector, the Company has a contract with Songas for the supply of gas to the Ubungo power plant, a contract with TANESCO
to supply gas to some of the TANESCO power plants, and a contract with TPDC to supply gas through NNGI. The contracts with Songas,
TANESCO and TPDC accounted for 60% of the Company’s gross field revenue operating revenue during 2021 and $10.2 million of the short-
and long-term receivables at December 31, 2021.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements
Notes to the Consolidated Financial Statements cont.

5. Risk Management cont.

E. Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Company’s receivables from TANESCO, Songas and TPDC. The carrying amount of accounts
receivable and the long-term receivable represents the maximum credit exposure. As at December 31, 2021 and 2020, loss allowance exists
against all of the long-term TANESCO receivable, gas plant operations and capital expenditure receivables from Songas, and a receivable
of $0.5 million from one industrial customer. No write-off of any receivables occurred in 2021 or 2020 (see Note 12).

The Company manages the credit exposure related to cash and cash equivalents by selecting counterparties based on credit ratings and
monitoring all investments to ensure a stable return, avoiding complex investment vehicles with higher risk such as asset backed commercial
paper. The Company’s cash resources are placed with reputable financial institutions with no history of default.

F. Liquidity Risk

Liquidity risk is the risk that the Company will not have sufficient funds to meet its liabilities. Cash forecasts identifying liquidity requirements of
the Company are produced on a regular basis. These are reviewed to ensure sufficient funds exist to finance the Company’s current operational
and investment cash flow requirements. At December 31, 2021 the Company has working capital of $41.8 million which is net of $63.1 million of
financial liabilities with regards to trade and other liabilities of which $29.6 million is due within one to three months, $4.9 million is due within
three to six months, and $28.6 million is due within six to 12 months (see Note 14).

At the end of the year approximately 35% of the current liabilities relate to TPDC (see Note 14). The amounts due to TPDC represent its share of
Profit Gas. In accordance with the terms of the PSA, TPDC is entitled to the payment of its share of Profit Gas on a quarterly basis proportional
to the cash receipts during the quarter. A substantial proportion of the TPDC liability is associated with the long-term TANESCO arrears and
payments to TPDC are made when cash is received for the arrears.

COVID-19 has reduced travel throughout the world in 2021 and 2020. Tourism is a major source of revenue and foreign currency for Tanzania
and the decrease in travel has resulted in a reduction of foreign currency flowing into the country. It has been more difficult for the Company
to convert Tanzanian shillings to United States dollars compared to prior years, however, as at the date of this report, this has not significantly
impacted PAET’s ability to meet its United States dollar obligations. There is a risk that in the future the Company may not be able to convert
Tanzanian shillings to United States dollars as and when required.

G. Capital Risk Management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to achieve an optimal capital structure to reduce the cost of capital.

H. Country Risk

The Company has unresolved disputes with TPDC related to Cost Gas revenue, TANESCO and Songas regarding unpaid invoices, and the
Tanzanian Revenue Authority (“TRA”) in relation to tax disputes (see Note 21). The Company continues to rely upon its rights under the existing
PSA and has initiated notices of disputes as required under the PSA and by local tax regulations to resolve outstanding issues.

6. Segment Information

The Company has one reportable industry segment which is international exploration, development and production of petroleum and natural
gas. During 2021 and 2020 the Company’s producing assets were entirely located in Tanzania.

Orca Energy Group Inc. Annual Report & Accounts 20217. Revenue

$’000

Industrial sector

Power sector

Gross field revenue

TPDC share of revenue

Company operating revenue

Current income tax adjustment

Years ended December 31

2021

39,477

60,445

99,922

2020

34,485

57,267

91,752

(22,285)

(19,685)

77,637

8,385

86,022

72,067

5,807

77,874

The Company recognized 100% of amounts invoiced for deliveries to TANESCO as revenue during 2021 and 2020. During 2021 the Company
invoiced TANESCO $23.9 million (2020: $23.3 million) for gas deliveries and received $22.9 million (2020: $43.2 million) in payments. Based
on the consistent payments from TANESCO, the Company: (i) recognized all amounts invoiced for gas deliveries in 2021 and 2020 as revenue;
and (ii) recognized $1.1 million during the year (2020: $19.9 million) as a reversal of loss allowance relating to the amounts collected during the
year that were applied towards the long-term TANESCO receivables previously allowed for (see Note 9). Subsequent to December 31, 2021 the
Company has invoiced TANESCO $5.5 million for 2022 gas deliveries and TANESCO has paid the Company $8.2 million.

8. Personnel Expenses

$’000

Employee and related costs included in:

Production, distribution and transportation

General and administrative

Stock based compensation (recovery) expense (Note 17)

Years ended December 31

2021

2020

2,932

7,032

9,964

(576)

9,388

3,176

6,163

9,339

1,074

10,413

Personnel expenses include Company employees who operate the Songas facilities on behalf of Songas; these expenses are recharged
to Songas.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Notes to the Consolidated Financial Statements cont.

9. Finance Income and Expense

Finance Income

$’000

Interest income

Investment income

Years ended December 31

2021

133

–

133

2020

844

305

1,149

At December 31, 2021 and December 31, 2020 the Company did not have investments in short-term bonds. The $0.3 million investment income
for 2020 includes interest earned of $0.3 million and amortization of the discount on the acquisition of the bonds of $ nil.

Finance Expense

$’000

Base interest expense

Participation interest expense

Lease interest expense

Interest expense

Net foreign exchange loss (gain)

Interest on tax assessment

Indirect tax

Years ended December 31

2021

5,982

920

6,945

628

588

1,826

9,987

2020

5,830

1,971

7,887

(438)

–

1,873

9,322

Base interest expense and participation interest expense relate to the long-term loan (“Loan”) with the International Finance Corporation (“IFC”).
Base interest on the Loan is payable quarterly in arrears at 10% per annum on a “pay-if-you-can” basis using a formula to calculate the net cash
available for such payments as at any given interest payment date. The participation interest expense is paid annually in arrears and equates to
6.4% of PAET’s net cash flows from operating activities net of net cash flows used in investing activities for the year. Such participation interest
will continue until October 15, 2026 regardless of whether the Loan is repaid prior to its contractual maturity date (see Note 16).

The interest on tax assessment represents the Company’s share of the amount in dispute with respect to interest on depreciation disallowed
by the TRA for expenditures in relation to completing well SS-10 in 2009 and 2010 and well SS-12 in 2015 and 2016. The indirect tax is for value
added tax (“VAT”) associated with invoices to TANESCO under the take or pay provisions within the PGSA and for interest on late payments.
In 2021 a take or pay invoice of $6.7 million (2020: $6.5 million) was raised but not recognized in the financial statements as it did not meet the
revenue recognition criteria with respect to assurance of collectability.

Orca Energy Group Inc. Annual Report & Accounts 202110. Income Taxes

The tax charge is as follows:

$’000

Current income tax expense

Deferred income tax expense

Years ended December 31

2021

10,192

6,534

16,726

2020

7,384

3,356

10,740

Tax of $2.0 million was paid during 2021 in relation to the settlement of the prior year’s tax liability (2020: $0.6 million). Installment tax payments
totaling $7.3 million were made in respect of 2021 (2020: $5.3 million). These are presented as a reduction in tax payable on the consolidated
statement of financial position.

Tax Rate Reconciliation

$’000

Income before tax per Consolidated Statements of Comprehensive Income

Less Additional Profits Tax

Income before statutory tax

Provision for income tax calculated at the statutory rate of 30%

Effect on income tax of:

Administrative and operating expenses

Foreign rate difference

Foreign exchange loss (gain)

Stock based compensation (recovery) expense

TANESCO interest not recognized as interest income

Change in unrecognized tax asset

Changes in estimates related to prior years

Years ended December 31

2021

39,298

2020

43,915

(4,609)

(4,054)

34,689

10,407

328

651

(68)

1,342

905

3,160

16,726

39,861

11,958

1,959

–

(258)

186

1,468

(4,796)

223

10,740

As at December 31, 2021 the loss allowance for TANESCO had resulted in an $18.6 million unrecognized deferred tax asset (December 31, 2020:
$18.6 million). If this debt is ultimately not recovered, the Company will also be entitled to an $18.7 million (2020: $13.1 million) refund of VAT).
As at December 31, 2021, the Company has not recognized the benefit of unused trading loss carry forwards of $7.5 million, which do not expire,
as it is not probable that future taxable profits will be available against which the benefit can be utilized.

In respect of each type of temporary difference the amounts of deferred tax assets/(liabilities) recognized in the consolidated balance sheet
were as follows:

$’000

Differences between tax base and carrying value of property, plant and equipment

Tax recoverable from TPDC

Loss allowances

Additional Profits Tax

Unrealized exchange losses/other provisions

As at December 31

2021

2020

(33,244)

(30,417)

(3,449)

2,847

8,884

(81)

(3,110)

3,357

10,946

715

(25,043)

(18,509)

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Notes to the Consolidated Financial Statements cont.

11. Additional Profits Tax

Under the terms of the PSA, APT is payable when the Company has recovered its costs plus a specified return out of Cost Gas revenue
and Profit Gas revenue. As a result: (i) no APT is payable until the Company recovers its costs out of Additional Gas revenues plus an annual
operating return under the PSA of 25% plus the percentage change in the United States Industrial Goods Producer Price Index (“PPI”); and
(ii) the maximum APT rate is 55% of the Company’s Profit Gas when costs have been recovered with an annual return of 35% plus the
percentage change in PPI.

The timing and the effective rate of APT depends on the realized value of Profit Gas which in turn depends on the level of expenditure.
The Company provides for APT by annually forecasting the total APT payable in the future as a proportion of the forecast Profit Gas over the
term of the PSA. The forecast takes into account the timing of future development capital spending. As at December 31, 2021 the current portion
of APT payable was estimated at $8.5 million (December 31, 2020: $11.5 million) with a long-term APT payable of $20.9 million (December 31,
2020: $24.8 million).

The effective APT rate of 17.3% (2020: 16.8%) has been applied to the Company’s Profit Gas of $26.7 million (2020: $24.1 million). Accordingly,
$4.6 million of APT has been recorded as APT in Consolidated Statement of Comprehensive Income for the year ended December 31, 2020
(2020: $4.1 million).

12. Current Trade and Other Receivables

As at December 31

2021

2020

2,502

5,603

2,042

11,840

(452)

21,535

2,827

3,447

3,647

(725)

9,196

30,731

2,053

7,417

–

9,362

(452)

18,380

4,571

–

6,935

(8,006)

3,500

21,880

As at December 31, 2021

Current

>30 <60

>60 <90

19,442

812

302

>90

979

Total

21,535

As at December 31, 2020

Current

14,608

>30 <60

>60 <90

1,424

882

>90

1,466

Total

18,380

$’000

Trade receivables

Songas

TPDC

TANESCO

Industrial customers

Loss allowance

Other receivables

Songas gas plant operations

Songas well workover program

Other

Loss allowance

Trade Receivables Aged Analysis

$’000

Orca Energy Group Inc. Annual Report & Accounts 2021
12. Current Trade and Other Receivables cont.

Songas

As at December 31, 2021 Songas owed the Company $5.3 million (December 31, 2020: $6.6 million), while the Company owed Songas $1.9 million
(December 31, 2020: $2.0 million). The amounts due to the Company are mainly for sales of gas of $2.5 million (December 31, 2020: $2.1 million)
and for the operation of the gas plant of $2.8 million (December 31, 2020: $4.6 million) against which the Company has made a loss allowance of
$0.7 million (December 31, 2020: $2.7 million). The amounts due to Songas primarily relate to pipeline tariff charges of $1.5 million (December 31,
2020: $1.7 million). The operation of the gas plant is conducted at cost and the charges are billed to Songas on a flow through basis.

TPDC

The current receivable from TPDC is for gas deliveries through the NNGI pursuant to the signing of the LTGSA. In accordance with the LTGSA,
any unpaid, overdue amounts are offset against TPDC profit share.

Reversal of loss allowance

$’000

Reversal of loss allowance

Loss allowance

Years ended December 31

2021

(3,762)

1,188

2020

(20,951)

5,337

(2,574)

(15,614)

The reversal of loss allowance of $3.8 million (2020: $21.0 million) follows collection of: (i) TANESCO arrears of $1.1 million (2020: $19.9 million)
which had been previously allowed for and represents the excess of receipts over gas sales invoiced during the year; (ii) Songas operatorship
arrears of $1.9 million (2020: $1.1 million) which had been previously allowed for; and (iii) collection of $0.8 million (2020: $ nil) of indirect taxes
related to the receipt of funds for the TANESCO 2016 take or pay invoice that had been previously allowed for.

The loss allowance of $1.2 million is for: (i) $0.5 million being the amount in dispute with the Tanzanian Revenue Authority (“TRA”) with respect
to withholding tax on services performed outside Tanzania by non-resident persons in 2010 and 2015-16; and (ii) $0.7 million with respect to
impairment of Swala convertible preference shares (see Note 24). The loss allowance for 2020 is for a receivable from the TRA who issued an
Agency Notice for $5.3 million obligating the Company’s bank in Tanzania to release funds in favor of the TRA. In 2021 the Tanzanian Court of
Appeal (“CAT”) ruled in favor of the TRA on the Company’s appeal filed in 2020. The Company, with advice from its legal counsel, decided not
to proceed further on this matter.

13. Capital Assets

$’000

Costs

As at December 31, 2020

Additions

As at December 31, 2021

Accumulated depletion and depreciation

As at December 31, 2020

Additions

As at December 31, 2021

Net book values

As at December 31, 2021

Natural gas
interests

Office

and other Right-of-use

Total

241,280

26,596

267,876

132,588

15,779

148,367

2,894

2,908

2,864

2,901

1,084

245,258

–

26,610

1,084

271,868

343

290

633

135,795

16,106

151,901

119,509

451

119,967

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Notes to the Consolidated Financial Statements cont.

13. Capital Assets cont.

$’000

Costs

As at December 31, 2019

Additions

Disposals

As at December 31, 2020

Accumulated depletion and depreciation

As at December 31, 2019

Additions

Disposals

As at December 31, 2020

Net book values

As at December 31, 2020

Natural gas
interests

Office

and other Right-of-use

Total

214,163

27,117

–

2,870

–

241,280

2,894

117,758

14,830

–

2,770

–

132,588

2,864

1,665

(661)

1,084

189

397

(243)

343

218,698

27,221

(661)

245,258

120,717

15,321

(243)

135,795

108,692

741

109,463

In determining the depletion charge the Company takes into account an estimate of future development costs, the capital expenditure required
to ensure the Company can produce the required gas volumes to meet its contractual obligations for the remaining life of the license. As
at December 31, 2021 the estimated future development costs required to bring the total proved reserves to production were $26.8 million
(December 31, 2020: $34.2 million). During the year the Company recorded depreciation of $0.3 million (2020: $0.1 million) in general and
administrative expenses.

Right-of-use assets

$’000

As at December 31, 2020

Depreciation

As at December 31, 2021

As at December 31, 2019

Additions

Disposals

Depreciation

As at December 31, 2020

741

(290)

451

1,476

(418)

(397)

741

Orca Energy Group Inc. Annual Report & Accounts 202113. Capital Assets cont.

Lease liabilities

$’000

As at December 31, 2020

Lease interest expense

Lease payments

As at December 31, 2021

As at December 31, 2019

Additions

Disposals

Lease interest expense

Lease foreign currency translation difference

Lease payments

As at December 31, 2020

684

(319)

408

1,411

(125)

(9)

(759)

684

Right-of-use assets are presented as part of capital assets on the Company’s balance sheet. Of the total lease liability of $0.4 million (2020: $0.7
million), $0.2 million (2020: $0.3 million) is current and is presented in trade and other liabilities.

14. Trade and Other Liabilities

$’000

Songas

Other trade payables

Trade payables

TPDC Profit Gas entitlement, net

Deferred income – take or pay contracts

Accrued liabilities

TPDC share of Profit Gas

$’000

TPDC share of Profit Gas

Less “Adjustment Factor”

TPDC share of Profit Gas entitlement

As at December 31

2021

1,899

3,179

5,078

21,911

5,215

14,572

46,776

2020

2,062

2,573

4,635

25,570

–

9,082

39,287

As at December 31

2021

27,994

(6,083)

21,911

2020

30,405

(4,835)

25,570

Under the PSA revenue sharing mechanism, the Company adjusts TPDC’s Profit Gas share by the “Adjustment Factor”. The Adjustment Factor is
equal to the amount necessary to fully pay and discharge the PAET liability for taxes on income derived from petroleum operations. A significant
percentage of the settlement of the $21.9 million liability to TPDC is dependent on receipt of payment from TANESCO for long-term arrears that
have been fully allowed for.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements
Notes to the Consolidated Financial Statements cont.

15. Long-term Receivables

$’000

Amounts invoiced to TANESCO

Trade receivables – TANESCO

Unrecognized amounts not meeting revenue recognition criteria1

Loss allowance

Net TANESCO receivable

VAT – Songas workovers

Lease deposit

As at December 31

2021

119,168

(2,042)

2020

111,234

–

(90,634)

(83,685)

(26,492)

(27,549)

–

2,205

2,215

–

2,205

2,214

1 The amount includes invoices for interest on late payments and invoices relating to differences between gas contracted for delivery versus gas taken by TANESCO.

The Company recognized 100% of amounts invoiced for deliveries to TANESCO as revenue during 2021 and 2020. In 2021 the Company invoiced
TANESCO $6.7 million (2020: $6.5 million) under the take or pay provision within the PGSA; this invoice has not been recognized as it does not
meet revenue recognition criteria with respect to assurance of collectability.

In 2017, based on agreement with TPDC, $12.3 million relating to the Songas share of workover costs of the wells SS-5 and SS-9 was transferred
to the cost pool to recover the costs via the PSA cost recovery mechanism. This resulted in $2.2 million relating to VAT on the workovers that
had already been paid being reclassified as a long-term receivable. The Company continues to take action to collect the workover costs through
the mechanisms provided in the agreements with Songas.

16. Long-term Loan

In 2015 PAET took out the Loan with the IFC, a member of the World Bank Group, for $60 million. The Loan was fully drawn down in 2016.

The Loan is to be paid out through six semi-annual payments of $5.0 million starting October 15, 2022 and one final payment of $25.2 million
due on October 15, 2025. The Company may voluntarily prepay all or part of the Loan but must simultaneously pay any accrued base interest
costs related to the principal amount being prepaid. The Loan is an unsecured subordinated obligation of PAET and was initially guaranteed by
the Company to a maximum of $30.0 million. The guarantee may only be called upon by IFC at maturity in 2025 and, subject to IFC approval
and receipt of all required regulatory approvals, the Company, at its discretion, may issue shares in fulfillment of all or part of the guarantee
obligation in 2025. Pursuant to the sale of the non-controlling interest in PAEM, the parent company of PAET, the Company agreed with the IFC
to reduce the outstanding amount of the Loan by the percentage interest sold of 7.9% ($4.8 million) before the fourth anniversary of the first
drawdown. PAET made this payment on October 16, 2019.

Dividends and distributions from PAET are restricted, if at any time amounts of interest, principal or participating interest are due and
outstanding. All amounts due under the Loan have been paid when due.

As at December 31

2021

55,240

2020

55,240

(637)

(994)

(5,000)

49,603

–

54,246

$’000

Loan principal

Financing costs

Current portion of long-term loan

Orca Energy Group Inc. Annual Report & Accounts 2021
17. Capital Stock

Authorised

50,000,000

Class A common shares (“Class A Shares”)

No par value

100,000,000

Class B subordinate voting shares (“Class B Shares”)

No par value

100,000,000

First preference shares

No par value

The Class A and Class B Shares rank pari passu in respect of dividends and repayment of capital in the event of winding-up. Class A Shares carry
twenty (20) votes per share and Class B Shares carry one (1) vote per share. The Class A Shares are convertible at the option of the holder at
any time into Class B Shares on a one-for-one basis. The Class B Shares are convertible into Class A Shares on a one-for-one basis in the event
that a takeover bid is made to purchase Class A Shares which must, by reason of a stock exchange or legal requirements, be made to all or
substantially all of the holders of Class A Shares and which is not concurrently made to holders of Class B Shares.

Changes in the capital stock

Number of shares

Class A Shares

Class B Shares

First preference shares

Total

Authorised
(000)

50,000

100,000

250,000

2021

Issued
(000)

1,750

18,203

–

As at December 31

Amount
($’000)

Authorised
(000)

983

46,471

–

50,000

100,000

250,000

19,953

47,454

2020

Issued
(000)

1,750

Amount
($’000)

983

24,388

62,260

–

26,138

63,243

During Q1 2021 the Company repurchased and canceled 6,153,846 Class B Shares at a weighted average price of CDN$6.50 per Class B
Share under a substantial issuer bid. This resulted in an aggregate purchase of CDN$40.0 million of Class B Shares representing 25.2% of the
Company’s issued and outstanding Class B Shares and 23.5% of the total number of the Company’s issued and outstanding shares. Total cash
payments of $32.0 million were applied to the capital stock and accumulated income accounts. All issued capital stock is fully paid.

On June 21, 2021 the Company commenced a normal course issuer bid (“NCIB”) to purchase Class B Shares through the facilities of the TSXV
and alternative trading systems in Canada. As at December 31, 2021, 30,900 Class B Shares have been purchased by the Company pursuant to
the NCIB at an average price per Class B Share of CDN$5.17. As at December 31, 2021, 15,100 of the purchased Class B Shares were canceled by
the Company.

Changes in Stock Appreciation Rights (“SARs”)

Outstanding as at January 1

Issued

Exercised

Forfeited

2021

2020

SARs
(000)

Exercise price
(CDN$)

SARs
(000)

Exercise price
(CDN$)

1,242

3.87 to 6.65

2,322

2.30 to 6.65

–

(413)

–

5.00

–

(83)

5.00

–

160

(517)

(120)

(30)

(317)

(118)

(108)

5.02

5.00

3.02

3.87

2.30

5.00

5.02

6.65

Outstanding as at December 31

746

3.87 to 6.65

1,242

3.87 to 6.65

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Notes to the Consolidated Financial Statements cont.

17. Capital Stock cont.

The number outstanding, the weighted average remaining life and weighted average exercise prices of SARs at December 31, 2021 were
as follows:

Exercise price (CDN$)

3.87

5.00 to 6.65

3.87 to 6.65

Change in Restrictive Stock Units (“RSUs”)

Outstanding as at January 1

Issued

Exercised

Forfeited

Outstanding as at December 31

Weighted
average
remaining
contractual
life
(years)

1.00

1.04

2.03

Number
exercisable
(000)

227

257

Number
outstanding
(000)

686

746

2021

2020

RSUs
(000)

133

–

(48)

(9)

Exercise
price
(CDN$)

0.01

RSUs
(000)

235

(78)

(44)

133

Weighted
average
exercise
price
(CDN$)

3.87

5.19

5.08

Exercise
price
(CDN$)

0.01

The number outstanding, the weighted average remaining life and weighted average exercise prices of RSUs at December 31, 2021 were
as follows:

Exercise price (CDN$)

0.01

Number
outstanding
(000)

Number
exercisable
(000)

Weighted
average
remaining
contractual life
(years)

1.08

As SARs and RSUs are settled in cash, they are revalued at each reporting date using the Black-Scholes option pricing model with the resulting
liability being recognized in trade and other liabilities. In the valuation of stock appreciation rights and restricted stock units as at December
31, 2021, the following assumptions have been made: a risk free rate of interest of 1.0% (December 31, 2020: 1.0%), stock volatility of 26.6% to
37.8% (December 31, 2020: 31.0% to 41.1%), 5% forfeiture (December 31, 2020: 5%) and a closing stock price of CDN$5.40 (December 31, 2020:
CDN$6.33) per Class B share. The valuation of the SARs and RSUs awards is increased to reflect the amount of dividends paid between the
award date to the time of exercise.

$’000

SARs

RSUs

As at December 31

2021

727

326

1,053

2020

1,683

496

2,179

As at December 31, 2021 a total accrued liability of $1.1 million (December 31, 2020: $2.2 million) has been recognized in relation to SARs and
RSUs which is included in other payables. The Company recognized a recovery for the year of $0.6 million (2020: expense of $1.1 million) as
stock based compensation.

Orca Energy Group Inc. Annual Report & Accounts 202117. Capital Stock cont.

Dividend Summary

Declaration date

February 24, 2022

November 9, 2021

September 9, 2021

June 4, 2021

February 23, 2021

November 19, 2020

September 17, 2020

June 22, 2020

February 25, 2020

18. Earnings Per Share

$’000

Outstanding shares

Record date

March 31, 2022

December 31, 2021

September 29, 2021

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

March 31, 2020

Payment date

April 15, 2022

January 14, 2022

October 15, 2021

July 15, 2021

April 15, 2021

January 15, 2021

October 15, 2020

July 15, 2020

April 30, 2020

Weighted average number of Class A and Class B Shares, basic

Weighted average number of Class A and Class B Shares, diluted

Amount per share (CDN$)

0.10

0.08

0.06

As at December 31

2021

2020

20,317

27,818

The calculation of basic earnings per share is based on a net income attributable to shareholders for the year of $16.4 million (2020: $27.8 million)
and a weighted average number of Class A and Class B Shares outstanding during the period of 20,317,407 (2020: 27,817,531).

19. Related Party Transactions

The Chair of the Company’s Board of Directors is counsel to Burnet, Duckworth & Palmer LLP, a law firm that provides legal advice to the
Company and its subsidiaries. During the year ended December 31, 2021 fees for services provided by this firm totaled $0.3 million (2020:
$1.0 million).

As at December 31, 2021 the Company had a total of $0.1 million (December 31, 2020: $0.1 million) recorded in trade and other liabilities in
relation to related parties.

20. Contractual Obligations and Committed Capital Investments

Protected Gas

Under the terms of the Gas Agreement for the Songo Songo project (“Gas Agreement”), in the event that there is a shortfall/insufficiency in
Protected Gas as a consequence of the sale of Additional Gas, the Company is liable to pay the difference between the price of Protected Gas
($0.55/MMbtu escalated) and the price of an alternative feedstock multiplied by the volumes of Protected Gas up to a maximum of the volume
of Additional Gas sold which was 257 Bcf as at December 31, 2021 (December 31, 2020: 235 Bcf). The Company did not have a shortfall during
the reporting period and does not anticipate a shortfall arising during the term of the Protected Gas delivery obligation to July 2024.

Terms of the Gas Agreement were modified by the Amended and Restated Gas Agreement (“ARGA”) which was initialed by all parties but
remains unsigned. In certain respects, the parties thereto are conducting themselves as though the ARGA is in effect. Management does not
foresee a material risk with the conduct of the Company’s business with an unsigned ARGA at this time.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Notes to the Consolidated Financial Statements cont.

20. Contractual Obligations and Committed Capital Investments cont.

Re-Rating Agreement

In 2011 the Company, TPDC and Songas signed a Re-Rating Agreement which evidenced an increase to the gas processing capacity of the
Songas Infrastructure to a maximum of 110 MMcfd (the pipeline and delivery pressure requirements at the Ubungo power plant restrict the
infrastructure capacity to a maximum of 102 MMcfd). Under the terms of the Re-Rating Agreement, the Company paid additional compensation
of $0.30/mcf for sales between 70 MMcfd and 90 MMcfd and $0.40/mcf for volumes above 90 MMcfd by issuing credit notes to TANESCO.
This was in addition to the tariff of $0.59/mcf payable to Songas as set by the energy regulator, EWURA.

The parties to the Re-Rating Agreement are in the process of negotiating a replacement agreement which may address the additional
compensation paid. In the interim, the processing capacity at the Songas Infrastructure remains unaltered and is fully available for utilization by
the Company. This capacity is in addition to the capacity available within the NNGI.

Portfolio Gas Supply Agreement (“PGSA”)

On June 17, 2011, the PGSA was signed (term to June 2023) between TANESCO (as the buyer) and the Company and TPDC (collectively as the
seller). TANESCO requested a change to the PGSA MDQ in accordance with clause 7.6(b) which PAET and TPDC approved effective January
29, 2018. The seller is obligated, subject to infrastructure capacity, to sell a maximum of approximately 26 MMcfd (previously 36 MMcfd) for
use in any of TANESCO’s current power plants, except those operated by Songas at Ubungo. Under the agreement, the basic wellhead price of
approximately $2.98/mcf increased to $3.04/mcf on July 1, 2017, to $3.10/mcf on July 1, 2019, $3.14/mcf on July 1, 2020 and $3.20/mcf on July 1,
2021. Previously under the PGSA any sales in excess of 36 MMcfd were subject to a 150% increase in the basic wellhead gas price. On December
22, 2018 a side letter amendment to the PGSA was agreed with TPDC to allow PGSA volumes up to a maximum monthly average volume of
35 MMcfd to temporarily flow through the NNGI. The temporary arrangement was terminated in September 2019 once the refrigeration unit
became fully operational and all PGSA volumes were again processed through the Songas Infrastructure.

Long-term Gas Sales Agreement (“LTGSA”)

On May 14, 2019 the Company and TPDC signed the LTGSA for an initial delivery of 20 MMcfd through the NNGI, at a price of $3.10/MMbtu
as at January 1, 2019, (escalating 2% per annum) exclusive of any processing and transportation tariff associated with the NNGI. The LTGSA
was amended on September 24, 2019 to increase the volumes supplied through the NNGI up to a maximum daily quantity of 30 MMcfd. In
2020 parties established a 12-month renewable agreement for the supply of volumes above 30 MMcfd on an ad hoc basis, allowing TPDC to
meet fluctuating demand and compensate for shortfalls in production from their Madimba plant without being penalized due to a higher, fixed
contractual limit and the subsequent take-or-pay penalties should the demand reduce again. The agreement has allowed the Company to
supply volumes in excess of 50 MMcfd on occasion, increasing average sales volumes and revenues.

All volumes above 20 MMcfd are supplied on a best endeavors basis until compression facilities are added to the Songas facilities in Q1 2022.

Leases

The Company has three office rental agreements, two in Dar es Salaam, Tanzania, and one in London, England. An agreement for the office in
Dar es Salaam was entered into on November 1, 2019 and expires on October 31, 2023 at an annual rent of $0.4 million. Another agreement for
the downstream office in Dar es Salaam was entered into on May 1, 2018 and extended on November 1, 2020 to June 30, 2022 at an annual rent
of $0.04 million. On November 15, 2021 the Company leased new office premises in London for a period of 12 months at a cost of $0.1 million per
annum. The cost of the London office lease is recognized in the general and administrative expenses.

Capital Commitments

Tanzania

At the date of this report, the Company’s significant outstanding contractual commitments are in relation to the compression contract,
originally priced at $38.0 million which has increased through variations to $41.7 million and the upcoming workover program originally
priced at $21.4 million which has increased through variations to $31.6 million. As of December 31, 2021, $40.5 million of the compression
contract has been paid, the remaining capital expenditures under this contract of $1.2 million will be paid in 2022. As of December 31, 2021,
$13.9 million of the workover contracts has been paid, the remaining capital expenditures of $17.7 million will be paid in 2022.

Orca Energy Group Inc. Annual Report & Accounts 202121. Contingencies

Upstream and Downstream Activities

The Petroleum Act, 2015 (the “Petroleum Act”) provides TPDC with exclusive rights over the distribution of gas in Tanzania. The Petroleum Act
has grandfathering provisions upholding the rights of the Company to develop and market natural gas produced under the PSA as it was signed
prior to the Petroleum Act coming into effect in 2015.

On October 7, 2016 the Government of Tanzania issued the Petroleum (Natural Gas Pricing) Regulation made under Sections 165 and 258 (I)
of the Petroleum Act. Article 260 (3) of the Petroleum Act preserves the Company’s pre-existing right with TPDC to market and sell Additional
Gas together or independently on terms and conditions (including prices) negotiated with third party Natural Gas customers. To date there has
been no impact on the Company as a result of the Natural Gas Pricing Regulation, however, any future impact cannot be determined at this time.

TPDC Back-in

TPDC has the right under the PSA to “back in” to the Songo Songo field development and convert this into a carried working interest in the
PSA. The current terms of the PSA require TPDC to provide formal notice in a defined period and contribute a proportion of the costs of any
development, sharing in the risks in return for an additional share of the gas. To date, TPDC has not contributed towards any costs.

Cost Recovery

TPDC conducted an audit of historical costs (the “Cost Pool”) and in 2011 disputed approximately $34.0 million of costs that had been recovered
from the Cost Pool from 2002 through to 2009. In 2014 a substantial portion of the disputed costs were agreed to be cost recoverable by
TPDC with $25.4 million remaining in dispute. Under the dispute mechanism outlined in the PSA, parties are to agree the appointment of an
independent specialist to assist the parties in reaching agreement on costs that are still subject to dispute. In 2014, prior to appointing an
independent specialist, TPDC suspended the process. From 2010 to 2015 TPDC rejected a further $16.8 million of costs. In 2016 the Tanzanian
Petroleum Upstream Regulatory Authority (“PURA”) assumed the role of auditing the PSA cost pool from TPDC and for 2016 to 2020 have
rejected all costs pertaining to downstream development amounting to $15.0 million and a further $9.5 million of other costs. To date there
remains a total of $66.7 million of costs that have been queried or rejected by TPDC or PURA through the cost pool audit process.

During 2019 discussions on the disputed amounts briefly resumed with TPDC. At the time of writing this report no independent specialist
has been appointed and neither TPDC nor PURA have issued a formal dispute regarding cost recovery. If the matter is not resolved to the
Company’s satisfaction, the Company intends to proceed to arbitration via the International Centre for Settlement of Investment Disputes
pursuant to the terms of the PSA. The Company’s view is that all costs have been correctly included in the Cost Pool however should any
of the costs be rejected as not being cost recoverable, the Company would be required to retroactively adjust its share of revenue for the
period under dispute.

Reason for dispute

Principal

Interest

Taxation

Amounts in $’millions

Area

Pay-As-You-Earn
(“PAYE”) tax

Period

2008-10

Withholding tax
(“WHT”)

Income tax

2005-09

2008-09,
2011-17

VAT

2012-18

PAYE tax on grossed-up amounts
in staff salaries which are contractually
stated as net.

WHT on services performed outside
of Tanzania by non-resident persons.

VAT already paid (2012 to 2014), VAT on
imported services (2015 and 2016); interest
on VAT decreasing adjustments and input
VAT on services (2017 and 2018).

As at December 31

2021

Total

0.3(1)

1.6(2)

2020

Total

1.6

8.7

0.3

1.0

–

0.6

34.2

17.5

51.7(3)

52.1

0.2

35.7

1.2

19.3

1.4(4)

55.0

6.8

69.2

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements Notes to the Consolidated Financial Statements cont.

21. Contingencies cont.

Taxation cont.

During Q2 2021 the Company paid the TRA $1.8 million as a deposit against the disputed taxes including PAYE tax, WHT, income tax and VAT
for the years 2012-16, an amount agreed upon in order for TRA to admit the outstanding tax objections. In Q3 2021, the Court of Appeal of
Tanzania (“CAT”) delivered its judgment on an appeal instituted by the Company on the appealability of a one-third deposit required to admit
objections for the 2012 year of income. The CAT decided that the matters are not tax decisions and are therefore not appealable. Aggrieved by
the decision, the Company filed a notice of motion for review of the decision at the same court and is awaiting a hearing. The decision, however,
will not affect the position on admission of objections for the years of 2012-16.

During 2020 the TRA issued an Agency Notice for $5.3 million obligating PAET’s commercial bank in Tanzania to release funds in favor of
the TRA with regards to the output VAT on SSI operatorship services (2008-10). In Q3 2020 the Company filed an appeal with the CAT and
recorded the $5.3 million as other receivables and fully allowed for the amount on the Company’s financials. Subsequently, during Q3 2021 the
CAT ruled in favor of the TRA on the Company’s appeal. Management, with advice from its legal counsel, decided not to proceed further on this
matter.

In Q4 2021 the Company recorded an allowance of $0.6 million with respect to interest on depreciation of disallowed costs of completion
of wells SS-10 (2009-10) and SS-12 (2015-16). In addition, the Company recorded an allowance of $0.5 million with respect to WHT on services
performed outside Tanzania by non-resident persons (2010 and 2015-16). These disputes are no longer represented in the table above.

In Q4 2021, the Company recorded an additional provision of approximately $2.2 million.

In Q4 2021, further to issuing its objections to TRA’s 2015-16 assessments, the Company received determination letters whereby the TRA agreed
to drop their claims with regards to WHT on interest on the IFC Loan and management fees (2015-16) and PAYE on grossed up salaries (2015-
16) in the amounts of $0.9 million and $1.4 million, respectively. The aforementioned disputes are no longer represented in the table above.
Additionally, with the advice from its legal and tax counsels, it was established that four of the assessments with respect to 2011 ($0.2 million),
2013 ($0.2 million), 2014 ($3.3 million) and 2015-16 ($0.4 million) income tax, which were previously presented as contingencies, were overridden
by four other assessments, effectively presenting duplicating assessments, for the respective years of income. This has now been amended
accordingly in the taxation contingency table above.

Subsequent to December 31, 2021, following the expiry of the statutory deadline for the TRA to respond to the Company’s objections, the
Company filed notices of intention to appeal to TRAB against the corporate income tax assessments for the years of 2012-16, tax on repatriated
income for the years of 2012 and 2013, and VAT for the years of 2015-16. In Q2 2022, these matters came for hearing and, at the request from
the TRA, the TRAB granted an order that these matters be withdrawn to allow the TRA to further review and issue determination letters.
The matters are expected to appear for a status review in May 2022. In addition, the Company paid the TRA $0.7 million as a deposit against
disputed income tax for the year of income of 2017.

During 2020, the TRA conducted audits of 2017 and 2018 and issued two assessments with regards to VAT ($1.2 million) and WHT ($0.01
million). The Company has conceded to the TRA with respect to the WHT assessment ($0.01 million) and a portion of the VAT assessment
($0.06 million). However, the Company has objected to the incorrect imposition of interest on VAT decreasing adjustments on TANESCO
payments ($1.1 million) and disallowing input VAT claimed in certain services ($0.1 million). No final assessments have been issued to date with
respect to corporation tax, excise duty or payroll tax for 2017 and no preliminary assessment has yet been received for 2018. During 2020 the
Company filed an application for judicial review at the CAT with regards to the 2008-10 PAYE case ($0.3 million). During the year, again acting
under instructions from the TRA, PAET’s commercial bank in Tanzania transferred the full principal tax amount in dispute ($0.3 million) to the
TRA. The Company has filed an appeal for review with the CAT.

Management, with advice from its legal counsel, has reviewed the Company’s position on the objections and appeals related to the disputed
amounts and has concluded that no further provision is required. However, if the TRA reassesses the Company’s tax returns for open taxation
years on a similar basis, the Company may be required to make future deposits to object such assessments.

Orca Energy Group Inc. Annual Report & Accounts 202121. Contingencies cont.

Taxation cont.

(1) (a) 2008-10 ($0.3 million): In 2020, the Company lost an appeal with CAT on the principal amount of PAYE tax and filed an application for judicial review at CAT. The TRA

instructed PAET’s commercial bank to transfer the full principal amount in dispute to TRA;

(2) (a) 2005-2009 ($1.6 million): In 2018 the CAT ruled in favor of the Company that no WHT was required on services performed outside Tanzania by non-resident persons.

It is unknown whether TRA will file an application objecting to the CAT ruling;

(3) (a) 2008 ($0.6 million): The Company objected to a TRA assessment that did not recognize a tax loss carried forward and is awaiting a response;

(b) 2009 ($0.8 million): The Company objected to an amended assessment from the TRA for being time-barred and arbitrary and is awaiting a TRA response;

(d) 2012 ($13.6 million): The Company objected to the TRA assessments with respect to understated revenue, timing of deductibility of capital expenditures, expenses and
tax on repatriated income. Following expiry of the statutory deadline for the TRA to respond to its objection, the Company filed an appeal at the TRAB and is awaiting
a hearing;

(e) 2013 ($9.3 million): The Company objected to two assessments as being time-barred and without merit ($7.4 million) and tax on repatriated income ($7.4 million) and is

awaiting the TRA’s response;

(f) 2014 ($8.0 million): The TRA issued two assessments for corporation tax ($4.9 million) and tax on repatriated income ($3.1 million). The Company field objections to the

assessments and is awaiting the TRA’s response;

(g) 2015-16 ($11.2 million): The TRA issued two assessments for corporation tax ($5.8 million) and tax on repatriated income ($5.4 million). The Company appealed to the TRAB

against the assessments following the TRA failure to determine the matters within the statutorily allowed period and is awaiting a response;

(4) (a) 2012-16 ($0.2 million): The Company has filed an objection to a TRA assessment with respecting to disallowing VAT on certain services and is awaiting a response;

(b) 2017-18 ($1.2 million) The Company has filed an objection to a TRA assessment and is awaiting a response. The Company has objected incorrect imposition of interest on

VAT decreasing adjustments in respect of delayed TANESCO payment ($1.1 million) and disallowing input VAT claimed in certain services ($0.1 million).

In 2016 the TRA introduced significant changes in relation to the income tax treatment of the extractive sector with separate new chapters
in Part V of the Income Tax Act 2004 (“ITA, 2004”) for mining and for petroleum to be effective commencing in 2018. Further changes were
subsequently made by the Written Laws (Miscellaneous Amendments) Act, 2017 (“WLMAA, 2017”) and in particular section 36(a)(ii) of the
WLMAA, 2017. The WLMAA, 2017 amended section 65M and 65N of the ITA 2004 to exclude cost oil/cost gas from inclusion in both income
and expenditure. The Company continues to review the tax effects of the changes as there are a number of uncertainties and ambiguities as
to the interpretation and application of certain provisions of the WLMAA, 2017. In the absence of guidance on these matters, the Company has
used what it believes are reasonable interpretations and assumptions in applying the WLMAA, 2017 for purposes of determining its tax liabilities
and the results of operations, which may change as it receives additional clarification and implementation guidance. The Company does not
expect a significant impact from the changes as it is able to recover taxes payable from the TPDC Profit Gas revenue entitlement under the
terms of the PSA.

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial Statements

Notes to the Consolidated Financial Statements cont.

22. Directors’ and Officers’ Emoluments

$’000

Directors

Officers

Base

500

514

1,316

1,465

Bonus

–

259

472

Stock based
compensation
expense

–

157

196

285

Total

500

671

1,771

2,222

Year

2021

2020

2021

2020

The table above provides information on compensation relating to the Company’s officers and Directors. Three officers (year ended December
31, 2020: five) and three Non-Executive Directors (year ended December 31, 2020: six) comprised the key management personnel during the
year ended December 31, 2021.

23. Change in Non-Cash Operating Working Capital

$’000

Increase in trade and other receivables

(Increase) decrease in prepayments

Increase (decrease) in trade and other liabilities

Decrease in APT

(Decrease) increase in tax payable

(Increase) decrease in long-term receivable

24. Non-Controlling Interest

As at December 31

2021

(11,143)

(235)

7,172

(11,545)

880

(1)

2020

(1,654)

5,854

(9,892)

(11,939)

1,455

(14,872)

(16,140)

The Company sold 7.9% (7,933 Class A common shares) of PAEM to a wholly owned subsidiary of Swala Oil & Gas (Tanzania) plc. (“Swala”)
in 2018 for $15.4 million cash and $4.0 million of Swala convertible preference shares (“Preference Shares”) pursuant to a share purchase
agreement. The Preference Shares entitle the Company to a 10% per annum distribution payable 15 days after each quarter end commencing
from the closing date, January 16, 2018. Payment of the quarterly distributions is at the discretion of Swala based on funds available, however,
the liability accrues if any amount is unpaid when due. If any distributable amount remains unpaid at December 31, 2021, the Company may
demand settlement and Swala is obligated to comply by transferring and returning the Class A common shares of PAEM sold to Swala. The
aggregate value of these shares will equal the amount of the outstanding distributions. As at December 31, 2021, the Company has not received
any distributions or recorded any amount receivable related to the Preference Shares.

Swala is obligated to redeem 20% of the Preference Shares for cash annually starting from December 31, 2021 until all shares are redeemed. If
at any time Swala does not redeem in cash the required number of Preference Shares, Swala is obligated to redeem the Preference Shares by
transferring and returning the Class A common shares of PAEM sold to Swala. The aggregate value of these Class A common shares will equal
the amount of any outstanding redemption. As of December 31, 2021, the Company recorded $0.7 million as a loss allowance with respect to
Preference Shares.

A reconciliation of the non-controlling interest is detailed below:

$’000

Balance, beginning of year

Net income attributable to non-controlling interest

Balance, end of year

25. Subsequent Events

As at December 31

2021

1,523

1,593

3,116

2020

163

1,360

1,523

On February 24, 2022 the Company declared a dividend of CDN$0.10 per share on each of its Class A Shares and Class B Shares for a total of
$1.6 million to holders of record as of March 31, 2022 paid on April 15, 2022.

Orca Energy Group Inc. Annual Report & Accounts 2021
Engineering Consultants
McDaniel & Associates Consultants Ltd.
Calgary, Canada

Auditors
KPMG LLP
Calgary, Canada

Website
orcaenergygroup.com

Lawyers
Burnet, Duckworth & Palmer LLP
Calgary, Canada

Transfer Agent
AST Trust Company
Calgary, Canada

Corporate Information

Board of Directors
Jay Lyons
Executive Director and Chief Executive Officer
Vancouver, Canada

David W. Ross
Chairman and Non-Executive Director
Calgary, Canada

Operating Office
PanAfrican Energy Tanzania Limited
Oyster Plaza Building, 5th Floor,
Haile Selassie Road
P.O. Box 80139, Dar es Salaam Tanzania
Tel: + 255 22 2138737
Fax: + 255 22 2138938

Dr Frannie Léautier
Non-Executive Director
Washington DC, United States

Linda Beal
Non-Executive Director
London, UK

Advisor to the Board and PAET
Lloyd Herrick
Director, PAET
Calgary, Canada

Officers
Jay Lyons
Chief Executive Officer
Vancouver, Canada

Lisa Mitchell
Chief Financial Officer
London, UK

Andrew Hanna
Managing Director, PAET
Surrey, UK

Registered Office
Orca Energy Group Inc.
Vistra Corporate Service Centre
Wickhams Cay II,
Road Town Tortola
British Virgin Islands, VG110

Investor Relations
Jay Lyons
Chief Executive Officer
jlyons@orcaenergygroup.com

Lisa Mitchell
Chief Financial Officer
lmitchell@orcaenergygroup.com

International Subsidiaries
PanAfrican Energy Tanzania Limited
Oyster Plaza Building, 5th Floor
Haile Selassie Road
P.O. Box 80139, Dar es Salaam Tanzania
Tel: + 255 22 2138737
Fax: + 255 22 2138938

PAE PanAfrican Energy Corporation
3rd Floor, Rogers House,
5 President John Kennedy Street
Port Louis,
Mauritius
Tel: + 230 207 8888
Fax: + 230 207 8833

Design and Production
www.carrkamasa.co.uk

Orca Energy Group Inc. Annual Report & Accounts 2021Strategic ReportManagement’s Discussion & AnalysisFinancial StatementsOrca Energy Group Inc.

Wickhams Cay II

Road Town, Tortola

VG1110

British Virgin Islands

orcaenergygroup.com