Monday, April 03, 2023
Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
We believe the market is undervaluing Hemisphere Energy’s asset base cash flow generation. We believe the stock price will move towards our price target as the company generates operating cash flow that is used to expand operations and return capital to shareholders. We view the investment as fairly low risk because it is expanding operations is an area that is well known and already providing high returns on investment.
Strong production growth. Production increased 55% in 2022 and management expects production to grow another 10-15% in 2023 in response to the addition of new wells. Unless there is a dramatic drop in oil prices, we believe the company will be able to maintain a double-digit production growth rate for the foreseeable future. Longer-term growth may be dependent upon completing a step-out acquisition to increase the company’s drilling locations.
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