Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.
Hans Baldau, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Outlook for 2025. Hemisphere Energy expects 2025 capital expenditures of approximately C$17 million which are expected to support ~15% growth in annual average production to 3,900 barrels of oil equivalent per day (boe/d) compared to 2024. Expenditures will be funded entirely from adjusted funds flow. Most of the capital will be allocated to drilling, optimization, and facility work, with approximately 10% allotted to exploration and land acquisition. Most planned expenditures are scheduled for the third quarter of 2025, providing the company with the flexibility to adjust plans based on changes in commodity prices.
Updating estimates. We have increased our 2024 adjusted funds flow (AFF) and EPS estimates to C$45.4 million and $0.32, respectively, from C$43.5 million and $0.31 to reflect modestly higher operating earnings. AFF and EPS in the fourth quarter are estimated to be C$10.0 million and $0.06, respectively. We have also increased our 2025 AFF and EPS estimates to C$50.6 million and $0.37, respectively, from C$38.0 million and $0.27 to reflect higher average annual production of 3,900 boe/d compared to our prior estimate of 3,625 boe/d. Additionally, we increased our WTI crude oil price assumption to US$72.00 per barrel versus our prior estimate of US$70.00.
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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Vancouver, British Columbia–(Newsfile Corp. – January 29, 2025) – Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) is pleased to provide a corporate update, announce the declaration of a quarterly dividend payment to shareholders, and deliver guidance for 2025.
Corporate Update
In 2024, Hemisphere achieved annual production growth of 10%, executed a $22 million capital expenditure program, and increased its positive year-end working capital position. The Company also returned over $0.22/share ($21.2 million) to shareholders in the form of dividends ($15.7 million) and share buybacks ($5.5 million), which represents an annualized 11.9% yield to shareholders based on Hemisphere’s market capitalization at December 31, 2024.
Hemisphere’s 2024 capital expenditure program grew production, added required infrastructure, and commenced testing a new resource play with an enhanced oil recovery (“EOR”) polymer pilot project. These investments were funded entirely by cash flow from the Company’s long-life reserve base and ultra-low production decline rates in the Atlee Buffalo oil assets, and have set up Hemisphere for continued growth in 2025.
Based on field estimates, production over the past two months (December 1, 2024 – January 27, 2025) has averaged approximately 3,800 boe/d (99% heavy oil) as new Atlee Buffalo wells were brought online through the fourth quarter of last year. With the addition of a new treater late in the quarter and upcoming injector conversions, these and other wells are expected to continue to be optimized during the first quarter of 2025 in Hemisphere’s flagship EOR polymer flood projects.
Balance sheet strength in 2024 allowed Hemisphere to invest in its pilot EOR project in the Marsden area of western Saskatchewan. The Company drilled 5 wells (3 production wells and 2 injection wells) and built facilities required to produce oil and inject polymer back into a known accumulation of oil that had been previously produced with vertical wells and abandoned, with the plans of rebuilding reservoir pressure and increasing the recovery factor of the oil-in-place from the pool. First injection commenced late in the third quarter of 2024 and Hemisphere is anticipating to see potential EOR response in mid-to-late 2025.
Quarterly Dividend
Hemisphere is pleased to announce that its Board of Directors has approved a quarterly cash dividend of $0.025 per common share in accordance with the Company’s dividend policy. The dividend will be paid on February 26, 2025 to shareholders of record as of the close of business on February 12, 2025. The dividend is designated as an eligible dividend for income tax purposes.
2025 Corporate Guidance
Hemisphere’s Board of Directors has approved a 2025 capital expenditure program of approximately $17 million, which is planned to be entirely funded by Hemisphere’s estimated 2025 adjusted funds flow1 (“AFF”) of $51 million and is anticipated to provide 15% annual production growth. The majority of capital will be allocated to drilling, optimization, and facility work, with approximately 10% allotted to exploration and land acquisition. Most of the planned capital expenditures are scheduled for the third quarter of 2025, providing Hemisphere with the flexibility to adjust plans subject to the commodity price environment.
After capital expenditures and asset retirement obligations (“ARO”), 2025 free funds flow1 (“FFF”) is estimated to be $34 million, of which approximately 30% is budgeted to be paid in quarterly base dividends as shown in the table below. The balance of cash will be used for discretionary purposes, which may include potential acceleration of other development or exploration projects, acquisitions, and additional return of capital to shareholders through Hemisphere’s normal course issuer bid (“NCIB”) program and/or special dividends. In 2024, two special dividends totaling $0.06/share ($5.7 million) were paid to shareholders in addition to Hemisphere’s base quarterly dividends of $0.10/share ($10 million), and share buybacks amounted to $0.06/share ($5.5 million), bringing total shareholder returns to $0.22/share ($21.2 million).
Management believes that the 2025 development plan provides stable production growth and consistent shareholder returns, with significant flexibility built in to allow for necessary adjustments based on changing political and commodity environments.
Highlights and assumptions of Hemisphere’s guidance at US$75/bbl WTI are as follows:
Average annual production of 3,900 boe/d (99% heavy oil), a 15% increase as compared to 2024
Average WTI price of US$75/bbl, with sensitivities shown at US$65/bbl and US$85/bbl
WCS differential of US$14.00/bbl and quality adjustment of $7.00/bbl
CAD/US FX of 1.43
Operating and transportation costs of $15.25/boe
Royalties and GORRs on gross revenue of 21% at US$75/bbl WTI, 19% at US$65/bbl WTI, and 23% at US$85/bbl WTI
Net G&A of $3.66/boe
Tax Costs of $8.10/boe at US$75/bbl WTI, $5.64/boe at US$65/bbl WTI, and $10.37/boe at US$85/bbl WTI
Notes: (1) AFF, Capital Expenditures, and FFF (including per share amounts) are non-IFRS financial measures that are forward looking and do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. AFF per basic share and FFF per basic share are non-IFRS financial ratios that are forward looking and do not have any standardized meaning under IFRS and therefore may not be comparable to similar ratios presented by other entities and include non-IFRS financial measure components of AFF and FFF. See “Non-IFRS Measures“. (2) See assumptions noted above within “2025 Corporate Guidance”. (3) Using a 2025 weighted average of 97.4 million basic shares issued and outstanding. (4) The amounts above do not include potential future purchases through the Company’s NCIB program or other discretionary uses of available funds.
About Hemisphere Energy Corporation
Hemisphere is a dividend-paying Canadian oil company focused on maximizing value-per-share growth with the sustainable development of its high netback, ultra-low decline conventional heavy oil assets through polymer flood enhanced recovery methods. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME” and on the OTCQX Venture Marketplace under the symbol “HMENF”.
For further information, please visit the Company’s website at www.hemisphereenergy.ca to view its corporate presentation or contact:
Don Simmons, President & Chief Executive Officer Telephone: (604) 685-9255 Email: info@hemisphereenergy.ca
Certain statements included in this news release constitute forward-looking statements or forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as anticipate, continue, estimate, expect, forecast, may, will, project, could, plan, intend, should, believe, outlook, potential, target, and similar words suggesting future events or future performance. In particular, but without limiting the generality of the foregoing, this news release includes forward-looking statements regarding the record date and payment date for Hemisphere’s quarterly dividend; expectations for the continued optimization of certain wells during the first quarter of 2025 in Hemisphere’s flagship EOR polymer flood projects; expectations on timing for potential EOR responses for activities in the Marsden area of western Saskatchewan; that Hemisphere’s 2025 capital budget is planned to be entirely funded by Hemisphere’s estimated 2025 AFF and is anticipated to provide 15% annual production growth, including that the majority of capital will be allocated to drilling, optimization, and facility work, with approximately 10% allotted to exploration and land acquisition, as well as expectations for the timing of such expenditures; Hemisphere’s anticipation that approximately 30% of estimated $34 million in free funds flow will be paid in quarterly dividends with the balance of cash being used for discretionary purposes; the expected manner in which the Company’s 2025 capital budget will be spent, including the timing of such expenditures and any discretionary amounts, which may include potential acceleration of other development or exploration projects, acquisitions, and return of capital to shareholders through Hemisphere’s NCIB program and/or dividends, and the anticipated effects thereof, including as set forth under “2025 Corporate Guidance” and the Company’s dividend policy and the other matters and guidance set forth under “2025 Corporate Guidance”; and management’s belief that the 2025 development plan provides stable production growth and consistent shareholder returns, with significant flexibility built in to allow for necessary adjustments based on changing political and commodity environments.
Forward‐looking statements are based on a number of material factors, expectations or assumptions of Hemisphere which have been used to develop such statements and information, but which may prove to be incorrect. Although Hemisphere believes that the expectations reflected in such forward‐looking statements or information are reasonable, undue reliance should not be placed on forward‐looking statements because Hemisphere can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein (including the assumptions noted in respect of “2025 Corporate Guidance”), assumptions have been made regarding, among other things: the current and go-forward oil price environment; that Hemisphere will continue to conduct its operations in a manner consistent with past operations; continued trade-agreements remain in place and no trade related disputes will develop, including tariffs on Canadian energy production to the United States will be applicable, that results from drilling and development activities are consistent with past operations; the quality of the reservoirs in which Hemisphere operates and continued performance from existing wells; the continued and timely development of infrastructure in areas of new production; inflationary pressure and related costs; that the Company’s dividend policy will remain the same and the Company will continue to be able to declare dividends; the accuracy of the estimates of Hemisphere’s reserve volumes; certain commodity price and other cost assumptions; continued availability of debt and equity financing and cash flow to fund Hemisphere’s current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Hemisphere operates; the general continuance of current industry conditions; the timely receipt of any required regulatory approvals; the ability of Hemisphere to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Hemisphere has an interest in to operate the field in a safe, efficient and effective manner; the ability of Hemisphere to obtain financing on acceptable terms; field production rates and decline rates; the accuracy of the Company’s reservoir modelling; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Hemisphere to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Hemisphere operates; and the ability of Hemisphere to successfully market its oil and natural gas products.
The forward‐looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward‐looking statements including, without limitation: changes in commodity prices; regulatory risks, including penalties or other remedial actions, the ability of the Company to maintain legal title to its properties; changes in the demand for or supply of Hemisphere’s products, the early stage of development of some of the evaluated areas and zones; unanticipated operating results or production declines; results of Hemisphere’s waterflood operations; the ability of Hemisphere to, pending future events, return capital to shareholders as a result of any required third party approvals; changes in budgets; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Hemisphere or by third party operators of Hemisphere’s properties, increased debt levels or debt service requirements; inaccurate estimation of Hemisphere’s oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time‐to‐time in Hemisphere’s public disclosure documents, (including, without limitation, those risks identified in this news release and in Hemisphere’s most recent Annual Information Form).
The forward‐looking statements contained in this news release speak only as of the date of this news release, and Hemisphere does not assume any obligation to publicly update or revise any of the included forward‐looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Forward Looking Financial Information
This news release may contain future oriented financial information (“FOFI”) within the meaning of applicable securities laws, including with respect to the Company’s anticipated 2025 Free Funds Flow, Capital Expenditures and Adjusted Funds Flow (including where applicable per share amounts). The FOFI has been prepared by management to provide an outlook of the Company’s activities and results. The FOFI has been prepared based on a number of assumptions including the assumptions discussed and disclosed above, including in relation to “2025 Corporate Guidance” above and “Forward Looking Statements” above and that the Company is cash taxable in 2025. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on FOFI. The Company’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these FOFI, or if any of them do so, what benefits the Company will derive therefrom. The Company has included the FOFI in order to provide readers with a more complete perspective on the Company’s future operations and such information may not be appropriate for other purposes. The Company disclaims any intention or obligation to update or revise any FOFI statements, whether as a result of new information, future events or otherwise, except as required by law.
Non-IFRS and Other Measures
This news release contains terms that are non-IFRS measures or ratios that are forward looking and commonly used in the oil and gas industry which are not defined by or calculated in accordance with International Financial Reporting Standards (“IFRS”), such as: (i) adjusted funds flow (ii) adjusted funds flow per basic share; (iii) capital expenditures; (iv) free funds flow; and (v) free funds flow per basic share. These terms should not be considered an alternative to, or more meaningful than the comparable IFRS measures (as determined in accordance with IFRS) which in the case of funds flow is cash provided by operating activities, in the case of adjusted funds flow (and adjusted funds flow per share) is cash provided by operating activities and in the case of capital expenditures is cash flow used in investing activities. There is no IFRS measure that is reasonably comparable to free funds flow. These measures are commonly used in the oil and gas industry and by Hemisphere to provide shareholders and potential investors with additional information regarding: (i) in the case of adjusted funds flow and free funds flow, the Company’s ability to generate the funds necessary to support future growth through capital investment and to repay any debt.
Hemisphere’s determination of these measures may not be comparable to that reported by other companies. Adjusted funds flow is calculated as cash generated by operating activities, before changes in non-cash working capital and adjusted for any decommissioning expenditures; Adjusted funds flow per share is calculated using the outstanding basic shares of the company as footnoted in the 2024 Corporate Guidance table; Free Funds Flow is calculated as Adjusted Funds Flow less capital expenditures; and Free funds flow per share is calculated using the outstanding basic shares of the company as footnoted in the 2025 Corporate Guidance table. The Company has provided additional information on how these measures are calculated, including a reconciliation of such measures to their comparable IFRS measure, in the Management’s Discussion and Analysis for the year ended December 31, 2023 and the interim period ended September 30, 2024, which are available under the Company’s SEDAR+ profile at www.sedarplus.ca.
In respect of any forward-looking non-IFRS measures, there is no significant difference between the non-GAAP financial measure that are forward-looking information and the equivalent historical non-GAAP financial measures.
In this news release, Hemisphere uses the term market capitalization at year-end. Hemisphere’s market capitalization was $178.2 million based on 97,389,735 shares outstanding and the Company’s closing price of $1.83 per share on December 31, 2024.
All amounts are expressed in Canadian dollars unless otherwise noted.
Oil and Gas Advisories
Any references in this news release to recent production rates (including as a result of recent waterflood activities) which may be considered to be initial rates and are useful in confirming the presence of hydrocarbons; however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter and are not necessarily indicative of long-term performance or ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Such rates are based on field estimates and may be based on limited data available at this time.
A barrel of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of 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. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas 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.
Definitions and Abbreviations
bbl
Barrel
WTI
West Texas Intermediate
bbl/d
barrels per day
WCS
Western Canadian Select
$/bbl
dollar per barrel
US$
United States Dollar
boe
barrel of oil equivalent
boe/d
barrel of oil equivalent per day
IFRS
International Financial Reporting Standards
$/boe
dollar per barrel of oil equivalent
G&A
General and Administrative Costs
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Vancouver, British Columbia–(Newsfile Corp. – December 16, 2024) – Hemisphere Energy Corporation (TSXV: HME)(OTCQX: HMENF) (“Hemisphere” or the “Company”) announces that its Board of Directors has approved a new Restricted Share Unit (“RSU”) Plan and made certain amendments to its existing Stock Option Plan that are intended to comply with the provisions of TSXV Policy 4.4 – Security Based Compensation, as well as other housekeeping changes, both subject to shareholder approval at the next annual general meeting in May 2025. The Company’s Board of Directors has also approved grants of incentive RSUs and stock options.
Restricted Share Units
Under the new RSU Plan, RSUs may be granted to directors, employees, and contractors of the Company. The RSU Plan permits the Company to either redeem RSUs for cash or by issuance of Hemisphere’s common shares.
On December 13, 2024, the Company conditionally awarded 930,000 incentive RSUs to directors and officers of Hemisphere, all of which will vest one-third annually over a three-year period and will expire on December 15, 2027.
The RSU Plan and the grant of the above noted RSUs each remain subject to the requisite approval of the shareholders of the Company, in accordance with the rules of the TSX Venture Exchange. These matters, as well as matters relating to the amendments and renewal of the Company’s Stock Option Plan, are expected to be presented for approval at the Company’s next annual meeting of shareholders.
Stock Options
Additionally, in accordance with the Company’s Stock Option Plan, Hemisphere has granted 48,000 incentive stock options to its investor relations service provider on December 13, 2024 at an exercise price of $1.84 per share which will vest quarterly over 12 months and expire on December 13, 2029.
About Hemisphere Energy Corporation
Hemisphere is a dividend-paying Canadian oil company focused on maximizing value-per-share growth with the sustainable development of its high netback, ultra-low decline conventional heavy oil assets through polymer flood EOR methods. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME” and on the OTCQX Venture Marketplace under the symbol “HMENF”.
For further information, please visit the Company’s website at www.hemisphereenergy.ca to view its corporate presentation or contact:
Don Simmons, President & Chief Executive Officer Telephone: (604) 685-9255 Email: info@hemisphereenergy.ca
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Third quarter financial results. Hemisphere Energy reported third-quarter net income of C$8.6 million or C$0.09 per share compared to C$8.5 million or C$0.08 per share during the third quarter of 2023. We had projected net income of C$8.4 million or C$0.08 per share. Year-over-year, oil and natural gas revenue increased 9.6% to C$26.7 million, driven by an 18.5% increase in average daily production to 3,621 barrels of oil equivalent (BOE) compared to 3,056 during the prior year period and our estimate of 3,600. The average sales price per BOE declined to C$80.06 compared to C$86.57 in the third quarter of 2023. Adjusted funds flow from operations amounted to C$11.7 million or C$0.12 per diluted share compared to C$11.7 million or C$0.11 per diluted share during the prior year period.
Updating estimates. While our 2024 EPS estimate is unchanged at C$0.31, we have modestly lowered our adjusted funds flow estimate to C$43.5 million from C$43.8 million. We lowered our full year average daily production expectations to 3,456 barrels of oil equivalent from 3,534 to reflect down time in the fourth quarter associated with vessel inspections and maintenance. While our 2025 average daily production estimate of 3,625 barrels of oil equivalent is unchanged, we lowered our 2025 AFF and EPS estimates to C$38.0 million and C$0.27 per share from C$42.6 million and C$0.32 to reflect lower crude oil prices.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Operational update. Hemisphere has drilled six horizontal wells into its southeast Alberta Atlee Buffalo F and G pools over the past two months, with two wells left to drill as part of its summer program. Drilling operations are expected to be completed early in the fourth quarter with wells put into production as they are tied-in through the remainder of the year. Hemisphere has also commenced polymer injection at its new pilot enhanced oil recovery project in Marsden, Saskatchewan. Management anticipates that it could take until mid-2025 to increase reservoir pressure and to evaluate the production response at the three producers.
Updating estimates. Crude oil prices have weakened since our last update. We have lowered our 2024 adjusted funds flow (AFF) and earnings per share (EPS) estimates to C$43.8 million and C$0.31, respectively, from C$45.4 million and C$0.35. Our third and fourth quarter EPS estimates were lowered by C$0.02 each to C$0.08 and C$0.06, respectively, based on average per barrel WTI crude oil prices of $75.69 and $71.20. While futures prices suggest 2025 WTI pricing in the $68 to $70 per barrel range, we are leaving our 2025 estimates unchanged for now based on a WTI crude oil price of $74.95 per barrel.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Vancouver, British Columbia–(Newsfile Corp. – September 24, 2024) – Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) is pleased to announce that its board of directors has approved the declaration of a special dividend to shareholders and provide an update from field operations.
Special Dividend
Given the strong financial position and performance outlook of the Company, Hemisphere is pleased to announce that its board of directors has approved the declaration of a special dividend of C$0.03 per common share, in accordance with its dividend policy. The special dividend will be paid on October 25, 2024 to shareholders of record on October 11, 2024, and is designated as an eligible dividend for Canadian income tax purposes. It is in addition to the Company’s quarterly base dividend of C$0.025 per common share.
Hemisphere has committed $17.4 million to shareholder returns to date in 2024, including quarterly base dividend payments in February, June, and September, special dividend payments in July and October, and shares repurchased and cancelled under the Company’s normal course issuer bid. This return of capital is funded entirely by the Company’s free cash flow, and is made possible by its high netback, ultra-low decline enhanced oil recovery (“EOR”) assets.
Operations Update
The Company has drilled six successful horizontal wells into its southeast Alberta Atlee Buffalo F and G pools over the past two months, with two remaining wells to drill as part of its summer development program. Drilling operations are expected to be finished early in the fourth quarter, and wells brought on production as they are tied-in through the remainder of the year.
Hemisphere has also commenced polymer injection at its new pilot EOR project in Marsden, Saskatchewan. Management anticipates that it could take until mid-2025 to increase reservoir pressure and evaluate production response at the three producers.
About Hemisphere Energy Corporation
Hemisphere is a dividend-paying Canadian oil company focused on maximizing value per share growth with the sustainable development of its high netback, ultra-low decline conventional heavy oil assets through polymer flood EOR methods. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME” and on the OTCQX Venture Marketplace under the symbol “HMENF”.
For further information, please visit the Company’s website at www.hemisphereenergy.ca to view its corporate presentation or contact:
Don Simmons, President & Chief Executive Officer Telephone: (604) 685-9255 Email: info@hemisphereenergy.ca
Certain statements included in this news release constitute forward-looking statements or forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “anticipate”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “could”, “plan”, “intend”, “should”, “believe”, “outlook”, “potential”, “target” and similar words suggesting future events or future performance. In particular, but without limiting the generality of the foregoing, this news release includes forward-looking statements including that a special dividend will be paid to shareholders on October 25, 2024 to shareholders of record on October 11, 2024; plans for drilling two remaining wells in its southeast Alberta Atlee Buffalo F and G pools with drilling operations expected to be finished early in the fourth quarter with wells brought on production as they are tied-in through the remainder of the year; and management’s expectation that it could take until mid-2025 to increase reservoir pressure and evaluate production response at three producers at its new pilot EOR project in Marsden, Saskatchewan.
Forward‐looking statements are based on a number of material factors, expectations or assumptions of Hemisphere which have been used to develop such statements and information, but which may prove to be incorrect. Although Hemisphere believes that the expectations reflected in such forward‐looking statements or information are reasonable, undue reliance should not be placed on forward‐looking statements because Hemisphere can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the timing for payment of the special dividend; no delays in the anticipated timing for delivery of the polymer skid and EOR project; the general continuance of current industry conditions; the timely receipt of any required regulatory approvals; the ability of Hemisphere to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Hemisphere has an interest in to operate the field in a safe, efficient and effective manner; the ability of Hemisphere to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Hemisphere to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Hemisphere operates; and the ability of Hemisphere to successfully market its oil and natural gas products.
The forward‐looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward‐looking statements including, without limitation: changes in project timelines and workstreams; changes in commodity prices; changes in the demand for or supply of Hemisphere’s products, the early stage of development of some of the evaluated areas and zones; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Hemisphere or by third party operators of Hemisphere’s properties, increased debt levels or debt service requirements; inaccurate estimation of Hemisphere’s oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time‐to‐time in Hemisphere’s public disclosure documents, (including, without limitation, those risks identified in this news release and in Hemisphere’s Annual Information Form).
The forward‐looking statements contained in this news release speak only as of the date of this news release, and Hemisphere does not assume any obligation to publicly update or revise any of the included forward‐looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Second quarter financial results. Hemisphere Energy reported second-quarter net income of C$10.4 million or C$0.10 per share compared to $5.8 million or $0.06 per share during the prior year period. We had forecast net income of C$9.5 million or C$0.09 per share. Year-over-year, revenue rose 52.2% to C$28.9 million driven by an increase in average daily production to 3,628 barrels of oil equivalent per day (BOE/d) compared to 2,883 during the prior year quarter and our estimate of 3,500. The average sales price per BOE increased to C$87.65 compared to C$72.48 in the second quarter of 2023. Adjusted funds flow from operations increased to C$13.6 million compared to C$8.1 million during the prior year period.
Updating estimates. We increased our 2024 adjusted funds flow (AFF) and earnings per share (EPS) estimates to C$45.4 million and C$0.35, respectively, from C$44.3 million and C$0.34. Our revisions are driven by the better than expected second quarter financial results. Our third and fourth quarter production estimates of 3,600 and 3,775 BOE/d are unchanged. We have increased our 2025 production estimate to 3,625 BOE/d from 3,504 and raised our AFF and EPS estimates to C$42.6 million and C$0.32, respectively, from C$41.1 million and C$0.30.
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Vancouver, British Columbia–(Newsfile Corp. – August 20, 2024) – Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) is pleased to provide its financial and operating results for the three and six months ended June 30, 2024, declare a quarterly dividend payment to shareholders, and provide an operations update.
Q2 2024 Highlights
Achieved record quarterly production of 3,628 boe/d (99% heavy oil), a 26% increase over the same quarter last year.
Attained quarterly revenue of $28.9 million, a 52% increase from the second quarter of 2023.
Delivered operating netback1 of $17.7 million or $53.58/boe for the quarter.
Realized quarterly adjusted funds flow from operations (“AFF”)1 of $13.6 million or $41.13/boe.
Invested $3.0 million of capital expenditures in the Company’s Marsden and Atlee Buffalo properties.
Achieved quarterly free funds flow1 of $10.6 million or $0.11/share.
Exited the second quarter with a positive working capital1 position of $11.6 million.
Distributed $2.5 million or $0.025/share in dividends to shareholders during the quarter.
Announced a special dividend of $0.03/share to shareholders that was paid subsequent to the quarter on July 26, 2024.
Purchased and cancelled 1,054,200 shares under the Company’s Normal Course Issuer Bid (“NCIB”).
Renewed the Company’s $35 million two-year extendible credit facility.
(1) Operating netback, adjusted funds flow from operations (AFF), free funds flow, capital expenditures, and working capital are non-IFRS measures, or when expressed on a per share or boe basis, non-IFRS ratio, that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Non-IFRS financial measures and ratios are not standardized financial measures under IFRS and may not be comparable to similar financial measures disclosed by other issuers. Refer to the section “Non-IFRS and Other Specified Financial Measures”.
Selected financial and operational highlights should be read in conjunction with Hemisphere’s unaudited consolidated interim financial statements and related notes, and the Management’s Discussion and Analysis for the three and six months ended June 30, 2024 which are available on SEDAR+ at www.sedarplus.ca and on Hemisphere’s website at www.hemisphereenergy.ca. All amounts are expressed in Canadian dollars unless otherwise noted.
Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Updating estimates. We increased our 2024 adjusted funds flow (AFF) and earnings per share (EPS) estimates to C$44.3 million and C$0.34 from C$40.9 million and C$0.30. Our revisions are driven by higher crude oil price assumptions and a redistribution of quarterly production estimates. While we have assumed higher oil prices in the second and third quarters, our model assumes prices weaken in the fourth quarter. We increased our 2025 AFF and EPS estimates to C$41.1 million and C$0.30, respectively, from C$31.4 million and C$0.21 based on higher production volume and crude oil price assumptions. We think our 2025 estimates could be conservative if the company can increase annual production within its targeted range of 10% to 20%.
Normal course issuer bid (NCIB). Hemisphere renewed its NCIB to purchase up to 8,255,766 common shares, representing ~10% of the current public float, for cancellation. The NCIB commenced on July 14 and will terminate on July 13, 2025. Under its previous NCIB, which authorized the repurchase of 8,670,636 shares and terminated July on 13, the company purchased 4,074,400 shares on the open market at a weighted average price of C$1.425. Shares are generally purchased opportunistically during periods of weakness.
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Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Special dividend. Excluding special dividends, Hemisphere Energy pays a base dividend of C$0.025 per share per quarter, or C$0.10 per share on an annual basis. Hemisphere Energy recently declared a special dividend of C$0.03 per common share. The special dividend will be paid on July 26 to shareholders of record on July 12. In May, the company’s board of directors approved a quarterly cash dividend of C$0.025 per share that will be paid on June 28 to shareholders of record on June 20.
Return of capital to shareholders. To date in 2024, Hemisphere has committed to returning C$10.7 million to shareholders, including shares repurchased and canceled under the company’s normal course bid, quarterly dividend payments in February and June, and the special dividend payment in July. Returns of capital are funded entirely with free cash flow supported by ultra-low decline rates, low operating expenses, low capital-intensive assets, long life reserves and minimal decommissioning liabilities.
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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
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Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
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Hemisphere Energy reported production results, pricing, and costs in line with expectations. The company remains on track to meet or beat management guidance. With production and oil prices rising, we expect cash flow and earnings to improve in upcoming quarters.
The company is actively drilling, including in a new area. Hemisphere drilled five wells during the quarter which should lead to production growth. Current production has already reached peak levels. The recently acquired property Marsden play represents a step out of current production and could be an important area for future growth.
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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Results were in line with expectations absent charge. Income, cash flow and earnings for the 2023-4Q and 2023 year would have been in line with expectations absent a $4.2 million nonrecurring charge to write down non-core assets.
Quarter production rose 16% year over year due to an active fall drilling program. The increase was expected. Extreme weather hurt production in the first few months of 2024 (2024-1Q production was announced below that in our models) but has risen to all-time high levels recently. We have lowered our 2024-1Q production estimate but raised our estimate for the remaining quarter’s of 2024.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Hemisphere announced an independent evaluation of its reserves highlighting a 5% increase in NPV10 value for proved reserves. The estimated value for total proved reserves (PR) when discounted back at a 10% rate was $325 million ($3.27 per share) versus $308 million in the reserve from last year. The increase reflects higher West Canada Select oil prices in future years with the completion of the Trans Mountain Pipeline running from Alberta to the Pacific Coast. The value of proved developed producing (PDP) reserves rose 9% as the company was active drilling in 2023 and moving reserves into the PDP category.
The company was able to replace reserves reduced by production through drilling and acquisition. Hemisphere produced 1.1 mmboe in 2023 and added 1.0 mmboe of reserves through the drillbit or from acquisition. As a result, proved reserves were 12.1 mmboe in the most recent report versus 12.2 mmboe last year. The company spent $16 million to drill eight wells in addition to purchasing land and seismic. Just two years ago, capital expenditures were only $8 million. Finding, Development and Acquisition costs per proved reserve added in 2023 were $14.82/boe, an attractive price given current oil prices.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
