VANCOUVER, May 30, 2016 /CNW/ – Hemisphere Energy Corporation (TSX-V: HME) (“Hemisphere” or the “Company”) announces its financial and operating results for the three months ended March 31, 2016.
Q1 2016 Highlights
- Achieved quarterly production averaging 508 boe/d (81% oil).
- Realized a $2.73/boe operating netback with a challenging commodity price environment and an average WTI price of $33.45 ($US/bbl).
- Reduced operating costs to $11.45/boe, a 15% decrease from the fourth quarter of 2015, due to the voluntary shut-in of higher cost wells and the implementation of strict cost control measures.
- Significantly reduced general and administration costs to $5.42/boe, a decrease of 34% from the fourth quarter of 2015.
- Announced the achievement of over 300% proved reserves replacement at a 2015 Finding and Development Cost of $0.24/boe (including changes in future development capital), due mainly to recognition of significant recoverable reserves in the Atlee Buffalo Upper Mannville F pool based on positive waterflood response in the reservoir.
Corporate Update
During the first quarter of 2016, Hemisphere successfully continued its conservative approach to capital spending. With the decline in oil prices and uncertainty in long term price forecasts, Hemisphere focused on operating cost efficiencies and progression of development plans in its core producing properties. The Company converted a third producing well in the Atlee Buffalo Upper Mannville F pool to an injector and is now undergoing pressure maintenance at all planned waterflood pilots in the pool.
Since April, oil prices have gradually improved, differentials have narrowed, and exchange rates have remained high. With these positive impacts to realized oil prices, Hemisphere is adjusting its focus from capital preservation to strategic capital investment in projects that will add production, increase reserves, and achieve long-term shareholder value and growth for the Company as oil prices continue to strengthen.
With all three designed waterflood pilot projects completed in the Atlee Buffalo F pool, the Company is now planning to construct a water handling facility in Atlee Buffalo. Hemisphere also has plans to drill at least one well into the Atlee Buffalo Upper Mannville G pool before year-end in order to prove the productivity of the reservoir. Historical oil production has resulted in a 3% recovery factor to date and less than a 4% recovery factor is reflected in current reserve bookings. The pool has been undergoing injection since November 2015 in order to re-energize the reservoir prior to production.
Hemisphere Energy’s annual review for its demand operating credit facility has been completed and the borrowing base has been set at $12.5 million. The facility is secured by a general security agreement and a floating charge on all lands of the Company and bears an interest at the bank’s prime rate plus 2.5%, as well as a standby charge for any undrawn funds.
Hemisphere’s corporate strategy is to continue to achieve organic reserve growth year-over-year while managing its balance sheet by limiting capital expenditures during this time of unstable commodity prices. The Company expects to see growth in production and reserves through the year with the continued success of its waterfloods and planned capital expenditures. When oil prices recover and stabilize, the Company is prepared to accelerate development activity accordingly.
Financial and Operating Summary
Three Months Ended March 31 |
|||||
Financial |
2016 |
2015 |
|||
Petroleum and natural gas revenue |
$ |
935,834 |
$ |
2,928,264 |
|
Petroleum and natural gas netback |
126,056 |
1,827,986 |
|||
Funds flow from operations(1) |
(247,514) |
1,256,533 |
|||
Per share, basic and diluted |
0.00 |
0.02 |
|||
Net income (loss) |
(1,066,556) |
(646,345) |
|||
Per share, basic and diluted |
(0.01) |
(0.01) |
|||
Capital expenditures, including property acquisitions |
344,676 |
133,289 |
|||
Net debt(2) |
12,038,298 |
10,420,007 |
|||
Bank indebtedness |
$ |
11,533,660 |
$ |
9,973,336 |
|
Operating |
|||||
Average daily production |
|||||
Oil (bbl/d) |
409 |
832 |
|||
Natural gas (Mcf/d) |
581 |
960 |
|||
NGL (bbl/d) |
2 |
3 |
|||
Combined (boe/d) |
508 |
995 |
|||
Oil and NGL weighting |
81% |
84% |
|||
Average sales prices |
|||||
Oil ($/bbl) |
$ |
22.39 |
$ |
36.01 |
|
Natural gas ($/Mcf) |
1.86 |
2.64 |
|||
NGL ($/bbl) |
19.21 |
21.56 |
|||
Combined ($/boe) |
$ |
20.24 |
$ |
32.71 |
|
Operating netback ($/boe) |
|||||
Petroleum and natural gas revenue |
$ |
20.24 |
$ |
32.71 |
|
Royalties |
2.36 |
2.70 |
|||
Operating costs |
11.45 |
6.80 |
|||
Transportation costs |
3.70 |
2.79 |
|||
Operating netback(3) |
$ |
2.73 |
$ |
20.42 |
Notes: |
|
(1) |
Funds flow from operations is an additional IFRS measure that represents cash generated by operating activities, before changes in non-cash working capital and may not be comparable to measures used by other companies. See “Non-IFRS and Additional IFRS Measures”. |
(2) |
Net debt is a non-IFRS measure calculated as current assets minus current liabilities including bank indebtedness and excluding flow-through share premium. See “Non-IFRS and Additional IFRS Measures”. |
(3) |
Operating netback is a non-IFRS measure calculated as the Company’s oil and gas sales, less royalties, operating expenses and transportation costs per barrel of oil equivalent. See “Non-IFRS and Additional IFRS Measures”. |
Annual General and Special Meeting of Shareholders
Hemisphere’s Annual General and Special Meeting of Shareholders is being held in the Pender Room of Oceanic Plaza, 1035 West Pender Street, Vancouver, British Columbia on Friday, June 10, 2016 at 9:00 a.m. (Pacific Daylight Time).
About Hemisphere Energy Corporation
Hemisphere Energy Corporation is a producing oil and gas company focused on developing conventional oil assets with low risk drilling opportunities. Hemisphere plans continual growth in production, reserves, and cash flow by drilling existing projects and executing strategic acquisitions. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME”.