Through 2019, Hemisphere drilled 11 horizontal oil wells in its Upper Mannville G pool, which greatly expanded development in the Company’s most prolific oil pool. The summer drilling program was completed on budget and on time with all wells being brought on production by the fourth quarter. Based on field estimates, corporate production during the fourth quarter of 2019 averaged approximately 2,160 boe/d (98% heavy crude oil and 2% conventional natural gas), which represents significant growth of more than 55% over the fourth quarter of 2018. Current production, based on field estimates for January 2020, is approximately 1,990 boe/d (98% heavy crude oil and 2% conventional natural gas) despite severe winter weather and two wells waiting on workovers during the month.
Hemisphere attained this growth while keeping capital outlay within its 2019 annual funds flow from operations. Capital expenditures for 2019 were approximately $11 million, which contributed to production growth of approximately 50% year over year. In addition, Hemisphere was able to purchase over 1.2 million shares under the Company’s Normal Course Issuer Bid (NCIB) program, while still lowering its year-end net debt to approximately $32 million. With record production levels and Western Canada Select (WCS) oil price averaging approximately $54.30 per barrel in the fourth quarter, Hemisphere achieved an estimated operating field netback of $31.36 per boe. Fourth quarter revenue was approximately $9.5 million which resulted in estimated funds flow from operations of $4.6 million. Total annual estimated funds flow from operations for the year ending December 31, 2019 was approximately $13.3 million.
Looking ahead to the rest of 2020, Hemisphere plans to continue its strategy of growing within funds flow from operations, with a strong focus on debt and related interest cost reduction. As in previous years, the Company intends to execute the majority of its capital program in the third quarter to take advantage of construction, drilling, completion, and tie-in efficiencies due to more favourable weather conditions and longer hours of daylight. In the first half of the year, Hemisphere plans to seek regulatory approval and complete field operations for the conversion of a number of existing wellbores to water injectors that will expand the waterfloods in both the Upper Mannville F and G pools. Reservoir simulation completed by management of Hemisphere indicates that these water injection conversions should improve production and capture more reserves as well as set the pool up for further drilling later in the year. Hemisphere has also taken steps to begin preparation for enhanced tertiary recovery of its pools through polymer and surfactant flood with further evaluation work to continue throughout the year.
Hemisphere is participating in the World Outlook Financial Conference being held at the Westin Bayshore in Vancouver, British Columbia on February 7 and 8, 2020. Ashley Ramsden-Wood, Vice President of Engineering, will be making a presentation on the Company at the VIP breakfast being held on February 8 and Hemisphere will have an information booth where current and potential investors can receive a corporate update.
Please see our website at www.hemisphereenergy.ca for the company’s updated corporate presentation.
About Hemisphere Energy Corporation
Hemisphere Energy Corporation is a Canadian oil and gas company focused on sustainable growth of its low risk conventional oil assets for minimal capital exposure by drilling development locations in its 100% owned assets and optimizing its waterflood projects. Hemisphere plans continued growth in production, reserves, and cash flow by focusing on existing projects and executing strategic and accretive acquisitions. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME”.