Despite the numerous challenges impacting the world throughout 2020, Hemisphere is optimistic that the year ahead will bring better times. With future constraints on oil supply due to lack of capital investment worldwide, combined with an eventual return of oil demand due to the implementation of vaccines and the return of air travel, Hemisphere sees the opportunity for a meaningful increase in oil prices in the coming years. Accordingly, Hemisphere has pivoted its capital activity away from drilling and towards longer term reserve and production growth into a rising price environment.
Hemisphere responded to the significant degradation of oil price early this year by deferring capital spending, focusing instead on debt reduction. To date in 2020, Hemisphere has paid down 20% of its loan, or US$5.25 million. This brings total remaining term loan debt to US$21.25 million. Hemisphere’s five year term loan facility has a maximum capacity of up to US$35 million, carries an interest rate of 7.50 percent plus LIBOR (with a LIBOR floor of 1 percent), and has a maturity date of September 15, 2022.
Over the past number of months, Hemisphere has dedicated significant time and resources to evaluating its Atlee Buffalo G oil pool as an excellent candidate for conversion from water to polymer flood. The long term value of this enhanced oil recovery project is significant in terms of incremental and accelerated reserve recovery, and management expects to begin polymer injection by mid-2021. An application has been submitted to the Alberta Energy Regulator (AER) for approval and engineering design is well underway.
During the third quarter, corporate production increased slightly to 1,685 boe/d (99% heavy crude oil), and average realized oil pricing improved by 225% to approximately $37/boe, as compared to the second quarter. Capital investment was minimal through the first half of 2020, but approximately $1 million will be dedicated through the fourth quarter to convert four Atlee Buffalo G pool wells to injectors, complete applications and engineering design of the Atlee Buffalo G pool polymer flood, secure additional fuel gas for more stable Atlee Buffalo battery operations through winter conditions, and continue to execute the Company’s Normal Course Issuer Bid (NCIB) plan.
The company has continued to be active in its Normal Course Issuer Bid (NCIB) program having purchased 1,715,000 shares to date in 2020.
Hemisphere’s risk management program comprises numerous oil hedges for the fourth quarter of 2020, including 425 bbl/d WTI swaps at a price of $54.85/bbl, 120 bbl/d WTI collars with a floor of $40/bbl and a ceiling of $68.25/bbl, and 200 bbl/d WTI collars with a floor of $40/bbl and a ceiling of $67.05/bbl. Please see the company’s corporate presentation for its additional 2021 oil hedges.
On behalf of the Hemisphere team and Board of Directors, we would like to thank our shareholders and stakeholders for their continued commitment and support during these challenging times.
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 water flood 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.”