Vancouver, British Columbia – Hemisphere Energy Corporation (TSXV: HME) (“Hemisphere” or the “Company”) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2020.
Q3 2020 Highlights
- Achieved revenue of $5.9 million.
- Realized an operating netback of $4.7 million, including hedging gains of $0.9 million.
- Attained quarterly adjusted funds flow from operations of $3.4 million or $0.04 per share (basic).
- Maintained average quarterly production at 1,686 boe/d (99% heavy crude oil).
- Reduced operating and transportation expenses to $9.31/boe, a 21% decrease from the third quarter of 2019.
- Achieved an operating netback of $30.41/boe, including a $5.51/boe hedging gain.
- Lowered net debt to $27.4 million, an 11% decrease from the end of the second quarter 2020.
- Corporate Liability Management Ratio (LMR) with the Alberta Energy Regulator was 12.23 as of the end of the third quarter of 2020.
Hemisphere had a very successful third quarter with oil prices recovering significantly from those seen during the second quarter. Combined with flat production and considerable reductions in operating costs, the Company attained adjusted funds flow from operations (“funds flow”) of $3.4 million ($0.04 per basic share). With minimal capital expenditures, Hemisphere was able to focus on debt reduction. As a result, net debt was lowered to $27.4 million by the end of the third quarter, yielding an annualized net debt to funds flow ratio of 2.0.
Hemisphere’s production averaged 1,686 boe/d (99% heavy crude oil) through the third quarter of 2020, up slightly by 2.5% over the second quarter. The Company has already converted one of its Atlee Buffalo G pool wells to an injector, and plans to convert three more wells in the pool to injectors over the next few months to further optimize waterflood performance. Emphasis continues to be placed on production efficiencies, which has resulted in a 21% reduction in operating and transportation costs as compared to the third quarter of 2019. Hemisphere has focused heavily on debt repayment over the past year, and has lowered its net debt position by $8.6 million, or 24% as compared to the third quarter of 2019.
Overcoming unprecedented challenges presented this year, Hemisphere has recorded $13.3 million in revenue, $10.9 million in operating netback, and $6.9 million ($0.08 per basic share) in funds flow, with capital expenditures of just under $1.1 million during the first nine months of 2020. Over this same period, average production has grown by 18% from the first three quarters of 2019 to 1,768 boe/d (99% heavy crude oil) this year, and operating and transportation costs have been reduced by 30% from the comparable period in 2019 to $9.06/boe this year.
In the coming quarters, Hemisphere will continue to move its plans forward to convert its Atlee Buffalo G oil pool from water to polymer flood. Approval for polymer flood conversion has already been received by the Alberta Energy Regulator, and engineering design is progressing with expectations for injection start-up in mid 2021. This enhanced oil recovery project has substantial long term value potential in terms of incremental and accelerated reserve recovery, and sets the stage for follow-up polymer flood conversion in the neighboring Atlee Buffalo F oil pool.
Financial and Operating Summary
|Three Months Ended Sept 30||Nine Months Ended Sept 30|
|Average daily production|
|Natural gas (Mcf/d)||70||404||87||329|
|Oil and NGL weighting||99%||96%||99%||96%|
|Average sales prices|
|Natural gas ($/Mcf)||2.13||0.80||2.01||1.74|
|Operating netback ($/boe)|
|Petroleum and natural gas revenue||$||37.96||$||51.34||$||27.47||$||53.96|
|Operating field netback(1)||24.90||32.57||16.13||33.88|
|Realized commodity hedging gain (loss)||5.51||(1.93||)||6.37||(3.03||)|
|Petroleum and natural gas revenue||$||5,889,668||$||8,207,658||$||13,305,661||$||22,039,005|
|Operating field netback(1)||3,862,969||5,206,705||7,813,633||13,838,733|
|Cash flow provided by operating activities||3,097,786||3,803,907||7,292,033||6,966,814|
|Adjusted funds flow from operations(3)||3,416,449||3,558,673||6,944,853||8,753,556|
|Per share, basic and diluted||0.04||0.04||0.08||0.10|
|Net income (loss)||1,442,021||2,854,615||407,810||4,777,972|
|Per share, basic and diluted||0.02||0.03||0.00||0.05|
|Gross term Loan(5)||$||29,967,750||$||34,426,600||$||29,967,750||$||34,426,600|
- Operating field netback is a non-IFRS measure calculated as the Company’s oil and gas sales, less royalties, operating expenses and transportation costs on an absolute and per barrel of oil equivalent basis.
- Operating netback is a non-IFRS measure calculated as the operating field netback plus the Company’s realized commodity hedging gain (loss) on an absolute and per barrel of oil equivalent basis.
- Adjusted Funds Flow From operations is a non-IFRS measure that represents cash generated by operating activities, before changes in non-cash working capital and adjusted for any decommissioning expenditures, and may not be comparable to measures used by other companies.
- Net debt is a non-IFRS measure calculated as current assets minus current liabilities including gross term loan, and excluding fair value of financial instruments and lease liabilities.
- Gross term loan is calculated as the total USD draws, less any payments, on the term loan translated to Canadian Dollars at the period end exchange rate.
About Hemisphere Energy Corporation
Hemisphere Energy Corporation is a producing oil and gas company focused on developing low risk conventional oil assets for minimal capital exposure through developing known pools of oil and optimizing waterflood projects. 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”.
For further information, visit our website at www.hemisphereenergy.ca to see our corporate presentation or contact: