Vancouver, British Columbia – Hemisphere Energy Corporation (TSXV: HME) (OTCQB: HMENF) (“Hemisphere” or the “Company”) is pleased to announce an update on its operations and provide corporate guidance for 2021 and 2022.
Operations Update and Development Plans
During the first quarter of 2021 Hemisphere has seen an overall increase in production from its fourth quarter injector conversions. Month-to-date production has averaged 1,850 boe/d (99% heavy oil, based on field estimates between March 1-28, 2021).
Hemisphere is excited to announce that its G pool polymer flood is anticipated to commence by the end of the second quarter with site preparation underway and additional equipment delivery and installation ongoing over the next few months. The Hemisphere team has also started polymer flood evaluation work on the Atlee Buffalo F pool to assess its economic viability for conversion in 2022.
Polymer flood is an Enhanced Oil Recovery technique that is used by companies worldwide to increase overall recovery factors from oil pools. Reservoir modelling indicates the potential for an incremental 10% recovery from the G pool on polymer flood as compared to recovery from water flood, as well as a considerable increase in oil rates from the pool. As such, Hemisphere intends to upsize its treating facilities at the G pool battery later this summer. Should oil prices stay at current levels, Hemisphere is also planning a three well development drilling program in the fall from a previously built and tied-in pad.
While 2020 was full of trials and tribulations, Hemisphere was able to act nimbly through the year by cutting capital, reducing costs, and paying down almost a quarter of its previously outstanding year-end debt. This has helped position the Company to take advantage of the improved pricing environment in 2021.
Management believes that over the next two years it can significantly lower or eliminate debt while growing production and funds flow, which should allow the Company to accelerate internal projects, make strategic acquisitions, and increase return of capital to shareholders through share buybacks and/or dividends.
In 2021, Hemisphere plans to execute a capital program of approximately $6 million on polymer flood implementation, facilities upgrades, and a small drilling program. In 2022, Hemisphere has allowed for a capital drilling program of $7 million. With the execution of its $13 million 2-year capital program and a successful G pool polymer flood conversion, the Company anticipates being debt-free by the end of 2022 in the following pricing and production scenario.
|Corporate Guidance(1)||WTI US$60/bbl|
|Average Annual Production||boe/d||1,900||2,550|
|Adjusted Funds Flow from Operations (FFO)(2)||$ million||19||30|
|FFO per Basic Share(2,3)||$/share||0.22||0.34|
|Capital Expenditures||$ million||6||7|
|Free Funds Flow(2)||$ million||13||23|
|Exit (Net Debt) Cash(2)||$ million||(13)||9|
|Exit Net Debt to FFO||0.7x||n/a|
(1) See “Guidance Assumptions“.
(2) See “Non-IFRS Measures“.
(3) Assuming 88.2 million basic shares issued and outstanding.
The Company continually monitors WTI oil and WCS differential hedge pricing options to protect cash flows, and currently has the following hedging contracts in place.
|Crude oil||3-Way||625 bbl/d||US$40.00(put)/US$48.00(put)/US$60(call)||WTI-NYMEX||Apr 1, 2021 – Jun 30, 2021|
|Crude oil||Phys. Swap||400 bbl/d||US$46.00||WCS||Apr 1, 2021 – Jun 30, 2021|
|Crude oil||Swap||200 bbl/d||US$11.15||WCS Diff||May 1, 2021 – Jun 30, 2021|
|Crude oil||Phys. Swap||200 bbl/d||US$44.05||WCS||July 1, 2021 – Sep 30, 2021|
|Crude oil||Phys. Swap||200 bbl/d||US$11.45||WCS Diff||July 1, 2021 – Sep 30, 2021|
|Crude oil||Swap||100 bbl/d||US$56.75||WTI-NYMEX||July 1, 2021 – Sep 30, 2021|
|Crude oil||Swap||500 bbl/d||US$60.07||WTI-NYMEX||July 1, 2021 – Sep 30, 2021|
|Crude oil||Swap||200 bbl/d||US$11.50||WCS Diff||July 1, 2021 – Sep 30, 2021|
|Crude oil||Swap||800 bbl/d||US$58.45||WTI-NYMEX||Oct 1, 2021 – Dec 31, 2021|
|Crude oil||Swap||100 bbl/d||US$12.50||WCS Diff||Oct 1, 2021 – Dec 31, 2021|
|Crude oil||Swap||800 bbl/d||US$57.03||WTI-NYMEX||Jan 1, 2022 – Mar 31, 2022|
|Crude oil||Put Spread||725 bbl/d||US$30.00(put sell)/US$40.00(put buy) w/ Net Deferred Cost US$1.65/bbl||WTI-NYMEX||Apr 1, 2022 – Aug 31, 2022|
About Hemisphere Energy Corporation
Hemisphere is a Canadian oil company focused on sustainable growth of its high netback, low decline conventional heavy oil assets through water and polymer flood enhanced recovery methods. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME” and on the OTCQB Venture Marketplace under the symbol “HMENF”.