Vancouver, British Columbia – Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) is pleased to provide its financial and operating results for the first quarter ended March 31, 2021.
The first quarter of 2021 yielded excellent results for Hemisphere. Production averaged 9% higher than the fourth quarter, as wells started to respond to injector conversions done late in 2020. Production has since climbed even further, averaging over 1,800 boe/d to date in the second quarter (99% heavy crude oil and 1% conventional natural gas), based on field estimates between April 1st to May 16th, 2021 and including an April turnaround and some downtime during facilities and pipeline work.
The Company invested $1.1 million in capital expenditures during the first three months of the year, which included facility upgrades to allow for polymer injection start-up at the Atlee Buffalo G pool by the end of June. With strong oil pricing through the quarter, Hemisphere generated adjusted funds flow from operations (AFF) of $4 million ($27.15/boe), and attained nearly $3 million in free cash flow which was utilized to pay down debt. This brings Hemisphere’s current ratio of net debt to annualized AFF to 1.3. Management anticipates that with an AFF of $27.15/boe, Hemisphere’s bottom line during the first quarter is amongst the highest of all its peers.
- Recorded a 9% increase in production over the previous quarter, at 1,654 boe/d (99% heavy crude oil and 1% conventional natural gas).
- Generated revenue of $7.9 million, a 59% increase from the first quarter of 2020.
- Achieved low operating and transportation costs of $10.51/boe.
- Attained $5.3 million ($0.06/basic share) in operating netback, or $35.59/boe, which includes $0.67/boe in hedging losses.
- Realized $4 million ($0.05/basic share) in adjusted funds flow from operations, or $27.15/boe.
- Lowered net debt by 36% when compared to the first quarter of 2020, to $21.1 million.
- Lowered Net Debt to AFF by 66% from the first quarter of 2020, to 1.3.
With continued strength in oil prices this year, Hemisphere plans to implement the Atlee Buffalo G pool polymer flood conversion, complete a late summer 3-well drilling program, move forward the F pool polymer conversion project for 2022 implementation, and continue to reduce debt and lower financing costs. The Company believes that substantial untapped value still exists in further developing its exceptional quality, low decline, and high free cash flow assets.
Selected financial and operational highlights should be read in conjunction with Hemisphere’s audited annual financial statements and related Management’s Discussion and Analysis for the year ended December 31, 2020. These reports, including the Company’s Annual Information Form for the year ended December 31, 2020, are available on SEDAR at www.sedar.com and on Hemisphere’s website at www.hemisphereenergy.ca. All amounts are expressed in Canadian dollars unless otherwise noted.
Financial and Operating Summary
|Three Months Ended March 31|
|Petroleum and natural gas revenue||$||7,889,016||$||4,963,201|
|Operating field netback(1)||5,397,952||2,690,809|
|Cash flow provided by operating activities||3,202,500||3,357,363|
|Adjusted funds flow from operations (AFF) (3)||4,041,562||2,154,594|
|Per share, basic(3)||0.05||0.02|
|Per share, diluted(3)||0.04||0.02|
|Per share, basic and diluted||0.02||0.01|
|Net debt to annualized AFF(3)(4)||1.3||3.9|
|Gross term loan(5)||$||24,174,150||$||35,855,550|
|Average daily production|
|Heavy oil (bbl/d)||1,638||1,941|
|Natural gas (Mcf/d)||92||192|
|Average sales prices|
|Heavy oil ($/bbl)||$||53.34||$||27.90|
|Natural gas ($/Mcf)||2.85||1.97|
|Operating netback ($/boe)|
|Petroleum and natural gas revenue||$||53.00||$||27.64|
|Operating field netback(1)||36.26||14.99|
|Realized commodity hedging gain (loss)||(0.67||)||4.64|
|Adjusted funds flow from operations(3) ($/boe)||$||27.15||$||12.00|
(1) 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.
(2) 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.
(3) Adjusted funds flow from operations (AFF), 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.
(4) Net debt is a non-IFRS measure calculated as current assets minus current liabilities, excluding fair value of financial instruments, lease and warrant liabilities, plus gross term loan.
(5) 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.