Vancouver, British Columbia – Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) is pleased to provide an update on its drilling operations in the Atlee Buffalo area of southeast Alberta.
Due to rig availability constraints and projected cost increases in 2022, Hemisphere has recently accelerated a portion of its 2022 capital spending plans and commenced a drilling program in the Atlee F pool for up to 4 wells during the fourth quarter of 2021. Hemisphere anticipates that the new wells will be on production in January 2022. This strategy will help to ensure earlier production and reserve additions in 2022, as well as mitigate the impact of supply chain issues and expected labour shortages across the industry.
The Atlee F pool is under an active waterflood and at least one of the new wells is likely to be converted to an injector in the coming year to help sweep oil through the pool and maintain reservoir pressure. As the Company has been focused on developing its Atlee G pool, minimal capital has been invested in the F pool since 2018. Hemisphere believes there is considerable potential to increase the recovery factor of this oil reservoir through expansion of its existing waterflood and potential future conversion to polymer flood.
In light of advancing the timing of this drilling program, Hemisphere anticipates changes to its previously announced 2021 guidance. With the addition of $4 million in capital expenditures for the new wells expected to be incurred in 2021, year-end net debt is projected to be approximately $16 million. Meanwhile, average annual production for 2021 is projected to be lower by approximately 5% due to timing of conversions of oil producer wells into injectors, delayed production start-up of the September 2021 drilling program, and downtime associated with facility expansion work in Atlee Buffalo.
At this time, 2022 guidance remains unchanged with the exception of shifting $4 million in capital expenditures forward into 2021. A revised budget will be released by the Company in the first quarter to address new pricing considerations, the possible addition of capital expenditures and projects, and updated estimates of production, funds flow, and net debt.
|Average Annual Production||boe/d||1,800||1,900||2,550||2,550|
|Adjusted Funds Flow from Operations (FFO)(2)||$ million||19||19||30||30|
|FFO per Basic Share(2,3)||$/share||0.21||0.22||0.33||0.34|
|Capital Expenditures||$ million||10||6||3||7|
|Free Funds Flow(2)||$ million||9||13||26||23|
|Exit (Net Debt) Cash(2)||$ million||(16)||(13)||9||9|
|Exit Net Debt to FFO||0.9x||0.7x||n/a||n/a|
(1) See “Guidance Assumptions“.
(2) See “Non-IFRS Measures“.
(3) Assuming 90.6 million basic shares issued and outstanding.