Vancouver, British Columbia – Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) is pleased to announce an update on its operations and provide corporate guidance for 2022.
During the fourth quarter of 2021 Hemisphere was very active in the field with facility expansion, production optimization, and drilling operations. Based on field estimates, corporate production for the month of December was approximately 2,400 boe/d (99% heavy crude oil). This brought the Company’s average production rate during the fourth quarter up to approximately 2,150 boe/d (99% heavy crude oil), representing a 29% increase over production from the previous quarter. Hemisphere’s recent production increase is mainly attributed to the success of its enhanced oil recovery projects, as well as the addition of three new wells in the Atlee G pool during the quarter.
The Company began injection of polymer into its Atlee G pool early in the third quarter with the anticipation of seeing some initial results after approximately six months. Including the addition of the three newly drilled G pool wells brought on in November, production rates from the pool in December 2021 increased by over 50% as compared to June 2021. Hemisphere is very pleased with the performance of the polymer flood to date, and will continue to focus its efforts on optimization through 2022.
Late in the fourth quarter, Hemisphere also drilled four wells in the Atlee F pool. The completion and tie-in operations of the new wells experienced delays due to lack of service rig availability before the holidays, and extremely cold weather in late December and early January. The Company expects to have all the new wells online by the end of the month.
2022 Corporate Guidance
Hemisphere’s Board of Directors has approved a 2022 capital expenditure program of $9 million. The entire capital program is expected to be funded by Hemisphere’s estimated 2022 Adjusted Funds Flow (AFF) of approximately $37 million. Nearly 50% of the estimated AFF will be used towards full debt repayment, with another 18% allocated to development projects and 7% to exploration, land, and seismic projects to identify and secure new opportunities for growth. The remaining 25% of estimated AFF will be used for discretionary purposes, which may include potential acceleration of other development or exploration projects, acquisitions, and return of capital to shareholders through Hemisphere’s NCIB program and/or dividends.
Highlights and assumptions of Hemisphere’s guidance are as follows:
- Capital expenditures of $9 million.
- Annual average production of 2,600 boe/d (99% heavy crude oil), a 44% increase from 2021.
- Exit rate of 3,000 boe/d (99% heavy crude oil), a 25% increase from 2021.
- WTI price of US$75/bbl WTI, with sensitivities shown at US$65/bbl and US$85/bbl.
- WCS differential of US$17.38/bbl for Jan’22 and US$12.50/bbl for remainder of year.
- CAD/US FX of 1.25
- Quality adjustment of $4.50/bbl
- Operating and transportation costs of $12.70/boe
- Net G&A of $3.40/boe
- Loan Interest of $0.60/boe
|2022 Corporate Guidance(1)||$65||$75||$85|
|Adjusted Funds Flow (AFF)(2)||$ million||31||37||41|
|AFF per Basic Share(2,3)||$/share||0.32||0.39||0.43|
|Free Funds Flow(2)||$ million||22||28||32|
|Exit Cash||$ million||5||11||15|
|Royalties and GORRs||%||18||22||25|
|Hedging Losses||$ million||1||2||3|
(1) See assumptions noted above within “2022 Corporate Guidance”.
(2) See “Non-IFRS Measures“.
(3) Using a 2022 weighted average of 94.9 million basic shares issued and outstanding, which assumes the exercise of 10.3 million remaining warrants, on a “cash-less” exercise basis, at $1.40/share, and the exercise of 3.9 million stock options expiring in September 2022.
As a result of current commodity price assumptions, recent drilling and operational results, and the approval of the Company’s 2022 budget, the foregoing guidance and its related sensitivities updates the Company’s previous 2022 corporate guidance, as last described in its news release dated November 25, 2021.
The Company is excited about the upcoming year as growth, new project generation, and debt repayment is balanced with shareholder returns. With Hemisphere’s low risk, low cost, and low decline oil assets, management anticipates delivering continued shareholder value.