Vancouver, British Columbia – Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) provides its financial and operating results for the first quarter ended March 31, 2022.
Q1 2022 Highlights
- Produced a record quarterly average of 2,648 boe/d, a 60% increase over the first quarter of 2021.
- Attained record quarterly revenue of $22.9 million, a 190% increase over the first quarter of 2021.
- Delivered an operating field netback1 of $64.89/boe, 80% higher than the first quarter of 2021.
- Achieved operating and transportation costs of $11.22/boe, only 7% higher than the first quarter of 2021 despite the addition of polymer flooding at the Upper Mannville G pool.
- Realized record quarterly adjusted funds flow from operations (AFF)1 of $11.0 million ($0.11 per diluted share), a 173% increase over the comparable period in 2021.
- Achieved free funds flow1 of $9.2 million, a 212% increase over the comparable period in 2021, after capital expenditures1 of $1.8 million.
- Generated net income of $4.6 million, a 161% increase over the comparable period in 2021.
- Lowered net debt1 at the end of the quarter to $8.7 million from $21.1 million at the end of March 2021, representing a 59% reduction year-over-year.
- Exited the quarter with a net debt to annualized AFF ratio1 of 0.2.
(1) Operating field netback, adjusted funds flow from operations (AFF), free funds flow, capital expenditures, and net debt are non-IFRS measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Net debt to annualized AFF ratio is a non-IFRS ratio that includes components of net debt and annualized AFF. Non-IFRS financial ratios are not standardized financial measures under IFRS and may not be comparable to similar financial measures disclosed by other issuers. Refer to the section “Non-IFRS and Other Financial Measures”.
Corporate Update and Outlook
In the first quarter of 2022, Hemisphere achieved record production levels due to the continued operational success of the Company’s enhanced oil recovery projects and the additional production from four new wells drilled in late 2021. Production through the first quarter averaged 22% higher than during the prior quarter, and 60% higher than the same period last year. Based on field estimates, production for the month of April has increased again by almost 10% over the first quarter to 2,900 boe/d (99% heavy oil).
During the first quarter Hemisphere realized several other record milestones with revenue of $22.9 million, AFF of $11.0 million, and free funds flow of $9.2 million. With strong cash flow and limited capital expenditures, Hemisphere lowered its net debt to $8.7 million and exited the quarter with a net debt to annualized AFF ratio of only 0.2.
Hemisphere is committed to the prudent management of its long life, low decline, high netback enhanced oil projects, with the purpose of maximizing value per share from the Company’s assets. With a combination of strong oil prices, production performance, balance sheet strength, and continued field execution, management believes that Hemisphere is in a favourable position to both accelerate high return projects and deliver significantly enhanced return of capital to shareholders.
The Company is currently in the process of renewing and extending its credit facility, and expects to be in a position within the next few weeks to update both its 2022 guidance and return of capital plan once the bank review is complete.
Financial and Operating Summary
|Three Months Ended March 31|
|Petroleum and natural gas revenue||$||22,855,529||$||7,889,016|
|Operating field netback(1)||15,461,664||5,397,952|
|Cash flow provided by operating activities||8,211,734||3,202,500|
|Adjusted funds flow from operations (AFF)(1)||11,039,080||4,041,562|
|Per share, basic(1)||0.12||0.05|
|Per share, diluted(1)||0.11||0.04|
|Free funds flow(1)||9,244,840||2,959,977|
|Net income (loss)||4,618,321||1,767,336|
|Per share, basic and diluted||0.05||0.02|
|Net debt to annualized AFF(1)||0.2||1.3|
|Gross Term loan(2)||–||$||24,174,150|
|Average daily production|
|Heavy oil (bbl/d)||2,624||1,638|
|Natural gas (Mcf/d)||141||92|
|Average sales prices|
|Heavy oil ($/bbl)||$||96.53||53.34|
|Natural gas ($/Mcf)||4.49||2.85|
|Operating netback ($/boe)|
|Petroleum and natural gas revenue||$||95.92||53.00|
|Operating field netback(1)||64.89||36.27|
|Realized commodity hedging gain (loss)||(14.54||)||(0.67||)|
|Adjusted funds flow from operations(1) ($/boe)||46.33||27.15|
(1) Non-IFRS and other financial measure. Refer to “Non-IFRS and Other Financial Measures” section below.
(2) Gross term loan is calculated as the total USD draws on the term loan translated to Canadian Dollars at the period end exchange rate.
Selected financial and operational highlights should be read in conjunction with Hemisphere’s Financial Statements and related Management’s Discussion and Analysis for the quarter ended March 31, 2022. These reports for the quarter ended March 31, 2022, 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.
Annual General and Special Meeting
Hemisphere Energy Corporation’s Annual General and Special Meeting of Shareholders will be held at 9:00 am (Vancouver time) June 9, 2022 in the Walker Room at the Terminal City Club. The address is 837 West Hastings St, Vancouver, British Columbia.