Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) provides its financial and operating results for the second quarter ended June 30, 2022.
During the second quarter of 2022, Hemisphere achieved record adjusted funds flow from operations (AFF)1 of $14 million and lowered net debt[1] to $3.7 million. Hemisphere was also active in the field with five new wells drilled in the Atlee Buffalo area, which were brought onstream throughout July. The Company continues to optimize both production and injection operations at its polymer and water flood pools in the area and anticipates further production growth through the year. A second drilling program will take place in September with up to four additional wells planned.
Quarterly Dividend
With significant free funds flow1 of over $8 million in the quarter, Hemisphere’s board of directors has approved a quarterly dividend of $0.025 per share, to be paid on September 7, 2022 to shareholders of record as of the close of business on August 31, 2022. The dividend is designated as an eligible dividend for income tax purposes.
Q2 2022 Highlights
- Produced a record quarterly average of 2,883 boe/d, a 61% increase over the second quarter of 2021.
- Attained record quarterly revenue of $30.6 million, a 203% increase over the second quarter of 2021.
- Delivered an operating field netback1 of $71.25/boe, 82% higher than in the second quarter of 2021.
- Realized record adjusted funds flow from operations (AFF)1 of $14.0 million ($0.14 per diluted share), a 232% increase over the comparable period in 2021.
- Achieved free funds flow1 of $8.2 million, ($0.08 per diluted share), representing a 250% increase over the comparable period in 2021.
- Lowered net debt1 at the end of the quarter to $3.7 million from $18.5 million at the end of June 2021, representing an 80% reduction year-over-year.
- Exited the quarter with a net debt to annualized AFF ratio1 of 0.07.
- Paid Hemisphere’s inaugural quarterly variable dividend of $0.025 per share.
- Acquired 656,500 Hemisphere shares as part of the corporate NCIB at an average price of $1.62.
Corporate Update
Since the second quarter of 2021, Hemisphere has organically grown production by approximately 75% to an average of 3,150 boe/d in July 2022 (99% heavy crude oil). Over the same period, Hemisphere reduced its net debt to annualized AFF ratio1 to less than 0.1. In June, Hemisphere commenced a variable dividend program targeting approximately 30% of annual free cash flow to be paid to shareholders quarterly. Additionally, over a million total shares have been purchased under Hemisphere’s Normal Course Issuer Bid (NCIB) to date in 2022.
Financial and Operating Summary
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||
($000’s except per unit amounts) | 2022 | 2021 | 2022 | 2021 | |||||||||
FINANCIAL | |||||||||||||
Petroleum and natural gas revenue | $ | 30,608 | 10,087 | $ | 53,463 | $ | 17,976 | ||||||
Operating field netback(1) | 18,695 | 6,375 | 34,156 | 11,773 | |||||||||
Operating netback(1) | 16,148 | 5,579 | 28,145 | 10,877 | |||||||||
Cash flow provided by operating activities | 14,926 | 4,741 | 23,136 | 7,944 | |||||||||
Adjusted funds flow from operations (AFF)(1) | 14,031 | 4,230 | 25,070 | 8,272 | |||||||||
Per share, basic(1) | 0.14 | 0.05 | 0.26 | 0.09 | |||||||||
Per share, diluted(1) | 0.14 | 0.05 | 0.25 | 0.09 | |||||||||
Free funds flow(1) | 8,249 | 2,356 | 17,493 | 5,316 | |||||||||
Net income (loss) | 4,131 | (3,594 | ) | 8,749 | (1,826 | ) | |||||||
Per share, basic and diluted ($/share) | 0.04 | (0.04 | ) | 0.09 | (0.02 | ) | |||||||
Capital expenditures(1) | 5,782 | 1,874 | 7,577 | 2,956 | |||||||||
Net debt(1) | 3,662 | 18,529 | 3,662 | 18,529 | |||||||||
Net debt to annualized AFF(1) | 0.1 | 1.1 | 0.1 | 1.1 | |||||||||
Bank debt | 3,529 | – | $ | 3,529 | – | ||||||||
Gross Term loan(2) | $ | – | 21,999 | – | $ | 21,999 | |||||||
OPERATING | |||||||||||||
Average daily production | |||||||||||||
Heavy oil (bbl/d) | 2,856 | 1,758 | 2,741 | 1,698 | |||||||||
Natural gas (Mcf/d) | 165 | 169 | 153 | 131 | |||||||||
Combined (boe/d) | 2,883 | 1,786 | 2,766 | 1,720 | |||||||||
Oil weighting | 99% | 98% | 99% | 99% | |||||||||
Average sales prices | |||||||||||||
Heavy oil ($/bbl) | $ | 117.37 | 62.78 | $ | 107.45 | 58.25 | |||||||
Natural gas ($/Mcf) | 6.93 | 2.93 | 5.81 | 2.90 | |||||||||
Combined ($/boe) | $ | 116.65 | 62.06 | $ | 106.78 | 57.73 | |||||||
Operating netback ($/boe) | |||||||||||||
Petroleum and natural gas revenue | $ | 116.65 | 62.06 | $ | 106.78 | 57.73 | |||||||
Royalties | (34.14 | ) | (10.73 | ) | (27.31 | ) | (8.58 | ) | |||||
Operating costs | (8.88 | ) | (9.46 | ) | (8.91 | ) | (8.85 | ) | |||||
Transportation costs | (2.39 | ) | (2.65 | ) | (2.33 | ) | (2.49 | ) | |||||
Operating field netback(1) | 71.25 | 39.22 | 68.22 | 37.81 | |||||||||
Realized commodity hedging loss | (9.71 | ) | (4.90 | ) | (12.01 | ) | (2.88 | ) | |||||
Operating netback(1) | $ | 61.54 | 34.32 | 56.21 | 34.93 | ||||||||
Adjusted funds flow from operations(1) ($/boe) | $ | 53.47 | 26.03 | 50.07 | 26.57 |
Notes:
(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 June 30, 2022. These reports for the quarter ended June 30, 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.