Vancouver, British Columbia–(Newsfile Corp. – April 18, 2024) – Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) is pleased to provide its financial and operating results for the fourth quarter and year ended December 31, 2023.
2023 Highlights
- Increased fourth quarter production by 16% to a record of 3,386 boe/d (99% heavy oil), and annual production by 11% to 3,125 boe/d (99% heavy oil), as compared to 2022.
- Achieved annual revenue of $84.5 million, with adjusted funds flow from operations (“AFF”)(1) of $39.4 million.
- Invested $16.9 million to drill eight successful Atlee Buffalo wells, one unsuccessful exploration well, upgrade facilities, purchase land and seismic, and pre-purchase materials for the 2024 development program.
- Generated $22.5 million of free funds flow (“FFF”)(1).
- Distributed $10.1 million in quarterly dividends to shareholders.
- Distributed $3.0 million in special dividends to shareholders.
- Purchased and cancelled 3.2 million shares at an average price of $1.28 per share under the Company’s normal course issuer bid (“NCIB”), returning $4.1 million to shareholders.
- Exited the year with a positive working capital(1) position of $3.6 million compared to a net debt(1) position of $0.8 million at December 31, 2022.
- Increased Proved Developed Producing (PDP) NPV10 BT reserve value by 9% to $248 million and maintained reserve volumes at 8.2 MMboe (99.6% heavy oil).
- Increased Proved (1P) NPV10 BT reserve value by 5% to $325 million and maintained reserve volumes at 12.1 MMboe (99.4% heavy oil).
- Increased Proved plus Probable (2P) NPV10 BT reserve value by 5% to $416 million and maintained reserve volumes at 16.3 MMboe (99.4% heavy oil).
Note:
(1) Non-IFRS financial measure that is not a standardized financial measure under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar financial measures disclosed by other issuers. Refer to “Non-IFRS and Other Financial Measures” section below.
Financial and Operating Summary
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, 2023. These reports, including the Company’s Annual Information Form for the year ended December 31, 2023, are available on SEDAR+ at www.sedarplus.ca and on Hemisphere’s website at www.hemisphereenergy.ca. All amounts are expressed in Canadian dollars unless otherwise noted.
Three Months Ended December 31 | Years Ended December 31 | |||||||||||
($000s except per unit and share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||
FINANCIAL | ||||||||||||
Petroleum and natural gas revenue | $ | 22,423 | $ | 19,564 | $ | 84,472 | $ | 96,699 | ||||
Operating field netback(1) | 13,517 | 10,926 | 51,843 | 58,270 | ||||||||
Operating netback(1) | 14,428 | 11,396 | 52,118 | 51,995 | ||||||||
Cash provided by operating activities | 13,496 | 8,995 | 44,241 | 45,091 | ||||||||
Adjusted funds flow from operations (AFF)(1) | 11,295 | 11,011 | 39,411 | 46,686 | ||||||||
Per share, basic(1) | 0.11 | 0.11 | 0.39 | 0.47 | ||||||||
Per share, diluted(1) | 0.11 | 0.11 | 0.39 | 0.46 | ||||||||
Free funds flow (FFF)(1) | 9,144 | 4,921 | 22,539 | 28,420 | ||||||||
Net income | 3,981 | 3,253 | 24,195 | 21,317 | ||||||||
Per share, basic | 0.04 | 0.03 | 0.24 | 0.21 | ||||||||
Per share, diluted | 0.04 | 0.03 | 0.24 | 0.21 | ||||||||
Dividends | 5,489 | 2,560 | 13,083 | 7,683 | ||||||||
Per share, basic | 0.025 | 0.025 | 0.130 | 0.075 | ||||||||
NCIB share repurchases | 2,085 | 1,694 | 4,095 | 3,387 | ||||||||
Capital expenditures (1) | 2,151 | 6,090 | 16,872 | 18,266 | ||||||||
Working capital (Net debt)(1) | 3,589 | (766 | ) | 3,589 | (766 | ) | ||||||
OPERATING | ||||||||||||
Average daily production | ||||||||||||
Heavy oil (bbl/d) | 3,364 | 2,884 | 3,100 | 2,801 | ||||||||
Natural gas (Mcf/d) | 132 | 138 | 147 | 158 | ||||||||
Combined (boe/d) | 3,386 | 2,907 | 3,125 | 2,828 | ||||||||
Oil weighting | 99% | 99% | 99% | 99% | ||||||||
Average sales prices | ||||||||||||
Heavy oil ($/bbl) | $ | 72.36 | $ | 73.52 | $ | 74.53 | $ | 94.29 | ||||
Natural gas ($/Mcf) | 2.19 | 4.76 | 2.56 | 5.03 | ||||||||
Combined ($/boe) | $ | 71.97 | $ | 73.16 | $ | 74.07 | $ | 93.69 | ||||
Operating netback ($/boe) | ||||||||||||
Petroleum and natural gas revenue | $ | 71.97 | $ | 73.16 | $ | 74.07 | $ | 93.69 | ||||
Royalties | (14.07 | ) | (16.50 | ) | (14.71 | ) | (23.71 | ) | ||||
Operating costs | (11.49 | ) | (13.16 | ) | (10.87 | ) | (11.09 | ) | ||||
Transportation costs | (3.03 | ) | (2.64 | ) | (3.03 | ) | (2.43 | ) | ||||
Operating field netback(1) | 43.38 | 40.86 | 45.46 | 56.46 | ||||||||
Realized commodity hedging gain (loss) | 2.92 | 1.76 | 0.24 | (6.08 | ) | |||||||
Operating netback(1) | $ | 46.30 | $ | 42.62 | $ | 45.70 | $ | 50.38 | ||||
General and administrative expense | (5.63 | ) | (4.92 | ) | (4.05 | ) | (3.94 | ) | ||||
Interest expense and foreign exchange (loss) | (0.44 | ) | (0.70 | ) | (0.58 | ) | (1.00 | ) | ||||
Current tax expense | (3.98 | ) | 4.18 | (6.51 | ) | (0.21 | ) | |||||
Adjusted funds flow from operations(1) ($/boe) | $ | 36.25 | $ | 41.18 | $ | 34.56 | $ | 45.23 |
Note:
(1) Non-IFRS financial measure that is not a standardized financial measure under IFRS Accounting Standards (“IFRS”) and may not be comparable to similar financial measures disclosed by other issuers. Refer to “Non-IFRS and Other Financial Measures” section of the MD&A.
COMMON SHARES | April 17, 2024 |
December 31, 2023 |
December 31, 2022 |
||||||
Common shares issued and outstanding | 97,951,239 | 99,340,339 | 101,978,939 | ||||||
Stock options | 7,563,000 | 7,563,000 | 6,075,000 | ||||||
Total fully diluted shares outstanding | 105,514,239 | 106,903,339 | 108,053,939 |
Operations Update and Outlook
2023 was another rewarding year for Hemisphere, resulting in production growth of 11%, significant shareholder returns of $0.17 per share paid in dividends and NCIB purchases (representing a FFF payout ratio(2) of 76%), and the transformation from a net debt to a cash position.
Additionally, Hemisphere purchased mineral rights in a Saskatchewan oil resource play during the year, and kicked off the first quarter of 2024 by successfully drilling a 5-well pad (3 producers and 2 injectors) into the pool. The Company anticipates bringing the wells on production in the third quarter of the year, after commissioning a new polymer flood facility and oil treating battery in the area. The remainder of Hemisphere’s 2024 capital development program will be spent in its core Atlee Buffalo property later this summer.
Following significant downtime due to extreme cold weather in January and early February, Hemisphere’s corporate production during the latter half of the quarter has reached all-time highs of over 3,500 boe/d (February 15 – March 31, 2024 field estimates, 99% heavy oil), bringing average first quarter production to 3,135 boe/d.
Pricing outlook for heavy oil is bullish across the industry with the Trans Mountain pipeline anticipated to commence operations in May. With this additional egress capacity, WCS differential forecasts for the year have narrowed substantially. Combined with strong WTI pricing and a weak Canadian dollar, Hemisphere is optimistic about the year ahead as it tests its new Saskatchewan play while continuing to deliver top-tier free funds flow yields to its shareholders from ultra-low decline, high-value reserves in Atlee Buffalo.
About Hemisphere Energy Corporation
Hemisphere is a dividend-paying Canadian oil company focused on maximizing value-per-share growth with the sustainable development of its high netback, low decline conventional heavy oil assets through polymer flood enhanced oil recovery methods. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME” and on the OTCQX Venture Marketplace under the symbol “HMENF”.