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Hemisphere Energy Corp. Third Quarter 2021 Results

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Hemisphere Energy Corp. reported its Q3 2021 results.

Q3 Financial & Operating Highlights

During the third quarter, Hemisphere invested just over $3.3 million in its Atlee Buffalo field operations. The majority of capital expenditures included a successful three well drilling program in the Atlee G Pool. The Company also acquired a Free Water Knockout (FWKO) vessel in anticipation of production growth at the G pool facility during the fourth quarter.

Hemisphere’s new G pool wells are the first drilled by the Company since 2019 due to severe market volatility during 2020 and early 2021. After being brought online in late October, total oil production from the new wells has averaged approximately 300 bbl/d during the first two weeks of November. With the addition of these new wells and the continued success of Hemisphere’s enhanced oil recovery projects, corporate production has increased to approximately 2,100 boe/d (99% heavy crude oil and 1% conventional natural gas), based on field estimates between November 1-15^th.

Hemisphere’s third quarter also marked two very important milestones for the Company, in both its field operations and financial structure.

At the start of the third quarter, the Company announced the implementation of its first polymer flood project in the Atlee G Pool in southeast Alberta. Reservoir simulation and analogue analysis indicate both increased production rates and higher recovery factors are predicted for the oil pool.29dk2902l

Subsequent to that, the Company announced the replacement of its previous five-year term loan with a new $35 million extendible two-year committed term facility with ATB Financial in July. The new facility provides Hemisphere with increased financial flexibility, a significant reduction in interest costs, and lower foreign exchange risk.

• Generated record revenue of $10.4 million, a 77% improvement over the third quarter of 2020.
• Maintained production at 1,671 boe/d (99% heavy crude oil and 1% conventional natural gas), relatively flat compared to the third quarter of last year, despite the conversion of several oil producer wells to water injectors and minimal capital spending over the past year.
• Achieved an operating field netback before hedges of $39.25/boe for a total of $6.0 million, a 56% increase over the third quarter of 2020.
• Increased adjusted funds flow (AFF) from operations by 19% to $4.0 million, when compared to the third quarter of 2020.
• Lowered net debt to $18.2 million, a 33% reduction from the third quarter of 2020.
• Reduced net debt to AFF ratio to 1.1.

Outlook

Strengthening the balance sheet through continually lowering debt over the past two years has been a top priority for Hemisphere, and refinancing this year with a reserve based loan from a Canadian bank was a major step forward in financial flexibility for the Company. As Hemisphere moves into 2022, it will continue to balance production and reserve growth with financial strength, with the goal of optimizing return to shareholders through continued share buybacks and/or dividends as debt levels fall.