Hemisphere Energy (HMENF) Update - Nov 29

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dan_s
Posts: 34469
Joined: Fri Apr 23, 2010 8:22 am

Hemisphere Energy (HMENF) Update - Nov 29

Post by dan_s »

Come to our luncheon tomorrow at Fratelli's Restorante (1330 Wirt Road, Houston, TX) to meet Don Simmons and get an update from him on Hemisphere's drilling program and how their polymer flood at Atlee Buffalo G Pool is going to impact 2022 production.
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Vancouver, British Columbia--(Newsfile Corp. - November 25, 2021) - Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) ("Hemisphere" or the "Company") is pleased to provide an update on its drilling operations in the Atlee Buffalo area of southeast Alberta.

Due to rig availability constraints and projected cost increases in 2022, Hemisphere has recently accelerated a portion of its 2022 capital spending plans and commenced a drilling program in the Atlee F pool for up to 4 wells during the fourth quarter of 2021.

Hemisphere anticipates that the new wells will be on production in January 2022. This strategy will help to ensure earlier production and reserve additions in 2022, as well as mitigate the impact of supply chain issues and expected labour shortages across the industry.

The Atlee F pool is under an active waterflood and at least one of the new wells is likely to be converted to an injector in the coming year to help sweep oil through the pool and maintain reservoir pressure. As the Company has been focused on developing its Atlee G pool, minimal capital has been invested in the F pool since 2018. Hemisphere believes there is considerable potential to increase the recovery factor of this oil reservoir through expansion of its existing waterflood and potential future conversion to polymer flood.

In light of advancing the timing of this drilling program, Hemisphere anticipates changes to its previously announced 2021 guidance. With the addition of $4 million in capital expenditures for the new wells expected to be incurred in 2021, year-end net debt is projected to be approximately $16 million. Meanwhile, average annual production for 2021 is projected to be lower by approximately 5% due to timing of conversions of oil producer wells into injectors, delayed production start-up of the September 2021 drilling program, and downtime associated with facility expansion work in Atlee Buffalo.

All of Hemisphere's D&C costs are now fully funded by operating cash flow; $12.3Cdn million for the nine months ending 9/30/2021 and forecast to be over $6.6 million in Q4 2021.

At this time, 2022 guidance remains unchanged with the exception of shifting $4 million in capital expenditures forward into 2021. A revised budget will be released by the Company in the first quarter to address new pricing considerations, the possible addition of capital expenditures and projects, and updated estimates of production, funds flow, and net debt.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34469
Joined: Fri Apr 23, 2010 8:22 am

Re: Hemisphere Energy (HMENF) Update - Nov 29

Post by dan_s »

Don has confirmed that he expects Hemisphere's realized oil price for Q4 to be $66Cdn/bbl, net of the heavy oil differential and cash settlements on their hedges.
The oil price above compares to a realized oil price in Q3 of $62.21Cdn/bbl. The largest impact on the per bbl price is from more unhedged oil.

Based on my forecast model, Hemisphere's full year operating cash flow for 2021 s/b in the range of $18.5Cdn to $19.0Cdn million. This compares to their updated 2021 capital program of $10Cdn million, so FCF will be $8.5 to $9.0 million this year.

Based on Hemisphere's preliminary production guidance for 2022, the Company's operating cash flow should be in the range of $40Cdn to $45Cdn million next year. FCF should be more than enough to pay off 100% of the Company's debt by the end of Q3 2022.

If all goes as planned (the polymer floods work in the G Pool), Hemisphere will be a debt free company generating over $0.15Cdn/share of operating cash flow per quarter by this time next year. A debt free company with stable production that is generating $0.60/share of cash flow should trade for 8X operating cash flow per share. Note that this does not include a successful polymer flood at the F Pool.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34469
Joined: Fri Apr 23, 2010 8:22 am

Re: Hemisphere Energy (HMENF) Update - Nov 29

Post by dan_s »

My updated forecast/valuation model for Hemisphere Energy has been posted to the EPG website.
Dan Steffens
Energy Prospectus Group
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