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. < Slightly higher than my forecast of 3,375 Boe per day.
Achieved annual revenue of $84.5 million, with adjusted funds flow from operations ("AFF") of $39.4 million. < Beat my forecast of $38.1 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"). < Outstanding!
> 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 position of $3.6 million compared to a net debt position of $0.8 million at December 31, 2022. < Hemisphere now has no interest-bearing debt. When current assets exceeds total debt, I consider a company debt free. Hemisphere now generates more than enough operating cash flow to fund all D&C capex, pay dividends (including a big Special Dividend near year-end) and fund accretive bolt-on acquisitions. I think they will focus on the new area being developed in Saskatchewan this year, so I don't expect any significant acquisitions to be made in 2024.
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).
Bottomline: Hemisphere's PV10 Net Asset Value as of December 31, 2023 is much higher than its current share price of $1.69Cdn.
From Slide 7 of today's presentation:
1P PV10 Net Asset Value at 21-31-2023 = $3.18Cdn
2P PV10 Net Asset Value at 12-31-2023 = $4.04Cdn
Hemisphere Energy (HMENF) Q4 Results - Apr 18
Hemisphere Energy (HMENF) Q4 Results - Apr 18
Last edited by dan_s on Thu Apr 18, 2024 10:49 am, edited 2 times in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Hemisphere Energy (HMENF) Q4 Results - Apr 18
Hemisphere is now aggressively buying back their stock, which is increasing per share valuation.
From 12-31-2023 through 4-17-2024 the Company's common stock outstanding declined from 99,340,339 to 97,951,229, a 1.4% decline.
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. < This is very good news. The project is ahead of schedule and good to see that they are going directly to the polymer flood. They've acquired a large acreage block, so if the polymer flood is successful, it could double Hemisphere's production over time, fully funded by operating cash flow.
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. < Slightly lower than my forecast. Hemisphere's well completion schedule back end loaded, so production will be flat in 1H 2024 then ramp up to a 2024 exit rate close to 4,000 Boepd. < This has been the growth plan for Atlee Buffalo since they began the polymer flood four years ago. Atlee Buffalo is expected to have a very low decline rate and profitably produce oil for many years, thanks to the polymer flood.
Previous production guidance was for YOY production growth of ~10% in 2024.
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.
From 12-31-2023 through 4-17-2024 the Company's common stock outstanding declined from 99,340,339 to 97,951,229, a 1.4% decline.
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. < This is very good news. The project is ahead of schedule and good to see that they are going directly to the polymer flood. They've acquired a large acreage block, so if the polymer flood is successful, it could double Hemisphere's production over time, fully funded by operating cash flow.
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. < Slightly lower than my forecast. Hemisphere's well completion schedule back end loaded, so production will be flat in 1H 2024 then ramp up to a 2024 exit rate close to 4,000 Boepd. < This has been the growth plan for Atlee Buffalo since they began the polymer flood four years ago. Atlee Buffalo is expected to have a very low decline rate and profitably produce oil for many years, thanks to the polymer flood.
Previous production guidance was for YOY production growth of ~10% in 2024.
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.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group