Hemisphere Energy Announce Record Quarterly Results and Declares Dividend
August 18, 2022
Vancouver, British Columbia, August 18, 2022 – Hemisphere Energy Corporation ("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) of $14 million and lowered net debt 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 flow 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 U.S. 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. < My forecast was 2,900 Boepd.
Attained record quarterly revenue of $30.6 million, a 203% increase over the second quarter of 2021. < My forecast was $27.5 million oil & gas revenues.
Delivered an operating field netback of $71.25/boe, 82% higher than in the second quarter of 2021. < Outstanding!
Realized record adjusted funds flow from operations (AFF) of $14.0 million ($0.14 per diluted share), a 232% increase over the comparable period in 2021.
Achieved free funds flow of $8.2 million, ($0.08 per diluted share), representing a 250% increase over the comparable period in 2021.
Lowered net debt 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. < As of today, Hemisphere is virtually debt free (as working capital is higher than their debts).
Exited the quarter with a net debt to annualized AFF ratio 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 ratio 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.
My valuation of HMENF was $3.85US per share
Hemisphere Energy (HMENF) Q2 Results - Aug 18
Hemisphere Energy (HMENF) Q2 Results - Aug 18
Last edited by dan_s on Thu Aug 18, 2022 11:48 am, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Hemisphere Energy (HMENF) Q2 Results - Aug 18
Some key items from the quarterly report.
In the second quarter of 2022, the Company’s average daily production was 2,883 boe/d (98% oil)
representing a 61% increase from 1,786 boe/d (98% oil) over the comparable quarter in 2021. For the six
months ended June 30, 2022, the Company’s average daily production was 2,766 boe/d (99% oil),
representing a 61% increase from 1,720 boe/d (99% oil) for the same period in 2021. This increase is
mainly attributed to the success of its enhanced oil recovery projects, as well as the addition of three new
wells in the Atlee G pool in the fourth quarter of 2021 and four new wells brought on production in the
Atlee F pool during the first quarter of 2022.
Higher royalty rate will lower my valuation a bit
Royalties per barrel for the three and six months ended June 30, 2022 were $34.14/boe and $27.31/boe,
respectively, representing a 218% increase over the three and six months ended June 30, 2021. These
higher royalties are due primarily to the result of significantly higher realized commodity and par prices
year over year and wells being off royalty holiday.
The capital spent during the six months ended June 30, 2022 of $7.8 million included exploration activities and
completion and tie-in work required to bring four Atlee F pool wells drilled in late 2021 on production, as
well as facility work to prepare for polymer injection into the Atlee F pool, and drilling expenses for five
Atlee wells that were brought on production in July 2022. < Compares to full-year 2022 Capex budget of $16 million.
The Company had approximately $54.5 million (December 2020 - $60.2 million) of tax pools available to
be applied against future income for tax purposes as of December 31, 2021. Based on the Company’s
increased taxable income, available pools and current commodity prices, the Company has recorded a
current tax provision of $1.0 million and a deferred income tax expense of $3.8 million for the first half of
2022. The Company expects to incur additional income tax payable in the balance 2022 and any taxes
payable beyond this will primarily be a function of commodity prices, capital expenditures and production
volumes
In the second quarter of 2022, the Company’s average daily production was 2,883 boe/d (98% oil)
representing a 61% increase from 1,786 boe/d (98% oil) over the comparable quarter in 2021. For the six
months ended June 30, 2022, the Company’s average daily production was 2,766 boe/d (99% oil),
representing a 61% increase from 1,720 boe/d (99% oil) for the same period in 2021. This increase is
mainly attributed to the success of its enhanced oil recovery projects, as well as the addition of three new
wells in the Atlee G pool in the fourth quarter of 2021 and four new wells brought on production in the
Atlee F pool during the first quarter of 2022.
Higher royalty rate will lower my valuation a bit
Royalties per barrel for the three and six months ended June 30, 2022 were $34.14/boe and $27.31/boe,
respectively, representing a 218% increase over the three and six months ended June 30, 2021. These
higher royalties are due primarily to the result of significantly higher realized commodity and par prices
year over year and wells being off royalty holiday.
The capital spent during the six months ended June 30, 2022 of $7.8 million included exploration activities and
completion and tie-in work required to bring four Atlee F pool wells drilled in late 2021 on production, as
well as facility work to prepare for polymer injection into the Atlee F pool, and drilling expenses for five
Atlee wells that were brought on production in July 2022. < Compares to full-year 2022 Capex budget of $16 million.
The Company had approximately $54.5 million (December 2020 - $60.2 million) of tax pools available to
be applied against future income for tax purposes as of December 31, 2021. Based on the Company’s
increased taxable income, available pools and current commodity prices, the Company has recorded a
current tax provision of $1.0 million and a deferred income tax expense of $3.8 million for the first half of
2022. The Company expects to incur additional income tax payable in the balance 2022 and any taxes
payable beyond this will primarily be a function of commodity prices, capital expenditures and production
volumes
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Hemisphere Energy (HMENF) Q2 Results - Aug 18
Share repurchase program increased equity value per share.
On July 14, 2021, the Company announced the renewal of its normal course issuer bid (NCIB), to purchase
and cancel, from time to time, up to 7,687,830 common shares of the Company until July 13, 2022. At
June 30, 2022, the Company had purchased and cancelled 712,400 shares under the NCIB for $1.1 million
at an average cost of $1.52 per share. Subsequent to the quarter end, the Company has repurchased
additional NCIB shares as disclosed below.
During the six months ended June 30, 2022, the Company issued 3,579,000 shares for stock options
exercised through the Employee Stock Option Plan, at an average exercise price of $0.25 per share. In
May 2022, the Company granted 150,000 stock options to a several of the Company’s consultants at an
exercise price of $1.27 each, all of which vested immediately.
On April 15, 2022 the Company issued 8,302,686 shares for the cashless exercise of the remaining
10,312,500 warrants at a $1.4367 30-day VWAP. There are no warrants outstanding following this
exercise.
Subsequent to the quarter ended June 30, 2022:
a) The Company has purchased and cancelled an additional 335,000 shares under the NCIB at an
average cost of $1.55 per share.
b) The Company issued 550,000 shares for stock options exercised for proceeds of $138 thousand.
Hemisphere is virtually debt free and generating a lot of free cash flow:
Hemisphere released its updated 2022 guidance in June 2022. The Company’s Board of Directors
approved a 2022 capital expenditure program of $16.0 million, of which the entire capital program is
expected to be funded by Hemisphere’s projected 2022 AFF, see Non-IFRS and Other Financial Measures,
of approximately $52.0 million. The projected AFF will be used for discretionary purposes, which may
include repayment of debt, potential acceleration of other development or exploration projects,
acquisitions, and return of capital to shareholders through Hemisphere’s NCIB program and dividends.
My guess is that the Company will hold the dividend at $0.025/quarter until they focus on the 2023 capital program. They are looking at potential acquisitions or they may accelerate the drilling program.
On July 14, 2021, the Company announced the renewal of its normal course issuer bid (NCIB), to purchase
and cancel, from time to time, up to 7,687,830 common shares of the Company until July 13, 2022. At
June 30, 2022, the Company had purchased and cancelled 712,400 shares under the NCIB for $1.1 million
at an average cost of $1.52 per share. Subsequent to the quarter end, the Company has repurchased
additional NCIB shares as disclosed below.
During the six months ended June 30, 2022, the Company issued 3,579,000 shares for stock options
exercised through the Employee Stock Option Plan, at an average exercise price of $0.25 per share. In
May 2022, the Company granted 150,000 stock options to a several of the Company’s consultants at an
exercise price of $1.27 each, all of which vested immediately.
On April 15, 2022 the Company issued 8,302,686 shares for the cashless exercise of the remaining
10,312,500 warrants at a $1.4367 30-day VWAP. There are no warrants outstanding following this
exercise.
Subsequent to the quarter ended June 30, 2022:
a) The Company has purchased and cancelled an additional 335,000 shares under the NCIB at an
average cost of $1.55 per share.
b) The Company issued 550,000 shares for stock options exercised for proceeds of $138 thousand.
Hemisphere is virtually debt free and generating a lot of free cash flow:
Hemisphere released its updated 2022 guidance in June 2022. The Company’s Board of Directors
approved a 2022 capital expenditure program of $16.0 million, of which the entire capital program is
expected to be funded by Hemisphere’s projected 2022 AFF, see Non-IFRS and Other Financial Measures,
of approximately $52.0 million. The projected AFF will be used for discretionary purposes, which may
include repayment of debt, potential acceleration of other development or exploration projects,
acquisitions, and return of capital to shareholders through Hemisphere’s NCIB program and dividends.
My guess is that the Company will hold the dividend at $0.025/quarter until they focus on the 2023 capital program. They are looking at potential acquisitions or they may accelerate the drilling program.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group