Hemisphere Energy (HMENF) Q2 Results - Aug 24

[dan_s]

Hemisphere Energy announced Q2 results this morning.

Q2 2023 HIGHLIGHTS
 Produced an average of 2,883 boe/d for the quarter and 3,026 boe/d for the six months ended June 30, 2023,
a 9% increase over the first half of 2022. < Compares to my Q2 forecast of 2,950 Boepd
 Attained quarterly revenue of $19.0 million. < My forecast was 19.5Cdn million
 Delivered an operating field netback of $11.1 million, or $42.41/boe for the quarter. < Very Strong economics at Atlee Buffalo.
 Realized quarterly adjusted funds flow from operations ("AFF") of $8.1 million, or $30.97/boe. < My Adjusted Operating Cash Flow forecast was $8.9Cdn million
 Achieved quarterly free funds flow of $3.6 million, or $0.04/basic share. < I love Hemisphere because it generates steady free cash flow that will be going a lot higher in Q4.
 Exited the second quarter with a positive working capital position of $2.6 million, compared to net debt of $3.7 million at the end of June 2022 < They remain virtually debt free.
 Distributed $2.5 million or $0.025/share in dividends to shareholders during the quarter.
 Purchased and cancelled 872,400 shares under the Company’s Normal Course Issuer Bid ("NCIB").

CORPORATE UPDATE

Hemisphere’s 2023 summer drilling program is currently underway. To date, four wells have been drilled in the Atlee
Buffalo G pool and one in the Atlee Buffalo F pool, with three remaining F pool locations currently being drilled off a
single pad. It is anticipated that half of these wells will be on production by the end of August, with the remainder
producing by the end of September. Two of the new wells are also planned to be completed as or converted to
injectors by the end of the year. < Q4 production should exceed 3,500 barrels per day; ~100% heavy oil since
most the produced natural gas is burned for power generation in the field, which lowers operating expenses.

With two of the newly drilled G pool wells recently tied-in, August production has averaged just over 3,000 boe/d (99%
heavy oil, based on field estimates between August 1-22, 2023). The Company’s polymer (G Pool) and polymer
surfactant (F Pool) floods are continuing to perform effectively, with relatively stable oil rates and lower water cuts
being seen across both pools. As the remaining new wells are brought online, Hemisphere will further optimize
injection and polymer concentration levels across its pools, as well as use additional treating and pumping capacity
added during the year.

To date in 2023, Hemisphere has strategically invested approximately $1 million in the acquisition of over 10 sections
of new land that management believes to be prospective enough to become an additional core area for the Company.
This resource is characterized by high oil in place and low recovery factor, and reservoir simulation supports its
significant potential as an application for Hemisphere’s expertise in Enhanced Oil Recovery ("EOR") techniques.
Current plans include drilling and testing a pilot flood into this new asset as part of Hemisphere’s 2024 development
capital budget. < Great New! The only negative for Hemisphere is their lack of "running room". As I told you on
this mornings webinar, Don Simmons is super conservative. His team has expertice in turning old fields into
successful EOR projects that have very long life recoverable reserves.

My updated forecast/valuation model will be posted to the EPG website this afternoon.