Hemisphere Energy (HMENF) Update - Feb 24
Posted: Wed Feb 24, 2021 5:03 pm
HMENF was up 21% today to close at $0.328US/share. In my January 28 newsletter I valued the stock at $0.85US/share.
Today I was able to spend some time on the Hemisphere model and talk to the company to clarify all of my assumptions.
> Hemisphere's oil is heavy, so it trades at a discount to Canadian light oil. If WTI averages $60US/bbl, Hemisphere's realized oil price s/b approximately $55Cdn/bbl.
> Net of royalties and all cash expenses, including G&A and interest expense, Hemisphere's netbacks (or cash flow from operations) s/b approximately $34Cdn/bbl, $0.24Cdn/share.
> I'm also assuming 2021 Capex of $7.5Cdn million, which is probably too high.
> Net of capital expenditures their, "Free Adjusted Funds Flow" (FAFF) should be over $13Cdn million
> My model is now based on the low end of their production guidance, 1,800 BOPD for the year with an exit rate of 2,500 BOPD.
> Hemisphere is going to report approximately $8.2Cdn million of free cash flow from operations in 2020.
> In March they will announce detailed guidance for 2021 and progress on getting the stock up-listed
> The valuation in my next newsletter will be $1.05US/share for HMENF
I have posted my updated forecast/valuation model to the EPG website.
Today I was able to spend some time on the Hemisphere model and talk to the company to clarify all of my assumptions.
> Hemisphere's oil is heavy, so it trades at a discount to Canadian light oil. If WTI averages $60US/bbl, Hemisphere's realized oil price s/b approximately $55Cdn/bbl.
> Net of royalties and all cash expenses, including G&A and interest expense, Hemisphere's netbacks (or cash flow from operations) s/b approximately $34Cdn/bbl, $0.24Cdn/share.
> I'm also assuming 2021 Capex of $7.5Cdn million, which is probably too high.
> Net of capital expenditures their, "Free Adjusted Funds Flow" (FAFF) should be over $13Cdn million
> My model is now based on the low end of their production guidance, 1,800 BOPD for the year with an exit rate of 2,500 BOPD.
> Hemisphere is going to report approximately $8.2Cdn million of free cash flow from operations in 2020.
> In March they will announce detailed guidance for 2021 and progress on getting the stock up-listed
> The valuation in my next newsletter will be $1.05US/share for HMENF
I have posted my updated forecast/valuation model to the EPG website.