HFI Research Top Pick: Hemisphere Energy (HMENF)

[dan_s]

Note from HFI received this morning
By: Jon Costello

Note: Dollar references in this article are to Canadian dollars unless specified otherwise.

Hemisphere Energy (HME:CA) is a small gem among Canadian E&P. As one of the few remaining junior Canadian oil producers, it generates unusually high cash returns for shareholders. Its superior economics stem from its use of polymer floods as an enhanced recovery technique. These polymer floods increase the amount of oil recovered for the least amount of capital. They reduce ongoing operating and capital costs and maximize free cash flow generation.

With its stock currently at depressed levels, HME’s high free cash flow yield and free cash flow growth at higher oil prices make it one of the most attractive long-term buys in our entire energy sector coverage universe.

Send me an email if you'd like to read HFI's full report on Hemisphere: dmsteffens@comcast.net

Hemisphere Energy is one of the Canadian Juniors in our High Yield Income Portfolio.

[dan_s]

From the HFI report:
"Over the past few months, the company spent $1.5 million leasing new undeveloped land in Saskatchewan. This acreage is separate from the acreage figures cited above. Management believes the land has significant oil in place and that HME’s polymer flood techniques could recover substantial quantities. HME has a pilot project planned for 2024 to gauge the prospectivity of the new acreage. The spending is accounted for in management’s capex guidance. Any material and economic discovery would extend HME’s reserve life and increase the company’s net asset value, which would likely result in greater value per share for its shareholders."

Hemisphere is going to drill several HZ wells within the new acreage in Saskatchewan this summer. If this pilot project is successful, I believe HMENF could be a double for us within a year.