Hemisphere Energy (HMENF) Valuation Update - Apr 18

[dan_s]

I have updated my forecast model for Hemisphere for actual Q4 2023 (better than my forecast) and their fresh guidance for 2024.

The Company's production will be down from Q4 to Q1 just due to weather, then ramp up into year-end. Due to their well completion schedule, most of the production growth will happen in Q3 and Q4.

Thanks to completion of the Trans Mountain Pipeline, Hemisphere is now getting a much higher price for their oil starting in April. The Company's realized oil price in Q4 was $75.31Cdn/bbl, net of cash settlements that they received of $910,000 during the quarter. Q1 realized prices will be close to $73.00Cdn/bbl and they are running above $85.00Cdn/bbl in April.

Big catalyst this year will be results in Saskatchewan where they have already drilled 5 horizontal wells. It is a large area with lots of oil in place that is well defined by vertical wells.

At the time of this post HMENF was trading at $1.23US. My current valuation increases by $0.10US to $2.50US.

Hemisphere has a "pristine" balance sheet and they should generate over $27.5Cdn million ($0.28/share) of free cash flow this year. There is nothing that justifies the shares trading below PV10 Net Asset Value using just their proved reserves, which is $2.35US/share.