Energy Prospectus

Notes below are from Simply Wall Street

Let's uncover some gems from our specialized screener.

Hemisphere Energy
Simply Wall St Financial Health Rating: ★★★★★☆

Overview: Hemisphere Energy Corporation acquires, explores, develops, and produces petroleum and natural gas interests in Canada with a market cap of CA$180.43 million.

Operations: The company's revenue is derived entirely from its petroleum and natural gas interests, amounting to CA$78.57 million.

Market Cap: CA$180.43M

Hemisphere Energy Corporation, with a market cap of CA$180.43 million, has shown robust financial performance, reporting revenue of CA$20.87 million in the third quarter and net income of CA$8.6 million. The company announced a quarterly dividend and a special dividend, reflecting its commitment to returning value to shareholders. Hemisphere Energy is debt-free, enhancing its financial stability despite short-term assets not covering long-term liabilities fully. Its seasoned management and board have guided significant earnings growth over five years at 54.3% annually, with recent growth outpacing the industry average significantly—demonstrating strong operational execution amidst volatility concerns.

Hemisphere is hosting a luncheon today in Dallas. Send an email to Sabrina if you would like to attend.

Send it to energyprospectus@gmail.com

"Hemisphere Energy is debt-free, enhancing its financial stability despite short-term assets not covering long-term liabilities fully."

Can anyone elaborate on the latter part of this statement? What are its long term liabilities that are not covered by short term assets? What assets are considered "short term"? Is it common in O&G producers for long term liabilities to exceed "short term assets"?

Does this particular metric matter? If not, why would it be mentioned in such a short note about the company?

Cmm, trying to explain the words of an analysts is like asking to explain the predictions of the oracle of Delphi. No one is sure what they mean.

“Short-term assets not covering long-term liabilities fully” sounds like a nonsense statement to me.
I am assuming the analyst means “Current assets not covering non-current liabilities”.

As per Q3, current assets (C$ 22.943 M) were well above current liabilities (C$ 10.660), which makes sense as otherwise Hemisphere would be relying on credit provided by its suppliers. This would be unhealthy.

Why current assets (C$ 22.943 M) would have to be more than long-term liabilities (C$ 27.563 M) is a mystery to me. The bulk of the long-term liabilities are deferred tax liabilities (C$ 17.365 M) for which there is no need to cover them with short-term assets. There are also de-commissioning obligations (C$ 6,963 M) which are even further in the future.

Hemisphere, with WTI =$70/bbl, should generate in 2025 a FCF of > C$ 30 M. A single year FCF is already more than sufficient to pay off all the long-term liabilities (if they wanted to).

Hemisphere financially is as healthy as any other oil company that I track, regardless of what this analyst says.