Summary
Hemisphere reported solid 2024 results with no surprises. Reserves were announced earlier and are mediocre. Production and profits were as expected. Without a success at the Marsden pilot, production should start a slow decline after 2025. The balance sheet is extremely sound. Shareholder returns are very generous.
The share price of Hemisphere has stood up well in 2025, declining -3.8% versus the average stock decline of -16.7%. As a consequence of its share performance Hemisphere has dropped out of the top 10 of the oil and gas ranking. Hemisphere now ranks a good 16th out of 85. If the Marsden pilot is successful Hemisphere should bounce up back into the top 3.
Reserves
• 2024 proven reserves (10.4 M BoE) were down -5.4% on 2023 (11.1 M BoE).
• The proven reserves are equivalent to a mediocre 8.0 years of 2025 production (3.9 K BoE/d). Industry average is 9.5-10.0 years.
• The 2029-2024 Reserves Replacement Ratio (RRR) was a good 1.57 (industry average 0.89-0.95)
• The RRR has been trending down in recent years. The 2024 RRR was a lowish 0.56 (industry average 0.90).
• The reserves and RRR combined cannot sustain the production at current levels.
• Production can grow if the Marsden polymer pilot is successful. Only minimal reserves at Marsden (0.8 M BoE =8% of total) have been booked in 2024.
Production
• Q4 Production was 3,359 BoE/d, slightly below Q3 (3,621 BoE/d).
• Q4 production in the first half of the quarter was affected by planned maintenance activities at the G-pool facilities.
• 2024 production (3,463 BoE/d) was 10.8% above 2023 (3,125 BoE/d). Guidance was 3,400 BoE/d.
• The outlook for 2025 is 3.9 K BoE/d. Q1 production was running at 3.8 K BoE/d.
• Production should peak at 4.0 K BoE/d in Q3 2025 after which Atlee Buffalo will go into a steady decline. Due to the polymer flooding the production decline rate is very low.
• Without Marsden I expect production to decline to 3.7-3.8 K BoE/d in 2028/2029
Marsden
• A pilot polymer flood project commenced at Marsden after 5 wells were drilled in Q1 2024 (2 injectors and 3 producers) and polymer injection started in late Q3 2024. Pressure and production response is anticipated mid/late 2025.
• Marsden represents just 5% of the 2P NPV10 BT valuation of the 2024 reserves
• Hemisphere was very tightlipped about Marsden in the 2024 results and associated presentation. No details for Marsden were revealed.
• I had a stab at the Marsden production (if the trials is success full). For production of over time with and without Marsden see the chart below.
- Hemisphre production chart - March 2025.jpg (38.45 KiB) Viewed 282 times
• The balance sheet is very healthy.
• The 2024 equity ratio(=equity/balance sheet total) late 2024 was an excellent 66.8%
• The 2024 ratio (66.8%) was comparable with 2023 (67.5%).
• Hemisphere has no long term and as such a debt/EBITDA ration is without meaning
• The balance sheet allows generous shareholder returns.
Profitability
• Hemisphere is a very profitable company, also under low oil prices.
• 2024 eps (C$ 0.34) was well above 2024 (C$ 0.24).
• Royalties were 20%, typical for a Canadian heavy oil producer.
• Unit costs (inclusive depreciation, interest and overheads) were a low US$ 20.86/BoE
• With WTI =$ 60-65/bbl and incorporating an extra 5% discount ($ 3.00bbl) due to oil import tariffs, I expect a 2025 eps of C$ 0.26-0.35 (PE=5.0-6.7).
• Over time without Marsden the eps can fall to C$ 0.21-0.33 in 2028/2029 (PE=5.4-8.3).
Shareholder returns
• Hemisphere paid in 2024 regular and special dividends for a total C$ 0.16 and bought back in 3.4 million shares for a total of C$ 4.7 M.
• Total shareholder returns in 2024 are equivalent to a generous 11.8%.
• Shareholder returns in 2025 should see a continuation of the regular quarterly dividend of C$ 0.025.
• The special dividends are oil price dependent.
• Shareholder returns in 2025 can increase versus 2024 as the FCF can increase with a lower 2025 capex (C$ 17 M) than in 2024 (C$ 22 M).
• With WTI= $ 60-70/bbl I expect a total shareholder 2025 returns of 10.2-15.3%.
• After 2025 shareholder returns will fall with the falling production but can still be 8.5%-15.0% in 2029.
Conclusions
Hemisphere reported solid 2024 results with no surprises. Reserves were announced earlier and are mediocre. Production and profits were as expected. Without a success at the Marsden pilot, production should start a slow decline after 2025. The balance sheet is extremely sound. Shareholder returns are very generous.
The share price of Hemisphere has stood up well in 2025, declining -3.8% versus the average stock decline of -16.7%. As a consequence of its share performance Hemisphere has dropped out of the top 10 of the oil and gas ranking. Hemisphere now ranks a good 16th out of 85. If the Marsden pilot is successful Hemisphere should bounce up back into the top 3.