Energy Prospectus

Everything looks good. I will post my update forecast/valuation model to the EPG website late this morning.

Q1 2025 Highlights

Attained record quarterly production of 3,833 boe/d (99% heavy oil), a 21% increase over the same period of last year. < Beat Q1 forecast of 3,747 Boepd.

Generated $27.3 million in revenue, a 30% increase over the first quarter of 2024. < Beat my revenue forecast of $25.2Cdn million.

Achieved total operating and transportation costs of $14.63/boe. < Lower than my forecast of $16.00/boe.

Delivered an operating netback of $17.0 million, or $49.27/boe.

Realized quarterly adjusted funds flow from operations ("AFF") of $12.7 million, or $36.83/boe, a 26% increase over the first quarter of 2024.

Generated free funds flow of $11.5 million, or $0.12 per share. < VERY GOOD and expected since Hemisphere does most of its capex spending after Spring Break Up starting in June.

Distributed $2.4 million, or $0.025 per share, in dividends to shareholders during the quarter. < Does not include the $0.03/share "Special Dividend" paid in April. I expect one more special dividend to be paid late this year in less Hemisphere makes an accretive acquisition.

Purchased and cancelled 709,700 shares for $1.3 million under the Company's Normal Course Issuer Bid ("NCIB"). < Should continue and it does increase my per share valuation.

Exited the first quarter with positive working capital1 of $14.1 million, compared to $4.2 million at the end of March 2024. < Hemisphere is a "Cash Flow Machine" and it has a pristine balance sheet.

More good news:

Quarterly Dividend

Hemisphere is pleased to announce that its Board of Directors has approved a quarterly cash dividend of $0.025 per common share in accordance with the Company's dividend policy. The dividend will be paid on June 30, 2025 to shareholders of record as of the close of business on June 19, 2025. The dividend is designated as an eligible dividend for income tax purposes.

Including Hemisphere's special dividend of $0.03 per common share paid in April and base quarterly dividends of $0.025 per common share in February and June, Hemisphere will have paid its shareholders $0.08 per common share in dividends during the first half of 2025. < I expect another $0.08 per share should be paid as dividends in 2H 2025 unless they announce an accretive acquisition. Annualized dividend yield is 9.2% based on today's share price.
I have been told that they will only make acquisitions that add shareholder value. Don Simmons is very conservative. I don't expect them to make any large acquisition until they decide what to do at Marsden.

Credit Facility

The Company has completed its annual bank review and renewed its $35.0 million two-year extendible credit facility with the same key terms, and the next annual review date set for May 31, 2026.

Operations Update

With the majority of Hemisphere's 2025 capital spending scheduled for the latter half of the year, the Company generated $11.5 million in free funds flow during the first quarter. Current second quarter production of approximately 3,800 boe/d (99% heavy oil, field estimates between April 1 - May 15, 2025) is consistent with that of the first quarter, and represents an increase of 13% over fourth quarter production of 3,359 boe/d (99% heavy oil), due both to downtime in November and continued injection support from Hemisphere's polymer floods at its Atlee Buffalo projects in southeast Alberta. < The fact that production is flat despite no new wells being completed is VERY GOOD NEWS. Buffalo Atlee is a "Gem".

At Hemisphere's Marsden pilot polymer flood project, injection continues to repressure the reservoir. < Good news.
Management anticipates that polymer response could take until late 2025, at which time the Company will determine economics of further development.

Management continues to closely monitor the volatility of the oil market and will adjust capital spending accordingly. With over $14 million in working capital and an undrawn credit line, Hemisphere will prioritize shareholder returns, share buybacks, and potential acquisition activity over accelerated capital spending.