CDN NEWS | 
US NEWS 
TSX-V: HME – VANCOUVER, April 26, 2018 /CNW/ – Hemisphere Energy Corporation (TSX-V: HME) (“Hemisphere” or the “Company”) is pleased to announce its financial and operating results for the fourth quarter and year ended December 31, 2017.
Last year was a transformational year as Hemisphere transitioned from strategic investment to aggressive growth. In September 2017 Hemisphere entered into a five-year term loan that allows the Company to draw up to US$35 million to fund the development of its low-risk oil assets in the Atlee Buffalo and Jennerproperties in southeast Alberta. Prior to last fall, the Company had been limited by access to capital and was focused on optimizing existing production and proving waterflood reserves with minimal capital outlay. Subsequent to this financing however, Hemisphere drilled six wells, built a key processing facility, and expanded an existing facility in the fourth quarter. This activity led to a 57% reserves increase year over year in both the Proved (1P) and Proved plus Probable (2P) categories, created significant growth in corporate production, and has set the Company up for a substantial drilling program in 2018.
2017 Highlights
- Achieved annual average production rate of 659 boe/d (93% oil), a 25% increase over 2016.
- Realized December 2017 average exit rate of approximately 850 boe/d (94% oil).
- Generated $11.0 million in annual revenue, a 76% increase from the previous year.
- Increased operating netback by 109% to $4.9 million.
- Generated $2.5 million of funds flow from operations, a 367% increase from 2016.
- Executed a strategic five-year term loan agreement with a borrowing base of up to US$35 million.
- Increased 2P net present value before tax of future net revenue (discounted at 10%) by 77% to $116.6 million.
- Increased 2P reserve volumes by 57% to 7.2 MMboe (97% oil).
- Increased net asset value by 68% to $1.12 per basic share.
Fourth Quarter 2017 Highlights
- Achieved average production rate of 770 boe/d (94% oil), a 31% increase over the fourth quarter of 2016.
- Generated $3.5 million in revenue, a 60% increase over the same quarter in 2016.
- Increased operating netback by 92% to $1.7 million.
- Generated $0.7 million of funds flow from operations, a 162% increase over the fourth quarter of 2016.
- Drilled six development wells in Atlee Buffalo area, of which two are designated water injectors.
- Expanded the Atlee Buffalo F pool facility with a SKUD (inclined free water knockout).
- Constructed the Atlee Buffalo G pool facility to separate and reinject produced water.
- Acquired 7,433 acres of new land in the immediate vicinity of its Atlee Buffalo operations.
Selected financial and operational highlights should be read in conjunction with Hemisphere’s audited annual financial statements and related Management’s Discussion and Analysis for the year ended December 31, 2017. These reports, including the Company’s Annual Information Form for the year ended December 31, 2017, are available on SEDAR at www.sedar.com and on Hemisphere’s website at www.hemisphereenergy.ca. All amounts are expressed in Canadian dollars unless otherwise noted.
Financial and Operating Summary
|
Three Months Ended December 31 |
Year Ended December 31 |
||||||||
|
2017 |
2016 |
2017 |
2016 |
||||||
|
FINANCIAL |
|||||||||
|
Petroleum and natural gas revenue |
$ |
3,528,565 |
$ |
2,206,835 |
$ |
10,974,634 |
$ |
6,221,497 |
|
|
Operating netback(1) |
1,650,446 |
860,849 |
4,913,240 |
2,347,747 |
|||||
|
Funds flow from operations(2) |
714,801 |
273,181 |
2,476,049 |
530,567 |
|||||
|
Per share, basic and diluted |
0.01 |
0.00 |
0.03 |
0.01 |
|||||
|
Net loss |
(3,308,520) |
(620,027) |
(3,796,175) |
(2,680,647) |
|||||
|
Per share, basic and diluted |
(0.04) |
(0.01) |
(0.04) |
(0.03) |
|||||
|
Capital expenditures |
4,663,442 |
715,762 |
8,689,240 |
2,722,376 |
|||||
|
Net debt(3) |
18,558,361 |
11,827,170 |
18,558,361 |
11,827,170 |
|||||
|
Bank indebtedness |
– |
11,247,537 |
– |
11,247,537 |
|||||
|
Term loan |
$ |
18,868,500 |
$ |
– |
$ |
18,868,500 |
$ |
– |
|
|
Operating |
|||||||||
|
Average daily production |
|||||||||
|
Oil (bbl/d) |
725 |
534 |
612 |
450 |
|||||
|
Natural gas (Mcf/d) |
259 |
330 |
270 |
452 |
|||||
|
NGL (bbl/d) |
2 |
1 |
2 |
2 |
|||||
|
Combined (boe/d) |
770 |
590 |
659 |
527 |
|||||
|
Oil and NGL weighting |
94% |
91% |
93% |
86% |
|||||
|
Average sales prices |
|||||||||
|
Oil ($/bbl) |
$ |
52.02 |
$ |
42.91 |
$ |
47.94 |
$ |
35.67 |
|
|
Natural gas ($/Mcf) |
2.05 |
3.05 |
2.33 |
1.96 |
|||||
|
NGL ($/bbl) |
53.01 |
46.32 |
47.69 |
29.08 |
|||||
|
Combined ($/boe) |
$ |
49.80 |
$ |
40.63 |
$ |
45.62 |
$ |
32.23 |
|
|
Operating netback ($/boe) |
|||||||||
|
Petroleum and natural gas revenue |
$ |
49.80 |
$ |
40.63 |
$ |
45.62 |
$ |
32.23 |
|
|
Royalties |
7.61 |
4.64 |
7.56 |
3.57 |
|||||
|
Operating costs |
13.10 |
17.52 |
14.66 |
12.46 |
|||||
|
Transportation costs |
3.02 |
2.61 |
2.90 |
4.04 |
|||||
|
Operating field netback(4) |
26.07 |
15.85 |
20.50 |
12.16 |
|||||
|
Realized commodity hedging loss |
2.78 |
– |
0.08 |
– |
|||||
|
Operating netback(1) |
$ |
23.29 |
$ |
15.85 |
$ |
20.42 |
$ |
12.16 |
|
|
Notes: |
|
|
(1) |
Operating netback is a non-IFRS measure calculated as the operating field netback plus the Company’s realized commodity hedging gain (loss) per barrel of oil equivalent. Operating netback per boe is a non-IFRS measure calculated as the operating field netback plus the Company’s realized commodity hedging gain (loss) per barrel of oil equivalent. |
|
(2) |
Funds flow from operations is a non-IFRS measure that represents cash generated by operating activities, before changes in non-cash working capital and may not be comparable to measures used by other companies. |
|
(3) |
Net debt is a non-IFRS measure calculated as current assets minus current liabilities including term loan or bank indebtedness and excluding fair value of financial instruments and any flow-through share premium. |
|
(4) |
Operating field netback per boe is a non-IFRS measure calculated as the Company’s oil and gas sales, less royalties, operating expenses and transportation costs per barrel of oil equivalent. |
|
As at December 31 |
|||
|
2017 |
2016 |
||
|
Share Information |
|||
|
Common shares outstanding |
89,793,302 |
85,745,102 |
|
|
Stock options outstanding |
8,169,000 |
4,385,000 |
|
|
Warrants outstanding |
13,750,000 |
– |
|
|
Fully diluted shares outstanding |
111,712,302 |
90,130,102 |
|
|
Weighted-average shares outstanding – basic and diluted |
88,495,660 |
80,672,032 |
|
Outlook
Hemisphere kicked off 2018 with a three well drilling program, including two wells that are awaiting approval for injection in order to expand waterflood productivity into new areas of the Atlee Buffalo pools. With continued improvements in price and more consistent WCS differentials, the Company is planning an extensive drilling program through the summer aimed specifically at increasing production and cash flow, while proving up significant unbooked reserves.
Annual General and Special Meeting of Shareholders
Hemisphere’s Annual General and Special Meeting of Shareholders is being held in the Pender Room of Oceanic Plaza, 1035 West Pender Street, Vancouver, British Columbia on Friday, June 22, 2018 at 9:30 a.m. (Pacific Daylight Time).
About Hemisphere Energy Corporation
Hemisphere Energy Corporation is a producing oil and gas company focused on developing conventional oil assets with low risk drilling opportunities. Hemisphere plans continual growth in production, reserves, and cash flow by drilling existing projects and executing strategic acquisitions. Hemisphere has the oil weighted assets to develop, the team to deliver results, and the access to capital required to move projects forward while providing top tier economics. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME”.
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