Hemisphere Energy Announces Q2 2018 Financial and Operating Results

August 22, 2018 CNW

TSX-V: HME – VANCOUVER, Aug. 22, 2018 /CNW/ – Hemisphere Energy Corporation (TSX-V: HME) (“Hemisphere” or the “Company”) announces its financial and operating results for the three and six months ended June 30, 2018.

Q2 2018 HIGHLIGHTS

Achieved record quarterly average production of 1053 boe/d (96% oil), a 76% increase over the second quarter of 2017.
Increased revenue by 132% to $5.6 million compared to $2.4 million for the second quarter of 2017.
Increased operating netbacks, including losses on commodity contracts, to $24.27/boe, an increase of 21% from the second quarter of 2017.
Generated funds flow from operations of $1.3 million ($0.01/share), an increase of 109% over the second quarter of 2017.
Drilled the first two wells of an 11-well summer program.
Amended credit agreement to reflect an increased commitment of US$15.0 million to the term loan, bringing the aggregate amount committed by the lender to US$30 million.
Achieved a Corporate Liability Management Ratio (“LMR”) with the Alberta Energy Regulator of 6.17 at the end of the second quarter 2018, which is within the top 13% of all licensees evaluated.

CORPORATE UPDATE

Since securing a five year term loan in September, 2017, Hemisphere has drilled 18 new wells including 12 drilled to-date in 2018. Current production of approximately 1250 boe/d (based on field estimates for the week of Aug 13-19) includes new production from three of the recent drills and is more than double that from the second quarter of 2017. Ongoing operations include drilling two more wells in Atlee Buffalo through August and early September, completing and putting on production the remainder of the summer drilling program wells by the end of the third quarter of 2018, expanding both of the Atlee F and G pool batteries to handle significantly increasing production, and preparing for further drilling operations through the winter.

Hemisphere has spent the last three years implementing its enhanced oil recovery projects in Atlee Buffalo and currently only 10% of the total original-oil-in-place from the Atlee Buffalo Upper Mannville F and G pools, as mapped by McDaniel and Associates Consultants Ltd. (“McDaniel”) for the purposes of its independent reserve report dated effective as of December 31, 2017 (the “Reserve Report”), is captured on a proved reserve basis in the Reserve Report, with 12% captured on a proved plus probable basis. Analogue waterflood pools within two townships of the Company’s Atlee Buffalo property have recovered up to 40% of original-oil-in-place through secondary and tertiary recovery schemes. Management anticipates significant reserve additions through 2018 with the level of activity achieved this year to enhance the development and establish the productivity of these pools.

Hemisphere expects to complete its capital program in 2018 with debt levels within its term loan commitment level of US$30 million, which allows for room to continue a capital program through the first quarter of 2019. Currently up to eight wells are being planned for the first quarter of 2019.

Hemisphere’s corporate strategy is to achieve organic production and reserve growth in order to improve profitability and financial flexibility. With continued success of its waterflood projects, the Company expects to see sustained increases in production and reserves through the year. Management believes the Company has considerable growth upside through development of its exceptional assets.

Q2 2018 FINANCIAL AND OPERATING HIGHLIGHTS

		Three Months Ended June 30				Six Months Ended June 30
		2018		2017		2018		2017
OPERATING
Average daily production
	Oil (bbl/d)		1,012		549		911		539
	Natural gas (Mcf/d)		235		296		258		303
	NGL (bbl/d)		2		2		2		2
	Combined (boe/d)		1,053		600		956		591
	Oil and NGL weighting		96%		92%		96%		91%
Average sales prices
	Oil ($/bbl)	$	60.64	$	46.85	$	54.07	$	46.57
	Natural gas ($/Mcf)		1.17		2.73		1.67		2.77
	NGL ($/bbl)		61.48		46.30		58.02		46.64
	Combined ($/boe)	$	58.64	$	44.34	$	52.09	$	44.02
Operating netback ($/boe)
	Petroleum and natural gas revenue	$	58.64	$	44.34	$	52.09	$	44.02
	Royalties		10.39		7.19		8.73		6.46
	Operating costs		11.08		16.20		12.85		16.79
	Transportation costs		2.95		2.81		2.79		2.94
	Operating field netback⁽¹⁾		34.23		18.14		27.73		17.83
	Realized commodity hedging (gain) loss		9.96		(1.96)		8.74		(1.37)
	Operating netback⁽²⁾	$	24.27	$	20.09	$	18.99	$	19.19
FINANCIAL
Petroleum and natural gas revenue		$	5,618,915	$	2,419,666	$	9,012,836	$	4,712,412
Operating netback⁽²⁾			2,325,836		1,096,412		3,284,932		2,054,688
Funds flow from operations⁽³⁾			1,251,089		598,078		1,350,810		1,103,409
	Per share, basic and diluted		0.01		0.01		0.02		0.01
Net income (loss)			(2,253,163)		(206,724)		(4,642,556)		(345,402)
	Per share, basic and diluted		(0.03)		(0.00)		(0.05)		(0.00)
Capital expenditures			2,532,877		661,307		5,402,941		917,821
Net debt⁽⁴⁾			23,734,580		10,605,594		23,734,580		10,605,594
Bank indebtedness			–		10,463,948		–		10,463,948
Term Loan⁽⁵⁾		$	23,637,600	$	–	$	23,367,600	$	–

Notes:
(1)	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 on an absolute and per barrel of oil equivalent basis.
(2)	Operating netback is a non-IFRS measure calculated as the operating field netback plus the Company’s realized commodity hedging gain (loss) on an absolute and per barrel of oil equivalent basis.
(3)	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.
(4)	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.
(5)	Gross term loan amount including foreign exchange

About Hemisphere Energy Corporation

Hemisphere Energy Corporation is a producing oil and gas company focused on developing low risk conventional oil assets for minimal capital exposure through developing known pools of oil and optimizing waterflood projects. Hemisphere plans continual growth in production, reserves, and cash flow by drilling existing projects and executing strategic acquisitions. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME”.