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Hemisphere Energy Announces Second Quarter 2019 Financial and Operating Results


Hemisphere Energy Corporation (TSX-V: HME) (“Hemisphere” or the  “Company”) announces its financial and operating results for the three months and six months ended June 30, 2019.

Q2 2019 HIGHLIGHTS

  • Achieved record revenue of $7.4 million, an increase of 32% over the second quarter of 2018.
  • Realized quarterly funds flow from operations of $2.6 million, a 105% increase over the same respective quarter of 2018.
  • Increased average quarterly production by 30% to 1,367 boe/d (96% oil), as compared to the second quarter of 2018.
  • Improved operating netback by 28% to $31.10/boe, over the same quarter in 2018.
  • Reduced net general and administration costs to $3.43/boe, which represents a 33% reduction from the second quarter of 2018.
  • Increased corporate Liability Management Ratio (LMR) with the Alberta Energy Regulator to 9.65 as of August 2019.

CORPORATE UPDATE

Hemisphere’s recent growth can be shown year over year when comparing the first half of 2019 to that of 2018. The Company has increased its production by 44% to 1,373 boe/d, revenue by 53% to over $13.8 million, operating netback by 63% to $30.99/boe, and funds flow from operations by 285% to $5.2 million. During the first six months of the year, Hemisphere focused on operating and corporate efficiencies attained from adding new stable production in the latter half of 2018. These combined achievements have helped Hemisphere to reduce its net debt from year-end 2018 by 8% while still funding the start of Hemisphere’s summer drilling program.

In the second quarter of 2019 the Company commenced an 11 well drilling program in the Atlee Buffalo area of southeast Alberta. This development drilling program was completed successfully in August and was executed ahead of schedule and on budget. Hemisphere anticipates that all new production from these wells will be on-stream by the end of September 2019. Facility upgrades at the Atlee Buffalo G pool battery are finished and already in operation in anticipation of the new well start-up dates.

Hemisphere’s corporate strategy through the remainder of 2019 is to focus on strengthening its balance sheet while optimizing new production and reducing per barrel operating and corporate costs. Hemisphere plans to keep its 2019 capital expenditures within corporate cash flow, and any additional funds are anticipated to be used to purchase shares under Hemisphere’s previously announced normal course issuer bid, fund the next phase of development drilling, or pay down debt. The Company will continue to move forward its development plans of the Atlee Buffalo oil pools as more information is gathered on the productivity levels of the recent drill program. Hemisphere has drawn US$26 million on its US$35 million multi-draw, non-revolving, 5-year term loan facility with an expiry date of September 2022, and continues to satisfy all financial and performance covenants set forth in the credit agreement.

The Company would like to thank its employees, contractors, and consultants for the smooth execution of this recent drilling campaign. With the commitment, hard work, and dedication of everyone involved, Hemisphere has achieved excellent technical success in the field and management looks forward to sharing the operational results of this program as they become available.

Q2 2019 FINANCIAL AND OPERATING HIGHLIGHTS

Three Months Ended June 30

Six Months Ended June 30

2019

2018

2019

2018

OPERATING

Average daily production

   Oil (bbl/d)

1,317

1,012

1,323

911

   Natural gas (Mcf/d)

295

235

291

258

   NGL (bbl/d)

1

2

1

2

   Combined (boe/d)

1,367

1,053

1,373

956

   Oil and NGL weighting

96%

96%

96%

96%

Average sales prices

   Oil ($/bbl)

$

62.15

$

60.64

$

57.17

$

54.07

   Natural gas ($/Mcf)

(2.14)

 

(6)

1.17

2.41

1.67

   NGL ($/bbl)

32.29

61.48

40.51

58.02

   Combined ($/boe)

$

59.44

$

58.64

$

55.65

$

52.09

Operating netback ($/boe)

   Petroleum and natural gas revenue

$

59.44

$

58.64

$

55.65

$

52.09

   Royalties

8.99

10.39

7.15

8.73

   Operating costs

12.84

11.08

11.25

12.85

   Transportation costs

2.59

2.95

2.52

2.79

   Operating field netback(1)

35.02

34.23

34.73

27.73

   Realized commodity hedging loss

3.92

9.96

3.74

8.74

   Operating netback(2)

$

31.10

$

24.27

$

30.99

$

18.99

FINANCIAL

Petroleum and natural gas revenue

$

7,396,095

$

5,618,915

$

13,831,347

$

9,012,836

Operating field netback(1)

4,357,767

3,279,840

8,632,028

4,797,818

Operating netback(2)

3,869,440

2,325,838

7,701,665

3,284,934

Cash flow provided by (used in)

operating activities

2,536,247

413,990

3,162,906

(193,833)

Funds flow from operations(3)

2,559,898

1,251,089

5,194,882

1,350,810

Per share, basic and diluted

0.03

0.01

0.06

0.02

Net income (loss)

2,812,582

(2,253,163)

1,923,356

(4,642,556)

Per share, basic and diluted

0.03

(0.03)

0.02

(0.05)

Capital expenditures

2,980,445

2,532,877

3,952,240

5,402,941

Net debt(4)

32,553,820

23,734,580

32,553,820

23,734,580

Gross term Loan(5)

$

34,036,600

$

23,637,600

$

34,036,600

$

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.

(5)

Gross term loan is calculated as the total USD draws on the term loan translated to Canadian Dollars at the period end exchange rate.

(6)

This price decrease is due to an overpayment on the Company’s non-operated joint interest in British Columbia in March 2019, which was subsequently reversed in April 2019.

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”.



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