Vancouver, British Columbia - May 25, 2023 (Newsfile Corp.) (Investorideas.com Newswire) Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) ("Hemisphere" or the "Company") provides its financial and operating results for the first quarter ended March 31, 2023, declares a quarterly dividend payment to shareholders, renews credit facility, and provides operations update.
Q1 2023 Highlights
(1) Operating field netback, adjusted funds flow from operations (AFF), free funds flow, working capital, and net debt are non-IFRS measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Non-IFRS financial ratios are not standardized financial measures under IFRS and may not be comparable to similar financial measures disclosed by other issuers. Refer to the section "Non-IFRS and Other Specified Financial Measures".
Q1 2023 Overview
In the first quarter of 2023, Hemisphere's production increased by 20% over the first quarter of 2022, achieving a record average rate of 3,171 boe/d (99% heavy oil). This was due in part to the production from two new Atlee Buffalo F pool wells that were placed on production early in the quarter.
Average sales price in the first quarter of 2023 was 32% lower than the first quarter of the previous year. This was due to a 19% decrease in the West Texas Intermediate ("WTI") crude oil price, combined with a 70% higher Western Canadian Select ("WCS") differential, which averaged US$76.13 and US$24.77, respectively, for the first quarter of 2023. Fortunately, WCS differentials have narrowed significantly and are trending closer to an average of US$15.50 for the second quarter of 2023 to date.
Despite the lower oil pricing environment, Hemisphere delivered solid financial results for the quarter with $8.3 million in adjusted funds flow from operations and a positive working capital position of $3.0 million at quarter-end. This marks the first time the Company has been in a positive working capital position in many years. Based on current commodity price and production forecasts, management expects the Company's balance sheet to further improve throughout the year while continuing to develop its core assets, deliver shareholder returns through its dividend and NCIB programs, and look for new growth and acquisition opportunities.
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 15, 2023 to shareholders of record as of the close of business on June 1, 2023. The dividend is designated as an eligible dividend for income tax purposes.
Future quarterly payments of this variable dividend will continue to be subject to board approval, and are conditional on production performance, commodity price environment, and compliance with the terms of the Company's credit facility. Board approved dividend declarations will be disclosed in the Company's news releases highlighting the financial and operating results for the applicable quarter except for the first quarter, where timing is adjusted due to the year-end third-party financial audit.
The Company has completed its annual bank review and renewed its $35 million two-year extendible credit facility, with the next annual review date set for May 31, 2024.
At this time, the Company is preparing its summer drilling program of up to nine wells, with drilling operations anticipated to commence in July and to be complete by the end of the third quarter. All new producing wells will be brought online after being completed and tied-in to existing facilities. Of the Company's nine planned wells, six are development production wells, two are injection wells, and one is an exploration well.
Corporate production to-date in the second quarter has averaged approximately 2,900 boe/d (99% heavy oil, based on field estimates between April 1st - May 23rd, 2023). Increased downtime at various wells, generators, and both batteries have impacted production. Additionally, overall injection rates at the G pool have decreased in the past few months due to surface injection pressure constraints at the facility. The Company has recently installed a second injection pump and subsequently increased injection rates back to previous levels. The Company is also modifying its source water piping in the G pool facility in order to increase and optimize injection rates even further over the coming months.
With its debt-free position and the anticipated free funds flow generated from its stable asset base of enhanced oil recovery operations, Hemisphere's balance sheet is capable of providing the Company with the ability to aggressively seek out and transact on meaningful new growth and development acquisition opportunities, as well as continued exploration programs.
Annual General and Special Meeting of Shareholders
Hemisphere's Annual General and Special Meeting of Shareholders will be held at 11:00 am (Pacific Daylight Time) on June 1, 2023 in the Ferguson Room of the Terminal City Club located at 837 West Hastings Street, Vancouver, British Columbia.
About Hemisphere Energy Corporation
Hemisphere is a dividend-paying Canadian oil company focused on maximizing value per share growth with the sustainable development of its high netback, low decline conventional heavy oil assets through polymer flood enhanced recovery methods. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol "HME" and on the OTCQX Venture Marketplace under the symbol "HMENF".
For further information, please visit the Company's website at www.hemisphereenergy.ca to view its corporate presentation or contact:
Don Simmons, President & Chief Executive Officer
Telephone: (604) 685-9255
Certain statements included in this news release constitute forward-looking statements or forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In particular, but without limiting the generality of the foregoing, this news release includes forward-looking statements including that management expects the Company's balance sheet to further improve throughout the year while continuing to develop its core assets, deliver shareholder returns through its dividend and NCIB programs, and look for new growth and acquisition opportunities; a dividend will be paid June 15, 2023 to shareholders of record as of the close of business on June 1, 2023; the Company's expectation to pursue a summer drilling program of up to nine wells, with drilling operations anticipated to commence in July and be complete by the end of the third quarter; new producing wells will be brought online after being completed and tied-in to existing facilities; and the Company's expectation that with its debt-free position and the anticipated free funds flow generated from its stable asset base of enhanced oil recovery operations, Hemisphere's balance sheet is capable of providing the Company with the ability to aggressively seek out and transact on meaningful new growth and development acquisition opportunities, as well as continued exploration programs.
Forward‐looking statements are based on a number of material factors, expectations or assumptions of Hemisphere which have been used to develop such statements and information but which may prove to be incorrect. Although Hemisphere believes that the expectations reflected in such forward‐looking statements or information are reasonable, undue reliance should not be placed on forward‐looking statements because Hemisphere can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the length of time that oil and gas operations will be impaired by the outbreak of Covid-19; the current and go-forward oil price environment; that Hemisphere will continue to conduct its operations in a manner consistent with past operations; that results from drilling and development activities are consistent with past operations; the quality of the reservoirs in which Hemisphere operates and continued performance from existing wells; the continued and timely development of infrastructure in areas of new production; the accuracy of the estimates of Hemisphere's reserve volumes; certain commodity price and other cost assumptions; continued availability of debt and equity financing and cash flow to fund Hemisphere's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Hemisphere operates; the general continuance of current industry conditions; the timely receipt of any required regulatory approvals; the ability of Hemisphere to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Hemisphere has an interest in to operate the field in a safe, efficient and effective manner; the ability of Hemisphere to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Hemisphere to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Hemisphere operates; and the ability of Hemisphere to successfully market its oil and natural gas products.
The forward‐looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward‐looking statements including, without limitation: changes in commodity prices; changes in the demand for or supply of Hemisphere's products, the early stage of development of some of the evaluated areas and zones; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Hemisphere or by third party operators of Hemisphere's properties, increased debt levels or debt service requirements; inaccurate estimation of Hemisphere's oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time‐to‐time in Hemisphere's public disclosure documents, (including, without limitation, those risks identified in this news release and in Hemisphere's Annual Information Form).
The forward‐looking statements contained in this news release speak only as of the date of this news release, and Hemisphere does not assume any obligation to publicly update or revise any of the included forward‐looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Non-IFRS and Other Financial Measures
This news release contains the terms adjusted funds flow from operations, operating field netback and operating netback, capital expenditures and working capital/net debt, which are considered "non-IFRS financial measures" and any of these measures calculated on a per boe or share basis, which are considered "non-IFRS financial ratios". These terms do not have a standardized meaning prescribed by IFRS. Accordingly, the Company's use of these terms may not be comparable to similarly defined measures presented by other companies. Investors are cautioned that these measures should not be construed as an alternative to net income (loss) or cashflow from operations determined in accordance with IFRS and these measures should not be considered to be more meaningful than IFRS measures in evaluating the Company's performance.
Oil and Gas Advisories
Any references in this news release to initial production rates (including as a result of recent waterflood activities) are useful in confirming the presence of hydrocarbons; however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter and are not necessarily indicative of long-term performance or ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Such rates are based on field estimates and may be based on limited data available at this time.
A barrel of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
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