TSX-V: HME
VANCOUVER, May 23, 2018 /CNW/ – Hemisphere Energy Corporation (TSX-V: HME) (“Hemisphere” or the “Company”) announces its financial and operating results for the three months ended March 31, 2018.
Q1 2018 Highlights
- Achieved quarterly production average of 858 boe/d (95% oil), a 47% increase over the first quarter of 2017.
- Increased revenue by 48% to $3.4 million compared to the first quarter of 2017.
- Drilled three additional development wells for total capital expenditures of $2.9 million.
- Corporate Liability Management Ratio (LMR) with the Alberta Energy Regulator was 5.6 at the end of the first quarter 2018.
Corporate Update
During the first quarter of 2018, Hemisphere experienced significant downtime and higher than average operating costs associated with severe winter conditions. Widened differentials between WTI and WCS oil prices also impacted oil revenues substantially which carved into gains from overall oil market improvements.
The WTI/WCS differential market appears to have stabilized during the second quarter with differentials narrowing dramatically for May and June 2018. Corporate production has continued to grow through the second quarter reaching rates in excess of 1000 boe/d (~97% oil).
In the first quarter, the Company drilled three wells into its Atlee Buffalo G pool. Two of these wells will be converted to injectors to help re-energize new areas of the reservoir in advance of a significant summer drilling program. Hemisphere now produces over 300 bbl/d of oil from this pool, up from 30 bbl/d of oil a year ago. The Company is also planning further development in its Atlee Buffalo F pool, where oil production has grown to almost 500 bbl/d from 300 bbl/d a year ago.
Hemisphere’s mangement anticipates significant growth and considerable upside as additional producer and injector wells are drilled through 2018 while pressure continues to build in both Atlee Buffalo pools. Hemisphere’s corporate strategy is to substantially increase cash flow through organic production and reserve growth of its existing assets that are still in very early stages of development.
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).
Financial and Operating Summary
| Three Months Ended March 31 | |||||
| Operating | 2018 | 2017 | |||
| Average daily production | |||||
| Oil (bbl/d) | 809 | 530 | |||
| Natural gas (Mcf/d) | 281 | 309 | |||
| NGL (bbl/d) | 2 | 2 | |||
| Combined (boe/d) | 858 | 583 | |||
| Oil and NGL weighting | 95% | 91% | |||
| Average sales prices | |||||
| Oil ($/bbl) | $ | 45.76 | $ | 46.29 | |
| Natural gas ($/Mcf) | 2.09 | 2.80 | |||
| NGL ($/bbl) | 54.06 | 46.97 | |||
| Combined ($/boe) | $ | 43.96 | $ | 43.68 | |
| Operating netback ($/boe) | |||||
| Petroleum and natural gas revenue | $ | 43.96 | $ | 43.68 | |
| Royalties | 6.67 | 5.70 | |||
| Operating costs | 15.04 | 17.41 | |||
| Transportation costs | 2.59 | 3.07 | |||
| Operating field netback(1) | $ | 19.66 | $ | 17.51 | |
| Realized commodity hedging gain (loss) | 7.24 | (0.75) | |||
| Operating Netback(2) | $ | 12.42 | $ | 18.26 | |
| Financial | |||||
| Petroleum and natural gas revenue | $ | 3,393,921 | $ | 2,292,746 | |
| Operating netback(2) | 959,096 | 958,276 | |||
| Funds flow from operations(3) | 99,720 | 505,330 | |||
| Per share, basic and diluted | 0.00 | 0.01 | |||
| Net income (loss) | (2,389,393) | (138,678) | |||
| Per share, basic and diluted | (0.03) | (0.00) | |||
| Capital expenditures, including property acquisitions | 2,870,066 | 256,513 | |||
| Net debt(4) | 22,024,394 | 11,578,352 | |||
| Bank indebtedness | $ | – | $ | 11,622,930 | |
| Term Loan(5) | 23,209,200 | – | |||
| 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”.
Forward-looking Statements
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 regarding Hemisphere’s outlook for our future operations, plans, and timing for the commencement or advancement of exploration and development activities on our properties; Hemisphere’s plans for two wells to be converted to injectors to help re-energize new areas of the reservoir in advance of a significant summer drilling program; the Company’s plans for further development in its Atlee Buffalo F pool; Hemisphere’s anticipation of significant growth and considerable upside as additional producer and injector wells are drilled through 2018 while pressure continues to build in both Atlee Buffalo pools; Hemisphere’s corporate strategy to substantially increase cash flow through organic production and reserve growth of its existing assets that are still in very early stages of development; Hemisphere’s plans for continual growth in production, reserves, and cash flow by drilling existing projects and executing strategic acquisitions; and other expectations, intentions, and plans that are not historical fact. In addition, statements relating to “reserves” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future
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: that Hemisphere will continue to conduct its operations in a manner consistent with past operations; 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 information and 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 information or 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 information and 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 or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Non-IFRS Measures
The press release contains terms that are non-IFRS measures and commonly used in the oil and gas industry which are not defined by or calculated in accordance with International Financial Reporting Standards (“IFRS”), such as: (i) funds flow from operations; (ii) net debt;; and (iii) operating netback, operating netback per boe and operating field netback per boe. These terms should not be considered an alternative to, or more meaningful than the comparable IFRS measures (as determined in accordance with IFRS) which in the case of funds flow from operations is cash provided by operating activities and cash flow from operating activities and in the case of operating field netback and operating netback are net income or net loss. There is no IFRS measure that is reasonably comparable to net debt. These measures are commonly used in the oil and gas industry and by Hemisphere to provide shareholders and potential investors with additional information regarding: (i) in the case of funds flow from operations, the Company’s ability to generate the funds necessary to support future growth through capital investment and to repay any debt; (ii) in the case of operating netback, operating netback per boe and operating field netback per boe the indication of the Company’s profitability relative to current commodity prices; and (iii) in the case of net debt, the capital structure of the Company.
Hemisphere’s determination of these measures may not be comparable to that reported by other companies. Funds flow from operations is calculated as cash generated by operating activities, before changes in non-cash working capital; operating field netback is calculated as the Company’s oil and gas sales, less royalties, operating expenses, and transportation costs; operating field netback per boe is calculated as operating field netback divided by production for the applicable period on a per barrel of oil equivalent basis; operating netback and operating netback per boe adjusts operating field netback and operating field netback per boe, respectively, for any realized gains or losses on commodity hedges and net debt is calculated as current assets minus current liabilities including bank indebtedness and excluding fair value of financial instruments and any flow-through share premium. The Company has provided additional information on how these measures are calculated in the Management’s Discussion and Analysis for the year ended December 31, 2017, which is available under the Company’s SEDAR profile at www.sedar.com.
Oil and Gas Advisories
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.
Short-term and peak production rates disclosed herein are not determinative of the rates at which the wells will continue to produce and decline thereafter and may not necessarily be indicative of the long term performance or estimated ultimate recovery.
Definitions and Abbreviations
| bbl | barrel | Mcf | thousand cubic feet |
| bbl/d | barrels per day | Mcf/d | thousand cubic feet per day |
| $/bbl | dollar per barrel | $/Mcf | dollar per thousand cubic feet |
| boe | barrel of oil equivalent | NGL | natural gas liquids |
| boe/d | barrel of oil equivalent per day | IFRS | International Financial Reporting Standards |
| $/boe | dollar per barrel of oil equivalent | WTI | West Texas Intermediate Oil price |
| WCS | Western Canada Select Oil Price |
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.
SOURCE Hemisphere Energy Corporation
For further information:
Please visit our website at www.hemisphereenergy.ca to see our corporate presentation or contact: Don Simmons, President & Chief Executive Officer, Telephone: (604) 685-9255, Email: info@hemisphereenergy.ca; Scott Koyich, Investor Relations, Telephone: (403) 619-2200, Email: scott@briscocapital.com
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