Hemisphere Energy Provides Corporate Update, Declares Quarterly Dividend, and Announces 2024 Guidance

Vancouver, British Columbia, January 25, 2024 – Hemisphere Energy Corporation ("Hemisphere" or the "Company") is pleased to provide a corporate update, announce the declaration of a quarterly dividend payment to shareholders, and deliver guidance for 2024. 

Corporate Update 

Hemisphere realized another successful year in 2023, balancing production growth with balance sheet strength and shareholder return. During the year, $17.5 million was returned to shareholders in the form of dividends ($13.1 million) and share buybacks ($4.4 million), representing an approximate 14% yield to shareholders based on the market capitalization of Hemisphere at year-end. 

The Company achieved record average production in the fourth quarter of 3,375 boe/d (99% heavy oil), which represents a 16% increase over the same period in 2022. This growth in production year-over-year is the combined result of Hemisphere’s successful third quarter drilling program with the Company’s effective enhanced oil recovery ("EOR") polymer flood projects. Hemisphere’s annual average production for 2023 was approximately 3,100 boe/d (99% heavy oil), representing 10% growth as compared to 2022. 

Balance sheet strength continued to be a priority in 2023, with Hemisphere exiting the year in a cash position. Hemisphere funded all of its shareholder returns and entire $16 million capital expenditure1 program on 2023 cash flow. In addition to drilling 8 successful Atlee Buffalo wells and upgrading some of its facilities, the Company acquired over 2,500 hectares of new land in Saskatchewan and Alberta. Hemisphere has plans to drill a new prospect on some of these Saskatchewan lands in the first half of 2024, and believes it to be prospective for EOR polymer flooding. 

Given the significant free cash flow generated by Hemisphere’s ultra-low production decline and long-life reserve asset base, the Company was able to complement its $0.025 per share quarterly base dividend with a $0.03 per share special dividend paid in the fourth quarter of 2023. This brought total shareholder returns last year to $0.13 per share in dividends. Hemisphere also invested $4.4 million into its normal course issuer bid ("NCIB") share buyback program to purchase and cancel 3.5 million shares in 2023. 

Quarterly Dividend 

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 February 23, 2024 to shareholders of record as of the close of business on February 9, 2024. The dividend is designated as an eligible dividend for income tax purposes. 

2024 Corporate Guidance 

Hemisphere’s Board of Directors has approved a 2024 capital expenditure program of $21 million, which is planned to be entirely funded by Hemisphere’s estimated 2024 adjusted funds flow1 ("AFF") of $40 million and is anticipated to provide 10% annual production growth. The majority of capital will be allocated to drilling and facility work, with approximately 10% allotted to exploration and land acquisition. Over half of the planned capital expenditures are scheduled for the third quarter, providing Hemisphere with the flexibility to adjust plans subject to the commodity price environment. 

The start of 2024 brought with it some extreme cold weather which has substantially affected corporate production during the month of January. The failure of an electrical panel at Hemisphere’s G pool facility resulted in the loss of power to its operations. Subsequent sustained -40°C weather led to freezing of most of the G pool wells and facility, which experienced 5 days of complete downtime and an additional few days of lower production as equipment was repaired and wells were brought back online. All impacts of this production disruption have been accounted for in the guidance set out below, and the team has now restored operations back to normal levels. 

After capital expenditures and asset retirement obligations ("ARO"), 2024 free funds flow1 ("FFF") is estimated to be $19 million, of which approximately 50% is planned to be paid in quarterly dividends as shown in the table below. The balance of cash will be used for discretionary purposes, which may include potential acceleration of other development or exploration projects, acquisitions, and additional return of capital to shareholders through Hemisphere’s NCIB program and/or special dividends. 

Management believes that the 2024 development plan provides stable production growth and consistent shareholder returns, while still allowing for modest investment in a new EOR play with exciting growth potential for the Company. 

Highlights and assumptions of Hemisphere’s guidance at US$75/bbl WTI are as follows: 

  • Average annual production of 3,400 boe/d (99% heavy oil), a 10% increase as compared to 2023 
  • Average WTI price of US$75/bbl, with sensitivities shown at US$65/bbl and US$85/bbl 
  • WCS differential of US$15.50/bbl and quality adjustment of $7.50/bbl 
  • CAD/US FX of 1.35 
  • Operating and transportation costs of $14.85/boe 
  • Royalties and GORRs on gross revenue of 20% at US$75/bbl WTI, 18% at US$65/bbl WTI, and 22% at US$85/bbl WTI 
  • Net G&A of $3.65/boe 
  • Tax Costs of $7.29/boe at US$75/bbl WTI, $4.91/boe at US$65/bbl WTI, and $9.53/boe at US$85/bbl WTI 

 

2024 Corporate Guidance(2) US$65 WTIUS$75 WTIUS$85 WTI
Adjusted Funds Flow (AFF)$million314049
AFF per Basic Share(1,3)$/share0.320.410.49
Capital Expenditures & ARO$million212121
Free Funds Flow (FFF)$million101928
FFF per Basic Share(1,3)$million.10.19.28
Dividend per Basic Share(3)$million.10.10.10

 

Notes: 

(1) AFF, Capital Expenditures, and FFF are non-IFRS financial measures that are forward looking and do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. AFF per basic share and FFF per basic share are non-IFRS financial ratios that are forward looking and do not have any standardized meaning under IFRS and therefore may not be comparable to similar ratios presented by other entities and include non-IFRS financial measure components of AFF and FFF. See "Non-IFRS Measures". 
(2) See assumptions noted above within “2024 Corporate Guidance”
(3) Using a 2024 weighted average of 98,988,539 basic shares issued and outstanding. 
(4) The amounts above 

 

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, ultra-low decline conventional heavy oil assets through EOR polymer flood projects. 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
Email: info@hemisphereenergy.ca
Website: www.hemisphereenergy.ca