Hemisphere Energy Announces 2021 Fourth Quarter and Year-End Financial and Operating Results

Vancouver, British Columbia, April 21, 2022 – Hemisphere Energy Corporation ("Hemisphere" or the "Company") is pleased to provide its financial and operating results for the fourth quarter and year ended December 31, 2021. 2021

Highlights

  • Increased annual production to record levels of 1,820 boe/d, and exited 2021 with a December production average of 2,400 boe/d.
  • Attained record annual revenue of $43.1 million, a 131% increase over 2020.
  • Realized record annual adjusted funds flow from operations (AFF) of $18.5 million, a 99% increase over 2020.
  • Executed a successful $12 million capital expenditure program with seven new wells, facility expansion, and polymer skid installation.
  • Achieved operating and transportation costs of $12.43/boe.
  • Increased Proved Developed Producing (PDP) NPV10 BT reserve value to $197 million and volumes to 7.3 MMboe (99.8% heavy crude oil).
  • Increased Proved (1P) NPV10 BT reserve value to $276 million and volumes to 12.0 MMboe (99.8% heavy crude oil).
  • Increased Proved plus Probable (2P) NPV10 BT reserve value to $351 million and volumes to 14.9 MMboe (99.8% heavy oil).
  • Repaid 5-year term loan with a new reserve based credit facility with a Canadian bank.
  • Commenced polymer injection at the Upper Manville G pool in Atlee Buffalo.

Message to Shareholders

Over the past year Hemisphere has achieved several corporate milestones, both operationally and financially. With higher oil pricing through 2021, we realized record accomplishments in multiple categories including revenue of over $43 million, adjusted funds flow from operations of $18.5 million, and annual production of 1,820 boe/d.

Our ability to maneuver quickly allowed us to capture a window of drilling rig availability before costs increased appreciably into 2022. In November, we accelerated part of our 2022 program and drilled four additional wells, bringing total wells drilled in 2021 to seven. Despite these four wells not being on production until January, Hemisphere exited the year with December average production at new record levels of 2,400 boe/d.

In March 2022, Hemisphere’s average production climbed to new highs of 2,900 boe/d. Our production increases are in large part attributable to success with our enhanced oil recovery projects in the Atlee Buffalo pools. In July of 2021 Hemisphere implemented an exciting new project with the conversion of our Upper 2 | P a g e Mannville G pool from waterflood to polymer flood. This project is anticipated to increase both oil production rates and overall oil recovery from the pool. Response has already begun with water cuts decreasing and oil rates increasing at many of our wells. Today we are producing over 80% more from the pool than we were before polymer injection, including the impact of drilling three new wells into the pool in late summer of 2021. Meanwhile, we are already busy moving forward our second polymer conversion project in Atlee Buffalo.

Over the past few years, Hemisphere has worked hard to unlock substantial reserve value from our assets and grow production meaningfully, while still reducing debt considerably. Last summer we repaid our 5-year term loan with a US lender over a year ahead of schedule and returned to a reserve based credit facility with our Canadian bank, which has increased our financial flexibility and lowered our interest costs.

Combined with continued strong oil pricing from supportive supply and demand fundamentals, Hemisphere’s robust balance sheet, long life assets, low decline wells, and high value reserve base have put Hemisphere in a position to continue to sustainably grow production, accelerate projects, participate in strategic acquisitions, and increase return of capital to shareholders. We anticipate our capital programs to be funded within cash flow, our current debt to be minimal within a few months, and our free cash flow generation to be significant over the coming years.

Financial and Operating Summary

Selected financial and operational highlights should be read in conjunction with Hemisphere’s audited annual financial statements and related Management’s Discussion and Analysis for the year ended December 31, 2021. These reports, including the Company’s Annual Information Form for the year ended December 31, 2021, are available on SEDAR at www.sedar.com and on Hemisphere’s website at www.hemisphereenergy.ca. All amounts are expressed in Canadian dollars unless otherwise noted.

See the PDF version of the news release for further information.