Hemisphere Energy Grows Proved Reserve Value to $325 Million and Proved Net Asset Value to $3.18 per Fully Diluted Share
- Hemisphere Energy Corporation invested $16 million in 2023 to drill eight successful Atlee Buffalo wells, upgrade facilities, purchase land and seismic, and pre-purchase materials for the 2024 development program.
- Corporate production increased by more than 10% year-over-year to 3,124 boe/d in 2023, with production currently trending over 3,450 boe/d in 2024.
- Hemisphere distributed $13.1 million in base and special dividends in 2023 and purchased 3.2 million shares under its normal course issuer bid for $4.0 million.
- The Reserve Report recognized Hemisphere's success in enhanced oil recovery projects, with increases in Proved Developed Producing, Proved, and Proved plus Probable reserve values.
- Hemisphere's new Saskatchewan lands account for a small percentage of reserves but offer significant upside potential for the company.
- Hemisphere stands out in liability management, with a top 8% industry-leading liability management ratio of 17, minimizing the impact of abandonment, decommissioning, and reclamation costs on reserve valuations.
- The company's reserves demonstrate low decline, long life, and high value, positioning Hemisphere for significant free cash flow generation with planned development and optimization of enhanced oil recovery techniques.
- None.
Vancouver, British Columbia--(Newsfile Corp. - March 12, 2024) - Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) ("Hemisphere" or the "Company") is pleased to announce highlights from its independent reserves evaluation (the "Reserve Report"), prepared by McDaniel & Associates Consultants Ltd. ("McDaniel") and effective as at December 31, 2023.
In 2023, Hemisphere invested
During the year, Hemisphere also distributed
The Company's continued success in the development of its enhanced oil recovery projects was recognized again by McDaniel in the Reserve Report. In the Proved Developed Producing ("PDP") category, Hemisphere replaced
The Company's new Saskatchewan lands currently account for only
Consistent with McDaniel's 2022 year-end evaluation, the Reserve Report incorporates full corporate abandonment, decommissioning, and reclamation costs ("ADR") in the PDP category. Hemisphere has always been cautious of acquiring additional wellbore and facility liabilities. A direct result of this strategy is that Hemisphere's reserves retain more comparative value per barrel than companies with additional ADR liabilities that must be deducted from their base valuations. Management estimates that total undiscounted and uninflated existing ADR is
Hemisphere's low decline, long life, and high value reserves are a sign of the tremendous resource the Company has been developing over the past number of years. These valuable assets are the backbone of Hemisphere and are expected to generate significant free cash flow as they continue to grow with planned additional development and optimization of enhanced oil recovery techniques.
2023 Reserve Highlights
Proved Developed Producing ("PDP") Reserves
- NPV10 BT of
$248 million , an increase of9% over year-end 2022 and equivalent to$2.49 per basic share. - Replaced
104% of 2023 production through organic development. - Maintained reserve volumes year-over-year at 8.2 MMboe (
99.6% heavy crude oil). - Achieved a 2-year FD&A cost of
$9.30 /boe (including changes in future development capital ("FDC")) for a recycle ratio of 5.4. - RLI of 7.2 years based on 2023 production.
Proved ("1P") Reserves
- NPV10 BT of
$325 million , an increase of5% over year-end 2022 and equivalent to$3.27 per basic share. - Replaced
90% of 2023 production through organic development. - Maintained reserve volumes year-over-year at 12.1 MMboe (
99.4% heavy crude oil). - Achieved a 2-year FD&A cost of
$14.82 /boe (including changes in FDC) for a recycle ratio of 3.4. - RLI of 10.6 years based on 2023 production.
- NAV of
$3.18 per fully diluted share based on Reserve Report pricing assumptions. - NAV of
$3.28 and$4.27 per fully diluted share based on Reserve Report run internally at McDaniel's pricing sensitivities of US$80 and US$100 WTI flat pricing.
Proved plus Probable ("2P") Reserves
- NPV10 BT of
$416 million , an increase of5% over year-end 2022 and equivalent to$4.19 per basic share. - Replaced
125% of 2023 production through organic development. - Maintained reserve volumes at 16.3 MMboe (
99.4% heavy crude oil). - Achieved a 2-year FD&A cost of
$14.91 /boe (including changes in FDC) for a recycle ratio of 3.4. - RLI of 14.3 years based on 2023 production.
- NAV of
$4.03 per fully diluted share based on Reserve Report pricing assumptions. - NAV of
$4.12 and$5.36 per fully diluted share based on Reserve Report run internally at McDaniel's pricing sensitivities of US$80 and US$100 WTI flat pricing.
2023 Independent Qualified Reserve Evaluation
The reserves data set forth below is based upon an independent reserves evaluation prepared by McDaniel dated March 11, 2024 with an effective date of December 31, 2023, and is in accordance with definitions, standards, and procedures contained within COGEH and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Additional reserve information as required under NI 51-101 will be included in Hemisphere's Annual Information Form which will be filed on SEDAR+ on or before April 30, 2024. Due to rounding, certain totals in the columns may not add in the following tables. All dollar values are in Canadian dollars, unless otherwise noted.
Pricing Assumptions
McDaniel's independent evaluation was based on the average of the published price forecasts for McDaniel, GLJ Petroleum Consultants Ltd., and Sproule Associates Ltd. (the "3-Consultant Average Price Forecast") at January 1, 2024, with the following table detailing pricing and foreign exchange rate assumptions. Hemisphere's corporate production historically averages a discount of approximately
| 3-Consultant Average Price Forecast January 1, 2023 | 3-Consultant Average Price Forecast January 1, 2024 | |||||||||||||
| WTI Crude Oil ($US/bbl) | Edmonton Light Crude Oil ($Cdn/bbl) | Western Canadian Select WCS Crude Oil ($Cdn/bbl) | AECO Spot Price ($Cdn/MM Btu) | Inflation (%) | US/Cdn Exchange Rate ($US/$Cdn) | WTI Crude Oil ($US/bbl) | Western Canadian Select WCS Crude Oil ($Cdn/bbl) | Edmonton Light Crude Oil ($Cdn/bbl) | AECO Spot Price ($Cdn/MM Btu) | Inflation (%) | US/Cdn Exchange Rate ($US/$Cdn) | |||
| 2024 | 78.50 | 97.74 | 77.75 | 4.40 | 2.3 | 0.765 | 2024 | 73.67 | 92.91 | 76.74 | 2.20 | 0 | 0.745 | |
| 2025 | 76.95 | 95.27 | 77.55 | 4.21 | 2 | 0.768 | 2025 | 74.98 | 95.04 | 79.77 | 3.37 | 2 | 0.765 | |
| 2026 | 77.61 | 95.58 | 80.07 | 4.27 | 2 | 0.772 | 2026 | 76.14 | 96.07 | 81.12 | 4.05 | 2 | 0.768 | |
| 2027 | 79.16 | 97.07 | 81.89 | 4.34 | 2 | 0.775 | 2027 | 77.66 | 97.99 | 82.88 | 4.13 | 2 | 0.772 | |
| 2028 | 80.74 | 99.01 | 84.02 | 4.43 | 2 | 0.775 | 2028 | 79.22 | 99.95 | 85.04 | 4.21 | 2 | 0.775 | |
| 2029 | 82.36 | 100.99 | 85.73 | 4.51 | 2 | 0.775 | 2029 | 80.80 | 101.94 | 86.74 | 4.30 | 2 | 0.775 | |
| 2030 | 84.00 | 103.01 | 87.44 | 4.60 | 2 | 0.775 | 2030 | 82.42 | 103.98 | 88.47 | 4.38 | 2 | 0.775 | |
| 2031 | 85.69 | 105.07 | 89.20 | 4.69 | 2 | 0.775 | 2031 | 84.06 | 106.06 | 90.24 | 4.47 | 2 | 0.775 | |
| 2032 | 87.40 | 106.69 | 91.11 | 4.79 | 2 | 0.775 | 2032 | 85.74 | 108.18 | 92.04 | 4.56 | 2 | 0.775 | |
| 2033 | 89.15 | 108.83 | 92.93 | 4.88 | 2 | 0.775 | 2033 | 87.46 | 110.35 | 93.89 | 4.65 | 2 | 0.775 | |
| 2034 | 90.93 | 111.00 | 94.79 | 4.98 | 2 | 0.775 | 2034 | 89.21 | 112.56 | 95.77 | 4.74 | 2 | 0.775 | |
| 2035 | 92.75 | 113.22 | 96.69 | 5.08 | 2 | 0.775 | 2035 | 90.99 | 114.81 | 97.68 | 4.84 | 2 | 0.775 | |
| 2036 | 94.61 | 115.49 | 98.62 | 5.18 | 2 | 0.775 | 2036 | 92.81 | 117.10 | 99.64 | 4.94 | 2 | 0.775 | |
| 2037 | 96.50 | 117.80 | 100.59 | 5.29 | 2 | 0.775 | 2037 | 94.67 | 119.45 | 101.63 | 5.03 | 2 | 0.775 | |
| 2038 | 98.43 | 120.16 | 102.60 | 5.40 | 2.00 | 0.78 | 2038 | 96.56 | 121.83 | 103.66 | 5.14 | 2.00 | 0.78 | |
Summary of Reserves(1)
| Heavy Oil | Conventional Natural Gas | Total | |
| Reserves Category | (Mbbl) | (MMcf) | (Mboe) |
| Proved | |||
| Developed Producing | 8,196 | 173 | 8,225 |
| Developed Non-Producing | 34 | 7 | 35 |
| Undeveloped | 3,756 | 250 | 3,798 |
| Total Proved | 11,987 | 429 | 12,058 |
| Probable | 4,231 | 188 | 4,262 |
| Total Proved plus Probable | 16,217 | 617 | 16,320 |
Note:
(1) Reserves are presented as "gross reserves" which are the Company's working interest reserves before royalty deductions and without including any royalty interests.
Summary of Net Present Value of Future Net Revenue, Before Tax ("NPV BT") (1)(2)
| NPV BT (M$, except per share amount) | |||
| Discounted at (% per Year) | |||
| Reserves Category | |||
| Proved | |||
| Developed Producing | 363,872 | 295,324 | 247,832 |
| Developed Non-Producing | 720 | 603 | 513 |
| Undeveloped | 126,954 | 97,757 | 76,777 |
| Total Proved | 491,546 | 393,685 | 325,121 |
| Probable | 190,663 | 126,483 | 91,337 |
| Total Proved plus Probable | 682,209 | 520,168 | 416,458 |
| Per basic share(3) | |||
| Proved Developed Producing | 3.66 | 2.97 | 2.49 |
| Proved | 4.95 | 3.96 | 3.27 |
| Proved plus Probable | 6.87 | 5.24 | 4.19 |
Notes:
(1) Based on the average of the published price forecasts for McDaniel, GLJ Petroleum Consultants Ltd., and Sproule Associates Ltd. at January 1, 2024, as outlined in the table herein entitled "Pricing Assumptions".
(2) It should not be assumed that the estimates of net present value of future net revenues presented in this table represent the fair market value of Hemisphere's reserves.
(3) Based on there being 99,340,339 issued and outstanding shares of the Company as of December 31, 2023.
Future Development Costs ("FDC")
The following summarizes the development costs deducted in the estimation of the net present value of the future net revenue attributable to 1P and 2P reserves.
| Forecast Costs (M$) | ||
| 1P | 2P | |
| 2024 | 16,410 | 16,410 |
| 2025 | 22,959 | 28,051 |
| 2026 | 7,087 | 12,648 |
| 2027 | 3,501 | 3,501 |
| Subsequent years | - | - |
| Total Undiscounted | 49,956 | 60,609 |
| Total Discounted at | 43,568 | 52,209 |
Finding, Development and Acquisition Costs ("FD&A") Costs and Recycle Ratios(1)(2)
| 2023 | 2-Year Totals/Average | |||||
| FD&A | PDP | 1P | 2P | PDP | 1P | 2P |
| Exploration, development and acquisition capital (M$)(3)(4) | 14,543 | 31,570 | ||||
| Total changes in FDC (M$) | -528 | 4,869 | 10,094 | -2,527 | 2,191 | 9,888 |
| Total FD&A Capital, including changes in FDC (M$) |
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FAQ
What was Hemisphere Energy Corporation's production increase in 2023?
Hemisphere's corporate production increased by more than 10% year-over-year to 3,124 boe/d in 2023.
How much did Hemisphere invest in drilling successful Atlee Buffalo wells in 2023?
Hemisphere invested $16 million in 2023 to drill eight successful Atlee Buffalo wells.
What percentage of 1P and 2P reserves do Hemisphere's new Saskatchewan lands currently account for?
Hemisphere's new Saskatchewan lands currently account for only 5% of 1P and 7% of 2P reserves.
What is Hemisphere's industry-leading ratio in liability management?
Hemisphere stands out among its industry peers with a top 8% industry-leading liability management ratio of 17.
What are some highlights of Hemisphere Energy Corporation's Reserve Report for 2023?
The Reserve Report highlights increases in Proved Developed Producing, Proved, and Proved plus Probable reserve values for Hemisphere.
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