Hemisphere Energy Grows Proved Reserve Value to $325 Million and Proved Net Asset Value to $3.18 per Fully Diluted Share

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 $16 million to drill eight successful Atlee Buffalo wells, upgrade facilities in Atlee Buffalo, purchase land and seismic, and pre-purchase some of the materials for its 2024 development program. With the Company's capital additions, corporate production in 2023 increased by more than 10% year-over-year, to 3,124 boe/d (99% heavy oil). Production is currently trending over 3,450 boe/d (99% heavy oil, based on field estimates between February 10 - March 10, 2024), after significant downtime experienced in January and early February due to extreme cold weather and equipment failure.

During the year, Hemisphere also distributed $13.1 million in base and special dividends, purchased 3.2 million shares under its normal course issuer bid ("NCIB") for a total price of $4.0 million (at an average price of $1.25/share), and exited the year in a cash position with working capital¹ of over $3 million.

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 104% of 2023 production and increased reserve value by 9% to $248 million NPV10 BT. Hemisphere also grew Proved ("1P") reserve value to $325 million NPV10 BT and Proved plus Probable ("2P") reserve value to $416 million NPV10 BT.

The Company's new Saskatchewan lands currently account for only 5% of 1P and 7% of 2P reserves, while making up only 3% of 1P and 5% of 2P NPV10 BT valuations of Hemisphere's reserves. Significant reserve upside remains on Hemisphere lands if the play proves successful over the course of 2024 and beyond.

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 $8.3 million ($2.3 million NPV10 BT, with costs inflated at 2%/yr), which includes all ADR associated with both active and inactive wells, pipelines, and facilities regardless of whether such wells, pipelines, and facilities had any attributed reserves. Based on public information, Hemisphere stands out among its industry peers as being within the top 8% of Alberta oil and gas operators for its industry-leading liability management ratio ("LMR") of 17, resulting in Hemisphere having less than 1% of its PDP net present value impaired by ADR.

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 of 9% 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 of 5% 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 of 5% 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 $4.50 to WCS pricing. When compared to last year's 3-Consultant Average Price Forecast dated January 1, 2023, the current WCS pricing outlook is down approximately 1% in 2024, and up 1% thereafter over the next 15-year period. The 2024 3-Consultant Average Price Forecast uses a 5-year 2024-28 WTI price of US$76.33/bbl and WCS price of Cdn$81.11/bbl.

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	0%	5%	10%
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 10%	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$)	Hemisphere Energy Corp OTC:HMENF HMENF Rankings N/A Ranked by Market Cap N/A Ranked by Dividends HMENF Latest News Apr 17, 2025 Hemisphere Energy Announces 2024 Fourth Quarter and Year-End Financial and Operating Results Apr 3, 2025 Hemisphere Energy Declares Special Dividend Mar 19, 2025 Hemisphere Energy Announces Proved Reserves of $317 Million with Proved Net Asset Value of $3.21 per Fully Diluted Share Jan 29, 2025 Hemisphere Energy Provides Corporate Update, Declares Quarterly Dividend, and Announces 2025 Guidance Dec 16, 2024 Hemisphere Energy Announces Updates to Its Share-Based Compensation Plans and Grants Incentive Restricted Share Units and Stock Options HMENF Stock Data Market Cap 125.63M Float 69.51M Insiders Ownership 7.56% Institutions Ownership 0.71% Industry Oil & Gas E&P Sector Energy Website Link Country Canada City Vancouver Explore About Rhea-AI Sitemap Legal Terms of Use Cookie Notice Privacy Policy Links RSS feed Discord Server Facebook Reddit © 2020-2025 StockTitan.net Login Please enter your login and password Email address Password Forgot password? LOGIN Close Don't have an account? Sign Up! Forgot Password Please enter your email address Email address RECOVER Close Sign Up To create a free account, please fill out the form below. Username Email address Password I accept the user agreement Sign me up for the newsletter CREATE ACCOUNT Close Already have an account? Login