Hemisphere Energy (HME-V) March 8, '16 is pleased to announce highlights from its independent reserves evaluation as at December 31, 2015 prepared by McDaniel & Associates Consultants Ltd. ("McDaniel").
In 2015, Hemisphere spent $2.4 million of development capital on its assets with specific focus on increasing fluid handling capacity in Jenner and implementing three enhanced oil recovery projects in its Atlee Buffalo oil pools in order to increase reserves without drilling any new wells. As a result of prudent capital allocation and constant emphasis on improving capital efficiencies and reducing costs, Hemisphere achieved another year of significant reserve growth adding 860.3 Mboe of Proved reserves at a finding and development cost ("F&D") of $0.24/boe, including changes in future development capital. This year-over-year growth was primarily due to waterflood recognition in the Upper Mannville F pool in Atlee Buffalo and positive technical revisions in Jenner as a result of well performance.
Hemisphere achieved an average corporate production rate for 2015 of approximately 776 boe/d (80% oil), which is a 14% increase over 2014 despite the conversion of two producing wells to water injectors in Atlee Buffalo and minimal development capital spending.
2015 Reserve Highlights
Added 860.3 Mboe of Proved reserves, replacing 304% of estimated 2015 production at an F&D cost of $0.24/boe, including changes in future development capital.
Achieved a 2 year average F&D of $10.70/boe on a Proved plus Probable basis, including changes in future development capital, for a recycle ratio of 2.6.
Increased Proved Developed Producing reserves by 49% to 1,631.7 Mboe (92% oil), with a net present value of $24.9 MM (NPV10 BT), a less than 3% decrease year-over-year despite a 40% reduction in the 2016 WTI price forecast.
Increased Proved reserves by 27% to 2,785.1 Mboe (95% oil), with a net present value of $34.3 MM (NPV10 BT).
Increased Proved plus Probable reserves by 18% to 3,933.9 Mboe (95% oil), with a net present value of $48.4 MM (NPV10 BT).
On a per share basis, increased Proved reserves by 26% and Proved plus Probable reserves by 17%.
Proved Developed Producing reserves represent 59% of total Proved reserves on a volume basis and 73% on a net present value basis (NPV10 BT).
Proved reserves represent 71% of the total Proved plus Probable reserves on a volume basis and 71% on a net present value basis (NPV10 BT).
Hemisphere's December 31, 2015 net asset value is calculated at $0.56 per share despite a significant reduction in the 2016 WTI crude oil forecast price.
Proved plus Probable reserve life index is 13.9 years based on Hemisphere's estimated 2015 average production.
Year-end 2015 Reserves
The reserves data set forth below is based upon an independent reserves evaluation prepared by McDaniel with an effective date of December 31, 2015 and is in accordance with definitions, standards, and procedures contained in the Canadian Oil and Gas Evaluation Handbook 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 29, 2016. Due to rounding, certain totals in the columns may not add in the following tables.
Summary of Reserves(1)
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| Heavy Oil
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| Natural Gas
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| Total
| Reserves Category
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| (Mbbl)
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| (MMcf)
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| (Mboe)
| Proved
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| Developed Producing
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| 1,493.0
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| 832.3
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| 1,631.7
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| Developed Non-Producing
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| 154.1
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| (303.1)(2)
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| 103.6
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| Undeveloped
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| 1,012.2
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| 226.0
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| 1,049.8
| Total Proved
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| 2,659.2
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| 755.3
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| 2,785.1
| Probable
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| 1,082.8
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| 395.8
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| 1,148.8
| Total Proved Plus Probable
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| 3,742.0
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| 1,151.1
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| 3,933.9
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Notes:
| (1)
| Gross reserves are working interest reserves before royalty deductions.
| (2)
| Negative natural gas reserves are shown due to a difference in gas-oil-ratios used in the Producing and Non-Producing categories in relation to Hemisphere's waterflood program. Once the waterflood is fully implemented and provided the Non-Producing reserves become Producing reserves, Hemisphere anticipates a lower gas-oil-ratio.
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Summary of Net Present Value of Future Net Revenue(1)(2)
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| Net Present Value of Future Net Revenue, Before Tax
(M$, except per share amount)
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| Discounted at (% per Year)
| Reserves Category
| 0%
| 5%
| 10%
| Proved
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| Developed Producing
| 37,946.7
| 30,285.5
| 24,909.6
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| Developed Non-Producing
| 3,773.7
| 2,933.5
| 2,315.7
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| Undeveloped
| 14,597.4
| 10,208.2
| 7,089.6
| Total Proved
| 56,317.7
| 43,427.2
| 34,314.9
| Probable
| 34,167.8
| 21,212.5
| 14,109.7
| Total Proved Plus Probable
| 90,485.6
| 64,639.7
| 48,424.5
| Per basic share(3)
| $1.19
| $0.85
| $0.64
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| Notes:
| (1)
| Based on McDaniel December 31, 2015 forecast prices.
| (2)
| The net present value of future net revenue does not represent the fair market value of Hemisphere's reserves.
| (3)
| Based on there being 75,803,498 issued and outstanding shares as of December 31, 2015.
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Future Development Costs ("FDC")
The following summarizes the development costs deducted in the estimation of the net present value of the future net revenue attributable to Proved reserves and Proved plus Probable reserves (using forecast prices and costs only).
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| Forecast Prices and Costs
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Year
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Proved
Reserves (M$)
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| Proved plus
Probable
Reserves (M$)
| 2016
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| 2,350
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| 2,350
| 2017
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| 4,700
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| 4,751
| 2018
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| 9,540
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| 11,163
| Total Undiscounted
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| 16,590
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| 18,264
| Discounted at 10%
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| 14,147
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| 15,457
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2015 Finding and Development Costs and Recycle Ratios(1)
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| 2015
| 2 year Totals/Average
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Proved
| Proved
plus
Probable
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Proved
| Proved
plus
Probable
| F&D Costs, including FDC
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| Exploration and development capital (M$)(2)(3)
| 2,448.3
| 2,448.3
| 22,667.8
| 22,667.8
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| Total change in FDC (M$)
| (2,241.0)
| (4,819.0)
| 5,938.0
| 2,486.0
| Total F&D capital, including change in FDC (M$)
| 207.3
| (2,370.7)
| 28,605.8
| 25,153.8
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| Reserve additions, including revisions (Mboe)
| 860.3
| 857.7
| 2,013.1
| 2,350.0
| F&D costs, including FDC ($/boe)(4)
| 0.24
| N/A
| 14.21
| 10.70
| Recycle Ratio(5)
| 79.5
| N/A
| 1.9
| 2.6
| FD&A Costs, including FDC
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| Exploration, development and acquisition capital (M$)(2)(3)
| 2,698.3
| 2,698.3
| 23,552.5
| 23,552.5
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| Total change in FDC (M$)
| (2,241.0)
| (4,819.0)
| 5,938.0
| 2,486.0
| Total F&D capital, including change in FDC (M$)
| 457.3
| (2,120.7)
| 29,490.5
| 26,038.5
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| Reserve additions, including revisions and acquisitions(Mboe)
| 875.3
| 879.7
| 2,045.1
| 2,393.0
| F&D costs, including FDC ($/boe)(4)
| 0.52
| N/A
| 14.42
| 10.88
| Recycle Ratio(5)
| 36.7
| N/A
| 1.9
| 2.5
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| Notes:
| (1)
| All financial information is per Hemisphere's preliminary unaudited financial statements for the year ended December 31, 2015 and therefore represents management's estimates. Readers are advised that these financial estimates may be subject to change as a result of the completion of the independent audit on Hemisphere's financial statements for the year ended December 31, 2015.
| (2)
| The aggregate of the exploration and development (or exploration, development, and acquisition if applicable) costs incurred in the financial year and change during that year in estimated future development costs generally will not reflect total finding and development (or exploration, development, and acquisition if applicable) costs related to reserve additions for that year.
| (3)
| The capital expenditures also exclude capitalized administration costs.
| (4)
| 2015 F&D (and FD&A) costs in the Proved plus Probable category may not be meaningful for readers as the reduction in future development costs from 2014 to 2015 exceeded actual capital spent.
| (5)
| Recycle ratio is calculated as operating netback divided by F&D (or FD&A) costs. Operating netback is calculated as revenue minus royalties, operating expenses, and transportation expenses. The Company's estimated operating netback in 2015 was $19.16/boe (unaudited) and the combined two-year average for 2014 and 2015 was $27.61/boe (unaudited).
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Summary of McDaniel Pricing as of January 1, 2016
The following table is McDaniel's forecast pricing and foreign exchange rates as at January 1, 2016 which were used in the preparation of McDaniel's reserve evaluation.
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| Oil
| Natural Gas
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Year
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WTI
Crude Oil
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Edmonton
Light
Crude Oil
| Western
Canadian
Select
Crude Oil
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Alberta
AECO Spot
Price
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Inflation
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US/Cdn
Exchange
Rate
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| ($US/bbl)
| ($Cdn/bbl)
| ($Cdn/bbl)
| ($Cdn/MMBtu)
| (%)
| ($US/$Cdn)
| 2016
| 45.00
| 56.60
| 46.40
| 2.70
| 2.0
| 0.730
| 2017
| 53.60
| 66.40
| 54.40
| 3.20
| 2.0
| 0.750
| 2018
| 62.40
| 72.80
| 59.70
| 3.55
| 2.0
| 0.800
| 2019
| 69.00
| 80.90
| 66.30
| 3.85
| 2.0
| 0.800
| 2020
| 73.10
| 83.20
| 68.20
| 3.95
| 2.0
| 0.825
| 2021
| 77.30
| 88.20
| 72.30
| 4.20
| 2.0
| 0.825
| 2022
| 81.60
| 93.30
| 76.50
| 4.45
| 2.0
| 0.825
| 2023
| 86.20
| 98.70
| 80.90
| 4.70
| 2.0
| 0.825
| 2024
| 87.90
| 100.70
| 82.60
| 4.80
| 2.0
| 0.825
| 2025
| 89.60
| 102.60
| 84.10
| 4.90
| 2.0
| 0.825
| 2026
| 91.40
| 104.70
| 85.90
| 5.00
| 2.0
| 0.825
| 2027
| 93.30
| 106.90
| 87.70
| 5.10
| 2.0
| 0.825
| 2028
| 95.10
| 108.90
| 89.30
| 5.20
| 2.0
| 0.825
| 2029
| 97.00
| 111.10
| 91.10
| 5.30
| 2.0
| 0.825
| 2030
| 99.00
| 113.40
| 93.00
| 5.40
| 2.0
| 0.825
| Thereafter
| Escalation Rate of 2%/year
| 2.0
| 0.825
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Reserve Life Index ("RLI")
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| As at December 31
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| 2015(1)
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| 2014(2)
| Proved
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| 9.8
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| 8.8
| Proved plus Probable
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| 13.9
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| 13.4
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| Notes:
| (1)
| Based on Hemisphere's estimated 2015 average production of 776 boe/d.
| (2)
| Based on Hemisphere's 2014 average production of 683 boe/d.
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Net Asset Value ("NAV")
Based on McDaniel January 1, 2016 forecast pricing, Hemisphere's net asset value as of December 31, 2015 is estimated to be $0.56 per share, calculated as follows:
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| (M$ except per share amounts)
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| 2015
| Proved plus Probable Reserves (NPV10 BT)
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| 48,424
| Undeveloped Land & Seismic(1)
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| 5,360
| Estimated Net Debt (unaudited)(2)
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| (11,429)
| Shares Outstanding (basic)
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| 75,803
| Estimated Net Asset Value per share (basic)
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| $0.56
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| Notes:
| (1)
| Based on an internal evaluation by management of Hemisphere as of December 31, 2015
| (2)
| All financial information is per Hemisphere's preliminary unaudited financial statements for the year ended December 31, 2015 and therefore represents management's estimates. Readers are advised that these financial estimates may be subject to changes as a result of the completion of the independent audit on Hemisphere's financial statements for the year ended December 31, 2015.
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Corporate Outlook
Significant additions in Proved Developed Producing reserves were achieved this year in Atlee Buffalo due to recognition of an initial waterflood response at the Upper Mannville F pool.
Current reserves have been booked using total pool recovery factors of approximately 9.6% (Proved) to 11.7% (Proved plus Probable) of McDaniel's mapped 28 MMbbl original oil in place. Nearby producing analogue pools (Upper Mannville N2N and YYY) have already recovered 10% and 26% of oil in place under waterflood; Based on management's analysis of current performance, there is significant potential for an increase in ultimate recovery factors at both pools. Compared to the N2N pool, the number of water injectors per producer is anticipated by Hemisphere to be substantially higher within Hemisphere's development plan, and as a result recovery factors are also anticipated by Hemisphere to be higher with all other variables remaining equal. In the first quarter of 2016, Hemisphere converted a third producing well in the Upper Mannville F Pool to an injector and is awaiting AER approval before commencing water injection. Internal reservoir simulations by Hemisphere show recoveries higher than those currently booked. With continued success of Hemisphere's waterflood through the year it is anticipated that recovery factors used for reserves booking purposes will eventually increase as more production data becomes available. Should commodity pricing improve, Hemisphere is positioned to accelerate its booked reserves development program which includes 4 additional producer-injector pairs.
The Atlee Buffalo Upper Mannville G pool currently has a reservoir pressure lower than the F pool and is being re-pressured at an injector that was converted in 2015. At this time, the pool has no producing wells and as such only two Proved reserve locations were booked at year-end reflecting a total recovery factor of less than 4% of McDaniel's mapped 38 MMbbl original oil in place. Hemisphere is committed to proving the economic viability of this waterflood so that additional reserves can be recognized this year.
In 2016, Hemisphere's corporate strategy is to achieve organic growth year-over-year while managing its balance sheet by staying within cash flow during this time of commodity price weakness. The Company expects to see growth in production and reserves through the year with continued success of its early stage waterflood pools, and to have minimal capital requirements in 2016 which include drilling at least one producing well within the Upper Mannville G pool.
About Hemisphere Energy Corporation
Hemisphere Energy Corporation is a producing oil and gas company focused on developing conventional oil assets with low risk drilling opportunities. 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".
SOURCE Hemisphere Energy Corporation
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 ,
Website: www.hemisphereenergy.ca |
