Hemisphere Energy (HME) Q2 2024 earnings summary

Executive summary

• Achieved record quarterly production of 3,628 boe/d (99% heavy oil), up 26% year-over-year, and revenue of $28.9 million, a 52% increase from Q2 2023.

• Net income for Q2 2024 was $10.4 million ($0.11/share basic), up from $5.8 million ($0.06/share) in Q2 2023.

• Adjusted funds flow from operations (AFF) reached $13.6 million ($0.14/share), a 67% increase year-over-year.

• Distributed $2.5 million in dividends and announced a $0.03/share special dividend paid after quarter-end.

• Renewed $35 million two-year extendible credit facility; no amounts drawn at quarter-end.

Financial highlights

• Operating netback was $17.7 million ($53.58/boe), up 61% year-over-year; AFF per boe was $41.13, up from $30.97.

• Free funds flow totaled $10.6 million ($0.11/share), compared to $3.6 million ($0.04/share) in Q2 2023.

• Capital expenditures totaled $3.0 million in Q2, focused on Marsden and Atlee Buffalo properties.

• Royalties increased to $6.3 million (22% of revenue), reflecting higher prices and production.

• Exited Q2 with positive working capital of $11.6 million.

Outlook and guidance

• 2024 guidance targets annual average production of 3,400 boe/d (99% heavy oil), with a $21 million capital program fully funded by projected AFF of $40 million.

• Free funds flow for 2024 is forecast at $19 million, supporting dividends, share buybacks, and potential project acceleration.

• Current production is approximately 3,700 boe/d, with 97% from EOR projects.

• Eight-well summer drilling program underway, with staged production starts between late August and October; Marsden polymer flood pilot expected to start by end of August.

• Marsden polymer flood response expected after several months of injection; minimal production budgeted for 2024.