F e b r u a r y

Transcription

1 F e b r u a r y

2 The Strategy Focus on creating long-term shareholder value by continually developing our early stage/low cost/high rate of return waterflood oil assets Maximize Oil Recovery Develop pools with horizontal wells drilled off pads to minimize surface impact No hydraulic fracturing required due to high reservoir porosity and permeability Use proven, highly effective waterflood enhanced oil recovery methods to maximize ultimate oil recovery per well and minimize capital invested Control of Assets & Development 100% owner & operator of land, wells & facilities Adjustable pace of development Geographic Focus Production and landbase located in friendly jurisdiction of southeast Alberta Strategic acquisitions of offsetting production and drilling opportunities Drive Capital Efficiency Continue to lower development and operating costs as we increase the size of drilling programs and improve well performance with increasing reservoir pressure 2

3 The Snapshot TSX Venture Share Price February 4, 2019 HME $ Week Range $ $0.32 Basic Shares Outstanding FD Shares Outstanding 89.8 MM MM Insider Ownership (Fully Diluted) ~26% Enterprise Value* Q3 Revenue Q3 Operating Field Netback September 30, 2018 Net Debt Term Loan Facility** 5 years; Matures September 15, 2022 Current Production*** Field-estimated; Jan 28 Feb 4, 2019 Proved + Probable Reserves**** NPV10 (before tax)**** Liability Management Rating (Feb 2, 2019) Ratio of Hemisphere s deemed assets (production) to deemed liabilities (abandonment & reclamation costs) $42.9 MM $5.9 MM $30.62/boe $31.2 MM US$35.0 MM ~1600 boe/d (96% oil) 7.2 MMboe $116.7 MM 8.46 (Top 10% of Alberta Companies) * Based on an equity value of $0.13 as of Feb. 4, 2019 and a net debt of $31.2 million as of Sept. 30, ** The lender under Hemisphere s Term Loan Facility has committed up to US$30.0 million to date. *** As disclosed in Hemisphere s news release dated February 6, **** Reserve volumes and net present values are as attributed by McDaniel & Associates Consultants Ltd. ("McDaniel") in the reserve report of McDaniel dated March 9, 2018 and effective as of December 31, 2017 ("McDaniel Reserve Report"). See Advisory Statements Oil and Gas Information Net Present Values. 3

4 Boe/d Boe/d per million shares The Recent Production Growth September 2017 Refinanced with 5- year term loan and started active development * 0 Production Production per share * As disclosed in Hemisphere s news release dated February 6,

5 The Foundation Assets Southeast Alberta Focus JENNER ATLEE BUFFALO Edmonton HME Land Calgary Atlee Buffalo Jenner 5

6 Jenner: The Stable Cash Flow B S o 100% average working interest o 100% operator of production o ~24,000 net acres of land o 8 oil pools defined by 3D seismic o 30 drilling locations identified* o 9 booked locations* o Operated oil processing and water disposal facilities o Expansion capability for growth in production S B S HME Land Battery Satellite Pipeline 3D Seismic * See Advisory Statements Oil and Gas Information Drilling Locations. 6

7 Atlee Buffalo: The Growth Opportunity o Upper Mannville F Pool o 28 MMbbl OOIP* o Only ~5% current oil recovery factor o Upper Mannville G Pool o 38 MMbbl OOIP* o Only ~4% current oil recovery factor o Working Interest 100% in both pools o Opex < $10/boe Total Q4 Operating and Transportation costs o Excellent Geological Control Oil pools delineated by over 50 vertical wells o 3D Seismic Coverage over both pools o Waterflood Expanding in both pools o Oil Recovery Factors** Local analogue oil pools have exceeded 40% recovery factors with enhanced recovery methods (waterfloods, polymer) o Hemisphere s Dec. 31, 2017 Reserve Report reflects total 2P booked reserves of just 12% of McDaniel s estimated oil in place* * Based on McDaniel s reservoir mapping for the purposes of the McDaniel Reserve Report. See Advisory Statements Oil and Gas Information OOIP. ** See Advisory Statements Oil and Gas Information Analogous Information. F POOL G POOL Hz producer Hz water injector Vertical injector 7

8 Atlee Buffalo: The Development Plan 2018 Accomplishments Drilled 14 wells Expanded both F and G pool facilities to enhance water separation and increase oil production 2019 Plans o H2 2019: Plans to drill up to 16 wells o Continue to expand field-wide reservoir simulation studies o Continue to optimize batteries and existing waterflood operations F POOL WELL ECONOMICS Internal Evaluation*** G POOL Hz producer Hz water injector Future producer**** Future injector**** Vertical injector Atlee Buffalo Capital Drill, Complete, Equip & Tie-in Estimated Ultimate Recovery* Initial Production* Payout** NPV10** ROR** Capital Efficiency** Area $MM Mbbl bbl/d Years $MM % $/bbl/d F Pool ,200 G Pool ,600 * See Advisory Statements Oil and Gas Information Initial Production Rates and Estimated Ultimate Recoveries. ** Assumptions: US$54 Flat WTI Pricing with US$17 WCS Differential and 1.33 Fx; Average $4 quality differential from WCS; Average ~$13/boe lifetime operating and transportation expenses, and ~$5.10/boe royalties. *** Economics for both Atlee Buffalo F and G Pools have been generated as of Feb 5, 2019 and are based on internal estimations of reserves and production profiles prepared by a member of management who is a qualified reserves evaluator in accordance with National Instrument for the 2019 development wells as shown on this slide **** See Advisory Statements Oil and Gas Information Drilling Locations. 8

9 MMboe $MM Per share (basic) The Long-Term Value Growth 8.0 Reserves* $140.0 NPV10 BT* $ % Growth in the last year through drilling and waterflood $120.0 $100.0 $80.0 $60.0 $40.0 $ % Growth Per Share in the last year $1.02 2P $22.2 1P $40.3 $0.64 2P $14.1 1P $34.3 $0.77 2P $20.2 1P $45.7 $1.30 2P $36.3 1P $80.4 $1.25 $1.00 $0.75 $0.50 $ Proved $ $0.00 Probable * Reserve volumes and net present values are attributed in each of the independent reserve reports prepared for Hemisphere effective as of the date noted above. 9

10 Atlee Buffalo: The Reserve Upside Potential Pool OOIP* Cumulative Production to-date 2P Booked Reserves as at December 31, 2017 Potential Additional (Unbooked) Reserves At Various RF*** (MMBbl) (MMBbl) (MMBbl) (MMBbl) 20% 30% 40% Upper Mann F (5% Recovery Factor) 2.9 (15% Recovery Factor)** Upper Mann G (4% Recovery Factor) 2.7 (11% Recovery Factor)** Atlee Buffalo Total (4% Recovery Factor) 5.5 (12% Recovery Factor)** Upper Mann F Potential Additional 4.2 MMbbl Produced 1.5 MMbbl Booked 2.9 MMbbl At a 30% Recovery Factor Upper Mann G Potential Additional 7.4 MMbbl Produced 1.4 MMbbl Booked 2.7 MMbbl * Based on McDaniel s reservoir mapping for the purposes of the McDaniel Reserve Report. See Advisory Statements Oil and Gas Information OOIP. ** Represents the booked recovery factor attributed by McDaniel in the McDaniel Reserve Report. *** The recovery factors (and reserve volumes) as noted are potential recovery factors (and reserve volumes) only and are based on management's estimates (as prepared by a qualified reserves evaluator in accordance with National Instrument ) and assumes the successful response to Hemisphere's proposed waterflood operations based on the results of analogous pools under waterflood (See Advisory Statements Oil and Gas Information Analogous Information). There is no guarantee that the potential recovery factors will be realized by Hemisphere or that the reserve volumes noted will be attributed by an independent qualified reserves evaluator to Hemisphere. 10

11 The Hemisphere Investment Assets for Growth Early stage of development High rate of return projects with production and reserve growth through strategic lowrisk, low capital expenditure and fast payout projects Multi-year, low-risk drilling inventory in Atlee Buffalo and Jenner oil pools Stable, long-life, inclining production through waterflood Access to Capital Well funded by strategic energy partner to execute growth of HME s oil assets Term Loan Facility of up to US$35 Million allows HME to organically develop its oil assets over the next 2-3 years Team to Deliver Competent and experienced management team that has led Hemisphere through several years of marginal commodity prices during the downturn and has positioned the company for growth Time to Execute Oil market has strengthened and development costs remain low 11

12 The Driven Leadership Management Don Simmons, P.Geol. President & Chief Executive Officer Over 18 years of experience technical, operational and management experience (Alberta Energy Company, Encana, Sebring) Ian Duncan, P.Eng. Chief Operating Officer Over 16 years of experience which includes drilling, completions, facilities, and operations (Talisman and Solaris MCI) Dorlyn Evancic, CPA, CGA Chief Financial Officer Over 30 years of experience in corporate finance and management (Guyana Frontier, Northern Continental and Gemco Minerals) Andrew Arthur, P.Geol. Vice President, Exploration Over 30 years of experience with several hundred wells drilled across the Western Canadian Sedimentary Basin (Enerplus, Mission, Talisman) Ashley Ramsden-Wood, P.Eng. Vice President, Engineering Over 16 years of experience in reservoir engineering, capital planning, and reserves evaluation (NAL, Petro-Canada) Board of Directors Charlie O Sullivan, B.Sc. Chairman Don Simmons, P.Geol. Frank Borowicz, QC, JP, CPA (Hon) Bruce McIntyre, P.Geol. Gregg Vernon, P.Eng. Richard Wyman, B.Sc., MBA 12

13 Advisory Statements Forward-looking Information and Statements This corporate presentation contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends", "forecast", "goals" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this presentation contains forward-looking information and statements pertaining to the following: the volumes and estimated value of Hemisphere's oil and gas reserves; resource estimates and volumes in respect of Hemisphere's Jenner and Atlee Buffalo property areas; the anticipated economics of the oil wells at Atlee Buffalo and Jenner, including timing for anticipated payout and rates of return; Hemisphere's proposed development plans for its properties at Atlee Buffalo and Jenner; the potential for increased recovery factors in and reserve additions from the oil pools in which Hemisphere holds an interest; potential future production rates, cash flows; future oil and natural gas prices; future results from operations; future costs, expenses and royalty rates; the exchange rate between the $US and $Cdn; cash flow estimates based on full-scale development plans; the amount and timing of capital projects; corporate costs; the total future capital associated with development of reserves and resources; the anticipated response of Hemisphere's oil assets at the Atlee Buffalo property area to waterflood stimulation operations (including the potential for increased recovery factors and reserve volumes resulting there from); estimated ultimate recoveries of producing wells; initial production rates and the estimated payout from wells to be drilled by Hemisphere, NPV10 values, rates of return and capital efficiencies of Hemisphere s Jenner and Atlee Buffalo wells. The recovery, reserve, and resource estimates of Hemisphere's reserves and resources provided herein are estimates only and there is no guarantee that the estimated reserves or resources will be recovered. In addition, forwardlooking statements or information are based on a number of material factors, expectations or assumptions of Hemisphere which have been used to develop such statements and information but which may prove to be incorrect. Although Hemisphere believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Hemisphere can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Hemisphere operates; the timely receipt of any required regulatory approvals; the ability of Hemisphere to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Hemisphere has an interest in to operate the field in a safe, efficient and effective manner; the ability of Hemisphere to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; risks associated with the degree of certainty in resource assessments; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Hemisphere to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Hemisphere operates; and the ability of Hemisphere to successfully market its oil and natural gas products. There are a number of assumptions associated with the potential of resource volumes estimated herein, including the quality of the reservoir, future drilling programs and the funding thereof, continued performance from existing wells and performance of new wells, well density per section and recovery factors and discovery and development of the lands evaluated in Hemisphere's property areas of operation, which necessarily involves known and unknown risks and uncertainties, including those identified in this presentation and including the risks set forth in Hemisphere's most recent annual information form available for review on SEDAR at The forward-looking information and statements included in this presentation are not guarantees of future performance and should not be unduly relied upon. The forward-looking information and statements contained in this presentation speak only as of the date of this presentation, and Hemisphere does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. Oil and Gas Information Net Present Values It should not be assumed that the estimates of future net revenues presented or disclosed in this presentation represent the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions made in estimating such future net revenues will be attained and variances could be material. BOE Disclosure provided herein in respect of Boe's may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 Mcf:1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. OOIP Original Oil-In-Place ("OOIP") is used by Hemisphere in this presentation as an equivalent to Discovered Petroleum Initially In Place ("DPIIP"). DPIIP, as defined in the Canadian Oil and Gas Evaluation Handbook, is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP includes production, reserves and contingent resources; the remaining portion of DPIIP is unrecoverable. It should not be assumed that any portion of the OOIP/DPIIP set forth in this presentation is recoverable other than the portion which has been attributed reserves by McDaniel. There is uncertainty that it will be commercially viable to produce any portion of the OOIP/DPIIP other than the portion that is attributed reserves. The OOIP/DPIIP set forth in this presentation has been provided for the sole purpose of highlighting the recovery factors for the reservoirs that have been attributed reserves. The OOIP/DPIIP volumes for Hemisphere's Atlee Buffalo property disclosed in this presentation are from the mapping of the reservoirs by McDaniel (who is independent of Hemisphere) in connection with preparing the McDaniel Reserve Report. All OOIP/DPIIP estimates set forth herein are provided as of December 31,

14 Advisory Statements Drilling Locations This presentation discloses drilling locations in two categories: (i) booked locations; and (iii) unbooked locations. Proved locations and probable locations, which are sometimes collectively referred to as "booked locations", are derived from the McDaniel Reserve Report and account for drilling locations that have associated proved or probable reserves, as applicable. Unbooked locations, are internal estimates based on the Company's prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources. Of the 30 locations identified at Jenner in this presentation, 8 are proved locations, 1 is a probable location and 21 are unbooked locations. After drilling 11 producers in Atlee Buffalo in 2018, of the 40 remaining drilling locations (producers) identified on the map at Atlee Buffalo, 8 are booked as proved undrilled locations and 3 are booked as probable undrilled locations, with the remaining 29 locations unbooked in the Mcdaniel Reserve Report dated December 31, Unbooked locations have specifically been identified by management as an estimation of Hemisphere's anticipated drilling activities based on evaluation of applicable geologic, seismic, and engineering, production and reserves data on prospective acreage and geologic formations. The drilling locations on which Hemisphere will actually drill wells ultimately depends upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results and other factors. While certain of the unbooked drilling locations have been derisked by drilling existing wells in relative close proximity to such unbooked drilling locations, certain unbooked drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves, resources or production. Analogous Information The information concerning Upper Mannville N2N and YYY analogue pools may be considered to be "analogous information" within the meaning of applicable securities laws. Such information was obtained by Hemisphere management throughout the year ended December 31, 2017 from various public sources including information available to Hemisphere through AccuMap (a mapping, data management and analysis software for companies operating in the Western Canadian Sedimentary Basin). Management believes such information is analogous to the Upper Mannville F and G pools in which Hemisphere has an interest and is relevant as it may help to demonstrate the reaction of such pools (in which Hemisphere has an interest) to waterflood stimulations. Hemisphere is unable to confirm whether the analogous information was prepared by a qualified reserves evaluator or auditor or in accordance with the COGE Handbook and whether such evaluator or auditor was independent and therefore, the reader is cautioned that the data relied upon by Hemisphere may be in error and/or may not be analogous to the oil pools in which Hemisphere holds an interest. Initial Production Rates and Estimated Ultimate Recoveries Initial production rates disclosed herein are not determinative of the rates at which the wells will continue to produce and decline thereafter and may not necessarily be indicative of long-term performance or estimated ultimate recovery. Such rates should be considered preliminary. The term "estimated ultimate recovery" is the estimated quantity of petroleum that is potentially recoverable or has already been recovered from a well. Estimated ultimate recovery does not have a standardized meaning and may not be comparable to similar measures presented by other companies. As such, it should not be used to make comparisons. Management uses estimated ultimate recovery for its own performance measurements and to provide readers with measures to compare the Company's performance over time; however, such measure is not a reliable indicator of the Company s future performance and future performance may not compare to the performance in previous periods and therefore should not be unduly relied upon. Non-IFRS Measures The presentation contains terms that are non-ifrs measures and commonly used in the oil and gas industry which are not defined by or calculated in accordance with International Financial Reporting Standards ("IFRS"), such as: (i) funds flow from operations or annualized funds flow; (ii) net debt; and (iii) operating field netback per boe. These terms should not be considered an alternative to, or more meaningful than the comparable IFRS measures (as determined in accordance with IFRS) which in the case of funds flow from operations is cash provided by operating activities and cash flow from operating activities and in the case of operating field netback is net income or net loss. There is no IFRS measure that is reasonably comparable to net debt. These measures are commonly used in the oil and gas industry and by Hemisphere to provide shareholders and potential investors with additional information regarding: (i) in the case of funds flow from operations, the Company's ability to generate the funds necessary to support future growth through capital investment and to repay any debt; (ii) in the case of operating field netback per boe, the indication of the Company's profitability relative to current commodity prices; and (iii) in the case of net debt, the capital structure of the Company. 14

15 Don Simmons, President & CEO Telephone: Scott Koyich, Investor Relations Telephone: Suite West Pender Street Vancouver, British Columbia V6C 1L6