Mr. Don Simmons reports

HEMISPHERE ENERGY ANNOUNCES Q3 2015 FINANCIAL AND OPERATING RESULTS

Hemisphere Energy Corp. has released its financial and operating results for the three and nine months ended Sept. 30, 2015.

Third quarter 2015 highlights:

• Averaged 678 barrels of oil equivalent per day (75 per cent oil and natural gas liquids) production during the quarter, a 6-per-cent decrease from the third quarter of 2014 as a result of converting two producing wells in Atlee Buffalo to water injectors, having downtime at the Jenner facilities to perform upgrades and experiencing natural declines in the company's oil production;
• Generated $700,000 (one cent per share) in funds flow from operations, a 46-per-cent decrease from the second quarter of 2015 due to lower realized oil prices and decreased production;
• Recognized a non-cash impairment charge to property, plant and equipment of $3.0-million and a non-cash reduction in the company's deferred tax asset of $1.2-million, both due to lower estimated future commodity prices;
• Generated a $17.54-per-barrel-of-oil-equivalent operating netback, a 31-per-cent decrease from the second quarter of 2015 due to lower commodity prices;
• Reduced operating costs to $9.95 per boe, a 12-per-cent and 14-per-cent decrease from the third quarter of 2014 and second quarter of 2015, respectively, primarily due to cost-cutting measures and operational efficiencies in the field;
• Reduced transportation costs to $2.76 per boe from $3.02 per boe during the third quarter of 2014 as a result of the company's voluntary shut-in of high-water-cut wells requiring transportation to processing facilities;
• Reduced general and administrative expenses to $4.38 per boe, a 42-per-cent decrease from the third quarter of 2014, despite lower production;
• Spent $1.4-million in capital expenditures during the quarter to implement three water flood pilot projects in Atlee Buffalo;
• Commenced one of three water flood pilots in Atlee Buffalo;
• Acquired an additional 4.5 sections of core land in Southern Alberta through Crown land sales, including 2.0 sections in Jenner and 2.5 key sections in Atlee Buffalo that bring the company's ownership to 100 per cent in both the Upper Mannville F and G pools;
• Renewed existing $15.0-million credit facility in the company's annual review.

Subsequent achievements:

• Received regulatory approvals and commenced injection in remaining two water floods in Atlee Buffalo;
• Completed construction of a new pipeline in Jenner to increase water disposal capacity at an existing disposal well.

Corporate update

Hemisphere has remained focused on cost reductions in the third quarter of 2015, resulting in overall decreases to its general and administrative expenses by 42 per cent to $4.38 per boe, operating costs by 12 per cent to $9.95 per boe and transportation costs by 9 per cent to $2.76 per boe since the third quarter of 2014. The company will continue to reduce costs where possible in the fourth quarter and into 2016 to maximize operating netback and cash flow during the low pricing environment.

During the nine months ended Sept. 30, 2015, Hemisphere reduced its net debt by $1.0-million and took a conservative approach to spending by investing $2.3-million in capital projects. The majority of the development capital was spent during the third quarter on three water floods in the Upper Mannville F and G pools in Atlee Buffalo. These costs included the conversion of five wells into three injectors and two water source wells, as well as the construction of a water source pipeline for the F pool water flood. The remaining development capital was spent in Jenner to complete a facility turnaround, optimize an injection pump for a 30-per-cent capacity increase and internally coat one of its vessels to extend its life. The company also spent approximately $75,000 during the third quarter of 2015 to purchase 4.5 sections of land in Southern Alberta through Crown land sales.

Going forward, Hemisphere will continue to evaluate all future capital investments based on project payouts, rates of return and capital efficiency metrics. The company strives to provide long-term stability to its shareholders through its reliable assets, which hold significant oil in place, have substantial reserve and production upside through enhanced oil recovery, and include a large inventory of undrilled development locations, which position Hemisphere for organic growth as the oil market recovers.

Selected financial and operational highlights should be read in conjunction with Hemisphere's interim condensed financial statements and related management's discussion and analysis for the three and nine months ended Sept. 30, 2015. These reports are available on SEDAR and on Hemisphere's website. All amounts are expressed in Canadian dollars.

                               FINANCIAL AND OPERATING SUMMARY

                                        Three months ended Sept. 30,     Nine months ended Sept. 30,
                                               2015            2014            2015            2014
Financial
Petroleum and natural gas revenue      $  2,043,781    $  4,703,496    $  8,256,065    $ 12,066,993
Petroleum and natural gas netback         1,094,625       2,852,204       4,876,857       6,741,319
Funds flow from operations                  711,203       2,279,843       3,274,418       5,338,611
Per share, basic and diluted                   0.01            0.03            0.04            0.08
Income (loss) before tax                 (3,518,717)        720,312      (4,335,446)      1,900,796
Net income (loss)                        (4,755,531)        720,312      (5,977,362)      1,900,796
Per share, basic and diluted                  (0.06)           0.01           (0.08)           0.03
Capital expenditures, including
property acquisitions                     1,384,223       6,502,651       2,347,006      14,385,158
Net debt                                 10,621,038       6,049,362      10,621,038       6,049,362
Bank indebtedness                      $  9,659,252    $  2,200,000    $  9,659,252     $ 2,200,000

Operating
Average daily production
Oil (bbl/d)                                     507             624             663             522
Natural gas (Mcf/d)                           1,026             594           1,045             551
NGL (bbl/d)                                       1               2               2               1
Combined (boe/d)                                678             725             840             616
Oil and NGL weighting                            75%             86%             79%             85%
Average sales prices
Oil ($/bbl)                                $  38.13        $  77.97        $  41.32         $ 79.88
Natural gas ($/Mcf)                            2.81            3.97            2.67            4.33
NGL ($/bbl)                                   16.61           59.86           21.40           63.61
Combined ($ per boe)                       $  32.74        $  70.52        $  36.02         $ 71.81
Operating netback ($ per boe)
Petroleum and natural gas revenue          $  32.74        $  70.52        $  36.02         $ 71.81
Royalties                                      2.50           13.39            2.67           13.23
Operating costs                                9.95           11.31            9.25           15.28
Transportation costs                           2.76            3.02            2.83            3.17
Operating netback                          $  17.54        $  42.79        $  21.28         $ 40.13

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