Mr. Don Simmons reports

HEMISPHERE ENERGY ANNOUNCES 2023 FIRST QUARTER RESULTS, DECLARES QUARTERLY DIVIDEND, RENEWS CREDIT FACILITY, AND PROVIDES OPERATIONS UPDATE

Hemisphere Energy Corp. has released its financial and operating results for the first quarter ended March 31, 2023; declared a quarterly dividend payment to shareholders; renewed a credit facility; and provided an operations update.

Q1 2023 Highlights

• Produced a record quarterly average of 3,171 boe/d, a 20% increase over the first quarter of 2022.Attained quarterly revenue of $18.7 million.
• Delivered an operating field netback1 of $11.3 million or $39.75/boe.
• Realized quarterly adjusted funds flow from operations ("AFF")1 of $8.3 million or $29.01/boe.
• Achieved free funds flow1 of $6.8 million or $0.07 per share.
• Exited the first quarter with a positive working capital1 position of $3.0 million, compared to $8.7 million net debt1 at the end of March 2022.
• Distributed $2.5 million, or $0.025 per share, in dividends to shareholders during the quarter.
• Purchased and cancelled 202,300 shares under the Company's Normal Course Issuer Bid ("NCIB").

Q1 2023 Overview

In the first quarter of 2023, Hemisphere's production increased by 20% over the first quarter of 2022, achieving a record average rate of 3,171 boe/d (99% heavy oil). This was due in part to the production from two new Atlee Buffalo F pool wells that were placed on production early in the quarter.

Average sales price in the first quarter of 2023 was 32% lower than the first quarter of the previous year. This was due to a 19% decrease in the West Texas Intermediate ("WTI") crude oil price, combined with a 70% higher Western Canadian Select ("WCS") differential, which averaged US$76.13 and US$24.77, respectively, for the first quarter of 2023. Fortunately, WCS differentials have narrowed significantly and are trending closer to an average of US$15.50 for the second quarter of 2023 to date.

Despite the lower oil pricing environment, Hemisphere delivered solid financial results for the quarter with $8.3 million in adjusted funds flow from operations and a positive working capital position of $3.0 million at quarter-end. This marks the first time the Company has been in a positive working capital position in many years. Based on current commodity price and production forecasts, management expects the Company's balance sheet to further improve throughout the year while continuing to develop its core assets, deliver shareholder returns through its dividend and NCIB programs, and look for new growth and acquisition opportunities.

Financial and Operating SummaryThree Months Ended March 31    
 ($000s except per unit and share amounts)               2023              2022  
 FINANCIAL                                                                       
 Petroleum and natural gas revenue              $      18,694      $     22,856  
 Operating field netback(1)                            11,342            15,462  
 Operating netback(1)                                  11,114            11,998  
 Cash flow provided by operating activities             9,034             8,212  
 Adjusted funds flow from operations (AFF)(1)           8,280            11,039  
 Per share, basic(1)                                     0.08              0.12  
 Per share, diluted(1)                                   0.08              0.11  
 Free funds flow(1)                                     6,815             9,245  
 Net income                                             5,958             4,618  
 Per share, basic and diluted                            0.06              0.05  
 Dividends                                              2,545                 -  
 Per share, basic                                       0.025                 -  
 Capital expenditures(1)                                1,465             1,794  
 Working capital (Net debt)(1)                          3,008            (8,681 )
 Bank debt                                      $           -      $    (12,514 )
 OPERATING                                                                       
 Average daily production                                                        
 Heavy oil (bbl/d)                                      3,143             2,624  
 Natural gas (Mcf/d)                                      169               141  
 Combined (boe/d)                                       3,171             2,648  
 Oil weighting                                            99%               99%  
 Average sales prices                                                            
 Heavy oil ($/bbl)                              $       65.93     $       96.53  
 Natural gas ($/Mcf)                                     3.08              4.49  
 Combined ($/boe)                               $       65.51     $       95.92  
 Operating netback ($/boe)                                                       
 Petroleum and natural gas revenue              $       65.51     $       95.92  
 Royalties                                             (11.47 )          (19.80 )
 Operating costs                                       (11.08 )           (8.95 )
 Transportation costs                                   (3.21 )           (2.27 )
 Operating field netback(1)                             39.75             64.89  
 Realized commodity hedging gain (loss)                 (0.80 )          (14.54 )
 Operating netback(1)                           $       38.95     $       50.35  
 General and administrative expense                     (2.88 )           (2.76 )
 Interest expense and foreign exchange loss             (0.67 )           (1.26 )
 Current tax expense                                    (6.39 )               -  
 Adjusted funds flow from operations(1) ($/boe) $       29.01     $       46.33  

Note: (1) Non-IFRS and other financial measure. Refer to "Non-IFRS and Other Financial Measures" section below.

Selected financial and operational highlights should be read in conjunction with Hemisphere's Financial Statements and related Management's Discussion and Analysis for the quarter ended March 31, 2023. These reports for the quarter ended March 31, 2023, are available on SEDAR at www.sedar.com and on Hemisphere's website at www.hemisphereenergy.ca. All amounts are expressed in Canadian dollars unless otherwise noted.

Quarterly Dividend

Hemisphere is pleased to announce that its Board of Directors has approved a quarterly cash dividend of $0.025 per common share in accordance with the Company's dividend policy. The dividend will be paid on June 15, 2023 to shareholders of record as of the close of business on June 1, 2023. The dividend is designated as an eligible dividend for income tax purposes.

Future quarterly payments of this variable dividend will continue to be subject to board approval, and are conditional on production performance, commodity price environment, and compliance with the terms of the Company's credit facility. Board approved dividend declarations will be disclosed in the Company's news releases highlighting the financial and operating results for the applicable quarter except for the first quarter, where timing is adjusted due to the year-end third-party financial audit.

Credit Facility

The Company has completed its annual bank review and renewed its $35 million two-year extendible credit facility, with the next annual review date set for May 31, 2024.

Operations update

At this time, the Company is preparing its summer drilling program of up to nine wells, with drilling operations anticipated to commence in July and to be complete by the end of the third quarter. All new producing wells will be brought online after being completed and tied-in to existing facilities. Of the Company's nine planned wells, six are development production wells, two are injection wells, and one is an exploration well.

Corporate production to-date in the second quarter has averaged approximately 2,900 boe/d (99% heavy oil, based on field estimates between April 1st - May 23rd, 2023). Increased downtime at various wells, generators, and both batteries have impacted production. Additionally, overall injection rates at the G pool have decreased in the past few months due to surface injection pressure constraints at the facility. The Company has recently installed a second injection pump and subsequently increased injection rates back to previous levels. The Company is also modifying its source water piping in the G pool facility in order to increase and optimize injection rates even further over the coming months.

With its debt-free position and the anticipated free funds flow generated from its stable asset base of enhanced oil recovery operations, Hemisphere's balance sheet is capable of providing the Company with the ability to aggressively seek out and transact on meaningful new growth and development acquisition opportunities, as well as continued exploration programs.

Annual General and Special Meeting of Shareholders

Hemisphere's Annual General and Special Meeting of Shareholders will be held at 11:00 am (Pacific Daylight Time) on June 1, 2023 in the Ferguson Room of the Terminal City Club located at 837 West Hastings Street, Vancouver, British Columbia.

About Hemisphere Energy Corporation

Hemisphere is a dividend-paying Canadian oil company focused on maximizing value per share growth with the sustainable development of its high netback, low decline conventional heavy oil assets through polymer flood enhanced recovery methods. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol "HME" and on the OTCQX Venture Marketplace under the symbol "HMENF".

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