Mr. Don Simmons reports

HEMISPHERE ENERGY GROWS PROVED RESERVE VALUE TO $325 MILLION AND PROVED NET ASSET VALUE TO $3.18 PER FULLY DILUTED SHARE

Hemisphere Energy Corp. has provided highlights from its independent reserves evaluation, prepared by McDaniel & Associates Consultants Ltd. and effective as at Dec. 31, 2023.

In 2023, Hemisphere invested $16-million to drill eight successful Atlee Buffalo wells, upgrade facilities in Atlee Buffalo, purchase land and seismic, and prepurchase some of the materials for its 2024 development program. With the company's capital additions, corporate production in 2023 increased by more than 10 per cent year-over-year, to 3,124 barrels of oil equivalent/day (99 per cent heavy oil). Production is currently trending over 3,450 boe/d (99 per cent heavy oil, based on field estimates between Feb. 10 and March 10, 2024), after significant downtime experienced in January and early February due to extreme cold weather and equipment failure.

During the year, Hemisphere also distributed $13.1-million in base and special dividends, purchased 3.2 million shares under its normal course issuer bid (NCIB) for a total price of $4-million (at an average price of $1.25/share), and exited the year in a cash position with working capital of over $3-million.

The company's continued success in the development of its enhanced oil recovery projects was recognized again by McDaniel in the reserve report. In the proved developed producing (PDP) category, Hemisphere replaced 104 per cent of 2023 production and increased reserve value by 9 per cent to $248-million NPV (net present value) with a 10-per-cent discount rate BT. Hemisphere also grew proved (1P) reserve value to $325-million NPV10 BT and proved plus probable (2P) reserve value to $416-million NPV10 BT.

The company's new Saskatchewan lands currently account for only 5 per cent of 1P and 7 per cent of 2P reserves, while making up only 3 per cent of 1P and 5 per cent of 2P NPV10 BT valuations of Hemisphere's reserves. Significant reserve upside remains on Hemisphere lands if the play proves successful over the course of 2024 and beyond.

Consistent with McDaniel's 2022 year-end evaluation, the reserve report incorporates full corporate abandonment, decommissioning and reclamation costs (ADR) in the PDP category. Hemisphere has always been cautious of acquiring additional wellbore and facility liabilities. A direct result of this strategy is that Hemisphere's reserves retain more comparative value per barrel than companies with additional ADR liabilities that must be deducted from their base valuations. Management estimates that total undiscounted and uninflated existing ADR is $8.3-million ($2.3-million NPV10 BT, with costs inflated at 2 per cent/year), which includes all ADR associated with both active and inactive wells, pipelines and facilities regardless of whether such wells, pipelines and facilities had any attributed reserves. Based on public information, Hemisphere stands out among its industry peers as being within the top 8 per cent of Alberta oil and gas operators for its industry-leading liability management ratio (LMR) of 17, resulting in Hemisphere having less than 1 per cent of its PDP net present value impaired by ADR.

Hemisphere's low-decline, long-life and high-value reserves are a sign of the tremendous resource the company has been developing over the past number of years. These valuable assets are the backbone of Hemisphere and are expected to generate significant free cash flow as they continue to grow with planned additional development and optimization of enhanced oil recovery techniques.

2023 reserve highlights

Proved developed producing (PDP) reserves:

• NPV10 BT of $248-million, an increase of 9 per cent over year-end 2022 and equivalent to $2.49 per basic share;
• Replaced 104 per cent of 2023 production through organic development
• Maintained reserve volumes year-over-year at 8.2 million boe (99.6 per cent heavy crude oil);
• Achieved a two-year FD&A (finding, development and acquisition) cost of $9.30/boe (including changes in future development capital (FDC)) for a recycle ratio of 5.4;
• RLI (reserve life index) of 7.2 years based on 2023 production.

Proved (1P) reserves:

• NPV10 BT of $325-million, an increase of 5 per cent over year-end 2022 and equivalent to $3.27 per basic share;
• Replaced 90 per cent of 2023 production through organic development;
• Maintained reserve volumes year-over-year at 12.1 MMboe (99.4 per cent heavy crude oil);
• Achieved a two-year FD&A cost of $14.82/boe (including changes in FDC) for a recycle ratio of 3.4;
• RLI of 10.6 years based on 2023 production;
• NAV (net asset value) of $3.18 per fully diluted share based on reserve report pricing assumptions;
• NAV of $3.28 and $4.27 per fully diluted share based on reserve report run internally at McDaniel's pricing sensitivities of $80 (U.S.) and $100 (U.S.) West Texas Intermediate flat pricing.

Proved plus probable (2P) reserves:

• NPV10 BT of $416-million, an increase of 5 per cent over year-end 2022 and equivalent to $4.19 per basic share;
• Replaced 125 per cent of 2023 production through organic development;
• Maintained reserve volumes at 16.3 MMboe (99.4 per cent heavy crude oil);
• Achieved a two-year FD&A cost of $14.91/boe (including changes in FDC) for a recycle ratio of 3.4;
• RLI of 14.3 years based on 2023 production;
• NAV of $4.03 per fully diluted share based on reserve report pricing assumptions;
• NAV of $4.12 and $5.36 per fully diluted share based on reserve report run internally at McDaniel's pricing sensitivities of $80 (U.S.) and $100 (U.S.) WTI flat pricing.

2023 independent qualified reserve evaluation

The reserves data set forth herein are based upon an independent reserves evaluation prepared by McDaniel dated March 11, 2024, with an effective date of Dec. 31, 2023, and are in accordance with definitions, standards and procedures contained within COGEH and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. 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 30, 2024. Due to rounding, certain totals in the columns may not add in the attached tables. All dollar values are in Canadian dollars, unless otherwise noted.

Pricing assumptions

McDaniel's independent evaluation was based on the average of the published price forecasts for McDaniel, GLJ Petroleum Consultants Ltd. and Sproule Associates Ltd. (the three-consultant average price forecast) at Jan. 1, 2024, with the attached table detailing pricing and foreign exchange rate assumptions. Hemisphere's corporate production historically averages a discount of approximately $4.50 to WCS pricing. When compared to last year's 3-Consultant Average Price Forecast dated January 1, 2023, the current Western Canadian Select pricing outlook is down approximately 1 per cent in 2024, and up 1 per cent thereafter over the next 15-year period. The 2024 three-consultant average price forecast uses a five-year 2024 to 28 WTI price of $76.33 (U.S.)/barrel and WCS price of $81.11/bbl.

About Hemisphere Energy Corp.

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 water and 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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