Mr. Don Simmons reports

HEMISPHERE ENERGY ANNOUNCES 2023 FOURTH QUARTER AND YEAR-END FINANCIAL AND OPERATING RESULTS

Hemisphere Energy Corp. has released its financial and operating results for the fourth quarter and year ended Dec. 31, 2023.

2023 highlights

• Increased fourth quarter production by 16 per cent to a record of 3,386 boe/d (barrels of oil equivalent per day) (99 per cent heavy oil), and annual production by 11 per cent to 3,125 boe/d (99 per cent heavy oil), as compared with 2022.
• Achieved annual revenue of $84.5-million, with adjusted funds flow from operations (AFF) of $39.4-million.
• Invested $16.9-million to drill eight successful Atlee Buffalo wells, one unsuccessful exploration well, upgrade facilities, purchase land and seismic, and prepurchase materials for the 2024 development program.
• Generated $22.5-million of free funds flow (FFF).
• Distributed $10.1-million in quarterly dividends to shareholders.
• Distributed $3.0-million in special dividends to shareholders.
• Purchased and cancelled 3.2 million shares at an average price of $1.28 per share under the company's normal course issuer bid (NCIB), returning $4.1-million to shareholders.
• Exited the year with a positive working capital position of $3.6-million compared with a net debt position of $800,000 at Dec. 31, 2022.
• Increased proved developed producing (PDP) NPV10 (net present value, 10-per-cent discount rate) BT reserve value by 9 per cent to $248-million and maintained reserve volumes at 8.2 MMboe (million barrels of oil equivalent) (99.6 per cent heavy oil).
• Increased proved (1P) NPV10 BT reserve value by 5 per cent to $325-million and maintained reserve volumes at 12.1 MMboe (99.4 per cent heavy oil).
• Increased proved plus probable (2P) NPV10 BT reserve value by 5 per cent to $416-million and maintained reserve volumes at 16.3 MMboe (99.4 per cent heavy oil).

Financial and operating summary

Selected financial and operational highlights should be read in conjunction with Hemisphere's audited annual financial statements and related management's discussion and analysis for the year ended Dec. 31, 2023. These reports, including the company's annual information Form for the year ended Dec. 31, 2023, are available on SEDAR+ and on Hemisphere's website. All amounts are expressed in Canadian dollars unless otherwise noted.

Operations update and outlook

Two thousand twenty-three was another rewarding year for Hemisphere, resulting in production growth of 11 per cent, significant shareholder returns of 17 cents per share paid in dividends and NCIB (normal course issuer bid) purchases (representing a FFF payout ratio of 76 per cent), and the transformation from a net debt to a cash position.

Additionally, Hemisphere purchased mineral rights in a Saskatchewan oil resource play during the year, and kicked off the first quarter of 2024 by successfully drilling a five-well pad (three producers and two injectors) into the pool. The company anticipates bringing the wells on production in the third quarter of the year, after commissioning a new polymer flood facility and oil treating battery in the area. The remainder of Hemisphere's 2024 capital development program will be spent in its core Atlee Buffalo property later this summer.

Following significant downtime due to extreme cold weather in January and early February, Hemisphere's corporate production during the latter half of the quarter has reached all-time highs of over 3,500 boe/d (Feb. 15 to March 31, 2024, field estimates, 99 per cent heavy oil), bringing average first quarter production to 3,135 boe/d.

Pricing outlook for heavy oil is bullish across the industry with the Trans Mountain pipeline anticipated to commence operations in May. With this additional egress capacity, WCS differential forecasts for the year have narrowed substantially. Combined with strong WTI (West Texas Intermediate) pricing and a weak Canadian dollar, Hemisphere is optimistic about the year ahead as it tests its new Saskatchewan play while continuing to deliver top-tier free funds flow yields to its shareholders from ultralow-decline, high-value reserves in Atlee Buffalo.

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 polymer flood enhanced oil 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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