Hemisphere gets a glowing Oil Report
Hemisphere Energy Corporation (TSXV: HME) (“Hemisphere”) recently announced highlights from its independent reserves evaluation by McDaniel & Associates Consultants Ltd. on its Atlee Buffalo project in Alberta, which concluded with significant additional reserve value being added. Hemisphere’s production methods have also yielded excellent results throughout the year, culminating in a great opportunity to get involved with Western Canadian Select at the end of a troublesome stretch for oil.
Positive, if slow, gains to prices this year, and Trump’s overt support for all-things-digging, is a warm glow on the horizon for the oil world. It likely feels for most as if it has been an impossibly long winter spent squirreling-away as much as possible, preparing for the inevitable boom period when everyone can have cake again.
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When commodity prices are low, it is wise to hold off on spending and concentrate on growing reserves and value as cost-efficiently as possible. Refinements can be made to processes to maximise profit during this time, and Hemisphere’s chosen innovations have served them well this year. We have previously discussed waterflooding and horizontal drilling as tools for accessing crude reserves, and Hemisphere is currently striving to demonstrate these, along with unique liners to control sand production, as viable commercial processes. Many are pushing tech-development to stand a chance of competing with the big guys, which have long-forced companies to either innovate or suffocate.
The procedures performed above expectations in both the Atlee Buffalo F and G Upper Mannville Pools. Despite only one well actually being drilled in 2016, Hemisphere has achieved some impressive results indeed; the bump to Proved plus Probable reserves was 16%, meaning it is now sitting pretty at 4,564Mboe. Net present value climbed by 36% to $65.9 million, and 427% of their 2016 production has been replaced. According to the report, the project has a total reserve life index of 23.7 years; plenty of time to make good on crude’s recovery.
Additionally, relatively little has been spent on the site even though a considerable amount has been achieved; an average corporate production rate of 526 barrels of oil per day was estimated, and only $2.4m of development capital was necessary to get there. The cash was spent mainly to further develop its first producing drill hole in the Atlee Buffalo G Pool, and the construction of a water reinjection facility at the Atlee F Pool that will be sure to further drive pressure and speed up production.
Looking forward to 2017, Hemisphere’s corporate strategy is to begin active development in Atlee Buffalo. The concepts of horizontal drilling, liners to control sand production, and waterflooding, when applied to these pools, have been demonstrated as a commercially sustainable method of production. The company should continue to see meaningful growth in production and reserves throughout the year, with continuing successful development of its core properties, all while watching the market recover.
Oil prices hit an all-time low in January 2016, but have been regaining ground ever since. The progress may be creeping right now, but these sorts of trends don’t stay sluggish for long. It only takes confidence to send the price skywards, and Hemisphere seems to be doing a rather fine job!
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