Resource World Magazine

64 www.resourceworld.com A P R I L / M A Y 2 0 1 7 Oil Patch Report by Bruce Lantz T he secret of success isn't riding high in the good times. It's working through the tough times, circling your wagons and riding it out until better days come that shows the mettle of a company. Many firms, overextended and under- funded, collapsed during the recent oil patch downturn. Their demise captured headlines and left everyone from indus- try players to ordinary citizens wondering how low things could go. But some firms weathered the storm and, with better times on the horizon, are well positioned for the future. One of those is Vancouver-based Hemisphere Energy Corp. [HME-TSXV] which is focusing on developing core areas that provide low-to-medium risk drill- ing opportunities to increase production, reserves and cash flow. The company was started as Northern Hemisphere Development in the late 1970s by Charlie O'Sullivan, who continues to serve as Chairman. O'Sullivan originally sourced mining ventures in the Northwest Territories, then he briefly got involved with some US oil and gas plays before again focusing on mining in the mid-to-late 1980s, then oil and gas again in northeast BC's Tommy Lakes area, with the likes of Shell Canada and Focus Energy, where the company still maintains a 30% interest. In 2009, the company was renamed Hemisphere Energy, restructured, recapi- talized, and began looking around southern Alberta for oil deals, considered better value than natural gas. From 2010-2014, Hemisphere completed a number of strategic acquisitions and started drilling, growing to production of just above 1,000 boe/d in early 2015. As oil prices fell and remained low during 2015 and 2016, Hemisphere focused on strategic investments and consolidating its projects, particularly the Atlee Buffalo and Jenner plays. "The company now owns 100% of its Jenner and Atlee Buffalo projects and operates all the wells and facilities," said Hemisphere President and CEO, Don Simmons. "During the downturn we ini- tiated secondary recovery (waterflood) schemes on our Atlee Buffalo pools as part of our plans to increase the oil recovery in these pools." Particularly in the Atlee Buffalo, full ownership allows Hemisphere to "control our own destiny", said Simmons. "We can make a good buck even at these (US $48- $50) prices," he said. Hemisphere's ongoing strategy includes targeting geographically focused acquisi- tions and farm-ins; identifying low- to medium-risk economic drilling opportuni- ties through evaluation and interpretation of vertical well control, 2D/3D seismic and engineering data; applying proven exper- tise in horizontal drilling to maximize well recovery and value; controlling operations and infrastructure to minimize operating costs and maximize efficiencies; focusing on projects with most attractive econom- ics; and maintaining a conservative and flexible balance sheet. "Ours is a simple story, a growth story that will continue over the next few years," said Simmons, who has been involved with other pools in Alberta. "We want to maxi- mize our properties and develop them 8-10 times more than they are now." Hemisphere has 66 million barrels in place and, with just 2.4 million produced thus far at a 3-4% recovery factor, he sees no reason that factor can't grow to 20-30%. "I know we'll get more," said Simmons. In 2016, Hemisphere's estimated average corporate production rate was 526 boe/d (86% oil). Throughout the year the com- pany invested $2.4 million of development capital with specific focus on drilling its first producing oil well in the Atlee Buffalo G Pool, and building a water handling and reinjection facility at its Atlee Buffalo F Pool. With very little capital spent in a year of depressed commodity pricing, Hemisphere achieved another year of sig- nificant reserve growth, adding 823 Mboe of 'proved' plus 'probable' reserves at a finding and development cost of $7.49/ boe, including changes in future develop- ment costs. Additions to proved reserves were achieved in 2016 due to recognition of waterflood response in both the Atlee Buffalo F and G Upper Mannville Pools, despite having drilled only one well in 2016. Significantly: Reserves have been booked in the Atlee Buffalo F Pool at a total pool recovery fac- tor of approximately 10% (proved) to 12% (proved + probable) of McDaniel's mapped 28 MMbbl original oil in place. There are eight total producing wells in the pool, with none drilled in 2016. Reserves have been booked in the Atlee Buffalo G Pool at a total pool recovery fac- tor of approximately 4% (proved) to 5% (proved + probable) of McDaniel's mapped 38 MMbbl original oil in place. There is currently only one producing well in the pool, which was placed on production in mid-2016. Hemisphere Energy: building production and reserves in lean times

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