Hemisphere Energy Corporation has commenced injection of polymer into its Atlee Buffalo Upper Mannville G pool. The Company would like to thank all its contractors, service providers, and field staff for their exceptional efforts in completing this project on time and on budget during these unprecedented times.
Hemisphere owns and operates two oil pools in the Atlee Buffalo area, and has worked toward polymer conversion at the first of these two pools over the past 9 months. Management believes that the quality of the Upper Mannville G pool reservoir is excellent, with permeability of up to 4 Darcies, porosity of up to 30%, and oil gravity of approximately 13-14 API. The pool was discovered in the 1980's and was initially developed using vertical wells, with cumulative oil production reaching only 1.2 MMbbl by 2013. At the time, the pool was considered to be at the end of its productive life and incapable of economic production. Subsequently, all mineral rights to both this and a second Atlee Buffalo oil pool were acquired by Hemisphere between 2013-2015 for total consideration of approximately $4 million.
Since obtaining 100% of the rights to the G pool, Hemisphere has already doubled the cumulative oil production from it by using horizontal wells and waterflood techniques. Going forward under polymer flood, McDaniel & Associates Consultants Ltd. has recognized over 10 MMboe (100% heavy crude oil) of additional reserves to be produced from this pool within the Proved plus Probable category, to be recovered at Finding and Development Costs of under $2.00/boe (as booked in Hemisphere's year-end reserve report effective Dec 31, 2020).
Reservoir modelling indicates the potential for extremely positive performance in this pool under polymer flood, with initial production response expected within the first 6 months of injection. Hemisphere's 2021 capital program in the G pool remains unchanged from previously announced guidance, which includes plans to convert one producing well to an injector and drill an additional three wells into the pool in the third quarter. All additional cash flow from higher than budgeted oil prices will be utilized to further strengthen the balance sheet by lowering debt and achieving under 1x net debt to adjusted funds flow by year-end.
With best-in-class value of reserves per barrel, top decile first quarter adjusted funds flow of over $27/boe, modest corporate operating and transportation costs of under $11/boe, and industry leading Liability Management Rating (LMR) of almost 10, Hemisphere is well positioned to take advantage of strong oil prices and opportunities to return value to shareholders.