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  • Oil and gas producer, Hemisphere Energy (TSXV:HME) has reported a 69 per cent increase in oil reserves at its Alberta-based operations
  • An independent study found that the company’s proven, developed reserves are now worth C$115.7 million
  • However, this study assumed an earlier oil price, which is now inaccurate, given the recent oil-price drop 
  • Alongside this news, Hemisphere announced that because of increased market volatility, it is defering all non-essential spending to 2021
  • Hemisphere Energy (HME) is up 6.67 per cent, with shares trading for $0.08 and a market cap of $7.09 million

Small-tier oil and gas producer, Hemisphere Energy (TSXV:HME) has significantly increased its available oil reserves.

Hemisphere currently operates two wells in southern Alberta.

An independent study has found that the company’s proven, developed reserves are valued at C$115.7 million. This is a 69 per cent increase, when compared to the company’s previous evaluation in 2018.

However, the independent study assumed a West Texas Intermediate oil price of around $85 in 2020. The oil-price is currently valued at just $32 a barrel.

The discrepancy is the result of an unforeseen and steep oil price drop off over the past month.

Earlier this month, trade negotiations between OPEC and Russia broke down. As a result, many large oil-producing countries, including Saudi Arabia, uncapped production.

This flooded a market already struggling under the economic impacts of COVID-19, driving the oil-price to historic lows.

However, the independent study forecasts well over the next ten years. So, if oil bounces back to more conventional prices, the recent price drop shouldn’t affect the study’s findings over the long term.

Over the short term, Hemisphere appears willing to weather the low oil price. In its 2020 outlook, the company believes its current hedging agreements should carry the company through the next few months.

A series of individual agreements fixed the oil price at between $56.3 and $81, a significant premium compared to the current market. These hedging agreements should result in $8.3 million more for the company than if they were trading on the open market.

That said, the extreme volatility in the oil and gas industry over the past few months hasn’t left Hemisphere unaffected. To maintain capital, the company will defer any non-essential spending to 2021, when the industry environment may be more predictable.

Hemisphere Energy (HME) is up 6.67 per cent, with shares trading for $0.08 at 12:00pm EST.

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