Hemisphere Energy (HME.V), mcap=C$173m, price C$1.68 vs C$1.4

Pitch: Oil producer with two pools in Alberta suited for polymer flooding, that is expected to result in incremental 25% recovery. Low production and transportation costs. Microscopic asset retirement obligations. Double-digit FCF yield even assuming $50 WTI. Management owns 15% of the company and seem to be good capital allocators – currently, they’re using 50% or more of cash flow to pay down debt to zero.

Valuation: HME.V is trading at 86% and 48% of its PDP and 2P reserve values (pre-tax and G&A), with avg. WTI of $69/bbl over the next 5 years (vs spot at $100+). Reserves look understated to due to low assumed recovery rates. Exp. FCF yield of 23% at $69 WTI and 14% at $50 WTI.

Exp. gain: Not specified.

Full HME.V write-up (free guest account required):

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