Summary
Hemisphere reported 2025 results as expected. Reserves remain flat and a bit mediocre. The 2025 RRR was good. Production was lower than expected. The Marsden pilot is still not yet showing any oil response. No news was shared. The balance sheet is very sound. Profits were as expected and are robust under low oil prices. Hemisphere is very profitable. The PE is low. Shareholder returns are high. In my 80-oil and gas companies ranking system, Hemisphere ranks inside the top 10 at a high 6th position.
Reserves
• Hemisphere proven reserves have been flat over the last seven years. Reserves have been varying in a narrow range of 11.4-12.1 M BoE.
• 2025 reserves (11.8 M BoE) were 3.3% above 2024 (11.4 M BoE).
• The proven reserves are equivalent to a below average 8.5 years of 2026 production (industry average 9.5-10.0 years).
• The 2019-2025 Reserves Replacement Ratio (RRR) is a good 1.51 (industry average 0.90-0.95)
• The RRR has been trending down in recent years. The 2025 RRR however was a good 1.28.
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Marsden
• The Marsden polymer flood pilot commenced in Q1 2024 with five wells drilled (two injectors and three producers). Polymer injection started in late Q3 2024.
• In the Q3 2025 Hemisphere shared that to date no oil production response has been noted at Marsden. In Q4 there was no change to this situation. No detailed update was provided.
Production
• Over the last seven years production has more than doubled (+208%) from 1,665 BoE/d (2019) to 3,645 BoE/d (2025).
• Q4 production (3,354 BoE/d) was lower than Q3 (3.571 BoE/d. New wells at Atlee Bufalo were started up in November. Production was affected by a facility shutdown in October.
• Q4 production (3,354 BoE/d) was below my expectation (3,650 BoE/d). Hemisphere had not provided a Q4 outlook. All Q4 production came from Atlee Buffalo.
• 2025 production (3,465 BoE/d) was well below the 3,900 K BoE/d outlook provided in Q1 (never updated thereafter). I had expected a 2025 production of 3,720 BoE/d.
• Hemisphere indicated that Q1 2026 production was approx. 3.8 K BoE/d. I set my Q1 expectation at this number. Due to the polymer flooding the production decline rate will be low.
• The 2026 production was set at 3,900 BoE/d. I expect 3,875 BoE/d.
• Without Marsden contributions, I expect production to decline to 3.6-3.7 K BoE/d in 2029/2030.
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Balance sheet
• The Hemisphere balance sheet is very healthy.
• The Q4 equity ratio (=equity/balance sheet total) of 66.5% was above Q3 (64.2%). The equity ratio is excellent.
• Similar to Q3, Hemisphere in Q4 has no long-term debt of any note. As such a debt/EBITDA ratio is without meaning.
• Cash and cash equivalents held are a high C$ 19.5 M.
• Hemisphere has earlier indicated it has funds available for possible acquisitions and is scanning the market. If Marsden in 2026 is declared a failure, I think an acquisition is likely.
• The balance sheet allows for generous shareholder returns.
Profitability
• Hemisphere is a very profitable company.
• Q4 eps, excluding non-cash hedging was (C$ 0.05), which was below Q3 (C$ 0.07) due to lower oil prices. The Q4 eps was spot on with my expectation of C$ 0.05.
• Realized oil prices (C$ 61.95/bbl) were as anticipated. Costs were as anticipated.
• Royalties were 17.8%, typical for a Canadian heavy oil producer.
• 2025 profits (eps= C$ 0.29) were below 2024 (eps=C$ 0.34). I had expected 2025 eps of C$ 0.29.
• With a 2026 WTI on average of $ 75/bbl (=effect Iran war), I expect 2026 eps excluding non-cash hedging of C$ 0.41 (PE = a low 0.66).
• Over time, with WTI falling back to $ 65/bbl and a shrinking production, without Marsden, the eps can fall to C$ 0.26 in 2030 (PE=10.3).
- Hemisphere profit.jpg (115.49 KiB) Viewed 960 times
Free cash flow and Financing
• Hemisphere is generating significant amounts of FCF, also under lower oil prices.
• Hemisphere has no scheduled debt repayments between 2026- 2030.
• The FCF should be available for shareholders or for new investments/acquisitions.
Shareholder returns
• Hemisphere shareholder returns are high.
• Hemisphere paid a quarterly dividend of C$ 0.025 in 2025. In April and August Hemisphere also paid a special dividend of C$ 0.03.
• Hemisphere bought back 3.5 M shares in 2025 for C$ 6.5 M - C$ 1.0 M in Q4, C$ 1.9 M (Q3), C$ 2.3 M (Q2), and C$ 1.3 M (Q1).
• Total 2025 shareholder returns were equivalent to high 11.6%.
• For 2026 I expect the quarterly dividends and the special dividends to continue. With the elevated 2026 oil prices it is well possible that a special dividend will be paid each quarter. Hemisphere announced a special dividend of C$ 0.03 for Q1 and another in April 2026. Total returns could be 12.8%.
• With WTI= $ 65/bbl share buybacks post 2026 could be a bit lower due to a declining production but the total returns still can reach a good 8.6% in 2030.
Conclusions
Hemisphere reported 2025 results as expected. Reserves remain flat and a bit mediocre. The 2025 RRR was good. Production was lower than expected. The Marsden pilot is still not yet showing any oil response. No news was shared. The balance sheet is very sound. Profits were as expected and are robust under low oil prices. Hemisphere is very profitable. The PE is low. Shareholder returns are high. In my 80-oil and gas companies ranking system, Hemisphere ranks inside the top 10 at a high 6th position.