Hemisphere Energy Declares Quarterly Dividend, Announces 2026 Second Quarter Results, and Provides Operations Update

Vancouver, British Columbia--(Newsfile Corp. - August 20, 2026) - Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) ("Hemisphere" or the "Company") declares a quarterly payment to shareholders, provides its financial and operating results for the three and six months ended June 30, 2026, and provides an operations update.

Quarterly Dividend

Hemisphere is pleased to announce that its Board of Directors has approved a quarterly base cash dividend of $0.025 per common share in accordance with the Company's dividend policy. The dividend will be paid on September 11, 2026 to shareholders of record as of the close of business on August 28, 2026. The dividend is designated as an eligible dividend for income tax purposes.

Q2 2026 Highlights

Generated record revenue of $33.6 million.

Delivered record operating netback 1 of $22.1 million, or $67.94/boe.

Realized record quarterly adjusted funds flow from operations ("AFF") 1 of $16.7 million, or $51.25/boe.

Generated record free funds flow 1 of $14.2 million, or $0.15/share.

Produced 3,576 boe/d (99% heavy oil) during the quarter.

Achieved total operating and transportation costs of $14.35/boe.

Distributed $2.4 million, or $0.025/share, in base dividends to shareholders during the quarter.

Distributed $5.7 million, or $0.06/share, in special dividends to shareholders during the quarter.

Purchased and cancelled 30,000 shares at an average price of $2.52/share under the Company's Normal Course Issuer Bid ("NCIB").

Renewed the Company's $35 million two-year extendible credit facility.

Exited the quarter with no bank debt and positive working capital 1 of $19.5 million.

Selected financial and operational highlights should be read in conjunction with Hemisphere's unaudited condensed interim consolidated financial statements and related notes, and the Management's Discussion and Analysis for the three and six months ended June 30, 2026 which are available on SEDAR+ at www.sedarplus.ca and on Hemisphere's website at www.hemisphereenergy.ca . All amounts are expressed in Canadian dollars unless otherwise noted.

Financial and Operating Summary

Operations Update

In late July, Hemisphere kicked off its summer drilling program with two successfully drilled horizonal wells in the Marsden area that targeted the Colony Formation. The Colony Formation is a zone that Hemisphere has not previously produced from in the Marsden area; if productive, these wells could prove up several additional locations along a well-delineated channel on the Company's land.

Hemisphere's pilot polymer flood in the Sparky Formation in Marsden is ongoing, and the Company is committed to continue testing the project until at least year-end. While limited production response has been noted, reservoir injection continues to replace historical production from the oil pool.

After completing drilling operations in Marsden, the rig recently moved to Atlee Buffalo where the Company plans to drill up to nine additional wells and convert up to five wells to injectors. This important part of reservoir development is expected to improve reservoir sweep in areas of the pool with lower pressure that need additional injection support. It is anticipated that the new wells and injector well conversions should be placed on production throughout September and October.

Outlook

With its strong balance sheet, unhedged oil production, and positive working capital, Hemisphere is in a solid position to fully capitalize on the current oil price environment and continue to prioritize per-share growth and shareholder returns.

About Hemisphere Energy Corporation

Hemisphere is a dividend-paying Canadian oil company focused on maximizing value-per-share growth with the sustainable development of its high netback, low decline conventional heavy oil assets through polymer flood enhanced oil recovery methods. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol "HME" and on the OTCQX Venture Marketplace under the symbol "HMENF".

For further information, please visit the Company's website at www.hemisphereenergy.ca to view its corporate presentation or contact:

Don Simmons, President & Chief Executive Officer Telephone: (604) 685-9255 Email: info@hemisphereenergy.ca Website: www.hemisphereenergy.ca

Forward-Looking Statements

Certain statements included in this news release constitute forward-looking statements or forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In particular, but without limiting the generality of the foregoing, this news release includes forward-looking statements including that a dividend will be paid September 11, 2026 to shareholders of record as of the close of business on August 28, 2026; that the two wells drilled at Marsden could prove up several additional locations on the Company's land; that the Company is committed to continue testing the pilot polymer project at Marsden until at least year-end; that the Company will drill up to nine wells in Atlee Buffalo and convert up to five wells to injectors, that this reservoir development is expected to improve reservoir sweep in areas of the pool with lower pressure, and that the producing wells and injecting well conversions should be placed on production throughout September and October; and that the nature of Hemisphere's strong balance sheet, unhedged oil position, and positive working capital will allow the Company to capitalize on the current oil price environment while continuing to prioritize per-share growth and shareholder returns.

Forward‐looking statements are based on a number of material factors, expectations or assumptions of Hemisphere which have been used to develop such statements and information but which may prove to be incorrect. Although Hemisphere believes that the expectations reflected in such forward‐looking statements or information are reasonable, undue reliance should not be placed on forward‐looking statements because Hemisphere can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the current and go-forward oil price environment; that Hemisphere will continue to conduct its operations in a manner consistent with past operations; that results from drilling and development activities are consistent with past operations; the quality of the reservoirs in which Hemisphere operates and continued performance from existing wells; the continued and timely development of infrastructure in areas of new production; the accuracy of the estimates of Hemisphere's reserve volumes; certain commodity price and other cost assumptions; continued availability of debt and equity financing and cash flow to fund Hemisphere's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Hemisphere operates; the general continuance of current industry conditions; the timely receipt of any required regulatory approvals; the ability of Hemisphere to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Hemisphere has an interest in to operate the field in a safe, efficient and effective manner; the ability of Hemisphere to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Hemisphere to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Hemisphere operates; and the ability of Hemisphere to successfully market its oil and natural gas products.

The forward‐looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward‐looking statements including, without limitation: changes in commodity prices; changes in the demand for or supply of Hemisphere's products, the early stage of development of some of the evaluated areas and zones; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Hemisphere or by third party operators of Hemisphere's properties, increased debt levels or debt service requirements; inaccurate estimation of Hemisphere's oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time‐to‐time in Hemisphere's public disclosure documents, (including, without limitation, those risks identified in this news release and in Hemisphere's Annual Information Form).

The forward‐looking statements contained in this news release speak only as of the date of this news release, and Hemisphere does not assume any obligation to publicly update or revise any of the included forward‐looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Non-IFRS and Other Financial Measures

This news release contains the terms adjusted funds flow from operations, free funds flow, capital expenditures, operating field netback, operating netback, and working capital/net debt, which are considered "non-IFRS financial measures" and any of these measures calculated on a per boe basis, which are considered "non-IFRS financial ratios". These terms do not have a standardized meaning prescribed by IFRS. Accordingly, the Company's use of these terms may not be comparable to similarly defined measures presented by other companies. Investors are cautioned that these measures should not be construed as an alternative to net income (loss) or cashflow from operations determined in accordance with IFRS and these measures should not be considered more meaningful than IFRS measures in evaluating the Company's performance.

a) Adjusted funds flow from operations ("AFF") (Non-IFRS Financial Measure and Ratio if calculated on a per share or boe basis): The Company considers AFF to be a key measure that indicates the Company's ability to generate the funds necessary to support future growth through capital investment and to repay any debt. AFF is a measure that represents cash flow generated by operating activities, before changes in non-cash working capital and adjusted for decommissioning expenditures and may not be comparable to measures used by other companies. The most directly comparable IFRS measure for AFF is cash provided by operating activities. AFF per share is calculated using the same weighted-average number of shares outstanding as in the case of the earnings per share calculation for the period.

A reconciliation of AFF to cash provided by operating activities is presented as follows:

b) Free funds flow ("FFF") (Non-IFRS Financial Measure): Calculated by taking adjusted funds flow and subtracting capital expenditures, excluding acquisitions and dispositions. Management believes that free funds flow provides a useful measure to determine Hemisphere's ability to improve returns and to manage the long-term value of the business.

c) Capital Expenditures (Non-IFRS Financial Measure): Management uses the term "capital expenditures" as a measure of capital investment in exploration and production assets, and such spending is compared to the Company's annual budgeted capital expenditures. The most directly comparable IFRS measure for capital expenditures is cash flow used in investing activities. A summary of the reconciliation of cash flow used in investing activities to capital expenditures is set forth below:

d) Operating field netback (Non-IFRS Financial Measure and Ratio if calculated on a per boe basis): A benchmark used in the oil and natural gas industry and a key indicator of profitability relative to current commodity prices. Operating field netback is calculated as oil and gas sales, less royalties, operating expenses, and transportation costs on an absolute and per barrel of oil equivalent basis. These terms should not be considered an alternative to, or more meaningful than, cash flow from operating activities or net income or loss as determined in accordance with IFRS as an indicator of the Company's performance.

e) Operating netback (Non-IFRS Financial Measure and Ratio if calculated on a per boe basis): Calculated as the operating field netback plus the Company's realized gain (loss) on derivative financial instruments on an absolute and per barrel of oil equivalent basis.

f) Working Capital/Net debt (Non-IFRS Financial Measure): Closely monitored by the Company to ensure that its capital structure is maintained by a strong balance sheet to fund the future growth of the Company. Working capital/Net debt is used in this document in the context of liquidity and is calculated as the total of the Company's current assets, less current liabilities, excluding derivative financial instruments, decommissioning obligations, lease liabilities, and tax provisions, and including any bank debt. There is no IFRS measure that is reasonably comparable to working capital/net debt.

The following table outlines the Company calculation of working capital:

g) Supplementary Financial Measures and Non-IFRS Ratios

"Adjusted Funds Flow from operations per basic share" is comprised of funds from operations divided by basic weighted average common shares. "Adjusted Funds Flow from operations per diluted share" is comprised of funds from operations divided by diluted weighted average common shares. "Annual Free Funds Flow" is comprised of free funds flow from the current three-month period multiplied by four. "Operating expense per boe" is comprised of operating expense, as determined in accordance with IFRS, divided by the Company's total production. "Realized heavy oil price" is comprised of heavy crude oil commodity sales from production, as determined in accordance with IFRS, divided by the Company's crude oil production. "Realized natural gas price" is comprised of natural gas commodity sales from production, as determined in accordance with IFRS, divided by the Company's natural gas production. "Realized combined price" is comprised of total commodity sales from production, as determined in accordance with IFRS, divided by the Company's total production. "Royalties per boe" is comprised of royalties, as determined in accordance with IFRS, divided by the Company's total production. "Transportation costs per boe" is comprised of transportation expense, as determined in accordance with IFRS, divided by the Company's total production.

The Company has provided additional information on how these measures are calculated in the Management's Discussion and Analysis for the year ended December 31, 2025 and the interim period ended June 30, 2026, which are available under the Company's SEDAR+ profile at www.sedarplus.ca .

Oil and Gas Advisories

Any references in this news release to initial production rates (including as a result of recent water or polymer flood activities) are useful in confirming the presence of hydrocarbons; however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter and are not necessarily indicative of long-term performance or ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Such rates are based on field estimates and may be based on limited data available at this time.

A barrel of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Definitions and Abbreviations

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/310532

TMX Newsfile

August 20, 2026 - 5:00 AM PDT

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