Hemisphere Energy Corp. (TSXV: HME) (OTCQX: HMENF), a Canadian heavy-oil producer with operations in Alberta and Saskatchewan, arrived at CEM’s Muskoka Capital Event with an investment story few companies would choose.

Less than a month earlier, a fire at the G pool facility of its flagship Atlee Buffalo operation in Alberta had shut in as much as 2,650 barrels of oil equivalent a day and knocked roughly 20–25% off Hemisphere’s share price.

The fire damaged three oil-processing units, auxiliary equipment, and part of the electrical system, but left the wells and reservoirs untouched. That helped shift the focus at Muskoka from the immediate production setback to the underlying value of the business, helping Hemisphere secure a Top Pick.

“People saw the share price drop after the fire, but the oil didn’t go anywhere and the wells are still there. I think that’s where they started to see an opportunity to buy into the company at a lower price,” said Don Simmons, Hemisphere’s President and CEO.

Hemisphere expects partial G pool production to resume as restoration progresses, with normal operations and previous production levels targeted during Q1 2027. The company says its insurance provides up to C$40 million in coverage for property damage and six months of business interruption, helping replace cash flow lost while production is offline.

“We’ll get to a point in the near future and look back and say it was a bump in the road, but it provided some opportunity too,” Simmons said.

Hemisphere’s business is built around a relatively simple strategy: extract more oil from existing reservoirs and use the resulting free cash flow to grow and return capital to shareholders.

Its main advantage is an enhanced oil recovery technique called polymer flooding, which helps the company recover more oil and keep production from declining too fast over time.

Polymer-thickened water is injected into the reservoir to maintain pressure and push more oil toward producing wells. Because it moves more evenly through the reservoir, Hemisphere says the technique can recover more oil and slow production declines.

Simmons said typical Canadian oil and gas companies can lose roughly 20–30% of their production each year as wells naturally decline. Hemisphere’s polymer-flood model is designed to slow that drop, reducing how much it needs to spend, simply replacing lost output.

“The lower your decline rate, the more free cash flow you have,” Simmons said. “And the more free cash flow you have, the more you have to grow your business, and the more you have to give back to shareholders.”

Before the August fire, Hemisphere averaged 3,576 boe/d in Q2, 99% of it heavy oil. Revenue reached C$33.6 million, adjusted funds flow was C$16.7 million and free funds flow reached C$14.2 million. The company ended June with C$19.5 million in working capital and no bank debt.

Atlee Buffalo accounts for more than 90% of Hemisphere’s production and has been the company’s main development focus for roughly five years. But there is still considerable oil left to recover.

Hemisphere reports more than 10 million barrels of proved reserves in the Atlee F and G pools, which it describes as being in “cash-flow harvest” mode. Across the company, year-end 2025 proved plus probable reserves stood at 15.2 million boe with a before-tax NPV10 of C$316 million.

That ability to turn production into free cash flow is central to Hemisphere’s model.

Since September 2019, the company has returned C$87.1 million to shareholders through quarterly dividends, special dividends, and share repurchases. That includes C$12.6 million returned during 2026 through October. The quarterly base dividend is currently C$0.025 per share.

Hemisphere is also looking for growth across the provincial border in Saskatchewan. The company recently drilled two horizontal wells into the Colony Formation at Marsden, in west-central Saskatchewan.

Both produced approximately 100 barrels a day during their first three weeks. The wells are relatively inexpensive by oil-industry standards. Simmons said they cost roughly C$700,000 to C$800,000 each and can pay back quickly at current oil prices.

More importantly, they tested a zone Hemisphere had not previously produced horizontally. Management is now evaluating how many additional locations the Colony play might support and whether pressure maintenance or other enhanced recovery techniques could eventually be applied.

The company is also testing other zones across its existing land base and looking at acquisitions.

Simmons said management isn’t interested in simply purchasing production and waiting for higher oil prices.

“We’re not just paying somebody for future cash flow that we expect to get and hoping the price of oil goes up,” he said. “We really want to bring our experience in order to add value.”

“If we’re buying 100 barrels a day, we want to be able to grow it to 500 or 1,000 or 2,000 barrels a day.”

Analysts have largely treated the Atlee fire as a temporary setback rather than a change to Hemisphere’s underlying investment case.

Haywood Securities maintained its Buy rating and C$3.30 target, citing the company’s low-decline production, strong balance sheet and free cash flow, while ATB Cormark kept its Outperform rating and C$3.50 target, saying insurance should offset much of the economic impact despite weaker near-term production.

That broadly reflects what investors saw at Muskoka.

“I think people like the idea of that slow, steady, continual growth, a little bit of a return to shareholders, but you’re also in the game,” added Simmons.

Following Hemisphere Energy’s selection as a CEM Muskoka Top Pick, President and CEO Don Simmons spoke about what could drive the company in 2027, the potential at Marsden and what Hemisphere wants from its next acquisition.

“The first thing is getting everything back up and running. Once we’re there, we get back to the regular business of developing what we have and looking for the next opportunity.

We’ll be following up at Marsden on the wells we’ve drilled there. There will continue to be opportunities at Atlee, and we’re always working on a number of other opportunities.

The next acquisition could happen before year-end or sometime in 2027. The important thing is that we find something where we’re comfortable, we can add real value.”

“The early results are positive, but it’s still early. The next step is figuring out how many locations we have, how big the pool could be, and what kind of development plan makes sense.

We’ll look at whether pressure maintenance or enhanced recovery can be applied and how much production we can build from there. Now that we’ve shown some success, the work is really about determining the scale of the opportunity.”

“We don’t want to stretch the balance sheet just to make an acquisition. We want something where we believe we can add significant value.

We’re not interested in buying production and hoping the oil price goes up. If we buy 100 barrels a day, we want to see a path to turning that into 500, 1,000, or 2,000 barrels a day.

That means drilling wells, building facilities, and applying the experience we already have. That’s the kind of opportunity we look for.”

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