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Enerplus Announces Second Quarter 2022 Results; Increases Return of Capital Framework; Increases Dividend; Updates Guidance and Five-Year Outlook

Cision

All financial information contained within this news release has been prepared in accordance with U.S. GAAP. This news release includes forward-looking statements and information within the meaning of applicable securities laws. Readers are advised to review the "Forward-Looking Information and Statements" at the conclusion of this news release. Readers are also referred to "Non-GAAP and Other Financial Measures" at the end of this news release for information regarding the presentation of the financial and operational information in this news release, as well as the use of certain financial measures that do not have standard meaning under U.S. GAAP and "Notice Regarding Information Contained in this News Release", "Non-GAAP Measures" in Enerplus' second quarter 2022 MD&A for supplementary financial measures, which information is incorporated by reference to this news release. A copy of Enerplus' 2022 interim and 2021 annual Financial Statements and associated MD&A are or will be available on our website at www.enerplus.com, under our profile on SEDAR at www.sedar.com and on the EDGAR website at www.sec.gov. All amounts in this news release are stated in United States dollars unless otherwise specified.

CALGARY, AB, Aug. 4, 2022 /CNW/ - Enerplus Corporation ("Enerplus" or the "Company") (TSX: ERF) (NYSE: ERF) today announced financial and operating results for the second quarter of 2022, an increase to its return of capital framework including its dividend, updated 2022 guidance and updates to its five-year outlook. The Company reported second quarter 2022 cash flow from operating activities and adjusted funds flow of $250.9 million and $297.4 million, respectively, compared to $110.5 million and $150.0 million, respectively, in the second quarter of 2021. Cash flow from operating activities and adjusted funds flow increased from the prior year period primarily due to higher realized commodity prices.

HIGHLIGHTS

  • Adjusted funds flow was $297.4 million in the second quarter, which exceeded capital spending of $132.9 million, generating free cash flow(1) of $164.5 million

  • Increased 2022 free cash flow(1) estimate to $800 million based on rest of year prices of $90 WTI and $6.50 NYMEX

  • Normal course issuer bid ("NCIB") was fully executed for 10% of the public float having repurchased 25.6 million shares between August 2021 and July 2022 at an average price of $11.14 per share, for total consideration of $284.8 million.

  • Increased return of capital framework to at least 60% of free cash flow commencing in the second half of 2022 and continuing through 2023

  • Increased minimum 2022 return of capital commitment to $425 million, from $350 million previously

  • Increased quarterly dividend by 16% to $0.05 per share

  • Production guidance for 2022 increased to 97,500 – 101,500 BOE per day (from 96,000 – 101,000 BOE per day) due to continued strong operational performance with no change to capital spending guidance and despite the recently announced sale of assets in Canada expected to impact 2022 production by approximately 850 BOE per day

  • Robust volume growth anticipated in the second half of 2022: approximately 15% liquids production growth expected in the third quarter compared to the second quarter

(1)

This is a non-GAAP financial measure. Refer to "Non-GAAP and Other Financial Measures" section for more information.

"Enerplus' second quarter results and updated 2022 outlook reflect our company's strong operating momentum and disciplined approach to capital allocation," said Ian C. Dundas, President and CEO. "Our annual production guidance has continued to move higher driven by well outperformance and efficient execution, while our capital spending plans remain unchanged."

Dundas continued, "Enerplus is in a solid financial position with a compelling free cash flow profile. As a result, we are increasing our cash returns to shareholders to at least 60% of free cash flow in the second half of this year, with a minimum commitment of returning $425 million in 2022 through dividends and share repurchases. We are also committing to returning at least 60% of 2023 free cash flow to shareholders."

SECOND QUARTER SUMMARY

Production in the second quarter of 2022 was 94,142 BOE per day, an increase of 2% compared to the prior quarter and the same period a year ago. Crude oil and natural gas liquids production in the second quarter of 2022 was 56,866 barrels per day, an increase of 2% compared to the prior quarter, and 1% lower than the same period a year ago. As previously noted, second quarter volumes were impacted by severe winter weather in North Dakota during April 2022, however, through strong operational performance and the continued optimization of the Company's development plan, Enerplus has been able to more than offset the impact from the storm to its annual production forecast. Third quarter liquids production is expected to be approximately 15% higher than the second quarter.

Enerplus reported second quarter 2022 net income of $244.4 million, or $0.99 per share (diluted), compared to a net loss of $50.9 million, or $0.20 per share (diluted), in the same period in 2021. Adjusted net income(1) for the second quarter of 2022 was $172.3 million, or $0.70 per share (diluted), compared to $54.7 million, or $0.21 per share (diluted), during the same period in 2021. Net income and adjusted net income were higher compared to the prior year period primarily due to higher realized commodity prices during the second quarter of 2022.

Enerplus' second quarter 2022 realized Bakken oil price differential was $0.85 per barrel above WTI, compared to $2.81 per barrel below WTI in the second quarter of 2021. Bakken crude oil price differentials turned positive to WTI due to increasing demand, excess pipeline capacity in the region and strong prices for crude oil delivered to the U.S. Gulf Coast. Given the constructive outlook for Bakken crude oil prices and strong realizations year to date, Enerplus expects its 2022 realized average Bakken crude oil differential to be $1.00 per barrel above WTI, compared to a price at par with WTI, previously.

The Company's realized Marcellus natural gas price differential was $0.59 per Mcf below NYMEX during the second quarter of 2022, compared to $0.89 per Mcf below NYMEX in the second quarter of 2021. Realized Marcellus differentials are expected to widen for the remainder of the year due to the seasonal impact on natural gas prices in the region. Enerplus' full-year 2022 Marcellus differential guidance is unchanged at $0.75 per Mcf below NYMEX.

In the second quarter of 2022, Enerplus' operating costs were $9.74 per BOE, compared to $8.56 per BOE during the second quarter of 2021. The increase in per unit operating expenses was primarily due to contracts with price escalators linked to WTI and the Consumer Price Index.

Capital spending totaled $132.9 million in the second quarter of 2022. In addition, Enerplus paid $9.9 million in dividends in the quarter and repurchased 7.1 million shares at an average price of $13.13 per share, for total consideration of $92.9 million. During July 2022, Enerplus repurchased the remaining 2.5 million shares under its 10% NCIB authorization at an average price of $12.81 per share, for total consideration of $31.5 million.

Enerplus ended the second quarter of 2022 with total debt of $571.4 million and cash of $25.4 million.

(1)

This is a non-GAAP financial measure. Refer to "Non-GAAP and Other Financial Measures" section for more information.

ASSET HIGHLIGHTS

North Dakota production averaged 58,626 BOE per day during the second quarter of 2022, an increase of 4% compared to the same period a year ago and 2% higher compared to the previous quarter. Severe winter weather temporarily impacted Enerplus' North Dakota operations during April 2022, however, strong well performance is expected to drive significant volume growth into the third quarter. Enerplus drilled 13 gross operated wells (88% working interest) during the second quarter and brought 24 operated wells (88% working interest) on production.

Marcellus production averaged 168 MMcf per day during the second quarter of 2022, an increase of 9% compared to the same period in 2021 and 3% higher than the prior quarter.

INCREASING RETURN OF CAPITAL TO SHAREHOLDERS

Based on strong operating and financial performance through the first half of 2022 and to date, a robust free cash flow outlook, and the recently announced divestment of assets in Canada, Enerplus is increasing its return of capital to shareholders. Under its updated framework, the Company plans to return at least 60% of its free cash flow to shareholders (from 50% previously) commencing in the second half of 2022 and continuing through 2023. Enerplus is also increasing its minimum 2022 return of capital commitment to $425 million, from $350 million previously. Year to date through July, Enerplus has returned $179 million through dividends and share repurchases, leaving a minimum remaining return of $246 million by the end of 2022.

In connection with this plan, Enerplus' board of directors has approved the renewal of its NCIB for another 10% of the public float in August 2022, subject to Toronto Stock Exchange approval, and a 16% increase to the quarterly dividend to $0.05 per share payable on September 15, 2022 to shareholders of record on August 31, 2022.

Enerplus plans to continue to prioritize share repurchases for the majority of its return of capital to shareholders due to its assessment that its intrinsic value, based on its mid-cycle commodity price view, is not adequately reflected in its current trading value. If this view changes such that Enerplus believes share repurchases no longer represent an attractive capital allocation opportunity, the Company will distribute the capital to shareholders through dividends to ensure it meets its shareholder returns commitment.

Remaining free cash flow not allocated to shareholder returns is expected to be directed to reinforcing the balance sheet.

2022 GUIDANCE UPDATE

Updates to Enerplus' 2022 guidance are provided in the tables below.

Enerplus is increasing its production guidance to 97,500 to 101,500 BOE per day, from the prior guidance of 96,000 to 101,000 BOE per day. Liquids production guidance has been updated to 59,500 to 62,500 barrels per day, from 58,500 to 62,500 barrels per day previously. The increase reflects strong well performance and the continued optimization of Enerplus' development plan. This update represents an increase of 1,000 BOE per day based on the guidance midpoint despite the expected loss of production associated with the recently announced sale of assets in Canada which is anticipated to close at the end of the third quarter and impact 2022 production by approximately 850 BOE per day.

There are no changes to capital spending guidance.

2022 Guidance Summary


Updated Guidance

Previous Guidance

Capital spending

$400 – 440 million (No change)

$400 – 440 million

Average total production

97,500 – 101,500 BOE/day

96,000 – 101,000 BOE/day

Average liquids production

59,500 – 62,500 bbls/day

58,500 – 62,500 bbls/day

Average production tax rate

(% of net sales, before transportation)

7% (No change)

7 %

Operating expense

$10.00/BOE

$9.75 10.50/BOE

Transportation expense

$4.25/BOE

$4.15/BOE

Cash G&A expense

$1.20/BOE

$1.25/BOE

Current tax expense

2-3% of adjusted funds flow before tax

$20 - 30 million

(2-3% of adjusted funds flow before tax)

2022 Differential/Basis Outlook(1)


Updated Guidance

Previous Guidance

U.S. Bakken crude oil differential

(compared to WTI crude oil)

$+1.00/bbl

$0/bbl

Marcellus natural gas sales price differential

(compared to NYMEX natural gas)

$(0.75)/Mcf (No change)

$(0.75)/Mcf

(1)

Excluding transportation costs.

UPDATED FIVE-YEAR OUTLOOK

Enerplus has updated its five-year outlook to reflect the higher current commodity price and inflationary environment and to exclude its Canadian assets due to the previously announced and ongoing divestment process. Enerplus' previous five-year outlook was based on a commodity price environment of $70 per barrel WTI and $3.00 per Mcf NYMEX. Enerplus is increasing its commodity price assumptions to $80 per barrel WTI and $4.00 per Mcf NYMEX(1) and is updating its projected annual capital spending to approximately $500 million (2023-2026) to account for higher anticipated costs due to inflation. The Company's outlook continues to be underpinned by a focus on operating with low financial leverage, delivering strong and sustainable free cash flow growth, and returning capital to shareholders.

Enerplus estimates cumulative free cash flow(2) of approximately $3 billion between 2022 and 2026 and an average reinvestment rate of less than 50% over the period. Enerplus projects 3% to 5% annual liquids production growth between 2023 and 2026 on a divestment adjusted basis. 2022 annual production growth is projected to be approximately 8% which is partially impacted by the timing of the Company's 2021 acquisitions.

(1)

2022 is based on prices of $90/bbl WTI and $ 6.50/Mcf NYMEX for the remainder of 2022.

(2)

This is a non-GAAP financial measure. Refer to "Non-GAAP and Other Financial Measures" section for more information.

Q2 2022 Conference Call Details

A conference call hosted by Ian C. Dundas, President and CEO will be held at 9:00 AM MT (11:00 AM ET) on August 5, 2022, to discuss these results. Details of the conference call are as follows:



Date:

Friday, August 5, 2022

Time:

9:00 AM MT (11:00 AM ET)

Dial-In:

587-880-2171 (Alberta)


1-888-390-0546 (Toll Free)

Conference ID:

73519318

Audiocast:

https://producereditionwebcasts.com/startherejsp?ei=1557604&tp_key=1b2aa32a82

To ensure timely participation in the conference call, callers are encouraged to join 15 minutes prior to the start time to register for the event. A telephone replay will be available for 30 days following the conference call and can be accessed at the following numbers:





Replay Dial-In:

1-888-390-0541 (Toll Free)

Replay Passcode:

519318 #

PRICE RISK MANAGEMENT

The following is a summary of Enerplus' financial commodity hedging contracts at August 3, 2022.














WTI Crude Oil ($/bbl)(1)(2)(3)


NYMEX Natural Gas ($/Mcf)(2)



Jul 1, 2022 –


Jan 1, 2023 –


Jul 1, 2023 –


Jul 1, 2022 –


Nov 1, 2022 –



Dec 31, 2022


Jun 30, 2023


Dec 31, 2023


Oct 31, 2022


Mar 31, 2023

Swaps











Volume (Mcf/day)





40,000


Swaps





$ 3.40













3 Way Collars











Volume (bbls/day)


17,000


15,000


5,000



Sold Puts


$ 40.00


$ 61.67


$ 65.00



Purchased Puts


$ 50.00


$ 79.33


$ 85.00



Sold Calls


$ 57.91


$ 114.31


$ 128.16














Collars











Volume (Mcf/day)





60,000


50,000

Volume (bbls/day)



2,000


2,000



Purchased Puts



$ 5.00


$ 5.00


$ 3.77


$ 6.50

Sold Calls



$ 75.00


$ 75.00


$ 4.50


$ 16.41

(1)

The total average deferred premium spent on outstanding hedges is $1.50/bbl from July 1, 2022 - December 31, 2022 and $1.25/bbl from January 1, 2023 – June 30, 2023.

(2)

Transactions with a common term have been aggregated and presented at weighted average prices and volumes.

(3)

Upon closing of the acquisition (the "Bruin Acquisition") of Bruin E&P Holdco, LLC ("Bruin"), Bruin's outstanding crude oil contracts were recorded at a fair value liability of $76.4 million. At June 30, 2022, the balance was a liability of $10.3 million on the Condensed Consolidated Balance Sheets. Realized and unrealized gains and losses on the acquired contracts are recognized in Condensed Consolidated Statement of Income/(Loss) and the Condensed Consolidated Balance Sheets to reflect changes in crude oil prices from the date of closing of the Bruin Acquisition. See Note 16 to the Interim Financial Statements for further details.

SECOND QUARTER 2022 PRODUCTION AND OPERATIONAL SUMMARY TABLES

Summary of Average Daily Production(1)


Three months ended June 30, 2022


Six months ended June 30, 2022


Williston Basin

Marcellus

Canadian
Water-
floods

Other(2)

Total


Williston Basin

Marcellus

Canadian
Water-
floods

Other(2)

Total

Tight oil (bbl/d)

42,447

-

-

798

43,245


42,003

-

-

836

42,839


Light & medium oil (bbl/d)

-

-

2,054

29

2,082


-

-

2,101

26

2,127


Heavy oil (bbl/d)

-

-

2,872

14

2,886


-

-

2,949

10

2,959


Total crude oil (bbl/d)

42,447

-

4,926

841

48,213


42,003

-

5,051

872

47,925















Natural gas liquids (bbl/d)

8,231

-

87

336

8,653


8,106

-

87

323

8,516















Shale gas (Mcf/d)

47,689

167,631

-

1,014

216,334


47,276

164,900

-

968

213,144


Conventional natural gas (Mcf/d)

-

-

1,459

5,860

7,319


-

-

1,420

5,836

7,256


Total natural gas (Mcf/d)

47,689

167,631

1,459

6,874

223,653


47,276

164,900

1,420

6,804

220,400















Total production (BOE/d)

58,626

27,938

5,255

2,322

94,142


57,988

27,483

5,375

2,329

93,174

















(1)

Table may not add due to rounding.

(2)

Comprises DJ Basin and other properties in Canada.

Summary of Wells Drilled(1)


Three months ended
June 30, 2022


Six months ended
June 30, 2022


Operated


Non-Operated


Operated


Non-Operated


Gross

Net


Gross

Net


Gross

Net


Gross

Net

Williston Basin

13

11.5


17

3.2


27

23.5


29

4.7

Marcellus

-

-


21

1.7


-

-


38

3.1

Canadian Waterfloods

-

-


-

-


-

-


-

-

Other(2)

-

-


4

0.1


-

-


15

0.4

Total

13

11.5


42

5.0


27

23.5


82

8.2

(1)

Table may not add due to rounding.

(2)

Comprises DJ Basin and other properties in Canada.

Summary of Wells Brought On-Stream(1)


Three months ended
June 30, 2022


Six months ended
June 30, 2022


Operated


Non-Operated


Operated


Non-Operated


Gross

Net


Gross

Net


Gross

Net


Gross

Net

Williston Basin

24

21.0


5

0.4


26

...