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Enerplus Corp. First Quarter 2021 Results

Share Print Bookmark    |    Friday,May 07,2021

Enerplus Corp. announced financial and operating results for the first quarter of 2021 and an increase to its dividend.

The Company reported first quarter 2021 cash flow from operating activities and adjusted funds flow of $37.2 million and $128.0 million, respectively, compared to $122.7 million and $113.2 million, respectively, in the first quarter of 2020. Cash flow from operating activities decreased from the prior year period primarily due to changes in working capital.  Adjusted funds flow increased from the prior year period primarily due to improved realized commodity prices during the first quarter of 2021.

Highlights:

• Adjusted funds flow was $128.0 million in the first quarter, which exceeded capital spending of $65.5 million, generating free cash flow of $62.5 million
• Delivered first quarter production of 91,671 BOE per day, including liquids of 49,046 barrels per day
• Completed two accretive acquisitions in the Williston Basin year to date, increasing Enerplus' acreage position in North Dakota by over four times to 296,000 net acres and extending its high-return development inventory
• Expect to deliver a 20% total well cost reduction in North Dakota in 2021 compared to 2019 through continued technology application and innovation
• Maintaining a solid financial position: net debt to adjusted funds flow ratio expected to be 1.3x or less by year-end 2021 based on US$55 per barrel WTI (annualized for 2021 acquisitions); current undrawn capacity on bank credit facility of approximately US$750 million
• Increasing the dividend and transitioning to quarterly payments: new quarterly dividend of $0.033 per share, a 10% increase from the current monthly dividend of $0.01 per share on an annualized basis, will be payable on June 15, 2021 to shareholders of record on May 28, 2021. Given the April and May dividends have already been paid or declared, the change to quarterly payments beginning in June represents an incremental dividend payment of $5.6 million in the second quarter of 2021

Ian C. Dundas, President and CEO, said: "It has been a constructive start to the year for us, having announced and closed two strategic acquisitions in the Bakken. These acquisitions are expected to be highly accretive to our per share metrics, support continued operational efficiencies and extend our core Bakken development inventory. They are also helping to drive a step change in the free cash flow generation of our business. As a result, and consistent with our commitment to sustainably growing our return of capital to shareholders, we are increasing our dividend.  As we continue integration efforts, we remain focused on delivering safe, consistent execution under a disciplined capital allocation framework." 

1Q21 Summary

Production in the first quarter of 2021 was 91,671 BOE per day, a decrease of 7% compared to the same period a year ago, and 6% higher than the prior quarter. Crude oil and natural gas liquids production in the first quarter of 2021 was 49,046 barrels per day, a decrease of 10% compared to the same period a year ago, and approximately flat to the prior quarter. The lower production compared to the same period in 2020 was due to the significant reduction in capital activity in 2020 in response to the low commodity price environment. Quarter-over-quarter production was higher due to increased Marcellus volumes and the contribution of approximately 6,300 BOE per day from the Company's acquisition of Bruin which closed on March 10, 2021.

Enerplus reported first quarter 2021 net income of $14.7 million, or $0.06 per share, compared to net income of $2.9 million, or $0.01 per share, in the same period in 2020. Adjusted net income for the first quarter of 2021 was $56.3 million, or $0.23 per share, compared to $21.1 million, or $0.09 per share, during the same period in 2020. Net income and adjusted net income were higher compared to the prior year period primarily due to higher benchmark commodity prices and stronger commodity price realizations during the first quarter of 2021.

Enerplus' first quarter 2021 realized Bakken oil price differential was US$3.12 per barrel below WTI, compared to US$5.26 per barrel below WTI in the first quarter of 2020. The improved year-over-year Bakken differential was supported by increased refinery demand in the first quarter of 2021, while regional production was and continues to be lower than pre-pandemic levels.

The Company's realized Marcellus natural gas price differential was US$0.15 per Mcf below NYMEX during the first quarter of 2021, compared to US$0.38 per Mcf below NYMEX in the first quarter of 2020. Marcellus pricing is generally stronger during the first quarter associated with an increase in seasonal demand due to the onset of colder weather. The Company continues to expect significant seasonality in pricing in the U.S. Northeast moving through the rest of the year.

In the first quarter of 2021, Enerplus' operating costs were $7.82 per BOE, transportation costs were $3.98 per BOE and cash general and administrative expenses were $1.59 per BOE.

Exploration and development capital spending totaled $65.5 million in the first quarter of 2021. The Company paid $7.4 million in dividends in the quarter.

Enerplus ended the first quarter of 2021 with total debt of $983.2 million and cash of $189.0 million. Subsequent to the first quarter, the Company increased and extended its senior, unsecured bank credit facility to US$900 million (from US$600 million) with a maturity date extended to October 31, 2025.  The Company also transitioned this facility to a sustainability-linked credit facility ("SLL credit facility"), incorporating sustainability-linked performance targets (see the Company's news release dated April 29, 2021).  

Asset Highlights

Williston Basin

Williston Basin production averaged 47,327 BOE per day (73% tight oil), inclusive of production acquired through the Bruin acquisition which closed on March 10, 2021. This is a decrease of 4% compared to the same period a year ago, and 3% higher than the prior quarter. The Company brought three gross operated wells (100% working interest) on production late in the first quarter. The Company reinitiated its drilling program in North Dakota in April and plans to continue running one drilling rig for the rest of the year. Enerplus is continuing to drive strong well cost efficiencies, with the average cost for a two-mile lateral expected to decline to US$6.1 million in 2021, a 20% reduction compared to 2019.

Marcellus production averaged 204 MMcf per day during the first quarter of 2021, a decrease of 6% compared to the same period in 2020, and 16% higher than the prior quarter. The Company participated in drilling 14 gross non-operated wells (1% average working interest) and brought 16 gross non-operated wells (3% average working interest) on production during the quarter.

Canadian waterflood production averaged 7,383 (97% oil) during the first quarter of 2021, a decrease of 10% compared to the same period in 2020, and 4% lower than the prior quarter.

In the DJ Basin, Enerplus brought three gross operated wells (86% average working interest) on production during the first quarter.

Acquisitions Update

Enerplus announced two strategic acquisitions in the Williston Basin year to date, which are expected to deliver meaningful accretion to per share metrics, enhance the Company's free cash flow outlook, extend its high-return drilling inventory and support further operational efficiencies.

The Company's acquisition of Bruin for total cash consideration of US$465 million (prior to closing adjustments), closed on March 10, 2021. The Company's acquisition of assets from Hess Corporation for total cash consideration of US$312 million (prior to closing adjustments), closed on April 30, 2021. Enerplus continues to maintain excellent liquidity and had approximately US$750 million undrawn capacity on its US$900 million SLL credit facility at May 1, 2021.

Dividend

Enerplus' Board of Directors approved a 10% increase to the Company's dividend to $0.033 per share paid quarterly, from $0.01 per share paid monthly previously. The first increased quarterly dividend is payable on June 15, 2021 to all shareholders of record at the close of business on May 28, 2021. The ex-dividend date for this payment is May 27, 2021.

2021 Guidance Update

Production and capital spending guidance for 2021 remains unchanged and is summarized in the table below. Capital spending is expected to be split relatively evenly between the first and second half of the year. Approximately 80% of the Company's 2021 capital budget is allocated to its North Dakota operations where it expects to drill 21 gross (21 net) operated wells and bring 42 gross (32 net) operated wells on production during the year. In addition to this operated activity, the budget includes an allocation for non-operated activity in North Dakota.

Operating expenses in 2021 are expected to average $8.25 per BOE. Unit operating expenses are expected to increase following the first quarter due to the Company's increased liquids production weighting from its recent acquisitions. Enerplus' first quarter production was 54% liquids which is expected to increase above 60% liquids for the rest of 2021.

Transportation and cash general and administrative ("G&A") expenses in 2021 are expected to average $3.85 per BOE and $1.25 per BOE, respectively.