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Enerplus Corp. Fourth Quarter, Full Year 2021 Results

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   |    Thursday,March 03,2022

Enerplus Corp. reported its fourth quarter and full year 2021 results.

Enerplus reported fourth quarter 2021 cash flow from operating activities and adjusted funds flow⁽¹⁾ of $283.5 million and $258.5 million, respectively, compared to $70.9 million and $68.6 million, respectively, in the fourth quarter of 2020. Full year 2021 cash flow from operating activities and adjusted funds flow⁽¹⁾ was $604.8 million and $712.4 million, respectively, compared to $335.9 million and $265.5 million, respectively, in 2020.

Highlights:

• Robust free cash flow generation – Adjusted funds flow⁽¹⁾ was $712.4 million in 2021, which exceeded capital spending of $302.3 million, generating free cash flow⁽¹⁾ of $410.1 million (representing a reinvestment rate⁽¹⁾ of 42%).
• Strategic Bakken acquisitions – Completed two highly accretive and strategic acquisitions in the Bakken in 2021 which have enhanced Enerplus' free cash flow generation and extended the Company's high quality drilling inventory to over a decade.
• Maintained balance sheet strength – Ended 2021 with net debt⁽¹⁾ of $640.4 million and a net debt to adjusted funds flow ratio⁽¹⁾ of 0.9x.
• Meaningful capital returned to shareholders – Increased the dividend by 37% and repurchased $123.2 million of the Company's shares in 2021 for a total cash return to shareholders of $153.7 million.
• Strong performance relative to emissions targets – Continued progress towards Enerplus' 50% greenhouse gas ("GHG") emissions intensity reduction target by 2030 (Scope 1 and 2). Relative to its 2019 baseline, the Company reduced methane emissions intensity by over 20% in 2021 (one year ahead of target) and reduced 2021 GHG emissions intensity by approximately 25%, based on preliminary estimates.
• Capital efficiency improvement – Solid operational execution delivered another significant reduction in total well cost performance in North Dakota which averaged $5.7 million per well in 2021, down 10% year-over-year.
• Substantial reserves growth – Year end 2021 net proved reserves increased 163% year-over-year (U.S. SEC Standards), and gross proved plus probable reserves increased 45% year-over-year (Canadian NI 51-101 Standards). See separate news release issued today.

Ian C. Dundas, President and CEO, said: "2021 was a transformational year for Enerplus. We completed two highly strategic and accretive acquisitions, maintained our commitment to operating with low financial leverage, and generated company record production and free cash flow.

"The depth of our North Dakota inventory and our operational scale have substantially increased following our 2021 acquisitions. We can point to over a decade of high-quality North Dakota drilling inventory, which further supports the sustainability of our long-term plan," commented Dundas.

"Looking ahead, we are positioned to deliver another year of strong results supported by high commodity prices, a capital efficient operating plan in North Dakota that is 75% protected from cost inflation, and structurally tight Bakken oil price differentials. Consistent with our track record, we expect to deliver meaningful cash returns to shareholders in 2022. We continue to believe that our intrinsic value, based on mid-cycle commodity price assumptions, is not adequately reflected in our current market value. As a result, we plan to continue our aggressive approach to share repurchases which is expected to result in a reduction to our shares outstanding of approximately 10% in less than a year since commencing the program."   

4Q 2021 Summary

Enerplus delivered fourth quarter total production of 102,823 BOE per day, which was at the high end of its guidance range (100,000 to 103,200 BOE per day). Total production in the fourth quarter was 4% higher than the prior quarter and 48% higher than the same period in 2020. Liquids production in the fourth quarter was 64,959 barrels per day, which was in line with the Company's guidance (64,150 to 66,550 barrels per day). Liquids production in the fourth quarter was 3% higher than the prior quarter and 63% higher than the same period in 2020. The higher quarter-over-quarter production was due to development activity in North Dakota and the Marcellus. The higher production compared to the same period in 2020 was primarily due to the Company's acquisitions in North Dakota completed during the first half of 2021. Enerplus completed the divestment of its Sleeping Giant and Russian Creek interests in the Williston Basin during the fourth quarter with associated production of approximately 2,400 BOE per day.

Enerplus reported fourth quarter 2021 net income of $176.9 million, or $0.71 per share, compared to a net loss of $161.6 million, or ($0.73) per share, in the fourth quarter of 2020. Excluding certain non-cash or non-recurring items, fourth quarter 2021 adjusted net income⁽¹⁾ was $130.0 million, or $0.52 per share, compared to $15.3 million, or $0.07 per share, during the same period in 2020. The higher net income and adjusted net income was primarily due to higher production and commodity prices. The net loss in the fourth quarter of 2020 was primarily due to a non-cash property, plant and equipment ("PP&E") impairment of $244.5 million.

Enerplus' fourth quarter 2021 Bakken crude oil price differential was $0.88 per barrel below WTI, compared to

$5.12 per barrel below WTI for the same period in 2020. The stronger Bakken differential was due to an improved supply and demand balance and excess pipeline capacity in the region. Enerplus' fourth quarter Marcellus natural gas price differential was $1.70 per Mcf below NYMEX, compared to $1.07 per Mcf below NYMEX for the same period in 2020. The wider Marcellus differential was due to volatility in NYMEX pricing and weaker local markets during the fourth quarter of 2021.

Operating expenses in the fourth quarter of 2021 were $8.46 per BOE, compared to $7.82 per BOE in the same period in 2020. The increase in per unit operating expenses was due to the Company's higher crude oil production, contract price escalation and increased well service activity. Cash general and administrative ("G&A") expenses were $1.12 per BOE in the fourth quarter of 2021, compared to $1.40 per BOE in the prior year period. The reduction in per unit G&A expenses was due to higher production in the fourth quarter of 2021.

Capital spending totaled $81.1 million in the fourth quarter of 2021. The Company paid $7.9 million in dividends during the quarter and repurchased 11.2 million shares at an average price of $10.08 (CDN$12.70) per share for a total cost of $113.3 million.

Enerplus ended the fourth quarter of 2021 with net debt of $640.4 million and was undrawn on its $900 million bank credit facility.

Full Year 2021 Summary

Enerplus delivered 2021 total production of 92,221 BOE per day, which was at the high end of its guidance range (91,450 to 92,250 BOE per day). Total production in 2021 was 26% higher compared to 2020. Liquids production in 2021 was 56,337 barrels per day, which was in line with the Company's guidance (55,950 to 56,750 barrels per day). Liquids production in 2021 was 37% higher compared to 2020. The higher year-over-year production was primarily due to the Company's acquisitions in North Dakota completed during the first half of 2021 and its development program in 2021.

Enerplus reported full year 2021 net income of $234.4 million, or $0.93 per share, compared to a net loss of $693.4 million, or ($3.12) per share, in 2020. Excluding certain non-cash or non-recurring items, 2021 adjusted net income⁽¹⁾ was $315.7 million, or $1.25 per share, compared to $14.5 million, or $0.07 per share, in 2020. The higher net income and adjusted net income was primarily due to higher production and commodity prices. The net loss in 2020 was primarily due to non-cash impairments of $900.9 million as a result of low commodity prices in 2020.

Enerplus' 2021 Bakken crude oil price differential was $2.15 per barrel below WTI, compared to $5.39 per barrel below WTI in 2020. Bakken pricing strengthened throughout the year as basin-wide production fell below 2020 levels, while pipeline egress capacity out of the basin increased with the Dakota Access Pipeline expansion start-up in August 2021. Enerplus' 2021 Marcellus natural gas price differential was $0.81 per Mcf below NYMEX, compared to $0.65 per Mcf below NYMEX in 2020. The weaker pricing was driven by warmer than anticipated weather for much of the year and volatility in NYMEX benchmark prices.

Operating expenses in 2021 were $8.69 per BOE, compared to $7.38 per BOE in 2020. Cash G&A expenses in 2021 were $1.14 per BOE, compared to $1.26 per BOE in 2020.

Capital spending totaled $302.3 million in 2021, in line with the Company's guidance of $303 million. The Company paid $30.5 million in dividends in 2021 and repurchased 12.9 million shares at an average price of $9.55 (CDN$12.06) per share for a total cost of $123.2 million.

Asset Activity

Williston Basin production averaged 67,590 BOE per day during the fourth quarter of 2021, 4% higher than the prior quarter. In the fourth quarter, Enerplus drilled six operated wells (100% working interest) and brought eight operated wells on production (100% working interest). Enerplus continued to deliver reductions to its well cost structures in 2021 through improved execution and technology application. This led to a 10% improvement year-over-year in total well costs which averaged $5.7 million in 2021.

Marcellus production averaged 161 MMcf per day during the fourth quarter of 2021, 5% higher than the prior quarter. Canadian waterflood production averaged 5,741 BOE per day during the fourth quarter of 2021, 2% lower than the prior quarter.

Environmental, Social and Governance (ESG) Update

Enerplus continued to make strong progress on its ESG initiatives in 2021. Based on preliminary estimates, the Company expects to have reduced its 2021 scope 1 and 2 GHG emissions intensity by approximately 25% and its methane emissions intensity by over 20%, each compared to a 2019 baseline. Enerplus also reduced its freshwater use per well completion in the Fort Berthold Indian Reservation by 31% in 2021, compared to a 2019 baseline, exceeding its target of 25%. The Company continues to work towards its longer-term environmental targets, including a 50% reduction in GHG emissions intensity by 2030 and a 50% reduction in freshwater use per well completion corporately by 2025. 

Enerplus is also well positioned to achieve its safety targets having delivered a company record in 2021 of zero lost time injuries. Enerplus is targeting a 25% reduction in lost time injury frequency, on average, from 2020 to 2023, relative to its 2019 baseline.