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Enerplus Corp. Third Quarter 2022 Results

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   |    Thursday,November 03,2022

Enerplus Corp. announced financial and operating results for the third quarter of 2022, a 10% increase to its quarterly dividend to $0.055 per share and updated 2022 guidance.

The Company reported third quarter 2022 cash flow from operating activities and adjusted funds flow of $409.9 million and $355.6 million, respectively, compared to $182.2 million and $203.1 million, respectively, in the third quarter of 2021. Cash flow from operating activities and adjusted funds flow increased from the same period in 2021 primarily due to higher realized commodity prices and production.

Highlights:

• Third quarter total production was 107,808 BOE per day (up 15% from the prior quarter) and liquids production was 68,382 barrels per day (up 20% from the prior quarter)
• Adjusted funds flow was $355.6 million in the third quarter, which exceeded capital spending of $114.5 million, generating free cash flow⁽¹⁾ of $241.1 million
• Total return of capital to shareholders during the third quarter was $123.3 million, comprising share repurchases of $111.8 million and dividends of $11.5 million
• Increased the quarterly dividend by 10% to $0.055 per share (from $0.05 per share)
• 2022 liquids production guidance was increased by 1,000 barrels per day at the midpoint due to continued strong operational performance; annual liquids production growth now tracking approximately 10%
• 2022 capital spending guidance was set to $430 million (from the previous range of $400 - $440 million)
• Fourth quarter production guidance is 105,000 to 110,000 BOE per day, including liquids production of 64,000 to 68,000 barrels per day

Ian C. Dundas, President and CEO, said: "Our operating momentum continued through the third quarter with liquids production increasing 20% quarter-over-quarter and strong volumes expected through the end of the year. This performance has driven another positive production guidance update while annual capital spending is forecast inside our previously stated range. The result of this execution has been robust free cash flow generation which has allowed us to reduce our net debt by almost 40% and return over $270 million to shareholders through the first nine months of 2022. We remain well positioned to continue with these initiatives in the fourth quarter and into 2023."

3Q Summary

Production in the third quarter of 2022 was 107,808 BOE per day, an increase of 15% compared to the prior quarter and 9% higher than the same period a year ago. Crude oil and natural gas liquids production in the third quarter of 2022 was 68,382 barrels per day, an increase of 20% compared to the prior quarter and 8% higher than the same period a year ago. Production increased from the previous quarter and prior year period primarily due to the Company's development activity in North Dakota.

Enerplus reported third quarter 2022 net income of $305.9 million, or $1.28 per share (diluted), compared to net income of $98.1 million, or $0.38 per share (diluted), in the same period in 2021. Adjusted net income⁽¹⁾ for the third quarter of 2022 was $207.9 million, or $0.87 per share (diluted), compared to $87.5 million, or $0.34 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 and production during the third quarter of 2022.

Enerplus' third quarter 2022 realized Bakken crude oil price differential was $2.41 per barrel above WTI, compared to $2.26 per barrel below WTI in the third quarter of 2021. Bakken crude oil prices continued to trade at premiums relative to WTI due to excess pipeline capacity in the region and strong physical 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 price differential to be $1.25 per barrel above WTI, compared to $1.00 per barrel above WTI, previously.

The Company's realized Marcellus natural gas price differential widened to $0.99 per Mcf below NYMEX during the third quarter of 2022, compared to $0.45 per Mcf below NYMEX in the third quarter of 2021. The Company's realized natural gas price was $6.53 per Mcf in the third quarter of 2022, an increase from $3.00 per Mcf in the same period in 2021 due to the increase in NYMEX natural gas prices in 2022. Enerplus continues to expect its full-year 2022 Marcellus natural gas price differential to average $0.75 per Mcf below NYMEX.

In the third quarter of 2022, Enerplus' operating expenses were $10.47 per BOE, compared to $9.76 per BOE during the third quarter of 2021. The Company continues to expect full-year 2022 operating expenses to average $10.00 per BOE.

Capital spending totaled $114.5 million in the third quarter of 2022. The Company ended the third quarter of 2022 with total debt of $433.2 million and cash of $42.2 million.

During the third quarter of 2022, Enerplus announced its intention to increase its expected 2022 return of capital to at least 60% of free cash flow commencing in the second half of 2022 and continuing through 2023, an increase from 50% of free cash flow in the first half of 2022. Enerplus also previously announced an increase to the expected minimum return of capital level to $425 million for 2022. In the third quarter, Enerplus paid $11.5 million in dividends and repurchased 7.9 million shares under its normal course issuer bid ("NCIB") at an average price of $14.13 per share, for total consideration of $111.8 million. During the nine months ended September 30, 2022, a total of $271.3 million was returned to shareholders through dividends and share repurchases.

Subsequent to September 30, 2022 and up to November 2, 2022, Enerplus repurchased 2.7 million shares under its NCIB at an average price of $16.00 per share, for total consideration of $43.7 million. Enerplus has also increased its quarterly dividend by 10% to $0.055 per share payable on December 15, 2022.

Asset Overview

Bakken

North Dakota production averaged 73,188 BOE per day during the third quarter of 2022, an increase of 25% compared to the prior quarter and 16% compared to the same period a year ago. Enerplus drilled eight gross operated wells (83% working interest) during the third quarter and brought eight operated wells (96% working interest) on production.

Marcellus production averaged 165 MMcf per day during the third quarter of 2022, an increase of 7% compared to the same period in 2021 and 2% lower than the prior quarter.

2022 Guidance Update

Capital spending guidance in 2022 has been updated to $430 million from the prior range of $400 to $440 million.

Annual production guidance has been revised to 99,750 to 101,000 BOE per day from the prior range of 97,500 to 101,500 BOE per day, representing an increase of 875 BOE per day at the midpoint. Annual liquids production guidance has been revised to 61,500 to 62,500 barrels per day from the prior range of 59,500 to 62,500 barrels per day, representing an increase of 1,000 barrels per day at the midpoint.

Fourth quarter volumes are expected to remain strong despite the two announced divestments of the Company's Canadian assets, one of which closed on October 31, 2022, with the other expected to close in December 2022. Enerplus is providing fourth quarter 2022 production guidance of 105,000 to 110,000 BOE per day, including liquids production of 64,000 to 68,000 barrels per day.

Enerplus' 2022 Bakken crude oil price differential guidance has been strengthened to $1.25 per barrel above WTI, from $1.00 per barrel above WTI previously.

A summary of Enerplus' updated 2022 guidance is provided in the tables below and includes the impact of the two announced Canadian asset divestments.