Quarterly / Earnings Reports | Second Quarter (2Q) Update

Enerplus Talks 2Q 2019 Results

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Enerplus Corporation today reported its second quarter 2019 operating and financial results.

HIGHLIGHTS

• Second quarter total production was 100,694 BOE per day, up 14% quarter-over-quarter, exceeding the high-end of the Company's guidance
• Liquids production was 52,861 barrels per day, up 16% quarter-over-quarter
• North Dakota production was 43,822 BOE per day, up 22% quarter-over-quarter
• 2019 total production guidance increased to 99,000 to 102,000 BOE per day (from 97,000 to 101,000 BOE per day) and liquids production guidance narrowed to 54,000 to 55,500 barrels per day (from 53,500 to 56,000 barrels per day)
• 14% liquids production per share growth in 2019 at the guidance midpoint
• 2019 capital spending guidance tightened to $610 to $630 million (from $590 to $630 million)
• Returned approximately $115 million of capital to shareholders through dividends and share repurchases year to date
• Based on current market conditions, Enerplus intends to repurchase its full authorization under its normal course issuer bid ("NCIB") equaling an additional 8.9 million shares as at August 7, 2019. Once completed, this would equate to a total of 24.2 million shares repurchased, or approximately 10% of shares outstanding, since initiating the share repurchase program in the third quarter of 2018
• Improved 2019 Bakken oil differential guidance to US$3.25 per barrel below WTI (from US$4.00 per barrel)
• Reduced 2019 unit cost guidance for operating expenses and cash general & administrative ("G&A") expenses
• Maintained significant financial flexibility; total debt net of cash was $359.0 million with a net debt to adjusted funds flow ratio of 0.5 times

President and Chief Executive Officer Ian C. Dundas commented: "We've established strong operational momentum through the first half of the year and remain well positioned relative to our financial and operational targets in 2019. Our strategy continues to be underpinned by disciplined capital allocation which is delivering profitable oil production growth and return of capital to shareholders, while maintaining our peer-leading balance sheet strength."

"Since initiating our share repurchase program in the third quarter of 2018, we've returned over $175 million to shareholders through repurchases. Underlying this decision has been the compelling value we see in our equity. We continue to see this value in our shares today and remain committed to prioritizing the acquisition of our stock, based on current market conditions."

Production

Production in the second quarter increased by 14% from the prior quarter to average 100,694 BOE per day, including oil and natural gas liquids production of 52,861 barrels per day (91% oil). The sequential production increase was driven by North Dakota and Marcellus volumes which were up 22% and 14%, respectively. With outperformance in the Marcellus and continued strong production in North Dakota, Enerplus is increasing its annual production guidance to 99,000 to 102,000 BOE per day (from 97,000 to 101,000 BOE per day) and narrowing its liquids production guidance to 54,000 to 55,500 barrels per day (from 53,500 to 56,000 barrels per day).

North Dakota production is expected to meaningfully build in the third quarter due to the timing of several well completions late in the second quarter and continued completions activity in the third quarter, with volumes moderating into the fourth quarter.

During the second quarter, Enerplus closed divestments for proceeds of $9.6 million primarily related to the sale of properties in southeast Saskatchewan with associated production of approximately 350 barrels per day (100% oil).

Pricing Realizations and Cost Structure
Enerplus' realized Bakken oil price differential averaged US$3.00 per barrel below WTI in the second quarter. Based on year to date price realizations and the continued strength in Bakken differentials, Enerplus is revising its full year Bakken differential guidance to US$3.25 per barrel below WTI (from US$4.00 per barrel). The Company continues to manage differential risk through fixed physical sales. For the second half of 2019, Enerplus has fixed physical differential sales of approximately 26,300 barrels per day of Bakken oil production at US$2.66 per barrel below WTI, including a portion which is sold directly into the U.S. Gulf Coast that utilizes the Company's firm capacity on the Dakota Access Pipeline. Enerplus' remaining production is sold through a combination of in-basin monthly spot and index sales.

The Company's realized Marcellus natural gas price differential moderated in the second quarter to US$0.57 per Mcf below NYMEX from the strong pricing in the prior quarter. A significant portion of the Company's Marcellus sales are tied to the Transco Zone 6 non-New York markets, where seasonal changes in demand drive prices lower from winter to spring. Enerplus is widening its full-year 2019 Marcellus differential guidance to US$0.35 per Mcf below NYMEX (from US$0.30 per Mcf).

Second quarter operating expenses were $7.84 per BOE, transportation expenses were $4.02 per BOE and cash G&A expenses were $1.26 per BOE. Enerplus is reducing its 2019 operating expense guidance to $7.90 per BOE (from $8.00 per BOE) and its cash G&A guidance to $1.45 per BOE (from $1.50 per BOE) primarily due to the Company's higher 2019 production expectations.

Capital Expenditures and Balance Sheet Position
Exploration and development capital spending in the second quarter was $207.2 million and was associated with drilling 12.7 net wells and bringing 26.3 net wells on production across the Company's operations. Enerplus has narrowed its 2019 capital spending guidance to $610 to $630 million (from $590 to $630 million) following the continued optimization of its operational plans. Capital spending for the second half of 2019 is expected to be weighted to the third quarter.

The Company continues to maintain its significant financial flexibility. At the end of the second quarter, its total debt net of cash was $359.0 million and its net debt to adjusted funds flow ratio was 0.5 times.

Share Repurchases
The Company repurchased and cancelled 6.6 million shares during the second quarter for total consideration of $70.6 million. Since initiating its share repurchase program in the third quarter of 2018 up to and including August 7, 2019, the Company has repurchased and cancelled 15.3 million shares for total consideration of $178 million. 

Enerplus continues to see the current trading value of its equity as discounted relative to the Company's internal view. As a result, the Company intends to repurchase the remaining authorization under its NCIB equaling an additional 8.9 million shares as at August 7, 2019. Combined with the shares repurchased to date, this would represent a total of 24.2 million shares repurchased, or approximately 10% of shares outstanding, since initiating its share repurchase program in the third quarter of 2018.  The Company's existing NCIB expires March 25, 2020.

ASSET ACTIVITY

Average Daily Production⁽¹⁾

Summary of Wells Brought On-Stream⁽¹⁾

Williston Basin

Williston Basin production averaged 46,920 BOE per day (83% oil) during the second quarter of 2019, including 43,822 BOE per day from North Dakota (83% oil). The Company drilled 11 gross operated wells (73% average working interest) and brought 26 gross operated wells (90% average working interest) on production during the second quarter, including a nine-well pad at the end of June.

Enerplus continues to drive capital efficiency improvements with current well costs down approximately US$700,000 from 2018 levels driven by a combination of lower costs, efficiencies and completion optimization.  Enerplus' current total well cost for a two-mile lateral (drill, complete, tie-in and facilities) is estimated at US$7.5 million.

Marcellus

Marcellus production averaged 237 MMcf per day during the second quarter, 14% higher than the previous quarter. The Company participated in drilling eight gross non-operated wells (4% average working interest) and brought 14 gross non-operated wells (11% average working interest) on production during the quarter.

DJ Basin

The Company drilled five gross operated wells (88% average working interest) in the second quarter. These wells are expected to be completed in the third quarter.

2019 Guidance Updates

The Company's updated guidance for 2019 is in the table below, including changes from its previous guidance.

2019 Guidance

RISK MANAGEMENT

Enerplus continues to manage price risk through commodity hedging. Enerplus has an average of 24,500 barrels per day of crude oil protected for the remainder of 2019 and 16,000 barrels per day protected in 2020.

For natural gas, Enerplus has entered into offsetting swaps through October 31, 2019, effectively locking in gains of $0.51 per Mcf on the Company's original NYMEX hedges through this term.

Commodity Hedging Detail (As at August 7, 2019)

SELECTED FINANCIAL AND OPERATING RESULTSSELECTED OPERATING RESULTS