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Enerplus Ups 2021 Capex, Production Outlook After Striking Bakken Deal

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Enerplus Corp. has updated its 2021 guidance after announcing a $312MM acquisition deal in the Bakken (the seller is Hess Corp.). Earlier this year, Enerplus also closed on its acquisition of Bakken-focused Bruin E&P.

Enerplus is increasing its 2021 production guidance to 111,000 to 115,000 BOE per day (up 7% at the midpoint from 103,500 to 108,500 BOE per day), including 68,500 to 71,500 barrels per day of liquids (from 63,000 to 67,000 barrels per day).

The increased production guidance was also driven by strong operating performance in North Dakota and higher than expected production in the Marcellus through the first three months of the year.

Capital spending in 2021 is revised to $360 to $400 million (from $335 to $385 million) in connection with the acquired assets - an increase of 9% at the midpoint.

The Company's 2021 Bakken oil price differential outlook is unchanged at $3.25 per barrel below WTI, which assumes the Dakota Access Pipeline ("DAPL") continues to operate. In the event DAPL is required to cease operations, Enerplus expects sufficient rail egress to be available, however, Bakken oil price differentials would be expected to widen reflecting rail economics. The Company estimates this would result in a realized 2021 differential of approximately $6.00 per barrel below WTI, assuming eight months of wider differentials if DAPL cannot operate. The impact to Enerplus' corporate netback in this scenario is estimated to be approximately $0.90 per BOE. The Acquisition is expected to continue to provide attractive financial returns at a wider differential, as outlined above.

Five Year Outlook

Enerplus also updated its five year plan as follows:

In connection with its five-year outlook, Enerplus has provided a capital allocation framework with the following key principles:

• Maintain low financial leverage: Target a long-term net debt to adjusted funds flow ratio of less than 1.0x.
• Committed to free cash flow generation: Target a long-term capital spending reinvestment rate of less than 75% of annual adjusted funds flow.
• Return capital to shareholders: Sustainably grow the Company's base dividend supported by an increasing cash flow base. Consider share repurchases to further enhance the return of capital to shareholders.

To highlight Enerplus' financial sustainability and robust free cash flow growth potential, the Company has provided an outlook through 2025. Assuming a constructive commodity price environment (WTI oil prices at approximately US$50 to $55 per barrel or higher), the Company projects annual capital spending of approximately $500 million from 2022 to 2025 focused on generating substantial levels of free cash flow. Under this capital spending plan, cumulative free cash flow is estimated at $1.2 to $1.8 billion between 2021 and 2025 based on a US$50 to $55 per barrel WTI crude oil price and US$2.75 per Mcf NYMEX natural gas price.⁽²⁾ This is expected to result in an average capital spending reinvestment rate of approximately 60% to 70% of adjusted funds flow over the period. Enerplus projects 3% to 5% annual liquids production growth from 2022 to 2025 based on this outlook. This growth rate is based on approximately 75,000 barrels per day, being the Company's implied liquids production in 2021 assuming a full year contribution from its recent acquisitions.