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Enerplus Announces Third Quarter 2022 Results; Increases Dividend and Updates 2022 Guidance

Cision

All financial information contained within this news release has been prepared in accordance with U.S. GAAP. This news release includes forward-looking statements and information within the meaning of applicable securities laws. Readers are advised to review the "Forward-Looking Information and Statements" at the conclusion of this news release. Readers are also referred to "Non-GAAP and Other Financial Measures" at the end of this news release for information regarding the presentation of the financial and operational information in this news release, as well as the use of certain financial measures that do not have standard meaning under U.S. GAAP and "Notice Regarding Information Contained in this News Release", "Non-GAAP Measures" in Enerplus' third quarter 2022 MD&A for supplementary financial measures, which information is incorporated by reference to this news release. A copy of Enerplus' 2022 interim and 2021 annual Financial Statements and associated MD&A are or will be available on our website at www.enerplus.com, under our profile on SEDAR at www.sedar.com and on the EDGAR website at www.sec.gov. All amounts in this news release are stated in United States dollars unless otherwise specified.

CALGARY, AB, Nov. 3, 2022 /CNW/ - Enerplus Corporation ("Enerplus" or the "Company") (TSX: ERF) (NYSE: ERF) today 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.

(1) This is a non-GAAP financial measure. Refer to "Non-GAAP and Other Financial Measures" section for more information.

"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," said Ian C. Dundas, President and CEO. "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."

THIRD QUARTER 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.

(1) This is a non-GAAP financial measure. Refer to "Non-GAAP and Other Financial Measures" section for more information.

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 DETAIL

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.

2022 Guidance Summary


Updated Guidance

Previous Guidance

Capital spending

$430 million

$400 – 440 million

Average total production

99,750 – 101,000 BOE/day

97,500 – 101,500 BOE/day

Average liquids production

61,500 – 62,500 bbls/day

59,500 – 62,500 bbls/day

Fourth quarter total production

105,000 – 110,000 BOE/day

n/a

Fourth quarter liquids production

64,000 – 68,000 bbls/day

n/a

Average production tax rate
(% of net sales, before transportation)

7% (No change)

7 %

Operating expense

$10.00/BOE (No change)

$10.00/BOE

Transportation expense

$4.25/BOE (No change)

$4.25/BOE

Cash G&A expense

$1.20/BOE (No change)

$1.20/BOE

Current tax expense

2-3% of adjusted funds flow before tax
(No change)

2-3% of adjusted funds flow before tax

2022 Differential/Basis Outlook(1)


Updated Guidance

Previous Guidance

U.S. Bakken crude oil differential
(compared to WTI crude oil)

$+1.25/bbl

$+1.00/bbl

Marcellus natural gas sales price differential
(compared to NYMEX natural gas)

$(0.75)/Mcf (No change)

$(0.75)/Mcf

(1) Excluding transportation costs.

Q3 2022 Conference Call Details

A conference call hosted by Ian C. Dundas, President and CEO will be held at 9:00 AM MT (11:00 AM ET) on November 4, 2022, to discuss these results. Details of the conference call are as follows:

Date:

Friday, November 4, 2022

Time:

9:00 AM MT (11:00 AM ET)

Dial-In:

587-880-2171 (Alberta)


1-888-390-0546 (Toll Free)

Conference ID:

58265396

Audiocast:

https://app.webinar.net/wraEPb2PVB9

To ensure timely participation in the conference call, callers are encouraged to join 15 minutes prior to the start time to register for the event. A telephone replay will be available for 30 days following the conference call and can be accessed at the following numbers:

Replay Dial-In:

1-888-390-0541 (Toll Free)

Replay Passcode:

265396 #

PRICE RISK MANAGEMENT

The following is a summary of Enerplus' financial commodity hedging contracts at November 3, 2022.



WTI Crude Oil ($/bbl)(1)(2)(3)


NYMEX Natural Gas ($/Mcf)(2)



Oct 1, 2022 –


Jan 1, 2023 –


Jul 1, 2023 –


Oct 1, 2022 –


Nov 1, 2022 –

Apr 1, 2023 –



Dec 31, 2022


Jun 30, 2023


Dec 31, 2023


Oct 31, 2022


Mar 31, 2023

Oct 31, 2023

Swaps












Volume (Mcf/day)





40,000


Volume (bbls/day)



10,000


10,000



Swaps





$ 3.40


Brent - WTI Spread



$ 5.47


$ 5.47















3 Way Collars












Volume (bbls/day)


17,000


15,000


5,000



Sold Puts


$ 40.00


$ 61.67


$ 65.00



Purchased Puts


$ 50.00


$ 79.33


$ 85.00



Sold Calls


$ 57.91


$ 114.31


$ 128.16















Collars












Volume (Mcf/day)





60,000


120,000

50,000

Volume (bbls/day)



2,000


2,000



Purchased Puts



$ 5.00


$ 5.00


$ 3.77


$ 6.27

$ 4.05

Sold Calls



$ 75.00


$ 75.00


$ 4.50


$ 18.17

$ 7.00

(1)

The total average deferred premium spent on our outstanding crude oil contracts is $1.50/bbl from October 1, 2022 - December 31, 2022 and $1.25/bbl from January 1, 2023 – December 31, 2023.

(2)

Transactions with a common term have been aggregated and presented at weighted average prices and volumes.

(3)

Upon closing of the acquisition of Bruin E&P Holdco, LLC (the "Bruin Acquisition"), Bruin E&P Holdco, LLC's outstanding crude oil contracts were recorded at a fair value liability of $76.4 million. At September 30, 2022, the remaining liability was $4.7 million on the Condensed Consolidated Balance Sheets. Realized and unrealized gains and losses on the acquired contracts are recognized in Condensed Consolidated Statement of Income/(Loss) and the Condensed Consolidated Balance Sheets to reflect changes in crude oil prices from the date of closing of the Bruin Acquisition.

THIRD QUARTER 2022 PRODUCTION AND OPERATIONAL SUMMARY TABLES

Summary of Average Daily Production(1)


Three months ended September 30, 2022


Nine months ended September 30, 2022


Williston
Basin

Marcellus

Canadian
Water-
floods

Other(2)

Total


Williston
Basin

Marcellus

Canadian
Water-
floods

Other(2)

Total

Tight oil (bbl/d)

52,014

-

-

779

52,793


45,376

-

-

817

46,194

Light & medium oil (bbl/d)

-

-

2,006

32

2,038


-

-

2,069

28

2,097

Heavy oil (bbl/d)

-

-

2,629

22

2,651


-

-

2,841

14

2,855

Total crude oil (bbl/d)

52,014

-

4,635

833

57,482


45,376

-

4,911

859

51,146













Natural gas liquids (bbl/d)

10,511

-

102

287

10,900


8,916

-

92

311

9,319













Shale gas (Mcf/d)

63,976

164,731

-

941

229,649


52,904

164,843

-

959

218,706

Conventional natural gas (Mcf/d)

-

-

1,375

5,534

6,909


-

-

1,405

5,734

7,139

Total natural gas (Mcf/d)

63,976

164,731

1,375

6,475

236,558


52,904

164,843

1,405

6,693

225,845













Total production (BOE/d)

73,188

27,455

4,966

2,199

107,808


63,110

27,474

5,237

2,285

98,106





















(1)

Table may not add due to rounding.

(2)

Comprises DJ Basin and other properties in Canada.

Summary of Wells Drilled(1)


Three months ended
September 30, 2022


Nine months ended
September 30, 2022


Operated


Non-Operated


Operated


Non-Operated


Gross

Net


Gross

Net


Gross

Net


Gross

Net

Williston Basin

8

6.6


6

0.2


35

30.1


34

4.6

Marcellus

-

-


23

2.2


-

-


60

5.1

Canadian Waterfloods

-

-


-

-


-

-


-

-

Other(2)

-

-


-

-


-

-


15

0.4

Total

8

6.6


29

2.4


35

30.1


109

10.1

(1)

Table may not add due to rounding.

(2)

Comprises DJ Basin and other properties in Canada.

Summary of Wells Brought On-Stream(1)


Three months ended
September 30, 2022


Nine months ended
September 30, 2022


Operated


Non-Operated


Operated


Non-Operated


Gross

Net