CALGARY, Jan. 31, 2017 /CNW/ – Enerplus Corporation (TSX & NYSE: ERF) today announced its 2017 capital budget, an operational update, and a production outlook through 2019. Enerplus’ 2017 capital budget is $450 million and is focused on generating strong returns on capital, maintaining the Company’s balance sheet strength, and delivering profitable growth.
Highlights of the $450 million capital budget:
- Company liquids production is expected to increase approximately 25% from the beginning of 2017 to the fourth quarter of 2017 driven by Enerplus’ high rate-of-return North Dakota development, where total production is expected to grow by approximately 50% over the same period
- Fourth quarter 2017 liquids production guidance is 45,000 – 50,000 barrels per day
- Fourth quarter 2017 total production guidance is 92,000 – 97,000 BOE per day
- 2017 funds flow is expected to be approximately balanced with capital spending and dividend payments at US$55 per barrel WTI and US$3.00 per Mcf NYMEX
“Our 2017 budget is expected to drive robust liquids growth while maintaining our strong financial position,” commented Ian C. Dundas, President & CEO. “This capital program is focused on our high quality North Dakota asset where we expect to continue to add shareholder value with our strong capital efficiencies and focus on returns. To support our capital program, we have increased our 2017 crude oil hedge position to approximately 60% of forecast volumes, net of royalties, and secured an estimated three quarters of our North Dakota capital costs including the majority of costs related to drilling, pumping and proppant supply.”
2017 Capital Budget and Guidance
Enerplus has allocated approximately $330 million to its North Dakota development in 2017, which will fund a two rig drilling program and bring on-stream approximately 30 net wells. This allocation includes non-drilling/completion spending, as well as pre-spending on facilities in preparation for the 2018 capital program. Enerplus estimates that it has protected approximately 75% of its 2017 North Dakota capital program from cost escalation.
Approximately $60 million is allocated to the Canadian waterfloods in 2017, which will fund waterflood expansion, maintenance, and ongoing polymer projects.
Approximately $60 million is allocated to the Marcellus in 2017, which will fund drilling activity and bring on-stream approximately 6 net wells.
Annual 2017 production is expected to average between 86,000 – 90,000 BOE per day, with crude oil and natural gas liquids production expected to average between 40,000 – 43,000 barrels per day. Following a limited completions program in North Dakota in the fourth quarter of 2016, capital spending is forecast to begin to accelerate in the first half of 2017, driving strong liquids production growth in the back half of the year. Fourth quarter 2017 liquids production is targeted at 45,000 to 50,000 barrels per day.
Operating expenses in 2017 are projected to be modestly higher than 2016 levels as a result of the higher expected liquids weighting in the Company’s 2017 production mix. Operating expenses are expected to average approximately $7.85 per BOE in 2017.
Cash G&A expenses in 2017 are expected to be flat to 2016 levels, averaging approximately $1.80 per BOE.
Transportation costs are expected to average $3.90 per BOE in 2017, an increase from 2016 transportation cost levels largely attributable to additional firm transportation commitments in the Marcellus that came into effect in August 2016 delivering to higher priced markets, lower production volumes due to the non-operated year-end 2016 divestment, and a weaker Canadian dollar projected versus 2016.
A summary of Enerplus’ 2017 guidance is provided below.
2017 Guidance |
|
Capital spending |
$450 million |
Average annual production |
86,000 – 90,000 BOE/d |
Q4 average production |
92,000 – 97,000 BOE/d |
Average annual crude oil and natural gas liquids production |
40,000 – 43,000 bbl/d |
Q4 average crude oil and natural gas liquids production |
45,000 – 50,000 bbl/d |
Average royalty and production tax rate |
23% |
Operating expense |
$7.85 per BOE |
Transportation expense |
$3.90 per BOE |
Cash G&A expense |
$1.80 per BOE |
2017 Differential/Basis Outlook(1) |
|
U.S. Bakken crude oil differential (compared to WTI crude oil) |
US$(6.00)/bbl |
Marcellus basis (compared to NYMEX natural gas) |
US$(0.90)/Mcf |
(1) Before field transportation costs |
Operational Update
Fourth quarter 2016 production averaged approximately 89,000 BOE per day, bringing annual average 2016 production to 93,100 BOE per day, in line with guidance of 93,000 BOE per day. Fourth quarter 2016 crude oil and natural gas liquids production averaged 41,500 barrels per day, bringing annual average 2016 liquids production to 43,300 barrels per day, towards the lower end of the guidance range of 43,000 to 44,000 barrels per day, reflecting severe weather in North Dakota in the fourth quarter.
As previously announced, Enerplus completed the sale of approximately 5,000 BOE per day of non-operated North Dakota production at the end of the fourth quarter of 2016, for cash consideration of US$292 million, before closing adjustments.
With completions activity in North Dakota scheduled to begin to ramp-up late in the first quarter of 2017, Enerplus expects first quarter production to be largely flat from the fourth quarter, after adjusting for the year- end divestment, following which production is expected to accelerate through the second half of 2017.
Three-Year Outlook
With Enerplus’ strong capital efficiencies, reduced cost structure, and significant financial flexibility, the Company is well positioned to deliver profitable growth in the current commodity price environment.
Enerplus has a deep inventory of high quality drilling locations in North Dakota which is expected to drive strong crude oil production growth as the Company executes its development plan. Enerplus is targeting annual liquids production growth of approximately 20% per year through 2019. Over the same period, total company annual production growth is targeted at approximately 10% per year. This production growth is expected to be funded by internally generated cash flow based on commodity prices of US$55 per barrel WTI and US$3.00 per Mcf NYMEX.
Risk Management Update
Enerplus has added additional crude oil hedges to protect its capital plans. Crude oil properties are expected to continue to generate over three quarters of the Company’s net operating income in 2017. Using swaps and collar structures, Enerplus now has an average of 18,000 barrels per day of crude oil protected in 2017 (approximately 63% of forecast crude oil production net of royalties) and 11,500 barrels per day of crude oil protected in 2018.
Commodity Hedging Detail (As at January 30, 2017) |
||||||
WTI Crude Oil |
NYMEX (US$/Mcf) |
|||||
Jan 1, 2017 – Jun 30, 2017 |
Jul 1, 2017 – |
Jan 1, 2018 – |
Jan 1, 2019 – |
Apr 1, 2019 – |
Jan 1, 2017 – |
|
Swaps |
||||||
Sold Swaps |
$53.50 |
$53.50 |
$53.73 |
$53.73 |
– |
– |
Volume (bbls/d or Mcf/d) |
2,000 |
2,000 |
3,000 |
3,000 |
– |
– |
3 Way Producer Collars |
||||||
Sold Puts |
$38.94 |
$39.62 |
$42.91 |
– |
$43.33 |
$2.06 |
Volume (bbls/d or Mcf/d) |
14,000 |
18,000 |
8,500 |
– |
3,000 |
50,000 |
Purchased Puts |
$50.29 |
$50.61 |
$53.88 |
– |
$54.25 |
$2.75 |
Volume (bbls/d or Mcf/d) |
14,000 |
18,000 |
8,500 |
– |
3,000 |
50,000 |
Sold Calls |
$61.14 |
$60.33 |
$62.87 |
– |
$64.90 |
$3.41 |
Volume (bbls/d or Mcf/d) |
14,000 |
18,000 |
8,500 |
– |
3,000 |
50,000 |
Presentation
An updated presentation will be posted to the Company’s website at www.enerplus.com.
About Enerplus
Enerplus Corporation is a responsible developer of high quality crude oil and natural gas assets in Canada and the United States committed to creating value for its shareholders through a disciplined capital investment strategy.