CALGARY, Aug. 10, 2018 /CNW/ – Enerplus Corporation (“Enerplus” or the “Company”) (TSX & NYSE: ERF) is pleased to announce second quarter 2018 operating and financial results. The Company reported second quarter 2018 net income of $12.4 million or $0.05 per share. For the first six months of 2018, net income was $42.0 million, or $0.17 per share.
HIGHLIGHTS
- Company production of 92,883 BOE per day in the second quarter
- Company liquids production was up 21% quarter-over-quarter, averaging 50,050 barrels per day, achieving the high end of second quarter guidance of 48,000 to 50,000 barrels per day
- 33% production growth in North Dakota quarter-over-quarter
- Increasing 2018 annual production guidance to 91,000 to 93,000 BOE per day, from 86,000 to 91,000 BOE per day
- Revising 2018 annual liquids production guidance to the upper-end of the range, now 49,000 to 50,000 barrels per day, from 46,000 to 50,000 barrels per day
- 2018 capital spending guidance tightened to $585 million (from $535 to $585 million previously) largely related to increased non-operated activity
- Generated adjusted funds flow of $173.7 million during the second quarter
- 2018 adjusted funds flow expected to exceed capital expenditures and dividends by over $100 million based on current forward strip pricing
- Reducing cash G&A guidance by $0.10 per BOE to $1.55 per BOE
- Balance sheet remains among the strongest in the peer group with a net debt to adjusted funds flow ratio of 0.5 times
“We delivered strong financial and operational performance through the first half of 2018,” said Ian C. Dundas, President and Chief Executive Officer. “Our plans to continue to drive profitable growth and competitive returns remain firmly on track. We are increasing our production guidance largely underpinned by high-margin, light oil growth out of the Bakken and we have visibility to generating over $100 million in free cash flow in the second half of the year. Notwithstanding this strong outlook, we will remain disciplined with our capital allocation and continue to focus on creating long-term value for our shareholders.”
SECOND QUARTER FINANCIAL AND OPERATIONAL SUMMARY
Production
Production in the second quarter of 2018 averaged 92,883 BOE per day, up 9% from the first quarter. Liquids production for the quarter averaged 50,050 barrels per day (90% crude oil and 10% natural gas liquids), achieving the high end of second quarter guidance of 48,000 to 50,000 barrels per day. The Company brought 11 operated high working interest wells on production in North Dakota during the quarter, which drove the 21% increase in liquids production from the prior quarter.
Natural gas production for the second quarter averaged 257 MMcf per day, largely flat to the prior quarter.
Enerplus is increasing its 2018 production guidance to 91,000 to 93,000 BOE per day (from 86,000 to 91,000 BOE per day) and annual liquids production guidance is being revised to 49,000 to 50,000 barrels per day, the high-end of the previous range of 46,000 to 50,000 barrels per day. The increased production guidance reflects better than expected well performance in North Dakota along with higher than forecast non-operated production in the Marcellus.
Net Income and Adjusted Funds Flow
Enerplus generated net income of $12.4 million in the second quarter of 2018, a decrease from the previous quarter primarily as a result of higher non-cash mark-to-market losses on the Company’s commodity derivative instruments resulting from the improvement in forward crude oil prices.
Adjusted funds flow was $173.7 million during the second quarter, up 12% compared to $155.2 million in the previous quarter, supported by an increase of 15% in realized crude oil prices and higher crude oil production during the quarter.
Pricing Realizations and Cost Structure
Bakken crude oil differentials continue to see support from improved egress out of the area due to the Dakota Access Pipeline. Enerplus’ realized Bakken crude oil price differential averaged US$3.42 per barrel below WTI in the second quarter, in-line with its unchanged 2018 guidance of US$3.50 per barrel below WTI.
The Company’s realized Marcellus natural gas price differential was US$0.69 per Mcf below NYMEX in the second quarter. Although weaker than the first quarter due to seasonality and pipeline maintenance issues, Marcellus differentials are expected to improve over the remainder of the year as additional pipeline projects are completed. As a result, the Company’s 2018 Marcellus differential guidance of US$0.40 per Mcf below NYMEX is unchanged.
Second quarter operating expenses were $7.20 per BOE, an increase of 3% from the first quarter due to the higher liquids production weighting in the second quarter. Transportation costs of $3.56 per BOE were largely flat to the prior quarter, and second quarter cash general and administrative (“G&A”) expenses of $1.44 per BOE were 16% lower compared to the prior quarter largely reflective of higher second quarter production. Enerplus’ 2018 guidance for operating costs ($7.00 per BOE) and transportation costs ($3.60 per BOE) remains unchanged. Cash G&A guidance for 2018 is being reduced to $1.55 per BOE (from $1.65 per BOE).
Capital Expenditures and Balance Sheet Position
Exploration and development capital spending in the second quarter was $177.1 million associated with drilling 18.2 net wells and completing and bringing on production 12.2 net wells across the Company. Enerplus is tightening its 2018 capital spending guidance to $585 million, from the previous guidance range of $535 to $585 million, as a result of an increase in non-operated activity and modest inflation on the cost of materials and services. Capital spending for the second half of 2018 is expected to be weighted to the third quarter.
Total debt net of cash at June 30, 2018 was $311.8 million. Total debt was comprised of $672.2 million of senior notes outstanding. The Company was undrawn on its $800 million bank credit facility and had a cash balance of $360.4 million. At June 30, 2018, Enerplus’ net debt to adjusted funds flow ratio was 0.5 times.
AVERAGE DAILY PRODUCTION(1)
Three months ended |
Six months ended |
||||||||
Crude Oil (Mbbl/d) |
Natural Gas Liquids (Mbbl/d) |
Natural gas (MMcf/d) |
Total Production (Mboe/d) |
Crude Oil (Mbbl/d) |
Natural Gas Liquids (Mbbl/d) |
Natural gas (MMcf/d) |
Total Production (Mboe/d) |
||
Williston Basin |
35.8 |
3.7 |
25.3 |
43.7 |
31.7 |
3.3 |
22.6 |
38.8 |
|
Marcellus |
– |
– |
202.4 |
33.7 |
– |
– |
205.4 |
34.2 |
|
Canadian Waterfloods |
9.0 |
0.1 |
3.8 |
9.8 |
9.2 |
0.1 |
4.4 |
10.1 |
|
Other(2) |
0.5 |
0.9 |
25.4 |
5.6 |
0.4 |
1.0 |
26.8 |
5.9 |
|
Total |
45.2 |
4.8 |
257.0 |
92.9 |
41.4 |
4.4 |
259.1 |
89.0 |
(1) Table may not add due to rounding. |
SUMMARY OF WELLS BROUGHT ON-STREAM(1)
Three months ended |
Six months ended |
||||||||||
Operated |
Non-Operated |
Operated |
Non-Operated |
||||||||
Gross |
Net |
Gross |
Net |
Gross |
Net |
Gross |
Net |
||||
Williston Basin |
11 |
10.3 |
2 |
0.7 |
19 |
15.5 |
2 |
0.7 |
|||
Marcellus |
– |
– |
14 |
1.8 |
– |
– |
25 |
3.3 |
|||
Canadian Waterfloods |
– |
– |
– |
– |
2 |
1.9 |
– |
– |
|||
Other |
– |
– |
– |
– |
– |
– |
1 |
0.3 |
|||
Total |
11 |
10.3 |
16 |
2.4 |
21 |
17.4 |
28 |
4.2 |
(1) Table may not add due to rounding. |
ASSET ACTIVITY
Williston Basin
Williston Basin production averaged 43,741 BOE per day (82% oil) during the second quarter of 2018, up 29% from the first quarter of 2018. Second quarter Williston Basin production was comprised of 40,479 BOE per day in North Dakota, a 33% increase from the first quarter, and 3,262 BOE per day in Montana.
Enerplus brought on-stream 11 gross operated wells (94% average working interest) across two pads at Fort Berthold during the second quarter. The six-well Cats pad had an average completed lateral length of 9,700 feet per well and average peak 30-day production rates per well of 2,013 BOE per day (84% oil, on a three-stream basis). The five-well Metals North pad had an average completed lateral length of 8,700 feet per well (including one 4,200 foot lateral) and average peak 30-day production rates per well of 1,684 BOE per day (81% oil, on a three-stream basis).
The Company drilled 13 gross operated wells (92% average working interest) in the second quarter.
The Company continues to run two operated drilling rigs and one dedicated completions crew at its Fort Berthold operations.
Marcellus
Marcellus production averaged 202 MMcf per day during the second quarter, a decrease from the previous quarter of 3% primarily due to pipeline maintenance and seasonally weaker natural gas prices in the second quarter.
Fourteen gross non-operated wells (13% average working interest) were brought on-stream during the quarter. Thirteen wells had more than 30 days on production as of the date of this news release with an average completed lateral length of 5,300 feet per well and average peak 30-day production rates per well of 8.1 MMcf per day.
The Company participated in drilling 16 gross non-operated wells (13% average working interest) during the second quarter.
Canadian Waterfloods
Canadian waterflood production averaged 9,770 BOE per day (92% oil) during the second quarter, 5% lower than the previous quarter, primarily due to downtime associated with facility upgrades at Giltedge. Capital activity for the remainder of the year will be focused on the Company’s drilling program at Medicine Hat.
DJ Basin
Enerplus drilled four gross (3.2 net) wells in the DJ Basin during the second quarter. The wells were recently completed and have commenced flow back. Post-cleanout well results are not expected until later this year.
2018 GUIDANCE
Enerplus’ 2018 updated guidance is summarized below. The Company increased its total production guidance, revised its liquids production and capital guidance, and reduced its cash G&A expense guidance. All other guidance remains unchanged.
Guidance |
|
Capital spending |
$585 million (from $535 – $585 million) |
Average annual production |
91,000 to 93,000 BOE/day (from 86,000 to 91,000 BOE/day) |
Average annual crude oil and natural gas liquids production |
49,000 to 50,000 bbls/day (from 46,000 to 50,000 bbls/day) |
Average royalty and production tax rate |
25% |
Operating expense |
$7.00/BOE |
Transportation expense |
$3.60/BOE |
Cash G&A expense |
$1.55/BOE (from $1.65/BOE) |
2018 Full-Year Differential/Basis Outlook (1)
U.S. Bakken crude oil differential (compared to WTI crude oil) |
US$(3.50)/bbl |
Marcellus natural gas sales price differential (compared to NYMEX natural gas) |
US$(0.40)/Mcf |
(1) Excluding transportation costs. |
RISK MANAGEMENT
Enerplus continues to manage price risk through commodity hedging. Using swaps and collar structures, Enerplus has an average of 22,000 barrels per day of crude oil protected for the remainder of 2018 (approximately 66% of forecast crude oil production at the midpoint of guidance, net of royalties and production taxes), 23,140 barrels per day protected in 2019, and 14,000 barrels per day protected in 2020.
For natural gas, Enerplus has 36,685 Mcf per day protected for the remainder of 2018 (approximately 19% of forecast natural gas production at the midpoint of guidance, net of royalties and production taxes) using collar structures.
Commodity Hedging Detail (As at August 9, 2018)
WTI Crude Oil (US$/bbl) (1) |
Nymex Natural Gas (US$/Mcf) (1) |
||||||||
Jul 1, – Sep 30, 2018 |
Oct 1 – Dec 31, 2018 |
Jan 1 – Mar 31, 2019 |
Apr 1 – Jun 30, 2019 |
Jul 1, – Sep 30, 2019 |
Oct 1, – Dec 31, 2019 |
Jan 1, – Dec 31, 2020 |
Jul 1, – Oct 31, 2018 |
Nov 1, – Dec 31, 2018 |
|
Swaps |
|||||||||
Sold Swaps |
$53.73 |
$53.73 |
$53.73 |
– |
– |
– |
– |
– |
– |
Volume (bbls/d or Mcf/d) |
3,000 |
3,000 |
3,000 |
– |
– |
– |
– |
– |
– |
Three-Way Collars |
|||||||||
Sold Puts |
$42.71 |
$42.74 |
$44.28 |
$44.50 |
$44.64 |
$44.64 |
$46.71 |
– |
– |
Volume (bbls/d or Mcf/d) |
18,000 |
20,000 |
17,000 |
23,500 |
24,500 |
24,500 |
14,000 |
– |
– |
Purchased Puts |
$52.53 |
$52.48 |
$54.12 |
$54.59 |
$54.81 |
$54.81 |
$57.14 |
$2.75 |
$2.75 |
Volume (bbls/d or Mcf/d) |
18,000 |
20,000 |
17,000 |
23,500 |
24,500 |
24,500 |
14,000 |
40,000 |
30,000 |
Sold Calls |
$61.22 |
$61.10 |
$64.12 |
$65.52 |
$65.95 |
$65.99 |
$72.07 |
$3.38 |
$3.47 |
Volume (bbls/d or Mcf/d) |
18,000 |
20,000 |
17,000 |
23,500 |
24,500 |
24,500 |
14,000 |
40,000 |
30,000 |
(1) Based on weighted average price (before premiums) |
Q2 2018 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) today to discuss these results. Details of the conference call are as follows:
Date: |
Friday, August 10, 2018 |
Time: |
9:00 AM MT (11:00 AM ET) |
Dial-In: |
587-880-2171 (Alberta) |
1-888-390-0546 (Toll Free) |
|
Conference ID: |
84144621 |
Audiocast: |
https://event.on24.com/wcc/r/1788011/F463A916B7AF3CFED0821F4E99352879 |
To ensure timely participation in the conference call, callers are encouraged to dial in 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:
Dial-In: |
416-764-8677 |
1-888-390-0541 (Toll Free) |
|
Passcode: |
144621 # |
SELECTED FINANCIAL AND OPERATING RESULTS
SELECTED FINANCIAL RESULTS |
Three months ended June 30, |
Six months ended June 30, |
|||||||||
2018 |
2017 |
2018 |
2017 |
||||||||
Financial (000’s) |
|||||||||||
Net Income/(Loss) |
$ |
12,404 |
$ |
129,302 |
$ |
42,041 |
$ |
205,595 |
|||
Adjusted Funds Flow(4) |
173,708 |
114,199 |
328,870 |
234,119 |
|||||||
Dividends to Shareholders – Declared |
7,347 |
7,264 |
14,667 |
14,505 |
|||||||
Debt Outstanding – net of Cash and Restricted Cash |
311,782 |
308,067 |
311,782 |
308,067 |
|||||||
Capital Spending |
177,082 |
101,739 |
328,554 |
222,086 |
|||||||
Property and Land Acquisitions |
2,392 |
4,713 |
14,664 |
7,249 |
|||||||
Property Divestments |
(182) |
59,842 |
6,788 |
58,942 |
|||||||
Net Debt to Adjusted Funds Flow Ratio(4) |
0.5x |
0.7x |
0.5x |
0.7x |
|||||||
Financial per Weighted Average Shares Outstanding |
|||||||||||
Net Income – Basic |
$ |
0.05 |
$ |
0.53 |
$ |
0.17 |
$ |
0.85 |
|||
Net Income – Diluted |
0.05 |
0.52 |
0.17 |
0.83 |
|||||||
Weighted Average Number of Shares Outstanding (000’s) |
244,862 |
242,127 |
244,369 |
241,710 |
|||||||
Selected Financial Results per BOE(1)(2) |
|||||||||||
Oil & Natural Gas Sales(3) |
$ |
48.13 |
$ |
35.96 |
$ |
45.65 |
$ |
36.14 |
|||
Royalties and Production Taxes |
(12.08) |
(8.95) |
(11.28) |
(8.42) |
|||||||
Commodity Derivative Instruments |
(2.28) |
0.28 |
(0.57) |
0.57 |
|||||||
Cash Operating Expenses |
(7.21) |
(5.88) |
(7.12) |
(6.23) |
|||||||
Transportation Costs |
(3.56) |
(3.72) |
(3.54) |
(3.80) |
|||||||
General and Administrative Expenses |
(1.44) |
(1.53) |
(1.57) |
(1.69) |
|||||||
Cash Share-Based Compensation |
(0.05) |
— |
(0.16) |
(0.01) |
|||||||
Interest, Foreign Exchange and Other Expenses |
(0.95) |
(1.34) |
(0.99) |
(1.31) |
|||||||
Current Income Tax Recovery/(Expense) |
(0.01) |
(0.26) |
(0.01) |
(0.14) |
|||||||
Adjusted Funds Flow(4) |
$ |
20.55 |
$ |
14.56 |
$ |
20.41 |
$ |
15.11 |
|||
SELECTED OPERATING RESULTS |
Three months ended June 30, |
Six months ended June 30, |
|||||||||
2018 |
2017 |
2018 |
2017 |
||||||||
Average Daily Production(2) |
|||||||||||
Crude Oil (bbls/day) |
45,242 |
36,861 |
41,364 |
35,030 |
|||||||
Natural Gas Liquids (bbls/day) |
4,808 |
4,133 |
4,449 |
3,648 |
|||||||
Natural Gas (Mcf/day) |
256,995 |
271,292 |
259,141 |
281,393 |
|||||||
Total (BOE/day) |
92,883 |
86,209 |
89,003 |
85,577 |
|||||||
% Crude Oil and Natural Gas Liquids |
54% |
48% |
51% |
45% |
|||||||
Average Selling Price (2)(3) |
|||||||||||
Crude Oil (per bbl) |
$ |
79.98 |
$ |
55.66 |
$ |
75.34 |
$ |
56.54 |
|||
Natural Gas Liquids (per bbl) |
32.23 |
25.14 |
30.36 |
30.57 |
|||||||
Natural Gas (per Mcf) |
2.68 |
3.48 |
3.09 |
3.56 |
|||||||
Net Wells Drilled |
18 |
13 |
32 |
28 |
(1) |
Non-cash amounts have been excluded. |
(2) |
Based on Company interest production volumes. See “Presentation of Production Information” below. |
(3) |
Before transportation costs, royalties, and commodity derivative instruments. |
(4) |
These non-GAAP measures may not be directly comparable to similar measures presented by other entities. See “Non-GAAP Measures” section in this news release. |
Three months ended June 30, |
Six months ended June 30, |
||||||||||
Average Benchmark Pricing |
2018 |
2017 |
2018 |
2017 |
|||||||
WTI crude oil (US$/bbl) |
$ |
67.88 |
$ |
48.29 |
$ |
65.37 |
$ |
50.10 |
|||
AECO natural gas– monthly index (CDN$/Mcf) |
1.02 |
2.77 |
1.44 |
2.86 |
|||||||
AECO natural gas – daily index (CDN$/Mcf) |
1.18 |
2.78 |
1.63 |
2.74 |
|||||||
NYMEX natural gas – last day (US$/Mcf) |
2.80 |
3.18 |
2.90 |
3.25 |
|||||||
USD/CDN average exchange rate |
1.29 |
1.34 |
1.28 |
1.33 |
Share Trading Summary |
CDN(1) – ERF |
U.S.(2) – ERF |
|||
For the three months ended June 30, 2018 |
(CDN$) |
(US$) |
|||
High |
$ |
17.21 |
$ |
13.49 |
|
Low |
$ |
13.79 |
$ |
10.75 |
|
Close |
$ |
16.58 |
$ |
12.60 |
|
(1) TSX and other Canadian trading data combined. |
|||||
(2) NYSE and other U.S. trading data combined. |
|||||
2018 Dividends per Share |
CDN$ |
US$(1) |
|||
First Quarter Total |
$ |
0.03 |
$ |
0.02 |
|
Second Quarter Total |
$ |
0.03 |
$ |
0.02 |
|
Total Year to Date |
$ |
0.06 |
$ |
0.04 |
(1) CDN$ dividends converted at the relevant foreign exchange rate on the payment date. |