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" and
"Non-GAAP 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. A copy of Enerplus' 2019 Financial Statements and MD&A is
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 Canadian dollars unless
otherwise specified.
CALGARY, March 16, 2020 /CNW/ - Enerplus Corporation
("Enerplus") (TSX & NYSE: ERF) announced an update to its
capital budget and operational plan for 2020 in response to
the rapid decline in crude oil prices. Effective immediately,
Enerplus is reducing its 2020 capital spending budget to
$325 million, or approximately 40% at
the midpoint of prior 2020 guidance of $520 to $570
million. The reduced 2020 capital budget is focused on
prioritizing the Company's balance sheet and free cash flow at
US$35 per barrel WTI and US$2.25 per Mcf NYMEX.
Enerplus is moving swiftly to preserve financial flexibility,
maximize value and maintain the long term sustainability of the
Company. Specifically, the Company plans to cease all operated
drilling and completions activity in North Dakota by mid-April. Based on the
revised plan, the Company will have 32 gross drilled uncompleted
wells in inventory in North
Dakota, creating valuable flexibility for rapid future
capital deployment.
Under this reduced capital program, 2020 crude oil and natural
gas liquids production is expected to average between 50,000 to
52,000 barrels per day (from 57,000 to 60,000 barrels per day),
representing a decline of approximately 7% at the midpoint compared
to 2019 average liquids production. Despite this initial decline in
liquids production from 2019, Enerplus estimates it could sustain
liquids production approximately flat to 2020 over the next several
years with capital spending at similar levels to the revised 2020
plan. Total average production guidance for 2020 has also been
reduced to 89,000 to 92,000 BOE per day (from 96,000 to 100,000 BOE
per day) in line with the Company's revised liquids production
range.
"We're taking immediate and decisive steps to protect value and
maintain our balance sheet strength in response to the rapid
deterioration in crude oil prices stemming from simultaneous supply
and demand shocks," commented Ian C.
Dundas, President & CEO of Enerplus. "Importantly, we
have entered this volatile period with a solid foundation. Our
conservative approach to financial leverage, a robust commodity
risk management program and corporate agility leave us
well-positioned to navigate these challenging crude oil
prices."
BALANCE SHEET STRENGTH
Foundational to Enerplus' strategy has been a financial plan
with low leverage. Enerplus ended 2019 with total debt net of cash
of $455 million. The Company's net
debt to adjusted funds flow ratio was 0.6 times at year-end 2019
with near-term debt maturities of US$82
million in 2020 related to its senior notes, with remaining
maturities extending to 2026. Enerplus has significant liquidity
available with $150 million of cash
on its balance sheet at December 31,
an undrawn US$600 million senior
unsecured bank credit facility and a capital plan expected to
generate free cash flow at current commodity prices.
COMMODITY PRICE RISK MANAGEMENT
In addition to its strong balance sheet, Enerplus has a
considerable amount of its crude oil production hedged through
commodity derivatives in 2020. Enerplus has approximately 68% of
its 2020 forecasted net crude oil production hedged (based on the
updated guidance midpoint). Assuming a US$35 per barrel WTI crude oil price for the
remainder of 2020, Enerplus forecasts hedging gains for the full
year of approximately $125
million.
Commodity Hedging Detail (As at March 13, 2020)
|
WTI Crude
Oil
(US$/bbl)(1)
|
|
Jan 1 –
Jan
31,
2020
|
Feb 1 –
Mar
31,
2020
|
Apr 1 –
Jun
30,
2020
|
Jul 1 –
Sep
30,
2020
|
Oct 1 –
Dec
31,
2020
|
Swaps
|
|
|
|
|
|
Volume
(bbls/d)
|
5,000
|
10,000
|
9,500
|
2,000
|
-
|
Sold Swaps
|
$57.05
|
$54.56
|
$57.37
|
$57.18
|
-
|
Put
Spreads(2)
|
|
|
|
|
|
Volume
(bbls/d)
|
16,000
|
16,000
|
16,000
|
16,000
|
16,000
|
Sold Puts
|
$46.88
|
$46.88
|
$46.88
|
$46.88
|
$46.88
|
Purchased
Puts
|
$57.50
|
$57.50
|
$57.50
|
$57.50
|
$57.50
|
Three Way
Collars
|
|
|
|
|
|
Volume
(bbls/d)
|
-
|
-
|
-
|
5,000
|
5,000
|
Sold Puts
|
-
|
-
|
-
|
$48.00
|
$48.00
|
Purchased
Puts
|
-
|
-
|
-
|
$56.25
|
$56.25
|
Sold Calls
|
-
|
-
|
-
|
$65.00
|
$65.00
|
(1)
|
The total average
deferred premium on outstanding 2020 hedges is US$1.73/bbl from
January 1, 2020 to December 31, 2020.
|
(2)
|
16,000 bbls/day
of sold puts are term settled.
|
SHARE REPURCHASES AND DIVIDEND
Enerplus is committed to returning capital to shareholders. The
Company plans to maintain its balance sheet strength and prioritize
free cash flow to continue to deliver a competitive return of
capital to shareholders. Under Enerplus' revised $325 million capital program, it expects to
generate free cash flow that fully funds the dividend and supports
the share repurchase program.
FORWARD-LOOKING INFORMATION AND STATEMENTS
This news release contains certain forward-looking
information and forward-looking statements within the meaning of
applicable securities laws ("forward-looking information"). The use
of any of the words "expect", "anticipate", "continue", "estimate",
"guidance", "believes" and "plans" and similar expressions are
intended to identify forward-looking information. In particular,
but without limiting the foregoing, this news release contains
forward-looking information pertaining to the following: expected
2020 production volumes, timing thereof and the anticipated
production mix; the proportion of our anticipated oil and gas
production that is hedged and the effectiveness of such hedges in
protecting our adjusted funds flow; the results from our drilling
program, timing of related production, and ultimate well
recoveries; oil and natural gas prices and differentials, our
commodity risk management programs in 2020 and in the future, and
expected hedging gains in 2020; expectations regarding our realized
oil and natural gas prices; future royalty rates on our production
and future production taxes; anticipated cash and non-cash G&A,
share-based compensation and financing expenses; operating and
transportation costs; our anticipated share repurchases under
current and future normal course issuer bids; capital spending
levels in 2020, net debt to adjusted funds-flow ratio, financial
capacity and liquidity and capital resources to fund capital
spending and working capital requirements in 2020.
The forward-looking information contained in this news
release reflects several material factors, expectations and
assumptions including, without limitation: that we will conduct our
operations and achieve results of operations as anticipated; that
our development plans will achieve the expected results; that lack
of adequate infrastructure will not result in curtailment of
production and/or reduced realized prices beyond our current
expectations; current commodity price, differentials and cost
assumptions; the general continuance of current or, where
applicable, assumed global economic and industry conditions; the
continuation of assumed tax, royalty and regulatory regimes; the
continued availability of adequate debt and/or equity financing and
adjusted funds flow to fund our capital, operating and working
capital requirements, and dividend payments as needed; the
continued availability and sufficiency of our adjusted funds flow
and availability under our bank credit facility to fund our working
capital deficiency; and the availability of third party services.
In addition, Enerplus' 2020 revised guidance contained in
this news release is based on the following: a WTI price
of US$35.00/bbl, a NYMEX price of US$2.25/Mcf, and a USD/CDN exchange rate of 1.38.
We believe the material factors, expectations and assumptions
reflected in the forward-looking information are reasonable, but no
assurance can be given that these factors, expectations and
assumptions will prove to be correct.
The forward-looking information included in this news release
is not a guarantee of future performance and should not be unduly
relied upon. Such information involves known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information including, without limitation:
continued instability in global economic and market environment;
continued decline in commodity prices environment or further
volatility in commodity prices; changes in realized prices of
Enerplus' products; changes in the demand for or supply of our
products; unanticipated operating results, results from our capital
spending activities or production declines; curtailment of our
production due to low realized prices or lack of adequate
infrastructure; changes in tax or environmental laws, royalty rates
or other regulatory matters; changes in our capital plans or by
third party operators of our properties; increased debt levels or
debt service requirements; inability to comply with debt covenants
under our bank credit facility and outstanding senior notes;
inaccurate estimation of our oil and gas reserve and contingent
resource volumes; limited, unfavourable or a lack of access to
capital markets; increased costs; a lack of adequate insurance
coverage; the impact of competitors; reliance on industry partners
and third party service providers; and certain other risks detailed
from time to time in our public disclosure documents (including,
without limitation, those risks and contingencies described under
"Risk Factors and Risk Management" in Enerplus' 2019 MD&A and
in our other public filings).
The forward-looking information contained in this press
release speaks only as of the date of this press release, and we do
not assume any obligation to publicly update or revise such
forward-looking information to reflect new events or circumstances,
except as may be required pursuant to applicable laws
NON-GAAP MEASURES
In this news release, Enerplus uses the terms "adjusted funds
flow", "free cash flow", "total debt net of cash", and "net debt to
adjusted funds flow ratio" measures to analyze operating
performance, leverage and liquidity. "Adjusted funds flow" is
calculated as net cash generated from operating activities but
before changes in non-cash operating working capital and asset
retirement obligation expenditures. "Free cash flow" is
calculated as adjusted funds flow minus capital spending. "Total
debt net of cash" is calculated as senior notes plus any
outstanding bank credit facility balance, minus cash and cash
equivalents. "Net debt to adjusted funds flow" is calculated as
total debt net of cash, including restricted cash, divided by
adjusted funds flow.
Enerplus believes that, in addition to cash flow from
operating activities, net earnings and other measures prescribed by
U.S. GAAP, the terms "adjusted funds flow", "free cash flow",
"total debt net of cash", and "net debt to adjusted funds flow" are
useful supplemental measures as they provide an indication of the
results generated by Enerplus' principal business activities.
However, these measures are not measures recognized by U.S. GAAP
and do not have a standardized meaning prescribed by U.S. GAAP.
Therefore, these measures, as defined by Enerplus, may not be
comparable to similar measures presented by other issuers. For
reconciliation of these measures to the most directly comparable
measure calculated in accordance with U.S. GAAP, and further
information about these measures, see disclosure under "Non-GAAP
Measures" in Enerplus' 2019 MD&A.
For further information, including financial and operating
results and our most recent corporate presentation, please visit
our website at www.enerplus.com or phone 1-800-319-6462.
Shareholders may, upon request, obtain a hard copy of Enerplus'
complete audited financial statements free of charge.
Ian C. Dundas
President & Chief Executive Officer
Enerplus Corporation
SOURCE Enerplus Corporation