Enerplus to Acquire Strategic Williston Basin Assets, Updates 2021 Guidance and Provides Five Year Outlook
April 08, 2021 at 08:00 AM EDT
CALGARY, AB, April 8, 2021 /CNW/ - Enerplus Corporation ("Enerplus" or the "Company") (TSX: ERF) (NYSE: ERF) today announced that it has entered into a definitive agreement to acquire assets in the Williston Basin from Hess Corporation for total cash consideration of US$312 million (the "Acquisition"). In connection with the Acquisition, the Company has updated its 2021 guidance including an increased production outlook due to operational outperformance year to date. The Company has also provided a five-year outlook based on principles of maintaining low financial leverage, generating meaningful free cash flow and returning capital to shareholders.
"These assets are a strong strategic and operational fit for Enerplus, further extending our high-return Bakken drilling inventory," said Ian C. Dundas, President and CEO of Enerplus. "The addition of this tier one resource into our development plan is expected to generate strong financial returns and enhance our free cash flow growth. In connection with the acquisition, we have highlighted a five-year outlook with projected cumulative free cash flow of between $1.2 to $1.8 billion between 2021 and 2025, assuming US$50 to $55 per barrel WTI."
Enerplus has agreed to acquire the properties for total cash consideration of US$312 million pursuant to a purchase and sale agreement, subject to customary purchase price adjustments. The Acquisition will be funded with the Company's existing cash position of approximately US$150 million with the remaining portion funded through borrowing on its undrawn bank credit facility. Closing of the Acquisition is subject to customary closing conditions and is expected to occur in May 2021.
2021 GUIDANCE UPDATE
Enerplus is increasing its 2021 production guidance to 111,000 to 115,000 BOE per day (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) based on an eight month contribution from the Acquisition to the Company's 2021 production. 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.
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.
2021 PRODUCTION AND CAPITAL SPENDING GUIDANCE SUMMARY
FIVE YEAR OUTLOOK
In connection with its five-year outlook, Enerplus has provided a capital allocation framework with the following key principles:
The key principles above and the macro environment will drive Enerplus' disciplined approach to growth, maximizing free cash flow and shareholder returns.
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.
Stifel FirstEnergy acted as financial advisor, BMO Capital Markets acted as strategic advisor. Vinson & Elkins LLP acted as U.S. legal advisor and Blake, Cassels & Graydon LLP acted as Canadian legal advisor to Enerplus on the Acquisition.
An investor presentation in connection with the Acquisition has been added to the Company's website at www.enerplus.com.
(1) Production and reserves are stated on a working interest basis before deduction of royalties.
Enerplus is an independent North American oil and gas exploration and production company focused on creating long-term value for its shareholders through a disciplined, returns-based capital allocation strategy and a commitment to safe, responsible operations.
Currency and Accounting Principles
Barrels of Oil Equivalent
Presentation of Production Information and Reserves Information
FORWARD-LOOKING INFORMATION AND STATEMENTS
The forward-looking information contained in this news release reflects several material factors and expectations and assumptions of Enerplus including, without limitation: that the Acquisition will be completed substantially on the terms and within the timeline described in this press release; that Enerplus will realize expected benefits of the Acquisition described in this press release and of its prior acquisition of Bruin E&P HoldCo, LLP (the "Bruin Acquisition") as previously announced; that Enerplus will conduct its operations and achieve results of operations as anticipated; that Enerplus' development plans will achieve the expected results; current commodity price and cost assumptions; the general continuance of current or, where applicable, assumed industry conditions, including expectations regarding the duration and overall impact of COVID-19; the continuation of assumed tax, royalty and regulatory regimes; the accuracy of the estimates of Enerplus' reserves and resources volumes; the continued availability of adequate debt and/or equity financing, cash flow and other sources to fund Enerplus' capital and operating requirements, and dividend payments as needed; availability of third party services; and the extent of its liabilities. In addition, Enerplus' updated 2021 outlook contained in this news release is based on the following: a WTI price of between US$55.00/bbl, a NYMEX price of US$3.00/Mcf, a Bakken crude oil price differential of US$3.25/bbl below WTI and a USD/CDN exchange rate of 1.27. Furthermore, in addition, Enerplus' five-year outlook contained in this news release is based on the following: a WTI price of between US$50.00/bbl and US$55.00/bbl, a NYMEX price of US$3.00/Mcf in 2021 and US$2.75/Mcf thereafter, a Bakken crude oil price differential of US$3.25/bbl below WTI in 2021 and US$2/bbl to US$3/bbl below WTI thereafter and a USD/CDN exchange rate of 1.27. Enerplus believes 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: failure to complete the Acquisition, at all or on terms or within the timeline described in this press release; failure by Enerplus to realize anticipated benefits of the Acquisition or the Bruin Acquisition; changes, including future decline, in commodity prices, including as a result of continued COVID-19 pandemic; changes in realized prices for Enerplus' products from those currently anticipated; changes in the demand for or supply of Enerplus' products; unanticipated operating results, results from Enerplus' capital spending activities or production declines; curtailment of Enerplus' 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 development plans by Enerplus or by third party operators of Enerplus' properties; increased debt levels or debt service requirements; changes in estimates of Enerplus' oil and gas reserves and resources 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; failure to complete any anticipated acquisitions or divestitures; changes in law or government programs or policies in Canada or the United States; and certain other risks detailed from time to time in Enerplus' public disclosure documents (including, without limitation, those risks identified in its annual information form for the year ended December 31, 2020, management's discussion and analysis ("MD&A"), and Form 40-F at December 31, 2020 as it may be updated from time to time by current reports on Form 6-K, all of which are available, as applicable, on SEDAR website at www.sedar.com, on the SEC's website at http://www.sec.gov and on Enerplus' website).
The purpose of our estimated free cash flow disclosure, is to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes. Information in this press release is provided as of the date hereof and Enerplus assumes no obligation to update any forward-looking statements, unless otherwise required by law.
Enerplus believes that, in addition to net earnings and other measures prescribed by U.S. GAAP, the terms "adjusted funds flow", "free cash flow" (including per share measures), "net debt to adjusted funds flow ratio", and "reinvestment rate" are useful supplemental measures as such provide an indication of the results generated by Enerplus' principal business activities. However, these measures are not 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.
SOURCE Enerplus Corporation