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US NEWS 
HIGHLIGHTS
- Adjusted funds flow was $260.4 million in the first quarter, which exceeded capital spending of $138.6 million, generating free cash flow(1) of $121.8 million
- Returned $66.6 million to shareholders through dividends and share repurchases in the first quarter; planning to return at least 60% of full-year 2023 free cash flow to shareholders (as previously indicated)
- Expect to complete remaining share repurchases of 3.3 million shares by end of July 2023, and renew normal course issuer bid for 10% of shares outstanding in August 2023, based on current market conditions
- Reduced net debt by 32% from year-end 2022, ending the quarter with net debt of $150.6 million
- First quarter production averaged 97.7 MBOE per day, including 56.7 Mbbl per day of liquids
- Production per share increased by 19% in the first quarter of 2023 compared to the same period in 2022
| (1) | This is a non-GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” section for more information. |
“Our strong operating performance has continued through the first quarter of 2023,” said Ian C. Dundas, President and CEO. “We remain on track to efficiently execute our capital program which is designed to generate attractive free cash flow and deliver profitable growth. Priorities for free cash flow will continue to be focused on returning capital to shareholders and reinforcing the balance sheet.”
FIRST QUARTER SUMMARY
Production in the first quarter of 2023 was 97,652 BOE per day, an increase of 6% compared to the same period a year ago, and 9% lower than the prior quarter. Crude oil and natural gas liquids production in the first quarter of 2023 was 56,734 barrels per day, in line with the same period a year ago, and 13% lower than the prior quarter. The higher production compared to the same period in 2022 was driven by the Company’s 2022 development plan and strong well performance in North Dakota and the Marcellus. The lower production compared to the prior quarter was due to the planned sequencing of the Company’s completions program in North Dakota with no operated wells brought online between mid-October 2022 and mid-February 2023. The sale of substantially all of Enerplus’ Canadian assets in the fourth quarter of 2022 with associated production of 6,400 BOE per day (78% liquids) also contributed to the lower production in the first quarter of 2023 compared to the prior quarter.
Enerplus reported first quarter 2023 net income of $137.5 million, or $0.63 per share (basic), compared to net income of $33.2 million, or $0.14 per share (basic), in the same period in 2022. Excluding certain non-cash or non-recurring items, adjusted net income(1) for the first quarter of 2023 was $140.7 million, or $0.65 per share (basic), compared to $145.8 million, or $0.60 per share (basic), during the same period in 2022. First quarter 2023 net income was higher than the prior year period primarily due to a gain in commodity derivative instruments compared to a commodity derivative instrument loss in the prior year quarter.
Enerplus’ first quarter 2023 realized Bakken oil price differential was $0.06 per barrel above WTI, compared to $0.35 per barrel below WTI in the first quarter of 2022. Enerplus is revising its 2023 Bakken crude oil price differential guidance to $0.50 per barrel above WTI, from $0.75 per barrel above WTI previously, reflecting the slightly weaker than expected pricing in the first quarter.
The Company’s realized Marcellus natural gas price differential was $0.64 per Mcf below NYMEX during the first quarter of 2023, compared to $0.01 per Mcf above NYMEX in the first quarter of 2022. Enerplus expects its Marcellus differential to remain supported during spring and into summer due to a flat outlook on natural gas supply growth and weaker NYMEX pricing. As a result, Enerplus is maintaining its annual Marcellus differential guidance of $0.75 per Mcf below NYMEX.
Operating expenses were $10.56 per BOE in the first quarter of 2023, compared to $10.03 per BOE during the first quarter of 2022. The increase in per unit operating expenses compared to the prior year period was due to inflation adjusted contract pricing, increased gas processing volumes due to improved capture rates, and higher planned well service activity.
Current tax expense was $11.0 million in the first quarter.
Capital spending totaled $138.6 million in the first quarter of 2023. The Company paid $12.0 million in dividends in the quarter and repurchased approximately 3.5 million shares at an average price of $15.37 per share, for total consideration of $54.6 million. Subsequent to March 31, 2023, and up to and including May 3, 2023, Enerplus repurchased 1.1 million shares at an average price of $14.81 per share, for total consideration of $16.0 million.
Enerplus ended the first quarter of 2023 with total debt of $203.2 million and cash of $52.6 million. Enerplus was undrawn on its $1.3 billion credit facilities.
| (1) | This is a non-GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” section for more information. |
OPERATIONS
North Dakota production averaged 66,656 BOE per day during the first quarter of 2023, an increase of 16% compared to the same period a year ago. North Dakota production was 8% lower than the prior quarter due to the planned sequencing of the Company’s completions program. During the first quarter, Enerplus drilled 14 gross operated wells (86% average working interest) and brought four gross operated wells (75% working interest) on production in North Dakota. In the second quarter, Enerplus expects to bring approximately 19 – 22 net operated wells on production in North Dakota, including 3 – 5 net refracs. The Company is continuing to operate two drilling rigs throughout 2023.
Marcellus production averaged 180 MMcf per day during the first quarter of 2023, approximately 11% higher than the same period in 2022 and approximately flat to the prior quarter.
RETURN OF CAPITAL TO SHAREHOLDERS
Enerplus remains committed to returning at least 60% of free cash flow generated in 2023 to shareholders through dividends and share repurchases. Based on current market conditions, the Company expects to continue to prioritize share repurchases for the majority of its return of capital plan and intends to complete share repurchases under its remaining normal course issuer bid (“NCIB”) by the end of July 2023. Enerplus expects to renew its NCIB in August 2023 for another 10% of the public float (within the meaning under the TSX rules).
As at May 3, 2023, Enerplus had 3.3 million shares remaining under its NCIB.
Enerplus announced a quarterly cash dividend of $0.055 per share payable on June 15, 2023 to shareholders of record on May 31, 2023.
2023 UPDATED GUIDANCE
Enerplus’ current 2023 guidance is summarized below. The Company has updated guidance for its Bakken oil price differential to $0.50 per barrel above WTI (from $0.75 per barrel above WTI), production tax of 7% to 8% (from 7%), and transportation expense to $4.20 per BOE (from $4.35 per BOE). All other guidance remains unchanged.
2023 Guidance Summary
| Guidance | |
| Capital spending | $500 – 550 million |
| Average total production | 93,000 – 98,000 BOE/day |
| Average liquids production | 57,000 – 61,000 bbls/day |
| Average production tax rate
(% of net sales, before transportation) |
7 – 8% (from 7%) |
| Operating expense | $10.75 – 11.75/BOE |
| Transportation expense | $4.20/BOE (from $4.35/BOE) |
| Cash G&A expense | $1.35/BOE |
| Current tax expense | 5 – 6% of adjusted funds flow, before tax |
2023 Differential/Basis Outlook(1)
| Guidance | |
| U.S. Bakken crude oil differential
(compared to WTI crude oil) |
$0.50/bbl (from $0.75/bbl) |
| Marcellus natural gas sales price differential
(compared to NYMEX natural gas) |
$(0.75)/Mcf |
| (1) | Excluding transportation costs. |
Q1 2023 Conference Call Details
A conference call hosted by Ian C. Dundas, President and CEO will be held at 9:00 AM MT (11:00 AM ET) on May 5, 2023, to discuss these results. Details of the conference call are as follows:
Date: Friday, May 5, 2023
Time: 9:00 AM MT (11:00 AM ET)
Audiocast: https://app.webinar.net/JmYbPKNEKpo
To immediately join the conference call by phone, without operator assistance, please use the following URL to register and be connected into the conference call by automated call back: https://emportal.ink/3LP3OCW.
To join the call from a live operator managed queue, please dial 1-888-390-0546 (Toll Free) using conference ID 00849157.
To ensure timely participation in the conference call, callers are encouraged to join 15 minutes prior to the start time to register for the event. A telephone replay will be available for 30 days following the conference call and can be accessed at the following numbers:
| Replay Dial-In: | 1-888-390-0541 (Toll Free) |
| Replay Passcode: | 849157 # |
PRICE RISK MANAGEMENT
The following is a summary of Enerplus’ financial commodity hedging contracts at May 3, 2023.
| WTI Crude Oil ($/bbl)(1)(2) | NYMEX Natural Gas ($/Mcf)(2) | |||||
| Apr 1, 2023 – | Jul 1, 2023 – | Apr 1, 2023 – | ||||
| Jun 30, 2023 | Dec 31, 2023 | Oct 31, 2023 | ||||
| Swaps | ||||||
| Volume (bbls/day) | 10,000 | 10,000 | – | |||
| Brent – WTI Spread | $ 5.47 | $ 5.47 | – | |||
| 3 Way Collars | ||||||
| Volume (bbls/day) | 15,000 | 5,000 | – | |||
| Sold Puts | $ 61.67 | $ 65.00 | – | |||
| Purchased Puts | $ 79.33 | $ 85.00 | – | |||
| Sold Calls | $ 114.31 | $ 128.16 | – | |||
| Collars | ||||||
| Volume (Mcf/day) | – | – | 50,000 | |||
| Volume (bbls/day)(3) | 2,000 | 2,000 | – | |||
| Purchased Puts | $ 5.00 | $ 5.00 | $ 4.05 | |||
| Sold Calls | $ 75.00 | $ 75.00 | $ 7.00 | |||
| (1) | The total average deferred premium spent on outstanding crude oil contracts is $1.32/bbl from April 1, 2023 – June 30, 2023 and $1.07/bbl from July 1, 2023 – December 31, 2023. |
| (2) | Transactions with a common term have been aggregated and presented at weighted average prices and volumes. |
| (3) | Outstanding commodity derivative instruments acquired as part of the Bruin Acquisition completed in 2021. |
FIRST QUARTER 2023 PRODUCTION AND OPERATIONAL SUMMARY TABLES
Summary of Average Daily Production(1)
| Three months ended March 31, 2023 | ||||
| Williston Basin | Marcellus | Other(2) | Total | |
| Tight oil (bbl/d) | 46,625 | – | 743 | 47,369 |
| Light & medium oil (bbl/d) | – | – | – | – |
| Heavy oil (bbl/d) | – | – | – | – |
| Total crude oil (bbl/d) | 46,625 | – | 743 | 47,369 |
| Natural gas liquids (bbl/d) | 9,276 | – | 89 | 9,365 |
| Shale gas (Mcf/d) | 64,531 | 180,184 | 793 | 245,509 |
| Conventional natural gas (Mcf/d) | – | – | – | – |
| Total natural gas (Mcf/d) | 64,531 | 180,184 | 793 | 245,509 |
| Total production (BOE/d) | 66,656 | 30,031 | 964 | 97,652 |
| (1) | Table may not add due to rounding. |
| (2) | Primarily DJ Basin. |
Summary of Wells Drilled(1)
| Three months ended March 31, 2023 | ||||||
| Operated | Non-Operated | |||||
| Gross | Net | Gross | Net | |||
| Williston Basin | 14 | 12.0 | 18 | 1.5 | ||
| Marcellus | – | – | 12 | 0.2 | ||
| DJ Basin | 2 | 2.0 | – | – | ||
| Total | 16 | 14.0 | 30 | 1.7 | ||
| (1) | Table may not add due to rounding. |
Summary of Wells Brought On-Stream(1)
| Three months ended March 31, 2023 | ||||||
| Operated | Non-Operated | |||||
| Gross | Net | Gross | Net | |||
| Williston Basin | 4 | 3.0 | 3 | 0.1 | ||
| Marcellus | – | – | 13 | 0.2 | ||
| DJ Basin | – | – | – | – | ||
| Total | 4 | 3.0 | 16 | 0.3 | ||
| (1) | Table may not add due to rounding. |
| SELECTED FINANCIAL RESULTS | Three months ended March 31, |
|||||
| 2023 | 2022 | |||||
| Financial (US$, thousands, except ratios) | ||||||
| Net Income/(Loss) | $ | 137,486 | $ | 33,243 | ||
| Adjusted Net Income/(Loss)(1) | 140,729 | 145,828 | ||||
| Cash Flow from Operating Activities | 241,401 | 195,992 | ||||
| Adjusted Funds Flow(1) | 260,409 | 261,895 | ||||
| Dividends to Shareholders – Declared | 11,993 | 7,918 | ||||
| Net Debt | 150,622 | 572,271 | ||||
| Capital Spending | 138,648 | 99,013 | ||||
| Property and Land Acquisitions | 1,748 | 1,941 | ||||
| Property and Land Divestments | 233 | 6,581 | ||||
| Net Debt to Adjusted Funds Flow Ratio(1) | 0.1x | 0.7x | ||||
| Financial per Weighted Average Shares Outstanding | ||||||
| Net Income /(Loss) – Basic | $ | 0.63 | $ | 0.14 | ||
| Net Income/(Loss) – Diluted | 0.62 | 0.13 | ||||
| Weighted Average Number of Shares Outstanding (000’s) – Basic | 216,806 | 242,787 | ||||
| Weighted Average Number of Shares Outstanding (000’s) – Diluted | 222,927 | 249,337 | ||||
| Selected Financial Results per BOE(2)(3) | ||||||
| Crude Oil & Natural Gas Sales(4) | $ | 47.02 | $ | 61.84 | ||
| Commodity Derivative Instruments | 3.90 | (8.81) | ||||
| Operating Expenses | (10.56) | (10.03) | ||||
| Transportation Costs | (4.30) | (4.32) | ||||
| Production Taxes | (3.43) | (4.26) | ||||
| General and Administrative Expenses | (1.48) | (1.35) | ||||
| Cash Share-Based Compensation | 0.10 | (0.25) | ||||
| Interest, Foreign Exchange and Other Expenses | (0.37) | (0.66) | ||||
| Current Income Tax Expense | (1.25) | (0.60) | ||||
| Adjusted Funds Flow(1) | $ | 29.63 | $ | 31.56 | ||
| SELECTED OPERATING RESULTS | Three months ended
March 31, |
|||||
| 2023 | 2022 | |||||
| Average Daily Production(3) | ||||||
| Crude Oil (bbls/day) | 47,369 | 47,634 | ||||
| Natural Gas Liquids (bbls/day) | 9,365 | 8,377 | ||||
| Natural Gas (Mcf/day) | 245,509 | 217,111 | ||||
| Total (BOE/day) | 97,652 | 92,196 | ||||
| % Crude Oil and Natural Gas Liquids | 58 % | 61 % | ||||
| Average Selling Price(3)(4) | ||||||
| Crude Oil (per bbl) | $ | 76.34 | $ | 91.95 | ||
| Natural Gas Liquids (per bbl) | 20.55 | 37.78 | ||||
| Natural Gas (per Mcf) | 3.08 | 4.62 | ||||
| Net Wells Drilled | 15.7 | 14.9 | ||||
| (1) | These non–GAAP measures may not be directly comparable to similar measures presented by other entities See “Non-GAAP and Other Financial Measures” section in this news release. |
| (2) | Non–cash amounts have been excluded. |
| (3) | Based on net production volumes. See “Basis of Presentation” section in this news release. |
| (4) | Before transportation costs and commodity derivative instruments. |
Condensed Consolidated Balance Sheets
| (US$ thousands) unaudited | March 31, 2023 | December 31, 2022 | ||||||||||||
| Assets | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | 52,578 | $ | 38,000 | ||||||||||
| Accounts receivable, net of allowance for doubtful accounts | 231,735 | 276,590 | ||||||||||||
| Other current assets | 56,987 | 56,552 | ||||||||||||
| Derivative financial assets | 23,647 | 36,542 | ||||||||||||
| 364,947 | 407,684 | |||||||||||||
| Property, plant and equipment: | ||||||||||||||
| Crude oil and natural gas properties (full cost method) | 1,384,953 | 1,322,904 | ||||||||||||
| Other capital assets | 9,678 | 10,685 | ||||||||||||
| Property, plant and equipment | 1,394,631 | 1,333,589 | ||||||||||||
| Other long-term assets | 14,632 | 21,154 | ||||||||||||
| Right-of-use assets | 17,469 | 20,556 | ||||||||||||
| Deferred income tax asset | 150,280 | 154,998 | ||||||||||||
| Total Assets | $ | 1,941,959 | $ | 1,937,981 | ||||||||||
| Liabilities | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable | $ | 386,590 | $ | 398,482 | ||||||||||
| Current portion of long-term debt | 80,600 | 80,600 | ||||||||||||
| Derivative financial liabilities | 3,191 | 10,421 | ||||||||||||
| Current portion of lease liabilities | 12,750 | 13,664 | ||||||||||||
| 483,131 | 503,167 | |||||||||||||
| Long-term debt | 122,600 | 178,916 | ||||||||||||
| Asset retirement obligation | 116,094 | 114,662 | ||||||||||||
| Lease liabilities | 7,008 | 9,262 | ||||||||||||
| Deferred income tax liability | 74,513 | 55,361 | ||||||||||||
| Total Liabilities | 803,346 | 861,368 | ||||||||||||
| Shareholders’ Equity | ||||||||||||||
| Share capital – authorized unlimited common shares, no par value
Issued and outstanding: March 31, 2023 – 215 million shares December 31, 2022 – 217 million shares |
2,811,708 | 2,837,329 | ||||||||||||
| Paid-in capital | 34,295 | 50,457 | ||||||||||||
| Accumulated deficit | (1,406,049) | (1,509,832) | ||||||||||||
| Accumulated other comprehensive loss | (301,341) | (301,341) | ||||||||||||
| 1,138,613 | 1,076,613 | |||||||||||||
| Total Liabilities & Shareholders’ Equity | $ | 1,941,959 | $ | 1,937,981 | ||||||||||
Condensed Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)
| Three months ended | |||||||
| March 31, | |||||||
| (US$ thousands, except per share amounts) unaudited | 2023 | 2022 | |||||
| Revenues | |||||||
| Crude oil and natural gas sales | $ | 413,182 | $ | 513,152 | |||
| Commodity derivative instruments gain/(loss) | 27,965 | (206,810) | |||||
| 441,147 | 306,342 | ||||||
| Expenses | |||||||
| Operating | 92,804 | 83,244 | |||||
| Transportation | 37,768 | 35,807 | |||||
| Production taxes | 30,123 | 35,355 | |||||
| General and administrative | 19,432 | 17,581 | |||||
| Depletion, depreciation and accretion | 87,109 | 66,691 | |||||
| Interest | 4,318 | 6,055 | |||||
| Foreign exchange (gain)/loss | (97) | 887 | |||||
| Other expense/(income) | (2,666) | 12,697 | |||||
| 268,791 | 258,317 | ||||||
| Income/(Loss) Before Taxes | 172,356 | 48,025 | |||||
| Current income tax expense/(recovery) | 11,000 | 5,000 | |||||
| Deferred income tax expense/(recovery) | 23,870 | 9,782 | |||||
| Net Income/(Loss) | $ | 137,486 | $ | 33,243 | |||
| Other Comprehensive Income/(Loss) | |||||||
| Unrealized gain/(loss) on foreign currency translation | — | (620) | |||||
| Foreign exchange gain/(loss) on net investment hedge, net of tax | — | 5,375 | |||||
| Total Comprehensive Income/(Loss) | $ | 137,486 | $ | 37,998 | |||
| Net Income/(Loss) per Share | |||||||
| Basic | $ | 0.63 | $ | 0.14 | |||
| Diluted | $ | 0.62 | $ | 0.13 | |||
Condensed Consolidated Statements of Cash Flows
| Three months ended | |||||||
| March 31, | |||||||
| (US$ thousands) unaudited | 2023 | 2022 | |||||
| Operating Activities | |||||||
| Net income/(loss) | $ | 137,486 | $ | 33,243 | |||
| Non-cash items add/(deduct): | |||||||
| Depletion, depreciation and accretion | 87,109 | 66,691 | |||||
| Changes in fair value of derivative instruments | 6,344 | 133,332 | |||||
| Deferred income tax expense/(recovery) | 23,870 | 9,782 | |||||
| Unrealized foreign exchange (gain)/loss on working capital | (185) | 1,171 | |||||
| Share-based compensation and general and administrative | 7,363 | 4,660 | |||||
| Other expense/(income) | (1,650) | 12,653 | |||||
| Amortization of debt issuance costs | 394 | 353 | |||||
| Translation of U.S. dollar cash held in parent company | — | 10 | |||||
| Investing activities in Other income | (322) | — | |||||
| Asset retirement obligation settlements | (6,782) | (8,795) | |||||
| Changes in non-cash operating working capital | (12,226) | (57,108) | |||||
| Cash flow from/(used in) operating activities | 241,401 | 195,992 | |||||
| Financing Activities | |||||||
| Drawings from/(repayment of) bank credit facilities | (56,316) | (104,409) | |||||
| Purchase of common shares under Normal Course Issuer Bid | (54,560) | (37,207) | |||||
| Share-based compensation – tax withholdings settled in cash | (16,392) | (11,567) | |||||
| Dividends | (11,993) | (7,918) | |||||
| Cash flow from/(used in) financing activities | (139,261) | (161,101) | |||||
| Investing Activities | |||||||
| Capital and office expenditures | (93,923) | (75,027) | |||||
| Canadian divestments | 5,191 | — | |||||
| Property and land acquisitions | (1,748) | (1,941) | |||||
| Property and land divestments | 2,733 | 6,581 | |||||
| Cash flow from/(used in) investing activities | (87,747) | (70,387) | |||||
| Effect of exchange rate changes on cash and cash equivalents | 185 | (3,121) | |||||
| Change in cash and cash equivalents | 14,578 | (38,617) | |||||
| Cash and cash equivalents, beginning of period | 38,000 | 61,348 | |||||
| Cash and cash equivalents, end of period | $ | 52,578 | $ | 22,731 | |||
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