Enerplus Corp ERF

Primary Symbol: T.ERF

Energy Oil & Gas E&P

Enerplus Corporation is a Canada-based independent oil and gas exploration and production company. The Company is focused on the development of North American oil and natural gas assets. Its portfolio includes light oil assets in the Bakken, North Dakota, and a position in the Marcellus natural gas shale region in northeast Pennsylvania. The Company's operations are concentrated in the core of the Bakken/Three Forks light oil shale play where it holds approximately 235,600 net acres in North Dakota. The acreage is primarily located across the Fort Berthold Indian Reservation, as well as in Williams and Dunn Counties. It holds an interest in approximately 32,500 net acres in the dry gas window of the Marcellus shale in northeast Pennsylvania. This non-operated position is located in Susquehanna, Bradford, Wyoming, Sullivan and Lycoming counties.

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Enerplus Corp

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Post by retiredcfon May 03, 2021 7:51am

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TD

Enerplus Establishes Sustainability-Linked Credit Facility

A First for an E&P (Although Not the First Canadian Company) We Expect Sustainability-Linked Loans to Grow

TD Investment Conclusion

ESG-linked incentives can impact borrowing costs: Enerplus (ERF-T, BUY, $10 Target Price) announced that it has established a $900mm sustainability- linked credit (SLL) facility. The newly-expanded senior, unsecured bank credit facility incorporates sustainability-linked performance targets (SPT) based on ERF's previously articulated ESG goals (outlined below; 2019 baseline). ERF's borrowing costs can increase/decrease by up to 5 bps as these targets are exceeded or missed. For perspective, other determinants of borrowing costs such as leverage or credit rating, can start in the 100s of bps.

GHG emissions: 50% reduction in corporate Scope 1 & 2 emissions intensity by 2030
Water management: 50% reduction in freshwater usage in well completions by 2025 or earlier; progress measured annually over the life of the SLL
Health & safety: achieve and maintain a 25% reduction in Lost Time Injury Frequency (LTIF) based on a trailing three-year average

First North American E&P with a SLL:While ERF is the first E&P,there are a number of companies in Canada across various industries with SLLs. While not exhaustive, we highlight some of them below:

Brookfield Renewable Partners (BEP-N, HOLD, US$47 TP)—expand renewable/ clean electricity generating capacity, pre-determined CO2 emissions avoidance levels
Enbridge (ENB-T, BUY, $54 TP)—35% reduction of Scope 1 & 2 GHG emissions intensity by 2030
Gibson Energy (GEI-T, HOLD, $23 TP)—15% reduction of Scope 1 & 2 GHG emissions intensity by 2025; diversity & inclusion targets for workforce and board
Maple Leaf Foods (MFI-T, ACTION LIST BUY, $45 TP)—targets on electricity use, water use, solid waste, carbon emissions
WSP Global (WSP-T, BUY, $150 TP)—GHG emissions reduction targets, higher proportion of revenues from services with a positive environmental impact, higher share of management positions held by women

Not "greenwashing"—there is industry guidance on SLLs: The International Capital Market Association (ICMA) published SLL principles here. The core components of an SLL include: 1) relationship to a borrower's overall sustainability strategy; 2) target setting (i.e. meaningful and credible goals); 3) reporting; and 4) external review.

We expect interest levels in SLLs will grow as there are a number of financial institutions globally who are looking to align their lending activities with their own climate change mitigation pledges (see our note on Desjardins' Net Zero 2040 announcement here). The benefit of SLLs to borrowers include: accessing new capital (or in the very least, maintaining it), holding management accountable to stated ESG goals, and having a positive impact on its reputation/credibility with all key stakeholders.