CIBCHave a $25.00 target. GLTA
EQUITY RESEARCH
July 29, 2022 Flash Research
ENERPLUS CORPORATION
Partial Disposition Of Canadian Assets At Modest Metrics Will
Go Towards Balance Sheet
Our Conclusion
Enerplus announced the sale of its Ante Creek and Medicine Hat operations
along with its broad interest in the West Five and West Six areas of Alberta
to Journey Energy for total consideration of C$140MM. We see the
disposition proceeds as being relatively modest, with the C$140MM value for
3.4 MBoe/d (60% liquids, net of royalties) computing to ~C$41,176/Boe/d,
which is below ERF’s 2022E trading value at ~C$46,000/Boe/d. The
purchaser noted the disposition value as being 2.0x operating income, which
is below ERF’s 2022E trading value on strip at 2.8x. In our view, the modest
proceeds (comprising C$81MM in cash, 3.0MM common shares of Journey
Energy valued at C$14MM along with a C$45MM interest bearing loan)
demonstrate the assets as being clearly non-core for ERF. We expect the
proceeds likely go towards reinforcing the balance sheet initially, with ERF
also on good footing to accelerate shareholder returns through share
repurchases or potential dividend increases.
We believe the remaining Canadian assets of 3 MBoe/d (99% crude oil)
could receive a stronger metric for ERF, with a higher crude weighting, and
likely higher cash flow contribution to the company.