CIBCHave a US$22.00 target. GLTA
EQUITY RESEARCH
November 2, 2022 Flash Research
ENERPLUS CORPORATION
Sale Of Remaining Canadian Assets Comes At Attractive
Metrics
Our Conclusion
Enerplus announced the sale of its remaining Canadian assets to Surge
Energy (SGY-TSX) for total consideration of C$245MM, representing 3.6x
2023E cash flow versus ERF’s current trading multiple of 3.0x on strip. The consideration comprises C$210MM in cash and C$35MM in common sharesof SGY, with the transaction expected to close in December 2022. Following the completion of its prior disposition to Journey Energy (JOY-TSX), this sale completes Enerplus’ disposition of its Canadian assets. We expect the proceeds to 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.
Key Points
Remaining Canadian assets sold for accretive metrics relative to ERF’s
trading values. The assets consist of 3 MBoe/d of net crude oil production
(4 MBoe/d prior to royalty deductions) in Alberta and Saskatchewan. After including the interim adjustments given the effective date of May 1, the proceeds to ERF compute to ~US$147MM or ~US$49,000/Boe/d (36% above ERF’s trading value). The disposition is also above the previously announced Ante Creek and Medicine Hat asset sale, which was expected given the higher liquids weighting (99%). The purchaser noted the disposition value as being 3.6x 2023E operating income, which also screens above ERF’s 2023E trading value on strip at 3.0x