Have a US$19.00 target. GLTA
Production Beat Caps Off Solid 2023 Our Conclusion
Enerplus’ production for Q4/23 topped estimates and we estimate the
company returned ~74% of free cash flow to shareholders last year, above
its 70% target. The strong production for Q4/23 likely mutes the cold weather
related downtime which impacted production across the entire Williston
Basin. Management indicated outages on its properties were short lived, with
the company highlighting production has now been fully restored. The
company’s 2024 liquids guidance and capital spending budget are in line
with our estimates and Street, and the stock is trading at 3.2x 2024E
E/DACF on strip versus peers at 3.1x.
Key Points
Strong fourth quarter operational performance drove production
volume beat versus expectations. Production of 103.5 MBoe/d beat our
previous estimate of 98.9 MBoe/d and Street at 98.5 MBoe/d, and exceeded
the top end of guidance at 99 MBoe/d. Liquids production of 67.1 MBoe/d
topped our previous estimate of 63.2 MBoe/d and Street at 62.3 MBoe/d.
Capital spending of $91MM was in line with our previous estimate of $89MM
and Street at $90MM which puts full-year spending of $532MM at the
midpoint of the company’s full-year guidance.
Strong buyback activity translates to 74% of estimated free cash flow
returned to shareholders in 2023. Enerplus returned $307MM in capital
through 2023 after accounting for Q4 buybacks of 5.8MM shares during
Q4/23, representing 2.7% of the company’s outstanding stock as of Q3/23.
Freeze-off impacts were short lived, with production now fully restored.
Enerplus expects Q1/24 liquids production to be ~2.5 MBbl/d lower than
previous internal forecasts, although the company had not provided guidance
for 2024 prior to this update. The company guided 2024 liquids production to
64.0 MBbl/d which is in line with our previous estimate and Street of 63.4
MBbl/d. Capital spending of $550MM is expected for 2024, which is in line
with our estimate of $550MM and Street at $551MM.