TSX:ERF - Post Discussion
Post by
retiredcf on May 09, 2022 12:31pm
RBC Upgrade
Their upside scenario target is now $23.00. GLTA
May 6, 2022
Enerplus Corporation Bolsters Shareholder Returns
Our view: Enerplus remains our favourite intermediate producer given its capable leadership team, solid execution, strong balance sheet and rising shareholder returns. We are reaffirming an Outperform rating on Enerplus and boosting our one-year target price by $1 (6%) to $18 per share.
Key points:
1Q Results. Enerplus Corporation delivered solid first-quarter results amid broadly in-line production of 92,200 boe/d and free cash flow generation of $154 million.
Shareholder Returns. The company raised its common share dividend by 30% to an annualized rate of $0.172 per share (1% yield) and enhanced its 2022 return of capital program by committing to return the greater of $350 million (minimum) or 50% of free cash flow through dividends and share repurchases. Subsequent to quarter end and up to and including May 4, Enerplus repurchased an additional $18.9 million (1.5 million shares at $12.61 per share) of its common shares. Enerplus plans to repurchase the remaining 8.0 million share authorization under its 10% NCIB by the end of July and renew its issuer bid in August. All said, Enerplus anticipates returning about $40 million to shareholders in 2022 via dividends, with the remaining $310 million or greater returned to shareholders via buybacks. Our outlook factors in share repurchases of $337 million in 2022 and $350 million in 2023.
2022 Guidance. Enerplus increased its mid-point production guidance by 500 boe/d to 98,500 boe/d (including 60,500 bbl/d oil & liquids). The company noted that severe weather in April temporarily impacted its North Dakota operations (circa 1,000 boe/d average annual impact in 2022)—with its second-quarter production largely flat on a sequential basis. Enerplus also boosted its mid-point 2022 capital program by 5% ($20 million) to $420 million, reflective of higher non-operated activity and inflationary pressures (including steel). Our production outlook for Enerplus now sits at 98,861 boe/d in 2022.
Strong FCF Profile. We peg Enerplus’ free cash flow (before dividends and A&D) at approximately $821 million in 2022 in the context of a $420 million capital program under our base outlook ($100 WTI, $5.00 Henry Hub). This would equate to a free cash flow yield of 28% in 2022.
Relative Valuation. Enerplus is trading at a 2022 debt-adjusted cash flow multiple of 2.6x (vs. our Canadian intermediate peer group avg. of 3.0x) and free cash flow yield of 28% (vs. our peer group avg. of 26%). We believe the company should trade at an average/above average multiple given its consistent operating performance, capable leadership team and strong balance sheet, partly off-set by portfolio concentration. Please see our Global Integrated & E&P Comparative Valuation update for a comparative valuation analysis under futures prices across our global coverage universe.
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