Enerplus Corp T.ERF

RBC

[retiredcf]

August 4, 2022

Enerplus Corporation
Quick Take 2Q – Bolsters Shareholder Returns

NYSE: ERF | USD 12.15 | Outperform | Price Target USD 20.00

Sentiment: Positive

Enerplus’s second-quarter results reinforce our confidence in the company’s outlook amid in-line AFFO per share, 2% higher production, and 14% lower capital spending (see table below). The company bolstered its shareholder returns profile including a 16% increase in its dividend to an annualized rate of $0.20 per share.

Conference call

• Time: 11:00 a.m. ET, Friday, August 5
• Dial-in: [phone] (conference ID: 73519318) • Replay: [phone] (passcode: 519318 #)

Key points

• In conjunction with strong operating performance and a favourable financial and operational outlook, Enerplus has enhanced its 2022 return-of-capital plan. The company will now return a minimum of $425 million to shareholders, up from $325 million previously, returning at least 60% of free cash flow (vs. 50% previously) to shareholders in the second half of 2022 and continuing through 2023.

• The company paid $9.9 million in dividends in the second quarter and repurchased 7.1 million shares for $92.9 million (avg. price of $13.13 per share). During July, the company repurchased the remaining 2.5 million shares under its 10% NCIB authorization at an average price of $12.81 per share, for total consideration of $31.5 million.

• The company’s board has renewed its NCIB (10% of public float) in August (subject to TSX approval).

• Year to date through July, Enerplus has returned $179 million through dividends and share repurchases, leaving a minimum

  remaining return to shareholders of $246 million by the end of 2022.

• Williston Basin production averaged 58,600 boe/d during the quarter, up 2% sequentially.

• Marcellus production averaged 168 mmcf/d during the quarter, up 3% sequentially.

• Second-quarter opex was $9.74/boe (below our $10.31 estimate).

• Cash taxes of $12 million during the quarter were below our outlook of $20 million.

• Enerplus’s net debt stood at $546 million as of June 30, 2022.

  2022 guidance

  • Enerplus has updated its 2022 guidance in conjunction with its disposition of certain Canadian assets, which it expects to close  at the end of the third quarter.

  • The company increased its 2022 midpoint production guidance to 99,500 boe/d, up 1% from 98,500 boe/d previously, reflecting

    strong well performance and the continued optimization of its development plan.

  • There is no change to Enerplus’s midpoint capital guidance of $420 million ($400–440 million).

  • Enerplus also updated its operating expense guidance to $10/boe (from $9.75–10.50/boe), increased its transportation expense

    2% to $4.25/boe, and decreased its cash G&A expense slightly to $1.20/boe (from $1.25/boe).

  • Current taxes remain pegged at 2–3% of AFFO (before tax).