CALGARY, AB, Jan. 25, 2021 /PRNewswire/ - Enerplus Corporation
("Enerplus" or the "Company") (TSX & NYSE: ERF) today announced
that it has entered into a definitive agreement to acquire all of
the shares of Bruin E&P HoldCo, LLC ("Bruin"), a pure play
Williston Basin private company, for total cash consideration of
US$465 million (the
"Acquisition").
KEY HIGHLIGHTS
- Core area acquisition improving scale – Acquiring
151,000 net acres in the Williston Basin, including 30,000 net
acres contiguous with Enerplus' tier 1 acreage position. The
acquisition includes approximately 24,000 BOE per day of existing
production (working interest(1)), 84 MMBOE of proved
plus probable reserves (working interest(1)), and an
inventory of 149 (111 net) drilling locations (including drilled
uncompleted wells). After the Acquisition, Enerplus estimates it
will hold more than a decade of drilling inventory capable of
sustaining production at 2021 levels, with additional drilling
inventory upside on Bruin's acreage if commodity prices
strengthen.
- Immediately accretive to per share metrics – Expected to
be materially accretive to per share metrics in the first year,
including adjusted funds flow and free cash flow. Accretion to
adjusted funds flow per share and free cash flow per share is
expected to be approximately 30% and 80%, respectively, in the
12-month period following closing of the Acquisition, inclusive of
the bought deal equity financing described below.
- Enhanced value capture and free cash flow acceleration –
The purchase price represents less than 3.0 times Bruin's 2021
forecast EBITDA using a US$50 per
barrel WTI oil price – a discount to Enerplus' current trading
metrics. Bruin's lower decline production base is expected to
support strong free cash flow generation. Pro forma and based on a
ten-month contribution from Bruin's assets in 2021, Enerplus
expects to generate over $200 million
of free cash flow in 2021 based on US$50 per barrel WTI crude oil and US$2.75 per Mcf NYMEX natural gas prices.
- Maintains strong balance sheet – The pro forma
business retains a solid financial position with an estimated
year-end 2021 net debt to adjusted funds flow ratio at or below
1.3x on a trailing 12-month basis (inclusive of the bought deal
equity financing described below), with a target of less than 1.0x
over the longer term. The business will continue to have excellent
liquidity and expects to be undrawn on its US$600 million bank credit facility upon the
Acquisition closing.
- Drives cost synergies – The enhanced operating scale and
asset synergies resulting from the Acquisition are expected to
drive continued efficiency gains and cost reductions supporting
further cash flow improvements beyond Enerplus' current forecast.
Additionally, there are no incremental general and administrative
costs associated with the Acquisition.
- Commitment to strong ESG performance – Enerplus will
continue to pursue ESG excellence while integrating Bruin's assets
and operations into its ESG initiatives. The Company will continue
to work towards its longer-term goals, including a 50% reduction in
GHG emissions intensity by 2030 and a 50% reduction in freshwater
use per well completion by 2025.
"This acquisition demonstrates our disciplined returns-oriented
focus and commitment to value creation for our shareholders," said
Ian C. Dundas, President and CEO of
Enerplus. "With immediately adjacent acreage offering strong
operational synergies, Bruin's assets are highly complementary to
our existing tier 1 position in the Bakken and will enable us to
accelerate free cash flow growth and further support our focus on
providing long term sustainable shareholder returns."
(1)
|
Production and
reserves are stated on a working interest basis before deduction of
royalties.
|
TRANSACTION DETAILS
Enerplus has agreed to acquire all of the outstanding shares of
Bruin for total cash consideration of US$465
million pursuant to a purchase and sale agreement, subject
to customary purchase price adjustments. The Acquisition will
be funded with a new US$400 million
term loan and a concurrent $115
million bought deal equity financing. Enerplus will not
assume any debt of Bruin as part of the Acquisition. Closing
of the Acquisition is subject to customary closing conditions and
is expected to occur in early March
2021.
In connection with the Acquisition, Enerplus has entered into a
binding agreement with RBC Capital Markets and BMO Capital Markets,
who are acting as Joint Bookrunners, to provide Enerplus with a new
three year, US$400 million term loan,
which will be fully drawn to fund a portion of the purchase price
for the Acquisition. The new term loan will include financial
and other covenants and pricing identical to Enerplus' existing
US$600 million revolving credit
facility which matures October 31,
2023. Funding under the term loan is subject to limited
conditions, including completion of the Acquisition and delivery of
customary credit facility documentation.
Bruin's properties are all located in North Dakota with significant production and
development inventory concentrated in the Fort Berthold area near
Enerplus' primary property. Bruin's current production rate
is approximately 24,000 BOE per day (72% tight oil, 14% NGL and 14%
natural gas). An independent reserves report on Bruin's properties
effective as of December 31, 2020 has
assigned proved plus probable reserves of 84.1 MMBOE consisting of
61.5 MMbbls of tight oil, 11.6 MMbbls of NGLs and 66.4 Bcf of
shale gas (working interest before the deduction of royalties).
2020 UPDATE AND PRO FORMA 2021 OUTLOOK
Enerplus delivered fourth quarter 2020 production at the higher
end of its guidance ranges with total production of approximately
86,200 BOE per day, including liquids production of 49,200 barrels
per day, based on preliminary estimates. Full year 2020 production
averaged approximately 90,700 BOE per day, with liquids production
of 51,100 barrels per day, also at the high end of the Company's
guidance. Capital spending in the fourth quarter of 2020 was
approximately $52 million, bringing
total 2020 capital spending to $291
million, below Enerplus' guidance of $295 million.
Enerplus' Fourth Quarter and Full-Year 2020 Production
Summary
|
Light & medium
crude oil
(bbl/d)
|
Tight oil
(bbl/d)
|
Heavy oil
(bbl/d)
|
NGL
(bbl/d)
|
Natural gas
(MMcf/d)
|
Total
(BOE/d)
|
Fourth quarter
2020
|
3,190
|
36,000
|
4,220
|
5,790
|
222
|
86,200
|
Full year
2020
|
3,280
|
38,240
|
3,900
|
5,630
|
238
|
90,700
|
Enerplus' stand-alone 2021 preliminary outlook (provided with
its third quarter 2020 results on November
6, 2020) contemplated 2021 production volumes approximately
flat to the Company's fourth quarter 2020 production guidance of
86,000 BOE per day, including 48,000 barrels per day of liquids
(based on the guidance mid-points). The capital spending associated
with this outlook was approximately $300
million.
Assuming completion of the Acquisition and a ten-month
contribution from the Bruin assets to Enerplus' 2021 results,
Enerplus expects to deliver 2021 production of 103,500 to 108,500
BOE per day, including 63,000 to 67,000 barrels per day of liquids.
Capital spending in 2021 is expected to be $335 to $385
million.
Assuming a ten-month contribution from Bruin, Enerplus expects
to generate over $200 million in free
cash flow in 2021 based on a US$50
per barrel WTI oil price and US$2.75
per Mcf NYMEX natural gas price. Under the same commodity price
assumptions, the Company expects its net debt to trailing adjusted
funds flow ratio to be at or below 1.3x at year-end 2021 (inclusive
of the bought deal equity financing). With the strengthening of its
free cash flow profile as a result of the Acquisition, Enerplus
plans to further enhance its balance sheet strength, targeting a
net debt to trailing adjusted funds flow ratio of less than 1.0x in
a sub-US$50 per barrel WTI oil price
environment. The Company will also consider options for increasing
its return of capital to shareholders with excess cash flow.
Pro forma for the Acquisition, the Company expects to realize a
Bakken oil price differential of $3.25 per barrel below WTI in 2021 assuming the
Dakota Access Pipeline ("DAPL") continues to operate. This
represents an improvement from 2020, where Enerplus' Bakken
differential guidance was US$5.00 per
barrel below WTI. The expected differential improvement is due to
declining basin production leading to increased pipeline egress. In
the event DAPL is required to cease operations, Enerplus expects
Bakken oil price differentials to widen reflecting rail economics.
The Company estimates this would result in a realized 2021
differential of approximately $6.00
per barrel below WTI, assuming ten months of wider differentials if
DAPL cannot operate. The impact to Enerplus' corporate netback in
this scenario is estimated to be approximately $1.00 per BOE. The Acquisition is expected to
continue to provide attractive per-share accretion to both adjusted
funds flow per share and free cash flow per share at a wider
differential, as outlined above.
Detailed guidance for 2021 will be provided following closing of
the Acquisition.
2021 OUTLOOK SUMMARY
|
Enerplus 2021
Preliminary
Outlook (Issued Nov 6, 2020)
|
Pro forma 2021
Outlook (based on a ten-month
contribution from Bruin's
assets)
|
Increase
(based on a
ten-month
contribution from Bruin's
assets)
|
Total production
(BOE/d)(1)
|
86,000
|
103,500 to
108,500
|
+17,500 to
22,500
|
Liquids production
(bbl/d)(1)
|
48,000
|
63,000 to
67,000
|
+15,000 to
19,000
|
Capital spending
($MM)
|
$300
|
$335 to
$385
|
+$35 to $85
|
|
|
(1)
|
Production is stated
on a working interest basis before the deduction of
royalties.
|
COMMODITY HEDGING UPDATE
Pro forma for the Acquisition, Enerplus has approximately 70% of
its 2021 forecasted crude oil production (net of royalties)
protected at a weighted average floor price of US$44 per barrel WTI through swaps and three way
collar structures. Of this hedged amount, approximately 66%
provides participation up to US$54
per barrel WTI. Based on the 2021 production forecast,
Enerplus has approximately 47% of its 2022 crude oil production
(net of royalties) protected at a weighted average floor price of
US$49 per barrel WTI through swaps
and three way collar structures. Of this 2022 hedged amount,
approximately 82% provides participation up to US$58 per barrel WTI.
For natural gas, Enerplus has hedges in place for its summer
2021 volumes representing approximately 43% of its forecasted
natural gas production (net of royalties) between April 1 to October 31, 2021, protected at a
weighted average floor price of US$2.85 per Mcf NYMEX primarily through swaps and
three way collar structures. Of this hedged amount, approximately
25% provides participation up to US$3.25 per Mcf NYMEX.
ADVISORS
Stifel FirstEnergy acted as financial advisor to Enerplus on the
Acquisition. Tudor, Pickering, Holt & Co. and TD Securities
acted as strategic advisors to Enerplus on the Acquisition. Vinson
& Elkins LLP acted as U.S. legal advisor to Enerplus for the
Acquisition and financings, and Blake, Cassels & Graydon LLP
acted as legal advisor to Enerplus on the Acquisition and
financings.
ABOUT ENERPLUS
Enerplus is an independent North American oil and gas
exploration and production company focused on creating long-term
value for its shareholders through a disciplined, returns-based
capital allocation strategy and a commitment to safe, responsible
operations.
Currency and Accounting Principles
All amounts in
this news release are stated in Canadian dollars unless otherwise
specified.
Barrels of Oil Equivalent
This news release also
contains references to "BOE" (barrels of oil equivalent). Enerplus
has adopted the standard of six thousand cubic feet of gas to one
barrel of oil (6 Mcf: 1 bbl) when converting natural gas to BOEs.
BOEs may be misleading, particularly if used in isolation. The
foregoing conversion ratios are based on an energy equivalency
conversion method primarily applicable at the burner tip and do not
represent a value equivalency at the wellhead. Given that the value
ratio based on the current price of oil as compared to natural gas
is significantly different from the energy equivalent of 6:1,
utilizing a conversion on a 6:1 basis may be misleading.
Presentation of Production Information and Reserves
Information
Under U.S. GAAP oil and gas sales are
generally presented net of royalties and U.S. industry protocol is
to present production volumes net of royalties. Under Canadian
industry protocol oil and gas sales and production volumes are
required to be presented on a gross basis before deduction of
royalties. In order to continue to be comparable with its Canadian
peer companies, unless otherwise stated, the information contained
within this news release presents Enerplus' production and BOE
measures on a before royalty "company interest" basis. All
production volumes presented herein are reported on a "company
interest" basis, before deduction of Crown and other royalties,
plus Enerplus' royalty interest. This news release also contains
references to the percentage of the Company's production that is
hedged under commodity derivatives contracts, this percentage being
based upon the Company's net of royalty production volumes. All
reserves volumes in this news release (and all information derived
therefrom) are based on "gross reserves" using forecast prices and
costs. "Gross reserves" (as defined in NI 51-101), are Enerplus'
working interest before deduction of any royalties. Information
about reserves on Bruin's properties contained in this press
release is derived from a report on Bruin's properties effective as
of December 31, 2020 prepared by
McDaniel & Associates Ltd., an independent reserves evaluator.
The drilling locations identified in this news release are
comprised of 65 gross (50.0 net) proved plus probable undeveloped
reserves locations identified by McDaniel & Associates Ltd., of
which 14 gross (9.9 net) are drilled and uncompleted, and 84 gross
(60.9 net) unbooked future drilling locations not associated with
any reserves of Bruin, and have been identified by internal
qualified reserves evaluators.
FORWARD-LOOKING INFORMATION AND
STATEMENTS
This news release contains certain
forward-looking information and statements ("forward-looking
information") within the meaning of applicable securities laws. The
use of any of the words "expect", "anticipate", "continue",
"estimate", "guidance", "ongoing", "may", "will", "project",
"plans", "budget", "strategy" and similar expressions are intended
to identify forward-looking information. In particular, but without
limiting the foregoing, this news release contains forward-looking
information pertaining to the following: anticipated completion of
the Acquisition and financings, including expected size, terms,
timing and completion thereof; expected benefits of the
Acquisition; expected impacted of the Acquisition on Enerplus'
operations and financial results, including inventory of drilling
locations, expected accretion to Enerplus' metrics (including
expected free cash flow in 2021 and year-end net debt to adjusted
funds flow ratio) and minimum rates of return; Enerplus' expected
2020 and 2021 average production volumes and expected capital
levels to support such production; anticipated production mix and
Enerplus' expected source of funding thereof; the proportion of
Enerplus' anticipated oil and gas production that is hedged; our
operating plans; oil and natural gas prices and differentials and
our commodity risk management programs; and anticipated impact of
the Acquisition on Enerplus' future costs and expenses; plans for
excess cash flow; and Enerplus' ESG targets, including reduction in
GHG emissions intensity and in freshwater use.
The forward-looking information contained in this news
release reflects several material factors and expectations and
assumptions of Enerplus including, without limitation: that the
Acquisition will be completed substantially on the terms and within
the timeline described in this press release; that Enerplus will
realize expected benefits of the Acquisition described in this
press release; that Enerplus will conduct its operations and
achieve results of operations as anticipated; that Enerplus'
development plans will achieve the expected results; current
commodity price and cost assumptions; the general continuance of
current or, where applicable, assumed industry conditions,
including expectations regarding the duration and overall
impact of COVID-19; the continuation of assumed tax, royalty
and regulatory regimes; the accuracy of the estimates of Enerplus'
reserves and resources volumes; the continued availability of
adequate debt and/or equity financing, cash flow and other sources
to fund Enerplus' capital and operating requirements, and dividend
payments as needed; availability of third party services; and the
extent of its liabilities. In addition, Enerplus' 2021 outlook
contained in this news release is based on the following: a WTI
price of between US$50.00/bbl, a
NYMEX price of US$2.75/Mcf, a Bakken
crude oil price differential of US$3.25/bbl below WTI and a USD/CDN exchange rate
of 1.27. Certain metrics included in this press release, including
accretion to adjusted funds flow per share and free cash flow per
share and net debt to trailing adjusted funds flow ratio, take into
account concurrent equity offering. Enerplus believes the material
factors, expectations and assumptions reflected in the
forward-looking information are reasonable but no assurance can be
given that these factors, expectations, and assumptions will prove
to be correct.
The forward-looking information included in this news release
is not a guarantee of future performance and should not be unduly
relied upon. Such information involves known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information including, without limitation: failure
to complete the Acquisition, at all or on terms or within the
timeline described in this press release; failure by Enerplus to
realize anticipated benefits of the Acquisition; changes, including
future decline, in commodity prices, including as a result of
continued COVID-19 pandemic; changes in realized prices for
Enerplus' products; changes in the demand for or supply of
Enerplus' products; unanticipated operating results, results from
Enerplus' capital spending activities or production declines;
curtailment of Enerplus' production due to low realized prices or
lack of adequate infrastructure; changes in tax or environmental
laws, royalty rates or other regulatory matters; changes in
development plans by Enerplus or by third party operators of
Enerplus' properties; increased debt levels or debt service
requirements; changes in estimates of Enerplus' oil and gas
reserves and resources volumes; limited, unfavourable or a lack of
access to capital markets; increased costs; a lack of adequate
insurance coverage; the impact of competitors; reliance on industry
partners; failure to complete any anticipated acquisitions or
divestitures; changes in law or government programs or policies in
Canada or the United States; and certain other risks
detailed from time to time in Enerplus' public disclosure documents
(including, without limitation, those risks identified in its AIF,
management's discussion and analysis ("MD&A"), and Form 40-F at
December 31, 2019 and management's
discussion and analysis for the third quarter of 2020) as it may be
updated from time to time by current reports on Form 6-K, all of
which are available, as applicable, on SEDAR website at
www.sedar.com, on the SEC's website at
http://www.sec.gov and on Enerplus' website).
The purpose of our estimated free cash flow disclosure, is to
assist readers in understanding our expected and targeted financial
results, and this information may not be appropriate for other
purposes. Information in this press release is provided as of the
date hereof and Enerplus assumes no obligation to update any
forward-looking statements, unless otherwise required by
law.
NON-GAAP MEASURES
In this news release,
Enerplus uses the terms "free cash flow" and "adjusted funds flow"
(including per share measures) as measures to analyze operating and
financial performance. "Free cash flow" is defined as "Adjusted
funds flow less exploration and development capital
spending". "Adjusted funds flow" is calculated as net cash
generated from operating activities but before changes in non-cash
operating working capital and asset retirement obligation
expenditures.
Enerplus believes that, in addition to net earnings and other
measures prescribed by U.S. GAAP, the terms "adjusted funds flow"
and "free cash flow" are useful supplemental measures as such
provide an indication of the results generated by Enerplus'
principal business activities. However, these measures are not
recognized by U.S. GAAP and do not have a standardized meaning
prescribed by U.S. GAAP. Therefore, these measures, as defined by
Enerplus, may not be comparable to similar measures presented by
other issuers.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/enerplus-agrees-to-acquire-williston-basin-operator-enhancing-value-for-shareholders-and-accelerating-free-cash-flow-generation-provides-preliminary-2020-results-and-2021-guidance-301214430.html
SOURCE Enerplus Corporation