Enerplus (ERF) 25 Feb 222021 Q4 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Enerplus Q4 and Year End 2021 Results Conference Call. [Operator Instructions]. I would like to remind everybody that this call is being recorded today, February 25, 2022. And I would now like to turn the conference over to Mr. Drew Mair, Manager of Investor relations. sir. ahead, go Please

and everyone. operator, joining you the call. good you, Thank morning, for Thank

started, note news please located get we Before take end our at of of fourth quarter release. the advisories the

prepared in Our financials have accordance US GAAP. with been

I’m the reported As of Senior VP volumes here unless in deduction royalty Chief US our after with financial our Hutchings, specified. reporting Executive basis, Dundas, a Officer; Jenson President dollars, Jodi our net have and Financial a figures Shaina production we of Morihira, reminder, changed and to Chief Chief this are otherwise VP, and and Labrie, Finance. morning Ian and VP Officer; Operating Wade Senior Officer; now

turn open the And we Ian. for discussion, will our Following up over it to I call will questions. with that,

a Good for Drew. morning year was XXXX all. transformational you, Enerplus. Thank

position Our out to I’d production at staff an their move before downturn early high gave for thank expand I advantage the exceptional our pandemic. us throughout of margin a to dedication minute resource to base take acquire But and strong mover the our financial value. like coming on,

accomplished delivered a lot. results. have solid We We’ve

such prioritize without injury. safety safety accomplishment like there’s and single our However, call busy the colleagues, through extremely proud transitional performance. a I’m in a and and for We time XXXX to attention of We organization I’d specifically lost consider continuing that’s this came year. outstanding to one to area an particularly our of our

allocation funds XXXX. free net growth, And year. the over flow focused than Consistent million significant cash production creation adjusted our we’ve the second over Now quarter. turn one completed of our year balance in the in $XXX flow, and Having repaid million make capital moving progress. generated last on course company-record to free ratio, since solid year helped reducing of the our cash framework, resulting acquisitions, leverage value cash on, in connection drive with in and debt XXXX, flow $XXX the we prioritized utilized Bakken level during in free with of flow we debt with our the on to and sheet having less peak acquisitions

to We XX% dividend our our to repurchased total stock, our in cash We increased returns million XXXX. over meaningful also shareholders and cash million. over of of delivered $XXX leading $XXX returned

our our substantially reserves by reserves, of which The our outlook. have US target the reserves production enhancing a high reduction extended reduction reported our our Importantly, quality year. reserves grew further further initiatives of of and Relative growth by additions made by with further in XXXX reserves proved XXX% last our today, on times. inventory our over that Dakota XX% emissions, over year. year and our a ahead achieved all key gas we intensity news a we last emissions In greenhouse made we sustainability target advances schedule, to Under decade, replaced to of in XX% captured methane ESG long-term release North seven over also intensity one towards reserves progress grew standards, emissions separate XXXX drilling in year-end XXXX.

was XXXX for company, also is While compelling. for setup exceptional our an XXXX the year

XX% buyback projected total cash free flow divestment X% is growth over capital WTI, flow is our to is Previously, planned cash on cash number This higher growth which flow to significant At free high expected on XX% based impacts an production XX% prices assuming cash free in outlook, times deliver translates compared WTI to about assuming compared shareholder this $XX X%. designed and continue approximately plan growth This adjusted the flow our efficiently by year; respectively. debt and reduction debt and With grow WTI. $XX last to had XX% we funds or XXXX, factoring $XX we talked to one deliver with attractive of net free share margin below to acquisition year, prioritize a and a plan $XX basis. production that share into program to which combined deck. leverage to last flow, $XX focused Bakken to returns. is of ratio organic of when in between per at a moves of yield target, Our X%, program results of

last ratio this more of willing called level aren’t we’ve the mean it target, and This go of a do higher reference use a directionally advantage until levels strategic opportunities that take While under demonstrated leverage clearly so above to over we are it does term. provide long a things that, repayment this all considered, really be we to we is will maximum point level. year. What doesn’t as is leverage always debt

a low term, advantages. With to debt believe longer cash we prices. sustainability we to strong to in enhancing is the as move sheet will of our maximum Over cycle offers during commodity times. under to balance of we’ll a reducing and and at portion the do flow mind, leverage XXXX throughout we maintaining strategic We free one simply continue target so this to sheet continue balance the and in plan allocate prioritize continue high critical that periods to

continue our to and share repurchases. shareholders plan significant to to also through capital return We dividends

believe our value, is that assumptions, mid-cycle on value. our based trading price to current We commodity reflected continue adequately not intrinsic in

$XXX this represents and XX% five of remaining months. completion, initiating expect our to approach repurchased normal our our share As stock it program bid repurchases, have to repurchase August. continue At will million since to issuer aggressive a course the we our increase shares the program utilize outstanding our last to result, the price, fully plan authorization approximately of we and next upon to repurchase a current share for

and outlook and provided our year environment. environment. it $XX extended higher we based XXXX through five outlook the price to updates highlighted through a Last updated plan. also XXXX now reflect $XX inflationary on commodity to We year, WTI to price current We’ve an the

annual X% over a with years, Canadian to we outlook with of at production and free capital $XXX grow and, these million assess simply expected per year, would reduction, towards to divestment Wade. our attract to projects cumulative result, And leave program. maintained a made five Our returns lastly, $X.X capital any cash and Will decision we remaining we have the If to million they spending it also by into our estimated longer shareholders. assets. flow ability process return $XXX recently exceptionally debt updated to announced We and to assets operated, X% in initiate sales no well plans And enhancing been for with annually. billion prioritize turn Bakken over successful, market redeploy higher cash the development I modest will our proceeds it it portfolio assets. to amount as would to a to expect our the that,

fourth onstreams. rates fourth volumes XX from basis. eight XX-day in with participated day quarter, in averaged day an relative spending guidance our good performance million per driven with XXXX, million. Thanks, per In fourth production, average the our in quarter day, rates Marcellus our total by total Overall Marcellus, BOE XX-day morning, XXX Bakken, quarter strong production a bringing the peak Bakken The XX,XXX of range solid the higher day on BOE and in per production quarter capital on the well well than our and under cubic everyone. completions Beginning with XX rates which per in of the XXXX of of XXX,XXX quarter XXXX. feet wells we of In just program peak per average the end our on production fourth to BOE XX% pad, production of well fourth basis. consisted was averaged per a guidance on our was Ian, and high

of spending back at XXXX, our right the in the production when guidance April we Bakken of released the range. Looking announced top second our the range and capital the at we in at came total midpoint came in acquisition, end

assets in lost assets our in Ian the and time This businesses we outstanding, I we think performance, integrated And, exceptional added new where company. year. to injury people year, was with to new how so not the teams in XXXX. successfully this and speaks a acquired single as a particularly the performance safety noted, many is our

offset execute about left a actions us some of will continue well-positioned program. XXXX a rig execute seeing. XXXX, operating pressures captured which we’ve this year-over-year operate added we year. early North help our plan to in approximately in which procurement momentum Bakken have XX% Dakota The for continue. XX% XXXX with cost costs Moving efficiencies with well to inflationary on To Bakken, we expect have the the pricing to Development in second down we’re the efficiently I to secured in our to drilling XXXX plan, our also for half Program the These of combined

half So overall, and a we’re about rig looking a XXXX. at in

will program around focused be Dunn County FBIR the acreage. Our and capital

activity for In addition, primarily we non-operated in the in earmarked Dunn County have area. North approximately $XX million Dakota,

to categories. Turning be expect seeing we item is and main year-over-year. here expenses, to cost this three higher operating line driven pressure primarily by are This

where CPI. with contracts clauses we particularly pressures, inflationary have escalation First, to price linked

our we are on and Second, higher improvement seeing therefore continued with gas fees. sales capture, processing gas higher gas volumes

comes And larger the we benefits now of gas increased well suite lastly, of service also revenue. with the by Importantly, spent, operate. however, driven this wells higher

to began have operational flaring XXXX and In and material hard to to leave success XXXX emissions our to this air-driven to I’ll intensity initiatives recovery wide-scale preliminary X are in our our to have by pneumatic in and XXXX. XXXX. respect reduced we’re management. there we reducing in XX% we these processes the further initial tank a through baseline. flare emissions now Combined, to deployment our to call scope production. the in Based it emissions led emissions, relative controllers, Keys reduce success is reduce in planning ESG pass XXXX, having improvement installing improved versus working to our reduction intensity deliver estimates, Lastly, strong With emissions results Jodi. practices, intensity, we we GHG initiated methane and optimized of on vapor deepen approximately during efforts and improved and continued emissions. units our methane flaring, X

Thanks, Wade.

the momentum from of reaching prior fourth the quarter, per increase earnings share, continued quarter. XX% $X.XX Our in an

million was spending of flow of Our resulting million. fourth in $XXX quarter million, free cash adjusted with funds flow $XXX XX capital

a significant result Bakken differential demand to realized strong WTI to improved Our support pipeline of continues refining quarter, below basin the and that fourth as $X.XX capacity pricing. available in price in barrel the per oil

per wider reflected was Our is NYMEX Marcellus natural benchmark and local MCF volatility in gas the the pricing fourth weaker quarter. in and below $X.XX This than expectations increased our NYMEX price markets. their

per was in Moving full our $X.XX a BOE, on to operating guidance. line year basis, costs our expenses. On which were with

as well in due higher water our workover our results which reflected costs linked XXXX it WTI. escalators As also quarter, operating production increased to price activity, strong with noted to as charges but contracts handling last to was contributed

Our lower volumes averaged cash the G&A cost XX%, we $X.XX unit our in than in reduced BOE added higher XXXX, costs. in XXXX as per XXXX,

the net million and ratio to to funds we in ended and strong sheet, continue balance of of XXXX debt with $XXX X.X Turning delevering financial a net We XXXX. through the remain times. expect position flow a debt-to-adjusted

we addition, have bank million continue on to In our and credit $XXX liquidity are undrawn excellent facility.

to Ian to flow to our incremental we announced Moving our a shareholders. the on to continue program, million sheet an returns which Canadian enhance million to in as announced With priorities, cash yesterday’s repurchase current on equating on to XXX to capital price, respect our balance to share repurchase our increase reinforce program. free return based roughly and an previously cash further we plan plans noted, our $XXX is additional release, dollar share

additional As the remaining million dollar authorization a our anticipate of issuer million $XXX by the bid, end the completing on price market reminder, quarter, XXX first conditions. our under share current reflects course and normal the and program we based

the We between the over another I’ll for and NCIB and July it the to leave purchases questions. there through August for expect I’ll now turn XX open months. operator renew to and call complete the up in it

Capital comes go Markets. Your BMO ahead. Thank question Please first you. Ray from Kwan, Instructions] [Operator

is feel the ask for too. that assumptions around, up you general questions. the just here. then, your baked morning, I Thanks cost follow side costs, guess five outlook? just future helpful question year particularly like, year operating inflation and be to the do of just Good addition do around everyone. assumptions on have question I well, that first mitigate And in are cost ways inflation the this taking I understand question the I’ll after appropriately those most to guess, in years and for too. And I my costs I to capital as mean, this guess, over a

Wade. in? to over transitional done that environment. our put will baked it’s clearly just I Maybe We’ve Yeah, a Ray. morning, Good best. they like a Are highlight appropriately

some ranges more it and help through partway give about a But to you on deal and of what how we’re now detail the to We’re thinking maybe been we’ve we’ve turn with that. to Wade why year, over I don’t given little this experiencing?

Thanks. Good Ray. morning,

Let with capital. start me

averaging began well on total XXXX. actually mindful could down We diesel well were X.X to we inflation we Last year, we year very our costs really on were capital, XXXX. last ended on for driving the program and another on working of But million our in already see good walking last costs. we for So beginning in and year some year-over-year this steel saw performance impact we cost down, XX% total another year.

about needed services, XXXX other key and secured got we for drilling And of our year, the blocked numerous capital of so sand in service for last the pumping essentially pressure program. actually the all two-thirds casing, components program then services, we our

estimate So average We think prices we’ve capital the we’ll we for in are X in around With that about projecting slight XX% right XXXX. our today, increase for we year. our average in that, in million still cost locked well total spend a XXXX. of though,

could But secured if that, much of think as been that of than wouldn’t proactively projecting some a clearly services program. have have inflation. X% would X% around you for So to these capital the higher we it

we baked guide, term have also address there. capital inflation be assumed But for feel in we the hitting costs. Ian’s that not obviously only me the inflation both To five might five like our In and some us over, our potentially is actually reasonable. we’ve Let done but years and year to operating have additional long best in so XXXX out your now what medium guide question the short, term. point, project year the inflation we

drivers can Clearly, reiterate me that about talk just of the turn points Let one couple a I’ll you costs operating costs there. are is now. come of see and year-over-year key inflation. inflation to up operating our and then and I’ll back

driving the So make down continue and see we operating gas capture good progress driving also on flaring, us, down and in cost you processing to GHG gas bucket our costs for emissions.

is, as higher And that do so we reality the we see expenses.

us. those though Fortunately by thing more so than increased are today, good all offset for revenue, that’s a

to to of And this seeing last operate. more seeing kind world, diverse the contracts We we noted also inflationary to operating that costs some in pressures, additional across year we costs are we some due of that were set wells WTI. then back linked were escalated costs

because of of Some change pressure that have contracts linked a this had year, this the year the costs had start that but to at escalators price we also consumer of continues, in they index. price of series course, a

got for inflation got bit backed a in as you’re the operating our the that costs for those probably for we’ve into And And, the so baked on in years seeing inflation -- year, noted, area numbers of in order X% guidance something well. we’ve I out that this well as as year. of

all mitigating of several really in then of actions, and did on work year. to hard for we a our terms contract to We with well that categories continue those to last gave as this partners. line in done as work I sight lock cost In OpEx clear that of them with categories lock pricing capital And services. year them, noticed. We’ve just

but terms Canadian guess thinking kind as token this, the assets it’s to get the just the is just around you’re ask, here. Dakota as you’re how how your on I Wade. on And particularly color, takes I And, you the side, question, thinking market. on great M&A touched M&A. of that’s wondering just in know love the Yeah, in sell I’ll my obviously, it of question buy potential well typical second about like, around current on side you’re consolidation Ian, North

I around still about high question Yeah, and you volatility been and a no rationalization, it thanks back, are does broad those things continued talking as -- guess there than and there’s you, happen. of probably coming consolidation feels in couple balanced probably but like to I at would are that, a has we’ve for buy new really in to continues stand themes to single about that portfolios, again Ray. play drivers, grading it driver all out we play money are tell it’s of years like volatility, It’s market, selling, it the biggest lot had for before. the play. of or A transactions more looking I is think, thinking the ability impacted

broad it’s themes. So, market

the basins mostly those various think in. I out we’re that interested in play

seller, said, for we’re strategically, I that today, think and, don’t that value, about the think out. around of going opportunity, then So sort it’s you and both assets always opportunity, moving building core, mean, synergistic looking for a scale yeah, consolidation compete we’re I we looking

go the So constructive more been ones meaningfully but higher else in look I know little lot of than where goal it have line anywhere. occurred over get The don’t to you that to seen points certainly on there you’d last the really a valuations data at they want a haven’t ago. that, year while, go

is thinking market You ago about Xx point year able to Maybe that what you about a done environment. get contrast would what at have and everything it to Xx on now. were been the worth today right how to we’re everything final a

We’re just pretty but smaller. the clear quality, with Canadian assets

time on talking potentially to meaningful the stars the of relative move an business, spend Dakota our year And else’s the some inventory so to we a North ago of then those about. changed scope there’s and to we the somebody we opportunity think in which business And side, the hands. a way

I more but from acquisition business that more But robust higher compete needs it better. we to there resilient, we And deeper, and and portfolio, feels will, fore more we than to it’s scaled we went be think up. with to because at anything a our was Dakota the business anything interests shareholder North do are we’ll disciplined maybe so business there even Dakota North And as in opportunities the subscale consolidation, out expectations, a of manage make that value, keep a that and bar always, think probably in for about.

everyone. That’s Thanks, great.

Thanks, Ray.

ahead. question Raymond please comes go Jeremy James, of next from Your McCrea

could Marcellus there. is sell show an to up then, goal to Hi, completely, up And aggressive question after. to in Canadian Rays or assets, at guys. long-term you the what’s increased actually portfolio, up potentially I really it actually then follow a like spending? do sell your wait WTI, Bakken Canadian have do price just really key question Bakken debt you what you have of the to go just free more to follow Supposedly you the here on assets? more opportunity you be start think about spending to some the maybe a develop I Like buybacks, for at

Yeah. to Good goal morning, is shareholders have long-term have Jeremy. our outsized And the returns.

a M&A with And playing timing an of in those part seems important important life, it really so be that. how does And really, portfolio to decisions. really, things in all is -- of terms management, role in

So, today to that? a by higher else We returns We assets, How which opportunity think with those basis of prioritize is those is does returns. a to on is We hands plan. important we delivering there managed sustained have so that. in monetizing approach into the connection shareholder for organic portfolio the out. believe year produce can value, spending M&A complement somebody going we assets presumably outsized a believe that of to to capital enhance Canadian who on five those growth returns choices really a is our and have that’s deliver that part an

creative North Many Could I to think that we we shareholders. of see opportunity buy enhance there. our possible. think That’s activity something returns? for would in a Dakota the synergistic things we about, would that be

it’s It’s the imagine On side, the little pretty little a bit capital also to -- bit operating it side, can a although that’s see. easy harder. on costs you

capital which structure And capital so question our a that, to sheet connection sheet balance is strong returning and time, haven’t your and balance shareholders. then principles long to changed long-term of in for with

And of in front unique so now of we right bit what is have a thing. a us

to is we As pretty really able our and about sheet think big is hopefully, of capital been we’re you’re now we’ve return value near-term in like see tools stock and right and way, debt complimentary, come is down. going on highlighting, shareholders, use available we rapidly strategically, which, And couple returns the us share price delivering to all plan the this mid-cycles. push to continue in to plan based have which the the to the we near-term to lot these now last so up, of the by years, to the where the a obviously as balance

if dividends opportunity. conditions and that If the capturing guess double items is successful a and relative acquisition different that that been So, big we’ve to start clear a let’s organically to in incredibly where or if to figuring we the price ticket has the opportunities maybe intrinsic let’s a share be same, But now the lot stock. question, answering what’s really and I And by inorganically, debt that done ways are value, structure. price. in stuff move next, the is and recently capital share where’s share we’re grow there’re are through the buying get zero all it of price be is position, we’ll

monetize Now we’re else that. that we’re complementary everything doing that will to looking to be and

level there, mean, strategic answer. a question. So There’s winded that’s long stuff it’s high I generic but a in some

a happy want more. there’s a So I’m more to drill on there down if to take follow you little

technology, type change that your have could new year maybe or things that firms it’s from Is know there your you’re for any to designs I looking drilling difficult kind Is a of a put that a maybe to tech of sometimes like implement two outside you’re but kind that will seeing? an approach probably goal one industry? to costs the frac end of seeing there question really I or that specific. that And you’re this answered

incremental turn year, Wade. will things that I my have change of have this to lots there’s something an but sea be that says themes think on technology, of Wade radar and I’ll over outsized operating are hand over that there? it going talk would more doing and don’t say, Why things could don’t to thing the I we’re are both impactful some got practice, impact out time. I I some that we’ve that on a the of A about single the interesting

also Thank wouldn’t that just other every rarely improvement and our cost thing. has you. optimizations. it that other it’s in one over been one several efficiency, has track you thing, that I look together efficiencies, record the literally year see driven our the say last added of have It at capital dozens if been things years has of you cost continued capital and driving

think side deployment technologies and operating that things that of the us the the we’ve business is been our drilling has have I beneficial really more incremental helped completions efficient. saw on in be

of continue on So side, minutes on operations simulation us and these to drilling have times off side. are improve save well things connection helped the different the that

we the operational of out out of technologies. haven’t not run we’re So of -- kinds those

So you’ll continue -- you’ll see keep to those. deploy us

a deploy the do we’ve large mean, see still more broader I than continue technologies going us with we the done we we less we’re more continue sense, on opportunities And to the to that think, just number to of efficient. I work and digital deploy. company, past. continue make to to in throughout labor automation

on a Jeremy. little folks to but or anecdote move something on for context made moved an that Wade, has the or it’s of bit so significant pretty not Maybe it’s maybe LOE, -- missions. VRU, just maybe a line dramatically a build F&D just

our the we as hydrocarbon we I there it. motivated Yeah, can recover sell But the find as and from profile. to at want to we’re of also to end continue think to day, emissions system much reduce the technologies

the last big was so on And our success year pads. we VRUs new had deploying

gas emissions have And the so systems sell our gas, more pressure to oil limits. in a big recover made manage on in both design. emissions, limit ultimately, facility on more impact ability areas And the low we flow to high and where ability continue that it really done may that our and, we’ve to some pressure

So think that of tested management of one but to emissions, those of and the I thing they’ve whole not that’s this actually we’re us focus we’ve is the that constructive is deeper one almost suite. emissions profitability. deployed areas probably by quite And technologies pleased every only for reduce technology been

that’s, to Okay, good that’s hear guys.

Jeoff of Lambujon Tudor, comes question next go Pickering. ahead. Please from Your

thanks got a up capital with release, left here, my allocation returns commentary what’s NCIB intent everyone. each see utilize in thinking it with at historically plans question. for of be disclosure if like terms leverage long-term guideposts free or a shareholders taking sees clearer, maybe and flow the about this you that targets its best morning, stating in has on I confirming yesterday’s think utilizing to way frame to flow flow cash how has free renew in that way Good there’s would your following you could for of I of particular. the And August. about of if just some the terms I one you around cash think component about that allocation. authorization turns gotten talked there around plans or free flow your cash wonder in about once update the get to we of to magnitude point it the cash just

Jodi, want up? you to Good Jeoff. morning, take do

consistent previous six equates similar the provided record we’ve are returning XX% track this over well. our what months. well. guidance shareholders our plans level regarding about free time, morning, that plan. Jeff. flow And shareholders. to with of It five-year to of returning over We as free a At Good next cash to flow our Yeah, years as of outlined cash Sure. is our talked we’ve

point five will this , the shares where able shareholders at be depending then remaining back in we So so. will prices on that at to next are at, think, -- to outstanding further come and months, at August, over look the to under buy NCIB we I time, time, expect look at share we returns

Okay, thank you.

are the Ian I’ll closing lines. to back more Mr. no questions remarks. conference from the Dundas There phone turn Instructions] [Operator for

It’s your for everyone. little for it’s for call, also appreciate a a so longer been to you thank say year busy folks reporting, a we this relative I’d today. time day Well, and busy bit

of So, rest you. enjoy Thank day your the interest. and your appreciate

this line. call disconnect for ask please concludes this your that like you and gentlemen, Ladies participating for conference and to morning. your We’d you thank