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Released September 13, 2021 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--As asset sales and merger opportunities continue to swirl through the North American upstream Oil & Gas business, companies have another reason to practice living within their cash flow: so they can be opportunistic buyers of assets or companies when the right deal comes along.
One company taking advantage of the current portfolio rationalization trend among exploration & production companies is Enerplus Corporation (NYSE:ERF) (Calgary, Alberta), whose executive vice president and chief operating officer spoke on a virtual conference organized by Hart Energy (Houston, Texas) September 8.
Enerplus' Wade Hitchings described two Williston Basin acreage acquisitions earlier this year that quadrupled the company's acreage and boosted its production by about 26%, to about 115,000 barrels of oil equivalent per day (BOE/d). At least one of those acquisitions involved acreage from a larger oil company that was shedding peripheral assets. Enerplus paid a total of $777 million to acquire acreage in those two deals.
Now 62% of the company's production is liquids. West Texas Intermediate crude oil has risen about 46% year-to-date, to just under $70 per barrel from $48 per barrel at the start of the year, generating significant incremental cash flow.
"By being conservative (with our capital) and shareholder-focused, we were in a good place to do deals," Hitchings said. There also will be a roughly $63 million increase in planned capital expenditures (capex) this year, to between $284 million and $316 million, from $237 million. Over the 2022-2025 period, Enerplus plans to further boost annual capex to roughly to $395 million.
"We have been patient and aggressive, while also opportunistic," he said. The COVID pandemic and last year's crude oil price collapse emphasized the importance of balancing growth and spending, he added.
Shortly after those two 2021 acreage acquisitions in the Williston Basin, Enerplus turned around and sold acreage in different plays in the Williston, which stretches under North Dakota and Montana, for about $115 million.
"We worked to keep our balance sheet in a place where we could survive during the big downturn and also be opportunistic when the market turned our way," Hutchings continued.
The company also has been working to lower its well costs by about 25% since 2019, relying on efficiency gains in both drilling and completions. These cost reductions, including "favorable" day rates for drilling rigs, coupled with commodity price gains, have combined to produce internal rates of return in excess of 100% in the Williston Basin.
Several speakers at the conference discussed the environmental, social and governance (ESG) emphasis among investors today. Hutchings said performing against ESG goals has become critical to ensuring access to capital. He added that the company's ESG efforts have lowered its costs. Enerplus' ESG efforts are focused in six areas: water management; greenhouse gas emission reductions; health & safety; board of directors' constitution & culture; community engagement; and organizational culture.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
One company taking advantage of the current portfolio rationalization trend among exploration & production companies is Enerplus Corporation (NYSE:ERF) (Calgary, Alberta), whose executive vice president and chief operating officer spoke on a virtual conference organized by Hart Energy (Houston, Texas) September 8.
Enerplus' Wade Hitchings described two Williston Basin acreage acquisitions earlier this year that quadrupled the company's acreage and boosted its production by about 26%, to about 115,000 barrels of oil equivalent per day (BOE/d). At least one of those acquisitions involved acreage from a larger oil company that was shedding peripheral assets. Enerplus paid a total of $777 million to acquire acreage in those two deals.
Now 62% of the company's production is liquids. West Texas Intermediate crude oil has risen about 46% year-to-date, to just under $70 per barrel from $48 per barrel at the start of the year, generating significant incremental cash flow.
"By being conservative (with our capital) and shareholder-focused, we were in a good place to do deals," Hitchings said. There also will be a roughly $63 million increase in planned capital expenditures (capex) this year, to between $284 million and $316 million, from $237 million. Over the 2022-2025 period, Enerplus plans to further boost annual capex to roughly to $395 million.
"We have been patient and aggressive, while also opportunistic," he said. The COVID pandemic and last year's crude oil price collapse emphasized the importance of balancing growth and spending, he added.
Shortly after those two 2021 acreage acquisitions in the Williston Basin, Enerplus turned around and sold acreage in different plays in the Williston, which stretches under North Dakota and Montana, for about $115 million.
"We worked to keep our balance sheet in a place where we could survive during the big downturn and also be opportunistic when the market turned our way," Hutchings continued.
The company also has been working to lower its well costs by about 25% since 2019, relying on efficiency gains in both drilling and completions. These cost reductions, including "favorable" day rates for drilling rigs, coupled with commodity price gains, have combined to produce internal rates of return in excess of 100% in the Williston Basin.
Several speakers at the conference discussed the environmental, social and governance (ESG) emphasis among investors today. Hutchings said performing against ESG goals has become critical to ensuring access to capital. He added that the company's ESG efforts have lowered its costs. Enerplus' ESG efforts are focused in six areas: water management; greenhouse gas emission reductions; health & safety; board of directors' constitution & culture; community engagement; and organizational culture.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
