CALGARY, Dec. 13, 2017 /CNW/ - Enerplus Corporation
(TSX & NYSE: ERF) today announced its 2018 exploration and
development capital budget of $535 to
$585 million which is focused on
generating sustainable and profitable cash flow growth, while
maintaining the Company's significant financial strength.
Highlights of the 2018 capital budget and guidance:
- Projecting approximately 10% total production growth and 20%
liquids production growth year-over-year, on a divestment adjusted
basis
- North Dakota production to
grow by over 30% year-over-year
- Liquids to account for more than 55% of total production by the
second half of 2018
- Capital spending and dividends expected to be funded within
cash flow at between US$50 –
$55 per barrel WTI oil and
US$3.00 per Mcf NYMEX natural
gas
- Price protection on more than 60% of 2018 forecast net crude
oil production, hedged largely through three-way collar structures,
with average upside participation to approximately US$60 per barrel WTI
- Net debt to adjusted funds flow ratio expected to remain below
1.0 times
"Our plans in 2018 remain grounded in disciplined capital
allocation focused on generating competitive economic returns and
profitable cash flow per share growth," stated Ian C. Dundas, President and Chief Executive
Officer. "The majority of our capital program will once again be
directed to our North Dakota asset
where our focus on continuous improvement is delivering top
quartile capital efficiencies. Supported by our strong free cash
flow generating assets in the Marcellus and Canada, our self-funded 2018 growth plan is
resilient and our balance sheet is expected to remain among the
strongest in the peer group."
2018 Operating Plan
Enerplus has allocated approximately 75% of its 2018 capital
budget to its North Dakota
development, which will fund a two rig program projected to drill
45 gross operated wells (38 net). This represents an increase of
approximately 30% in operated wells drilled year-over-year despite
an unchanged rig count. This improvement is due to faster drilling
cycle times and efficiency gains driven by more pad development in
2018. The Company expects to complete 38 gross operated wells (33
net) in North Dakota in 2018.
Enerplus plans to spend approximately 10% of its 2018 capital
budget in the Marcellus to drill 8 net wells and bring 6 net wells
on production.
Enerplus plans to spend approximately 10% of its 2018 capital
budget across its Canadian waterflood portfolio. Capital activity
will comprise drilling 17 gross (15 net) producer and injector
wells across the waterflood assets, along with ongoing polymer
injection for existing projects, and facilities maintenance and
optimization.
The remaining 5% of the 2018 capital budget will be directed to
non-core properties in Canada and
the continued testing of the Company's DJ Basin acreage.
The Company's $535 to $585 million capital budget includes an
allocation for non-drilling/completion capital, primarily related
to maintenance and optimization spending and capitalized G&A
expenses. The allocation across assets is shown in the table
below.
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Capital
Allocation(1)
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2018
Budget
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North
Dakota
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75%
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Marcellus
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10%
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Canadian
Waterfloods
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10%
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Other(2)
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5%
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Total
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100%
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(1)
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Approximate capital
allocation based on the mid-point ($560 million) of capital
spending guidance
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(2)
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Other capital
comprises exploration and development capital associated with
Enerplus' DJ Basin acreage, as well as spending for Enerplus'
non-core properties in Canada
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Fourth Quarter 2017 Non-Core Canadian Divestments
Enerplus has continued to progress the divestment of minor
non-core properties in Canada
during the fourth quarter of 2017. By the end of the quarter,
Enerplus expects to divest approximately 1,400 BOE per day (70%
natural gas) of aggregate non-core production from properties in
Alberta for minimal proceeds.
These properties have significantly higher cost structures than the
Company's corporate average and as a result, generated only modest
cash flow. The properties had an average operating netback of
$3.70 per BOE through the first nine
months of 2017. Additionally, these divestments further reduce
Enerplus' overall well count and abandonment and reclamation
liabilities. The transactions are expected to close late in the
fourth quarter of 2017, or early 2018.
2018 Guidance
Annual 2018 production is expected to average between 86,000 to
91,000 BOE per day, with crude oil and natural gas liquids
production expected to average between 46,000 to 50,000 barrels per
day. In total throughout 2017, Enerplus expects to have divested
approximately 8,700 BOE per day (70% natural gas) of non-core
production. On a pro forma basis after adjusting for the impact of
these divestments, year-over-year total Company and liquids
production in 2018 is projected to grow by approximately 10% and
20%, respectively.
The Company's realized Bakken crude oil price differential below
WTI is projected to be US$2.50 per
barrel in 2018. This represents an expected 40% improvement
year-over-year largely driven by increased basin pipeline takeaway
due to the Dakota Access Pipeline which commenced operations in
mid-2017. The Company's realized Marcellus natural gas price
differential below NYMEX is projected to be US$0.40 per Mcf in 2018. This represents an
expected 50% improvement year-over-year resulting from the
significant slate of incremental Marcellus pipeline projects and
Cove Point LNG expected to come into service between the fourth
quarter of 2017 and year-end 2018.
Operating expenses in 2018 are forecast to be modestly higher
than 2017 levels as a result of the higher expected liquids
weighting in the Company's 2018 production mix. Operating expenses
are expected to average $7.00 per BOE
in 2018.
Transportation costs and cash G&A expenses per BOE are
expected to trend lower in 2018, and are forecast to average
$3.60 per BOE and $1.65 per BOE, respectively.
A summary of Enerplus' 2018 guidance is provided below. This
guidance includes the impact of the expected fourth quarter 2017
divestments.
2018
Guidance
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Capital
spending
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$535 – 585
million
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Average annual
production
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86,000 – 91,000
BOE/d
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Average annual crude
oil and natural gas liquids production
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46,000 – 50,000
bbl/d
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Average royalty and
production tax rate
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25%
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Operating
expense
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$7.00/BOE
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Transportation
expense
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$3.60/BOE
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Cash G&A
expense
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$1.65/BOE
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2018
Differential/Basis Outlook(1)
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U.S. Bakken crude oil
differential (compared to WTI crude oil)
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US$(2.50)/bbl
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Marcellus basis
(compared to NYMEX natural gas)
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US$(0.40)/Mcf
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(1)
Excluding transportation costs
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Risk Management Update
Enerplus has added additional crude oil hedges to protect its
capital plans. Crude oil production is expected to generate over
three quarters of the Company's net operating income in 2018.
Using swaps and collar structures, Enerplus has an average of
20,500 barrels per day of crude oil protected in 2018
(approximately 64% of forecast crude oil production net of
royalties at the midpoint of guidance) and 14,000 barrels per day
of crude oil protected in 2019.
Commodity Hedging
Detail (As at December 12, 2017)
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WTI Crude
Oil
(US$/bbl) (1)
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Nymex Natural
Gas (US$/Mcf)
(1)
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Oct 1, –
Dec 31,
2017
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Jan 1, –
Mar 31,
2018
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Apr 1 –
Jun 30,
2018
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Jul 1 –
Sep 30,
2018
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Oct 1 –
Dec 31,
2018
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Jan 1, –
Mar 31,
2019
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Apr 1, –
Dec 31,
2019
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Oct 1, 2017
– Dec 31,
2017
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Jan 1, 2018
– Dec 31,
2018
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Swaps
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Sold Swaps
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$53.50
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$55.38
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$55.38
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$53.73
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$53.73
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$53.73
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-
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-
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-
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Volume (bbls/d or
Mcf/d)
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2,000
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5,000
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5,000
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3,000
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3,000
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3,000
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-
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-
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-
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Three-Way
Collars
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Sold Puts
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$39.62
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$42.83
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$42.92
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$42.71
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$42.74
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$43.52
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$43.48
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$2.06
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-
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Volume (bbls/d or
Mcf/d)
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18,000
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13,000
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15,000
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18,000
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20,000
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11,000
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14,000
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50,000
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-
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Purchased
Puts
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$50.61
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$53.04
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$52.90
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$52.53
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$52.48
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$53.23
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$53.45
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$2.75
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$2.75
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Volume (bbls/d or
Mcf/d)
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18,000
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13,000
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15,000
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18,000
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20,000
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11,000
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14,000
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50,000
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30,000
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Sold Calls
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$60.33
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$61.99
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$61.73
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$61.22
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$61.10
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$62.09
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$62.69
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$3.41
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$3.47
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Volume (bbls/d or
Mcf/d)
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18,000
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13,000
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15,000
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18,000
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20,000
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11,000
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14,000
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50,000
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30,000
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(1)
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Based on weighted
average price (before premiums). A portion of the sold puts are
settled annually rather than monthly.
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About Enerplus
Enerplus Corporation is a responsible
developer of high quality crude oil and natural gas assets in
Canada and the United States committed to creating value
for its shareholders through a disciplined capital investment
strategy.
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
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 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.
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: expected 2018 average production volumes and the
anticipated production mix and Enerplus' expected source of funding
thereof; the proportion of Enerplus' anticipated oil and gas
production that is hedged; the results from our drilling program
and the timing of related production; oil and natural gas prices
and differentials and our commodity risk management programs;
expected net debt to adjusted funds flow ratio in 2018; anticipated
cash G&A, operating and transportation expenses; expected
average royalty and production tax rate; expected capital spending
levels in 2018, its components and its impact on production, and
anticipated divestments, including proceeds therefrom, timing of
anticipated closing thereof, and anticipated impact on the
Company's abandonment and reclamation costs.
The forward-looking information contained in this news
release reflects several material factors and expectations and
assumptions of Enerplus including, without limitation: 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; 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' 2018 guidance contained in this news release is
based on the following: a WTI price of US$50.00/bbl, a NYMEX price of US$3.00/Mcf, and a USD/CDN exchange rate of
1.28. 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: changes,
including future decline, in commodity prices; 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; Enerplus' inability to comply with covenants under
its bank credit facility and senior notes; 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; 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, 2016).
NON-GAAP MEASURES
In this news release, Enerplus uses the term "net debt to
adjusted funds flow ratio" as a measure to analyze operating
performance, leverage and liquidity. "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. "Net debt to adjusted funds
flow ratio" is calculated as total debt net of cash, divided by a
trailing 12 months of adjusted funds flow. Calculation of these
terms is described in Enerplus' Third Quarter 2017 MD&A under
the "Liquidity and Capital Resources" section.
Enerplus believes that, in addition to net earnings and other
measures prescribed by U.S. GAAP, the term "adjusted funds flow"
and "net debt to adjusted funds flow" are useful supplemental
measures as they provide an indication of the results generated by
Enerplus' principal business activities. However, these measures
are not measures 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. For reconciliation of these
measures to the most directly comparable measure calculated in
accordance with U.S. GAAP, and further information about these
measures, see disclosure under "Non-GAAP Measures" in Enerplus'
Third Quarter 2017 MD&A.
Follow @EnerplusCorp on Twitter at
https://twitter.com/EnerplusCorp.
Ian C. Dundas
President & Chief Executive Officer
Enerplus Corporation
SOURCE Enerplus Corporation