Enerplus (ERF) 40-F 2018 FY Annual report (Canada)

        REPORTS

Exhibit 99.2

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of our Chief Executive Officer and our Chief Financial Officer we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control‑Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, we have concluded that as of December 31, 2018, our internal control over financial reporting is effective.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even those systems determined to be effective can provide only reasonable assurance with respect to the financial statement preparation and presentation.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, has been audited by KPMG LLP, the Independent Registered Public Accounting Firm, who also audited the Company’s Consolidated Financial Statements for the year ended December 31, 2018.

/s/ Ian C. Dundas	/s/ Jodine J. Jenson Labrie
President and Chief Executive Officer	Senior Vice President and Chief Financial Officer

Calgary, Alberta

February 22, 2019

ENERPLUS 2018 FINANCIAL SUMMARY37

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Enerplus Corporation

Opinion on Internal Control Over Financial Reporting

We have audited Enerplus Corporation’s (the “Corporation”) internal control over financial reporting as of December 31, 2018, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Corporation as of December 31, 2018 and 2017, the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity and cash flows for the years then ended, and the related notes, comprising a summary of significant accounting policies and other explanatory information (collectively referred to as the “consolidated financial statements”) and our report dated February 22, 2019 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control and Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Chartered Professional Accountants
Calgary, Canada
February 22, 2019

38              ENERPLUS 2018 FINANCIAL SUMMARY

Management’s Responsibility for Financial Statements

In management’s opinion, the accompanying consolidated financial statements of Enerplus Corporation have been prepared within reasonable limits of materiality and in accordance with accounting principles generally accepted in the United States of America. Since a precise determination of many assets and liabilities is dependent on future events, the preparation of financial statements necessarily involves the use of estimates and approximations. These have been made using careful judgment and with all information available up to February 21, 2019. Management is responsible for all information in the annual report and for the consistency, therewith, of all other financial and operating data presented in this report.

To meet its responsibility for reliable and accurate financial statements, management has established and monitors systems of internal control which are designed to provide reasonable assurance that financial information is relevant, reliable and accurate, and that assets are safeguarded and transactions are executed in accordance with management’s authorization.

The consolidated financial statements have been examined by KPMG LLP, Independent Registered Public Accountants. Their responsibility is to express a professional opinion on the fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The Report of Independent Registered Public Accounting Firm outlines the scope of their examination and sets forth their opinion.

The Audit Committee, consisting exclusively of independent directors, has reviewed these statements with management and the Independent Registered Public Accounting Firm and has recommended their approval to the Board of Directors. The Board of Directors has approved the consolidated financial statements of the Company.

/s/ Ian C. Dundas	/s/ Jodine J. Jenson Labrie
President and Chief Executive Officer	Senior Vice President and Chief Financial Officer

Calgary, Alberta

February 22, 2019

ENERPLUS 2018 FINANCIAL SUMMARY39

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Enerplus Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Enerplus Corporation (the “Corporation”) as of December 31, 2018 and 2017, the consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2018 and 2017, and the results of operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Corporation’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2019 expressed an unqualified opinion on the effectiveness of the Corporation’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Comparative information

The consolidated financial statements of the Corporation for the year ended December 31, 2016, excluding the impact of adoption of ASU 2016-18 as described in Note 2(f) to the consolidated financial statements, were audited by another auditor who expressed an unqualified (unmodified) opinion on the consolidated financial statements on February 24, 2017.

As part of our audits of the consolidated financial statements as at and for the years ended December 31, 2018 and 2017, we audited the adoption of ASU 2016-18 as described in Note 2(f) to the consolidated financial statements that was applied to amend the comparative information presented for the year ended December 31, 2016. In our opinion, the adoption of ASU 2016-18 has been properly applied.

We were not engaged to audit, review, or apply any procedures to the consolidated financial statements of the Corporation for the year ended December 31, 2016, other than with respect to the amendment described in Note 2(f) to the consolidated financial statements. Accordingly, we do not express an opinion or any other form of assurance on those financial statements taken as a whole.

We have served as the Corporation’s auditor since 2017.

/s/ KPMG LLP

Chartered Professional Accountants

Calgary, Canada

February 22, 2019

40              ENERPLUS 2018 FINANCIAL SUMMARY

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Enerplus Corporation

We have audited, before the effects of the adjustments to retrospectively apply ASU 2016-18 adopted in 2017 as discussed in Note 2(f) to the consolidated financial statements, the accompanying consolidated financial statements of Enerplus Corporation and subsidiaries (the “Company”), which comprise the consolidated statements of income/(loss) and comprehensive income/(loss), consolidated statements of changes in shareholders’ equity, and consolidated statements of cash flows for the year ended December 31, 2016, and the notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, such consolidated financial statements, before the effects of the adjustments to retrospectively apply ASU 2016-18 adopted in 2017 as discussed in Note 2(f) to the consolidated financial statements, present fairly, in all material respects, the financial performance and cash flows of Enerplus Corporation and subsidiaries for the year ended December 31, 2016 in accordance with accounting principles generally accepted in the United States of America.

Other Matter

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively adopt ASU 2016-18 as discussed in Note 2(f) to the consolidated financial statements and, accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied. Those retrospective adjustments were audited by other auditors.

/s/ Deloitte LLP

Chartered Professional Accountants

February 24, 2017

ENERPLUS 2018 FINANCIAL SUMMARY41

      STATEMENTS

Consolidated Balance Sheets

(CDN$ thousands)	Note	December 31, 2018		December 31, 2017
Assets
Current assets
Cash and cash equivalents		$	363,327	$	346,548
Accounts receivable	3		145,206		129,386
Income tax receivable	12		55,172		1,190
Derivative financial assets	14(b)		59,258		3,852
Other current assets			8,928		5,902
			631,891		486,878
Property, plant and equipment:
Oil and natural gas properties (full cost method)	4		1,293,941		889,967
Other capital assets, net	4		13,130		10,064
Property, plant and equipment			1,307,071		900,031
Goodwill	5(b)		654,799		638,878
Derivative financial assets	14(b)		32,220		—
Deferred income tax asset	12		465,124		569,937
Income tax receivable	12		27,195		50,108
Total Assets		$	3,118,300	$	2,645,832
Liabilities
Current liabilities
Accounts payable	6	$	290,045	$	213,978
Dividends payable			2,395		2,421
Current portion of long-term debt	7, 14(a)		60,001		27,656
Derivative financial liabilities	14(b)		1,909		28,642
			354,350		272,697
Derivative financial liabilities	14(b)		—		9,907
Long-term debt	7, 14(a)		636,849		644,723
Asset retirement obligation	8		126,112		117,736
			762,961		772,366
Total Liabilities			1,117,311		1,045,063
Shareholders’ Equity
Share capital – authorized unlimited common shares, no par value
Issued and outstanding:  December 31, 2018 – 239 million shares
December 31, 2017 – 242 million shares	13(a)		3,337,608		3,386,946
Paid-in capital			46,524		75,375
Accumulated deficit			(1,772,084)		(2,124,676)
Accumulated other comprehensive income			388,941		263,124
			2,000,989		1,600,769
Total Liabilities & Shareholders' Equity		$	3,118,300	$	2,645,832
Commitments and Contingencies	15
Subsequent Event	13(a)

The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

Approved on behalf of the Board of Directors:

/s/ Elliott Pew	/s/ Robert B. Hodgins
Director	Director

42              ENERPLUS 2018 FINANCIAL SUMMARY

Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)

For the year ended December 31 (CDN$ thousands)	Note	2018		2017		2016
Revenues
Oil and natural gas sales, net of royalties	9	$	1,292,736	$	920,693	$	722,732
Commodity derivative instruments gain/(loss)	14(b)		88,232		14,310		(29,397)
			1,380,968		935,003		693,335
Expenses
Operating			238,261		197,101		247,917
Transportation			123,463		111,265		107,147
Production taxes			87,286		54,318		37,417
General and administrative	10		75,783		74,301		86,319
Depletion, depreciation and accretion			304,274		250,774		328,964
Asset impairment	5(a)		—		—		301,171
Interest			36,799		38,714		45,443
Foreign exchange (gain)/loss	11		39,521		(30,150)		(40,526)
Gain on divestment of assets	4		—		(78,400)		(559,235)
Gain on prepayment of senior notes	7		—		—		(19,270)
Other expense /(income)			(5,909)		(1,906)		(2,230)
			899,478		616,017		533,117
Income/(Loss) Before Taxes			481,490		318,986		160,218
Current income tax expense/(recovery)	12		(27,093)		(47,957)		(2,351)
Deferred income tax expense/(recovery)	12		130,304		129,945		(234,847)
Net Income/(Loss)		$	378,279	$	236,998	$	397,416
Other Comprehensive Income/(Loss)
Change in cumulative translation adjustment			125,817		(90,277)		(49,271)
Total Comprehensive Income/(Loss)		$	504,096	$	146,721	$	348,145
Net Income/(Loss) per Share
Basic	13(c)	$	1.55	$	0.98	$	1.75
Diluted	13(c)	$	1.53	$	0.96	$	1.72

The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

ENERPLUS 2018 FINANCIAL SUMMARY43

Consolidated Statements of Changes in Shareholders’ Equity

For the year ended December 31 (CDN$ thousands)	2018		2017		2016
Share Capital
Balance, beginning of year	$	3,386,946	$	3,365,962	$	3,133,524
Public offering (net of issue costs)		—		—		223,031
Purchase of common shares under Normal Course Issuer Bid		(82,596)		—		—
Share-based compensation – settled		23,389		20,984		9,407
Stock Option Plan – cash		9,138		—		—
Stock Option Plan – exercised		731		—		—
Balance, end of year	$	3,337,608	$	3,386,946	$	3,365,962
Paid-in Capital
Balance, beginning of year	$	75,375	$	73,783	$	56,176
Share-based compensation – cash settled		(30,648)		—		—
Share-based compensation – non-cash settled		(23,389)		(20,984)		(9,407)
Share-based compensation – non-cash		25,917		22,576		27,014
Stock Option Plan – exercised		(731)		—		—
Balance, end of year	$	46,524	$	75,375	$	73,783
Accumulated Deficit
Balance, beginning of year	$	(2,124,676)	$	(2,332,641)	$	(2,694,618)
Purchase of common shares under Normal Course Issuer Bid		3,569		—		—
Net income/(loss)		378,279		236,998		397,416
Dividends declared		(29,256)		(29,033)		(35,439)
Balance, end of year	$	(1,772,084)	$	(2,124,676)	$	(2,332,641)
Accumulated Other Comprehensive Income
Balance, beginning of year	$	263,124	$	353,401	$	402,672
Change in cumulative translation adjustment		125,817		(90,277)		(49,271)
Balance, end of year	$	388,941	$	263,124	$	353,401
Total Shareholders’ Equity	$	2,000,989	$	1,600,769	$	1,460,505

The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

44              ENERPLUS 2018 FINANCIAL SUMMARY

Consolidated Statements of Cash Flows

For the year ended December 31 (CDN$ thousands)	Note	2018		2017		2016
Operating Activities
Net income/(loss)		$	378,279	$	236,998	$	397,416
Non-cash items add/(deduct):
Depletion, depreciation and accretion			304,274		250,774		328,964
Asset impairment	5(a)		—		—		301,171
Changes in fair value of derivative instruments	14(b)		(124,266)		(6,184)		105,026
Deferred income tax expense/(recovery)	12		130,304		129,945		(234,847)
Foreign exchange (gain)/loss on debt and working capital	11		58,628		(42,623)		(40,634)
Share-based compensation	13(b)		25,917		22,576		27,014
Translation of U.S. dollar cash held in Canada (gain)/loss	11		(19,630)		10,978		—
Gain on the divestment of assets	4		—		(78,400)		(559,235)
Gain on prepayment of senior notes	7		—		—		(19,270)
Asset retirement obligation expenditures	8		(11,263)		(12,907)		(8,390)
Changes in non-cash operating working capital	17(a)		(3,459)		(35,032)		15,075
Cash flow from operating activities			738,784		476,125		312,290
Financing Activities
Proceeds from the issuance of shares (net of issue costs)	13(a)		9,138		—		220,410
Dividends	13(a),17(b)		(29,282)		(29,017)		(39,230)
Bank credit facility	7		—		(23,272)		(55,999)
Senior notes	7		(29,044)		(29,084)		(335,400)
Purchase of common shares under Normal Course Issuer Bid	13(a)		(79,027)		—		—
Cash flow from/(used in) financing activities			(128,215)		(81,373)		(210,219)
Investing Activities
Capital and office expenditures	17(b)		(604,110)		(459,152)		(260,083)
Property and land acquisitions	4		(18,009)		(13,276)		(126,126)
Property divestments	4		(919)		56,196		670,364
Cash flow from/(used in) investing activities			(623,038)		(416,232)		284,155
Effect of exchange rate changes on cash and cash equivalents			29,248		(25,277)		(419)
Change in cash and cash equivalents			16,779		(46,757)		385,807
Cash and cash equivalents, beginning of year			346,548		393,305		7,498
Cash and cash equivalents, end of year		$	363,327	$	346,548	$	393,305

The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

ENERPLUS 2018 FINANCIAL SUMMARY45

      NOTES

Notes to Consolidated Financial Statements

1) REPORTING ENTITY

These annual audited Consolidated Financial Statements (“Consolidated Financial Statements”) and notes present the financial position and results of Enerplus Corporation (the “Company” or “Enerplus”) including its Canadian and U.S. subsidiaries. Enerplus is a North American crude oil and natural gas exploration and development company. Enerplus is publicly traded on the Toronto and New York stock exchanges under the ticker symbol ERF. Enerplus’ head office is located in Calgary, Alberta, Canada.

2) SIGNIFICANT ACCOUNTING POLICIES

The following significant accounting policies are presented to assist the reader in evaluating these Consolidated Financial Statements and, together with the following notes, are an integral part of the Consolidated Financial Statements.

a) Basis of Preparation

Enerplus’ Consolidated Financial Statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain prior period amounts have been restated to conform with current period presentation.  

i. Reporting Currency

These Consolidated Financial Statements are presented in Canadian dollars, which is Enerplus’ reporting currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand unless otherwise indicated.

ii. Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. Actual results could differ from these estimates, and changes in estimates are recorded when known. Significant estimates made by management include: oil and natural gas reserves and related present value of future cash flows, depreciation, depletion and accretion (“DD&A”), impairment, asset retirement obligations, income taxes, income tax asset values, impairment assessments of goodwill and the fair value of derivative instruments. Enerplus uses the most current information available and exercises judgment in making these estimates and assumptions. In the opinion of management, these Consolidated Financial Statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies.

iii. Basis of Consolidation

These Consolidated Financial Statements include the accounts of Enerplus and its subsidiaries. Intercompany balances and transactions are eliminated on consolidation. Interests in jointly controlled oil and natural gas assets are accounted for following the concept of undivided interest, whereby Enerplus’ proportionate share of revenues, expenses, assets and liabilities are included in the accounts.

The acquisition method of accounting is used to account for acquisitions that meet the definition of a business under U.S. GAAP. The cost of an acquisition is measured as the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the acquisition date. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

b) Revenue

Revenue from the sale of crude oil, natural gas and natural gas liquids is measured based on the consideration specified in contracts with customers, net of sales taxes. Enerplus recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer. This is generally at the time the customer obtains legal title to the product and when it is physically transferred to the contractual delivery points.

Enerplus evaluates its arrangements with third parties and partners to determine if the Company acts as the principal or as an agent.  In making this evaluation, management considers if Enerplus retains control of the product being delivered to the end customer. As part of this assessment, management considers whether the Company retains the economic benefits associated with the good being delivered to the end customer. Management also considers whether the Company has the primary responsibility for the delivery of the product, the ability to establish prices or the inventory risk. If Enerplus acts in the capacity of an agent rather than as a principal in a transaction, then the revenue is recognized on a net basis, only reflecting the fee, if any, realized by the Company from the transaction.

46              ENERPLUS 2018 FINANCIAL SUMMARY

c) Transportation

Enerplus generally sells oil and natural gas under two types of agreements which are common in our industry.  Both types of agreements include a transportation charge.  One is a net-back arrangement, under which the Company sells crude oil or natural gas at the wellhead and collects a price, net of the transportation incurred by the purchaser.  In this case, sales are recorded at the price received from the purchaser, net of transportation costs. 

Under the other arrangement, Enerplus sells crude oil or natural gas at a specific delivery point, pays transportation to a third party and receives proceeds from the purchaser with no transportation deduction.  In this case, transportation costs are recorded as transportation expense on the Consolidated Statements of Income/(Loss).  Due to these two distinct selling arrangements, Enerplus’ computed realized prices, before the impact of derivative instruments, include revenues which are reported under two separate bases.

d) Oil and Natural Gas Properties

Enerplus uses the full cost method of accounting for its oil and natural gas properties. Under this method, all acquisition, exploration and development costs incurred in finding oil and natural gas reserves are capitalized, including general and administrative costs directly attributable to these activities. These costs are recorded on a country‑by‑country cost centre basis as oil and natural gas properties subject to depletion (“full cost pool”). Costs associated with production and general corporate activities are expensed as incurred.

The net carrying value of both proved and unproved oil and natural gas properties is depleted using the unit of production method using proved reserves, as determined using a constant price assumption of the simple average of the preceding twelve months’ first-day-of-the-month commodity prices (“SEC prices”). The depletion calculation takes into account estimated future development costs necessary to bring those reserves into production.

Under full cost accounting, a ceiling test is performed on a cost centre basis. Enerplus limits capitalized costs of proved and unproved oil and natural gas properties, net of accumulated depletion and deferred income tax liabilities, to the estimated future net cash flows from proved oil and natural gas reserves discounted at 10%, net of related tax effects, plus the lower of cost or fair value of unproved properties (“the ceiling”). The estimated future net cash flows are calculated using the simple average of the preceding twelve months’ first-day-of-the-month commodity prices. If such capitalized costs exceed the ceiling, a write-down equal to that excess is recorded as a non-cash charge to net income. A write-down is not reversed in future periods even if higher oil and natural gas prices subsequently increase the ceiling.

Under full cost accounting rules, divestitures of oil and gas properties are generally accounted for as adjustments to capitalized costs, with no recognition of a gain or loss.  However, if not recognizing a gain or loss on the transaction would have otherwise significantly altered the relationship between a cost centre’s capitalized costs and proved reserves, then a gain or loss must be recognized.

e) Other Capital Assets

Other capital assets are recorded at historical cost, net of depreciation, and include furniture, fixtures, leasehold improvements and computer equipment. Depreciation is calculated on a straight-line basis over the estimated useful life of the respective asset. The cost of repairs and maintenance is expensed as incurred.

f) Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents includes cash and highly liquid investments with original maturities of less than 90 days.

In 2017, Enerplus adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. As a result of the adoption of ASU 2016-18, restricted cash of $392.0 million at December 31, 2016 has been included in cash and cash equivalents on the Consolidated Statements of Cash Flows, with a corresponding increase to change in cash and cash equivalents. Prior to adoption, changes in restricted cash were included in investing activities. Enerplus’ 2016 Consolidated Statement of Cash Flows was restated as required to reflect this change in presentation.

g) Goodwill

Enerplus recognizes goodwill relating to business acquisitions when the total purchase price exceeds the fair value of the net identifiable assets and liabilities acquired. The portion of goodwill that relates to U.S. operations fluctuates due to changes in foreign exchange rates. Goodwill is stated at cost less impairment and is not amortized. Goodwill is not deductible for income tax purposes.   

Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Enerplus first performs a qualitative assessment to determine whether events or changes in circumstances indicate that goodwill may be impaired. If it is more likely than not that the fair value of the reporting unit is less than its carrying value,

ENERPLUS 2018 FINANCIAL SUMMARY47

quantitative impairment tests are performed.  If the carrying value of the reporting unit exceeds its fair value, goodwill is written down to its implied fair value with an offsetting charge to earnings in the Consolidated Statements of Income/(Loss). For the purposes of goodwill impairment testing, Enerplus has two reporting units. The change in goodwill in 2018 and 2017 related to the impact of foreign exchange movements on U.S. dollar denominated goodwill balances. No impairment has been recorded in 2018, 2017 or 2016.

h) Asset Retirement Obligations

Enerplus’ oil and natural gas operating activities give rise to dismantling, decommissioning and site remediation activities. Enerplus recognizes a liability for the estimated present value of the future asset retirement obligation liability at each balance sheet date. Upon recognition, the liability is recorded at its estimated fair value. The associated asset retirement cost is capitalized and amortized over the same period as the underlying asset. Changes in the estimated liability and related asset retirement cost can arise as a result of revisions in the estimated amount or timing of cash flows.

Depletion of asset retirement costs and increases in asset retirement obligations resulting from the passage of time are recorded to depreciation, depletion and accretion and charged against net income in the Consolidated Statements of Income/(Loss).

i) Income Tax

Enerplus uses the liability method of accounting for income taxes. Deferred income tax assets and liabilities are recorded on the temporary differences between the accounting and income tax basis of assets and liabilities, using the enacted tax rates expected to apply when the temporary differences are expected to reverse. Deferred tax assets are reviewed each period and a valuation allowance is provided if, after considering available evidence, it is more likely than not that a deferred tax asset will not be realized. Enerplus considers both positive and negative evidence including historic and expected future taxable income, reversing existing temporary differences and tax basis carry forward periods in making this assessment. A valuation allowance is removed in any period where available evidence indicates all or a portion of the valuation allowance is no longer required.  The financial statement effect of an uncertain tax position is recognized when it is more likely than not, based on technical merits, that the position will be sustained upon examination by a taxation authority. Penalties and interest related to income tax are recognized in income tax expense.

j) Financial Instruments

i. Fair Value Measurements

Financial instruments are initially recorded at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For financial instruments carried at fair value, and when disclosing the fair value of financial instruments on certain non-financial items, inputs used in determining the fair value are characterized according to the following fair value hierarchy:

   Level 1  –  Inputs represent quoted market prices in active markets for identical assets or liabilities.

   Level 2  –  Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets or other market corroborated inputs.

   Level 3  – Inputs that are not observable from objective sources, such as forward prices supported by little or no market activity or internally developed estimates of future cash flows used in a present value model.

Subsequent measurement is based on classification of the financial instrument into one of the following five categories: held-for-trading, held-to-maturity, available-for-sale, loans and receivables or other financial liabilities.

ii. Non-derivative financial instruments

The carrying amount of cash, accounts receivable, income tax receivable, accounts payable, dividends payable and bank credit facilities reported on the Consolidated Balance Sheets approximates fair value. The fair value of the senior notes are considered a level 2 fair value measurement. The fair value of debt has been disclosed in Note 14. 

iii. Derivative financial instruments

Enerplus enters into financial derivative contracts in order to manage its exposure to market risks from fluctuations in commodity prices, foreign exchange rates and interest rates in the normal course of operations. Enerplus has not designated its financial derivative contracts as effective accounting hedges, and thus has not applied hedge accounting, even though it considers most of these contracts to be economic hedges. As a result, all financial derivative contracts are classified as held-for-trading and are recorded at fair value based on a Level 2 designation, with changes in fair value recorded in net income. The fair values of these derivative instruments are generally based on an estimate of the amounts that would be paid or received to settle these

48              ENERPLUS 2018 FINANCIAL SUMMARY

instruments at the balance sheet date. Enerplus’ accounting policy is to not offset the fair values of its financial derivative assets and liabilities.

Realized gains and losses from commodity price risk management activities are recognized in income when the contract is settled. Unrealized gains and losses on commodity price risk management activities are recognized in income based on the changes in fair value of the contracts at the end of the respective reporting period.

Enerplus’ crude oil, natural gas and natural gas liquids physical delivery purchase and sales contracts qualify as normal purchases and sales as they are entered into and held for the purpose of receipt or delivery of products in accordance with the Company’s expected purchase, sale or usage requirements. As such, these contracts are not considered derivative financial instruments. Settlements on these physical contracts are recognized in net income over the term of the contracts as they occur.

k) Foreign Currency

i. Foreign currency transactions

Transactions denominated in foreign currencies are translated to the functional currency of the entity (Canadian dollars) using the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency of the entity using the rate of exchange in effect at the balance sheet date whereas non-monetary assets and liabilities are translated at the historical rate of exchange in effect on the date of the transaction. Foreign currency differences arising on translation are recognized in net income in the period in which they arise.

ii. Foreign operations

Assets and liabilities of Enerplus’ U.S. operations, which has a U.S. dollar functional currency, are translated into Canadian dollars at period end exchange rates while revenues and expenses are translated using average rates for the period. Gains and losses from the translation are deferred and included in the cumulative translation adjustment which is recorded in accumulated other comprehensive income.

l) Share-Based Compensation

Enerplus’ share-based compensation plans include its equity-settled Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”) plans. The Company is authorized to issue up to 3.8% of outstanding common shares from treasury in relation to these  plans. Enerplus also has a cash-settled Deferred Share Unit (“DSU”) plan.

Enerplus’ Stock Option Plan was suspended in 2014 and is now closed.

i. RSU, PSU, and DSU plans

Under Enerplus’ RSU plan, employees receive compensation in relation to the value of a specified number of underlying notional shares. The number of notional shares awarded varies by individual and vests one-third each year for three years. The value upon vesting is based on the value of the underlying notional shares plus notional accrued dividends over the vesting period.

Under Enerplus’ PSU plan, executives and management receive compensation in relation to the value of a specified number of underlying notional shares. The number of notional shares awarded varies by individual and they vest at the end of three years. The value upon vesting is based on value of the underlying shares plus notional accrued dividends along with a multiplier that ranges from 0 to 2 depending on Enerplus’ performance compared to the TSX oil and gas index over the vesting period.

Under Enerplus’ DSU plan, directors receive compensation in relation to the value of a specified number of underlying notional shares. The number of notional shares awarded is based on the annual retainer value and they vest upon the director leaving the Board. The value upon vesting is based on the value of the underlying notional shares plus notional accrued dividends over the vesting period. All DSU grants are settled in cash.

Enerplus recognizes non-cash share-based compensation expense over the vesting period of the equity-settled long-term incentive plans, net of estimated forfeitures, based on the estimated grant date fair value of the respective awards.  Share-based compensation charges are recorded on the Consolidated Statements of Income/(Loss) with an offset to paid-in capital.  Each period, management performs an estimate of the PSU plan multiplier. Any differences that arise between the actual multiplier on plan settlement and management’s estimate is recorded to share-based compensation. On settlement of these plans, amounts previously recorded to paid-in capital are reclassified to share capital.

ENERPLUS 2018 FINANCIAL SUMMARY49

Enerplus recognizes a liability in respect of its cash-settled long-term incentive plans based on their estimated fair value. The liability is re-measured at each reporting date and at settlement date with any changes in the fair value recorded as share-based compensation, included in general and administrative expense. 

ii. Stock options

Enerplus’ Stock Option Plan was suspended in 2014 and is now closed. All options outstanding under the plan are fully vested and the expense has been fully recognized.

m) Net Income Per Share

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period.

For the diluted net income per common share calculation, the weighted average number of shares outstanding is adjusted for the potential number of shares which may have a dilutive effect on net income. The weighted average number of diluted shares is calculated in accordance with the treasury stock method which assumes that the proceeds received from the exercise of all stock options and outstanding RSU’s and PSU’s would be used to repurchase common shares at the average market price.

n) Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, environmental and other sources are recognized when it is probable that a liability has been incurred and the amount can be reasonably estimated. Contingencies are adjusted as additional information becomes available or circumstances change.

o) Accounting Changes and Recent Pronouncements Issued

i. Recently adopted accounting standards

Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these Consolidated Financial Statements.

Enerplus adopted ASC 606 Revenue from contracts with customers effective January 1, 2018 as detailed in Note 2(b). Enerplus used the modified retrospective method to adopt the new standard, with ASC 606 applied to all contracts not yet completed as of the date of adoption with the cumulative effect on comparative periods reflected as an adjustment to retained earnings. The adoption of the new standard had no impact on the Consolidated Financial Statements, with the exception of the additional disclosures which are detailed in Note 9.

Management has applied the following practical expedients as part of the adoption of the standard:

· No changes have been made to the revenue recognized under the previous revenue standard for contracts that were    completed during the comparative  period; and

· The effect of contract modifications before the beginning of the comparative reporting period have not been evaluated  separately. Instead, Enerplus has reflected the aggregated effect of those modifications when identifying the performance obligations, determining the transaction price and allocating the transaction price to the satisfied and unsatisfied performance obligations.

ii. Future accounting changes

In future accounting periods, the Company will adopt the following Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”): 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU introduced a lessee accounting model that requires lessees to recognize a right-of-use (ROU) asset and related lease liability on the balance sheet for all leases, including operating leases. The FASB further issued several ASUs in 2018 which provide clarification on implementation of the new standard, technical corrections, improvements and practical expedients that can be applied under certain circumstances. The standard does not apply to oil and gas exploration rights, intangible assets or inventory. The new standard also expands disclosures related to the amount, timing and uncertainty of cash flows arising from leases. The standard will be applied using a modified retrospective approach using either 1) the effective date or 2) the beginning of the earliest comparative period presented in the financial statements as the Company’s date of initial adoption. The Company is required to adopt the new standard on January 1, 2019 and will use the effective date as its date of initial application. The standard also provides for certain practical expedients at the date of adoption and for an entity’s ongoing accounting. The Company currently expects to elect the practical expedient pertaining to land easements and the short-term lease recognition exemption which allows it to not recognize ROU assets or lease liabilities for leases with a term shorter than twelve months.

50              ENERPLUS 2018 FINANCIAL SUMMARY

The Company has developed an inventory of existing lease agreements, and expects that there will be a material impact on its Consolidated Financial Statements. While the Company continues to finalize the impact of adoption, the most significant effects relate to 1) the recognition of new ROU assets and lease liabilities on the Balance Sheet for office and drilling rig operating leases and 2) providing significant new disclosures about the Company’s leasing activities. The Company continues to address system and process changes necessary to compile the information to meet the recognition and disclosure requirements of the new standard. On adoption, we currently expect to recognize lease liabilities ranging from $40.0 million to $45.0 million, with corresponding ROU assets within the same range.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). The ASU significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance amends the impairment model of financial instruments basing it on expected losses rather than incurred losses. These expected credit losses will be recognized as an allowance rather than a direct write down of the amortized cost basis. The new guidance is effective January 1, 2020, and will be applied using a modified retrospective approach. Enerplus does not expect to early adopt the standard and continues to assess the impact to the Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350). This standard eliminates Step 2 of the goodwill impairment test, and requires a goodwill impairment charge for the amount that the carrying amount of the reporting unit exceeds the reporting unit’s fair value. The updated guidance is effective January 1, 2020, and will be applied prospectively. Enerplus does not expect to early adopt the standard. The amended standard may affect goodwill impairment tests post the adoption date, the impact of which is not known.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), making more hedging strategies eligible for hedge accounting. The new guidance is effective January 1, 2019, and will be applied prospectively. Hedge accounting continues to be an elective accounting policy choice. Enerplus does not currently apply hedge accounting, and therefore does not expect this ASU to have a material impact to its Consolidated Financial Statements.

3) ACCOUNTS RECEIVABLE

($ thousands)	December 31, 2018		December 31, 2017
Accrued revenue	$	118,821	$	102,051
Accounts receivable – trade		30,252		30,787
Allowance for doubtful accounts		(3,867)		(3,452)
Total accounts receivable, net of allowance for doubtful accounts	$	145,206	$	129,386

4) PROPERTY, PLANT AND EQUIPMENT (“PP&E”)

			Accumulated Depletion,
As at December 31, 2018			Depreciation,
($ thousands)	Cost		and Impairment		Net Book Value
Oil and natural gas properties(1)	$	14,773,082	$	(13,479,141)	$	1,293,941
Other capital assets		115,510		(102,380)		13,130
Total PP&E	$	14,888,592	$	(13,581,521)	$	1,307,071

			Accumulated Depletion,
As at December 31, 2017			Depreciation,
($ thousands)	Cost		and Impairment		Net Book Value
Oil and natural gas properties(1)	$	13,622,266	$	(12,732,299)	$	889,967
Other capital assets		107,582		(97,518)		10,064
Total PP&E	$	13,729,848	$	(12,829,817)	$	900,031

(1) All of the Company’s unproved properties are included in the full cost pool.

Acquisitions:

For the years ended December 31, 2018 and 2017, Enerplus acquired property and land totaling $25.8 million, and $13.3 million, respectively. 

ENERPLUS 2018 FINANCIAL SUMMARY51

Divestments:

For the years ended December 31, 2018 and 2017, Enerplus disposed of properties for proceeds of $6.9 million and $56.2 million, respectively. Certain asset divestments may result in gains if the divestments cause a significant alteration in the relationship between the cost centre’s capitalized costs and proved reserves. During 2018, Enerplus did not recognize any gains on asset divestments (2017 – $78.4 million, 2016 – $559.2 million). 

5) IMPAIRMENT

a) Impairment of PP&E

There was no impairment recorded for the years ended December 31, 2018 and 2017. The $301.2 million impairment for the year ended December 31, 2016 was due to lower 12-month average trailing crude oil and natural gas prices.

The following table outlines the 12-month average trailing benchmark prices and exchange rates used in Enerplus’ ceiling test as at December 31,2018, 2017 and 2016:

								U.S. Henry	AECO Natural
	WTI Crude Oil		Exchange Rate		Edm Light Crude		Hub Gas		Gas Spot
Period	US$/bbl		US$/CDN		CDN$/bbl		US$/Mcf		CDN$/Mcf
2018	$	65.56		1.28	$	69.58	$	3.10	$	1.67
2017		51.34		1.30		63.57		2.98		2.32
2016		42.75		1.32		52.26		2.49		2.17

b) Goodwill Impairment

Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that goodwill may be impaired. 

There were no additions or impairments to goodwill for the year ended December 31, 2018 or the comparative years.

6) ACCOUNTS PAYABLE

($ thousands)	December 31, 2018		December 31, 2017
Accrued payables	$	115,388	$	96,743
Accounts payable – trade		174,657		117,235
Total accounts payable	$	290,045	$	213,978

7) DEBT

($ thousands)	December 31, 2018		December 31, 2017
Current:
Senior notes	$	60,001	$	27,656
Long-term:
Bank credit facility	$	—	$	—
Senior notes		636,849		644,723
Total debt	$	696,850	$	672,379

Bank Credit Facility

Enerplus has a senior unsecured, covenant‑based, $800 million bank credit facility that matures on October 31, 2021. Drawn fees range between 125 and 315 basis points over bankers’ acceptance rates. Standby fees on the undrawn portion of the facility are based on 20% of the drawn pricing. The Company has the ability to request an extension of the facility or repay the entire balance at the end of the term. At December 31, 2018, Enerplus was undrawn on the facility (December 31, 2017 –undrawn). During 2018, a fee of $0.4 million (2017 – $0.5 million, 2016 – $0.7 million) was paid to extend the facility.

Senior Notes

During 2018 and 2017, Enerplus made its first and second US$22 million principal repayments on its 2009 senior notes. During 2016, Enerplus repurchased US$267 million in outstanding senior notes at a discount, resulting in gains of $19.3 million.

52              ENERPLUS 2018 FINANCIAL SUMMARY

The terms and rates of the Company’s outstanding senior notes are detailed below:

				Original	Remaining	CDN$ Carrying
			Coupon	Principal	Principal	Value
Issue Date	Interest Payment Dates	Principal Repayment	Rate	($ thousands)	($ thousands)	($ thousands)
September 3, 2014	March 3 and Sept 3	5 equal annual installments beginning September 3, 2022	3.79%	US$200,000	US$105,000	$	143,189
May 15, 2012	May 15 and Nov 15	Bullet payment on May 15, 2019	4.34%	CDN$30,000	CDN$30,000		30,000
May 15, 2012	May 15 and Nov 15	Bullet payment on May 15, 2022	4.40%	US$20,000	US$20,000		27,274
May 15, 2012	May 15 and Nov 15	5 equal annual installments beginning May 15, 2020	4.40%	US$355,000	US$298,000		406,383
June 18, 2009	June 18 and Dec 18	3 equal annual installments beginning June 18, 2019 - 2021	7.97%	US$225,000	US$66,000		90,004
				Total carrying value		$	696,850

8) ASSET RETIREMENT OBLIGATION

($ thousands)	December 31, 2018		December 31, 2017
Balance, beginning of year	$	117,736	$	181,700
Change in estimates		16,755		13,064
Property acquisition and development activity		1,565		1,322
Divestments		(4,585)		(72,306)
Settlements		(11,263)		(12,907)
Accretion expense		5,904		6,863
Balance, end of year	$	126,112	$	117,736

Enerplus has estimated the present value of its asset retirement obligation to be $126.1 million at December 31, 2018 based on a total undiscounted liability of $343.9 million (December 31, 2017 – $117.7 million and $318.8 million, respectively). The asset retirement obligation was calculated using a weighted average credit-adjusted risk‑free rate of 5.59% and inflation rate of 1.8% (December 31, 2017 – 5.73% and 1.8%, respectively).  The majority of Enerplus’ asset retirement obligation expenditures are expected to be incurred between 2025 and 2055.

9) OIL AND NATURAL GAS SALES

($ thousands)	2018		2017		2016
Oil and natural gas sales	$	1,610,899	$	1,141,770	$	882,126
Royalties(1)		(318,163)		(221,077)		(159,394)
Oil and natural gas sales, net of royalties	$	1,292,736	$	920,693	$	722,732

(1)Royalties above do not include production taxes which are reported separately on the Consolidated Statements of Income/(Loss).

Oil and natural gas revenue by country and by product for the year ended December 31, 2018 is as follows:

Year ended December 31, 2018		Total revenue, net				Natural		Natural gas
($ thousands)		of royalties(1)		Crude oil(2)		gas(2)		liquids(2)		Other(3)
Canada	$	198,263	$	148,949	$	32,109	$	14,075	$	3,130
United States		1,094,473		834,146		236,825		23,502		—
Total	$	1,292,736	$	983,095	$	268,934	$	37,577	$	3,130

(1) Royalties above do not include production taxes which are reported separately on the Consolidated Statements of Income/(Loss).

(2) U.S. sales of crude oil and natural gas relate primarily to the Company’s North Dakota and Marcellus properties, respectively. Canadian crude oil sales relate primarily to the Company’s waterflood properties.

(3) Includes third party processing income.

Enerplus sells the majority of its production pursuant to variable-price contracts. The transaction price for variable priced contracts is based on the commodity price, adjusted for quality, location or other factors, whereby each component of the pricing formula can be either fixed or variable, depending on the contract terms. Under the contracts, the Company is required to deliver a fixed or variable volume of crude oil, natural gas liquids or natural gas to the contract counterparty. Revenue is recognized when a unit of production is delivered to the contract counterparty. The amount of revenue recognized is based on the agreed transaction price, and any variability in revenue relates to the Company’s ability to deliver product. As a result, revenue is allocated to the production delivered in the period.

Crude oil, natural gas and natural gas liquids are sold under contracts of varying terms, including multi-year contracts. Revenues are typically collected in the month following production.

ENERPLUS 2018 FINANCIAL SUMMARY53

10) GENERAL AND ADMINISTRATIVE EXPENSE

($ thousands)	2018		2017		2016
General and administrative expense	$	49,943	$	50,544	$	59,773
Share-based compensation expense(1)		25,840		23,757		26,546
General and administrative expense	$	75,783	$	74,301	$	86,319

(1) Includes cash and non-cash share-based compensation.

11) FOREIGN EXCHANGE

($ thousands)	2018		2017		2016
Realized:
Foreign exchange (gain)/loss	$	523	$	1,495	$	108
Translation of U.S. dollar cash held in Canada (gain)/loss		(19,630)		10,978		—
Unrealized:
Translation of U.S. dollar debt and working capital (gain)/loss		58,628		(42,623)		(40,634)
Foreign exchange (gain)/loss	$	39,521	$	(30,150)	$	(40,526)

12) INCOME TAXES

Enerplus’ provision for income tax is as follows:

($ thousands)	2018		2017		2016
Current tax expense/(recovery)
Canada	$	(400)	$	(407)	$	(661)
United States		(26,693)		(47,550)		(1,690)
Current tax expense/(recovery)		(27,093)		(47,957)		(2,351)
Deferred tax expense/(recovery)
Canada	$	3,915	$	(17,127)	$	(23,714)
United States		126,389		147,072		(211,133)
Deferred tax expense/(recovery)		130,304		129,945		(234,847)
Income tax expense/(recovery)	$	103,211	$	81,988	$	(237,198)

The following provides a reconciliation of income taxes calculated at the Canadian statutory rate to the actual income taxes:

($ thousands)	2018		2017		2016
Income/(loss) before taxes
Canada	$	104,204	$	146,953	$	121,257
United States		377,286		172,033		38,961
Total income/(loss) before taxes		481,490		318,986		160,218
Canadian statutory rate		27.00%		27.00%		27.00%
Expected income tax expense/(recovery)	$	130,002	$	86,126	$	43,259
Impact on taxes resulting from:
Foreign and statutory rate differences	$	(23,859)	$	157,320	$	(12,826)
Share-based compensation		(18,102)		5,067		6,611
Non-taxable capital (gains)/losses		7,254		(6,337)		(6,478)
Change in valuation allowance		6,292		(162,992)		(266,896)
Other		1,624		2,804		(868)
Income tax expense/(recovery)	$	103,211	$	81,988	$	(237,198)

54              ENERPLUS 2018 FINANCIAL SUMMARY

The deferred income tax asset consists of the following:

As at December 31 ($ thousands)	2018		2017
Deferred income tax liabilities
Property, plant and equipment	$	(46,284)	$	—
Derivative financial instruments		(24,184)		—
Total deferred income tax liabilities		(70,468)		—
Deferred income tax assets
Property, plant and equipment	$	60,665	$	132,879
Tax loss carry-forwards and other credits		429,651		397,081
Capital loss carryforwards and other capital items		188,409		181,334
Asset retirement obligation		33,935		31,677
Derivative financial instruments		—		8,795
Other assets		14,099		3,046
Deferred income tax asset before valuation allowance		726,759		754,812
Valuation allowance		(191,167)		(184,875)
Deferred income tax assets, net		535,592		569,937
Total deferred income tax asset	$	465,124	$	569,937

As of December 31, 2018, $27.2 million was reclassified from deferred income tax asset to income tax receivable for the AMT refund expected to be realized in 2019 (December 31, 2017 – $50.1 million).

Loss carry-forwards and tax credits available for tax reporting purposes:

As at December 31 ($ thousands)	2018		Expiration Date
Canada
Capital losses	$	1,226,000	Indefinite
Non-capital losses		410,000	2028-2038
United States
Net operating losses – prior to 2018	$	933,000	2030-2037
Net operating losses – 2018 and thereafter		119,000	Indefinite
Alternative minimum tax credits		58,000	Recoverable 2019-2021

Changes in the balance of Enerplus' unrecognized tax benefits are as follows:

($ thousands)	2018		2017		2016
Balance, beginning of year	$	13,300	$	13,300	$	15,100
Settlements		—		—		(1,800)
Balance, end of year	$	13,300	$	13,300	$	13,300

If recognized, all of Enerplus’ unrecognized tax benefits as at December 31, 2018 would affect Enerplus’ effective income tax rate. It is not anticipated that the amount of unrecognized tax benefits will significantly change during the next 12 months.

A summary of the taxation years, by jurisdiction, that remain subject to examination by the taxation authorities are as follows:

Jurisdiction	Taxation Years
Canada – Federal & Provincial	2013-2018
United States – Federal & State	2015-2018

Enerplus and its subsidiaries file income tax returns primarily in Canada and the United States. Matters in dispute with the taxation authorities are ongoing and in various stages of completion.

ENERPLUS 2018 FINANCIAL SUMMARY55

13) SHAREHOLDERS’ EQUITY

a) Share Capital

	2018			2017			2016
Authorized: unlimited number of common shares Issued: (thousands)	Shares	Amount		Shares	Amount		Shares	Amount
Balance, beginning of year	242,129	$	3,386,946	240,483	$	3,365,962	206,539	$	3,133,524
Issued for cash:
Purchase of common shares under Normal Course Issuer Bid	(5,925)		(82,596)	—		—	—		—
Stock Option Plan	668		9,138	—		—	—		—
Public offering	—		—	—		—	33,350		230,115
Share issue costs (net of tax of $2,621)	—		—	—		—	—		(7,084)
Non-cash:
Share-based compensation – settled	2,539		23,389	1,646		20,984	594		9,407
Stock Option Plan – exercised	—		731	—		—	—		—
Balance, end of year	239,411	$	3,337,608	242,129	$	3,386,946	240,483	$	3,365,962

The Company is authorized to issue an unlimited number of common shares without par value.

For the year ended December 31, 2018, Enerplus declared dividends of $0.12 per weighted average common share totaling $29.3 million (December 31, 2017 – $0.12 per share and $29.0 million, December 31, 2016 – $0.16 per share and $35.4 million).

On March 21, 2018, Enerplus announced the acceptance of its Normal Course Issuer Bid (“NCIB”) to repurchase shares through the facilities of the Toronto Stock Exchange, New York Stock Exchange and/or alternative Canadian trading systems. Pursuant to the NCIB, the Company was permitted to repurchase for cancellation up to 17,095,598 common shares over a period of twelve months commencing on March 26, 2018. All repurchases are made in accordance with the NCIB at prevailing market prices plus brokerage fees, with consideration allocated to share capital up to the average carrying amount of the shares, and any excess is allocated to accumulated deficit. For the year ended December 31, 2018, the Company repurchased 5,925,084 common shares under the NCIB at an average price of $13.33 per share, for total consideration of $79.0 million. Of the amount paid, $82.6 million was charged to share capital and $3.6 million was credited to accumulated deficit.

Subsequent to the year, and up to February 20, 2019, the Company repurchased an additional 586,953 common shares under the NCIB at an average price of $11.40 per share, for consideration of $6.7 million. The Company also received approval from the Board of Directors to renew the NCIB upon expiry of the existing term on March 25, 2019, subject to approval by the TSX. The proposed renewal will be for 7% of public float (within the meaning under the TSX rules) consistent with the current bid.

b) Share-based Compensation

The following table summarizes Enerplus' share-based compensation expense, which is included in General and Administrative expense on the Consolidated Statements of Income/(Loss):

($ thousands)	2018		2017		2016
Cash:
Long-term incentive plans expense	$	133	$	997	$	3,114
Non-Cash:
Long-term incentive plans expense		25,917		22,576		26,951
Equity swap (gain)/loss		(210)		184		(3,582)
Stock option plan expense		—		—		63
Share-based compensation expense	$	25,840	$	23,757	$	26,546

56              ENERPLUS 2018 FINANCIAL SUMMARY

i) Long-term Incentive (“LTI”) Plans

The following table summarizes the Performance Share Unit (“PSU”), Restricted Share Unit (“RSU”) and Deferred Share Unit (“DSU”) activity for the twelve months ended December 31, 2018:

For the year ended December 31, 2018	Cash-settled LTI Plans	Equity-settled LTI Plans		Total
(thousands of units)	DSU	PSU(1)	RSU
Balance, beginning of year	368	2,713	2,109	5,190
Granted	78	735	809	1,622
Vested	(55)	(2,071)	(1,080)	(3,206)
Forfeited	—	(6)	(85)	(91)
Balance, end of year	391	1,371	1,753	3,515

(1)Based on underlying awards before any effect of the performance multiplier.

Cash-settled LTI Plans

For the year ended December 31, 2018, the Company made cash payments of $0.5 million related to its cash-settled plans (2017 – $0.1 million, 2016 – $2.7 million).  

The 2016 PSU’s which vested in December 2018 were cash settled in January 2019, resulting in $30.6 million being recorded to Accounts Payable and Paid-in Capital on the Consolidated Balance Sheets at December 31, 2018.

As of December 31, 2018, a liability of $4.1 million (December 31, 2017 – $4.5 million) with respect to the DSU plan has been recorded to Accounts Payable on the Consolidated Balance Sheets.

Equity-settled LTI Plans

The following table summarizes the cumulative share-based compensation expense recognized to-date which is recorded to Paid-in Capital on the Consolidated Balance Sheets. Unrecognized amounts will be recorded to non-cash share-based compensation expense over the remaining vesting terms.

At December 31, 2018 ($ thousands, except for years)	PSU(1)		RSU		Total
Cumulative recognized share-based compensation expense	$	17,042	$	12,765	$	29,807
Unrecognized share-based compensation expense		15,131		5,429		20,560
Fair value	$	32,173	$	18,194	$	50,367
Weighted-average remaining contractual term (years)		1.8		1.4

(1)Includes estimated performance multipliers.

ii) Stock Option Plan

At December 31, 2018, all stock options are fully vested and all non-cash share-based compensation expense has been fully recognized.

The following table summarizes the stock option plan activity for the year ended December 31, 2018:

	Number of Options	Weighted Average
Year ended December 31, 2018	(thousands)	Exercise Price
Options outstanding, beginning of year	5,486	$	18.25
Exercised	(668)		13.66
Forfeited	(49)		21.17
Expired	(638)		30.20
Options outstanding and exercisable, end of year	4,131	$	17.12

At December 31, 2018, 4,130,921 options were exercisable at a weighted average exercise price of $17.12 with a weighted average remaining contractual term of 0.8 years, giving an aggregate intrinsic value of nil (December 31, 2017 – nil, December 31, 2016 – nil). The intrinsic value of options exercised during the year ended December 31, 2018 was $1.9 million (December 31, 2017 – nil, December 31, 2016 – nil).

ENERPLUS 2018 FINANCIAL SUMMARY57

c) Basic and Diluted Net Income/(Loss) Per Share

Net income/(loss) per share has been determined as follows:

(thousands, except per share amounts)	2018		2017		2016
Net income/(loss)	$	378,279	$	236,998	$	397,416
Weighted average shares outstanding – Basic		244,076		241,929		226,530
Dilutive impact of share-based compensation		3,185		5,945		4,763
Weighted average shares outstanding – Diluted		247,261		247,874		231,293
Net income/(loss) per share
Basic	$	1.55	$	0.98	$	1.75
Diluted	$	1.53	$	0.96	$	1.72

14) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

a) Fair Value Measurements

At December 31, 2018, senior notes had a carrying value of $696.9 million and a fair value of $695.4 million (December 31, 2017 – $672.4 million and $687.2 million, respectively).

There were no transfers between fair value hierarchy levels during the year.

b) Derivative Financial Instruments

The derivative financial assets and liabilities on the Consolidated Balance Sheets result from recording derivative financial instruments at fair value.

The following tables summarize the change in fair value for the respective years:

							Income
Gain/(Loss) ($ thousands)	2018		2017		2016		Statement Presentation
Equity Swaps	$	210	$	(184)	$	3,582	G&A expense
Electricity Swaps		—		639		1,135	Operating expense
Commodity Derivative Instruments:
Oil		114,822		(5,445)		(96,238)	Commodity derivative
Gas		9,234		11,174		(13,505)	instruments
Total Unrealized Gain/(Loss)	$	124,266	$	6,184	$	(105,026)

The following table summarizes the effect of Enerplus’ commodity derivative instruments on the Consolidated Statements of Income/(Loss):

($ thousands)	2018		2017		2016
Change in fair value gain/(loss)	$	124,056	$	5,729	$	(109,743)
Net realized cash gain/(loss)		(35,824)		8,581		80,346
Commodity derivative instruments gain/(loss)	$	88,232	$	14,310	$	(29,397)

The following table summarizes the fair values at the respective year ends:

	December 31, 2018						December 31, 2017
	Assets				Liabilities			Assets		Liabilities
($ thousands)	Current		Long-term		Current			Current		Current	Long-term
Equity Swaps	$	—	$	—	$	1,909	$	—	$	2,119	$	—
Commodity Derivative Instruments:
Oil		48,314		32,220		—		2,142		26,523		9,907
Gas		10,944		—		—		1,710		—		—
Total	$	59,258	$	32,220	$	1,909	$	3,852	$	28,642	$	9,907

58              ENERPLUS 2018 FINANCIAL SUMMARY

c) Risk Management

In the normal course of operations, Enerplus is exposed to various market risks, including commodity prices, foreign exchange, interest rates and equity prices, credit risk and liquidity risk.

i)Market Risk

Market risk is comprised of commodity price, foreign exchange, interest rate and equity price risk.

Commodity Price Risk:

Enerplus manages a portion of commodity price risk through a combination of financial derivative and physical delivery sales contracts. Enerplus’ policy is to enter into commodity contracts subject to a maximum of 80% of forecasted production volumes net of royalties and production taxes.

The following tables summarize Enerplus’ price risk management positions at February 20, 2019:

Crude Oil Instruments:

Instrument Type(1)(2)	bbls/day	US$/bbl
Jan 1, 2019 – Mar 31, 2019
WTI Swap	3,000	53.73
WTI Purchased Put	17,000	54.12
WTI Sold Call	17,000	64.12
WTI Sold Put	17,000	44.28
WCS Differential Swap	1,500	(14.17)
Apr 1, 2019 – Jun 30, 2019
WTI Purchased Put	23,500	54.59
WTI Sold Call	23,500	65.52
WTI Sold Put	23,500	44.50
WCS Differential Swap	1,500	(14.83)
WTI - Brent Swap	2,700	(8.10)
Jul 1, 2019 – Sep 30, 2019
WTI Purchased Put	24,500	54.81
WTI Sold Call	24,500	65.95
WTI Sold Put	24,500	44.64
WCS Differential Swap	1,500	(14.83)
WTI - Brent Swap	2,700	(8.10)
Oct 1, 2019 – Dec 31, 2019
WTI Purchased Put	24,500	54.81
WTI Sold Call	24,500	65.99
WTI Sold Put	24,500	44.64
WCS Differential Swap	1,500	(14.83)
WTI - Brent Swap	2,700	(8.10)
Jan 1, 2020 – Dec 31, 2020
WTI Purchased Put	16,000	57.50
WTI Sold Call	16,000	72.50
WTI Sold Put	16,000	46.88
WTI - Brent Swap	4,400	(8.03)

(1) Transactions with a common term have been aggregated and presented as the weighted average price/bbl before premiums.

(2) The total average deferred premium on three way collars is US$1.61/bbl from January 1, 2019 to December 31, 2020.

ENERPLUS 2018 FINANCIAL SUMMARY59

Natural Gas Instruments:

Instrument Type(1)	MMcf/day	US$/Mcf
Jan 1, 2019 – Mar 31, 2019
NYMEX Swap	50.0	4.23
NYMEX Purchased Put	50.0	3.80
NYMEX Sold Call	50.0	6.01
Apr 1, 2019 – Oct 31, 2019
NYMEX Swap	70.0	2.85

(1) Transactions with a common term have been aggregated and presented as the weighted average price/Mcf.

Enerplus has physical sales contracts in place for approximately 16,000 bbls/day of 2019 Bakken production with fixed differentials averaging approximately US$3.00/bbl below WTI.

Foreign Exchange Risk:

Enerplus is exposed to foreign exchange risk in relation to its U.S. operations, U.S. dollar denominated senior notes, cash deposits and working capital. Additionally, Enerplus’ crude oil sales and a significant portion of its natural gas sales are based on U.S. dollar indices. To mitigate exposure to fluctuations in foreign exchange, Enerplus may enter into foreign exchange derivatives. At December 31, 2018, Enerplus did not have any foreign exchange derivatives outstanding.

Interest Rate Risk:

At December 31, 2018, all of Enerplus’ debt was based on fixed interest rates, and Enerplus did not have any interest rate derivatives outstanding.

Equity Price Risk:

Enerplus is exposed to equity price risk in relation to its long‑term incentive plans detailed in Note 13. Enerplus has entered into various equity swaps maturing in 2019 and has effectively fixed the future settlement cost on 195,000 shares at a weighted average price of $20.60 per share.

ii) Credit Risk

Credit risk represents the financial loss Enerplus would experience due to the potential non-performance of counterparties to its financial instruments. Enerplus is exposed to credit risk mainly through its joint venture, marketing and financial counterparty receivables.

Enerplus mitigates credit risk through credit management techniques, including conducting financial assessments to establish and monitor counterparties’ credit worthiness, setting exposure limits, monitoring exposures against these limits and obtaining financial assurances such as letters of credit, parental guarantees, or third party credit insurance where warranted. Enerplus monitors and manages its concentration of counterparty credit risk on an ongoing basis.

Enerplus’ maximum credit exposure at the balance sheet date consists of the carrying amount of its non‑derivative financial assets and the fair value of its derivative financial assets. At December 31, 2018, approximately 80% of Enerplus’ marketing receivables were with companies considered investment grade.

Enerplus actively monitors past due accounts and takes the necessary actions to expedite collection, which can include withholding production, netting amounts off future payments or seeking other remedies including legal action. Should Enerplus determine that the ultimate collection of a receivable is in doubt, it will provide the necessary provision in its allowance for doubtful accounts with a corresponding charge to earnings. If Enerplus subsequently determines an account is uncollectible the account is written off with a corresponding charge to the allowance account. Enerplus’ allowance for doubtful accounts balance at December 31, 2018 was $3.9 million (December 31, 2017 – $3.5 million).

iii)Liquidity Risk & Capital Management

Liquidity risk represents the risk that Enerplus will be unable to meet its financial obligations as they become due. Enerplus mitigates liquidity risk through actively managing its capital, which it defines as debt (net of cash and cash equivalents) and shareholders’ capital. Enerplus’ objective is to provide adequate short and longer term liquidity while maintaining a flexible capital structure to sustain the future development of its business. Enerplus strives to balance the portion of debt and equity in its capital structure given its current oil and natural gas assets and planned investment opportunities.

Management monitors a number of key variables with respect to its capital structure, including debt levels, capital spending plans, dividends, share repurchases, access to capital markets, as well as acquisition and divestment activity.

60              ENERPLUS 2018 FINANCIAL SUMMARY

At December 31, 2018, Enerplus was in full compliance with all covenants under the bank credit facility and outstanding senior notes.

15) COMMITMENTS AND CONTINGENCIES

a) Commitments

Enerplus has the following minimum annual commitments:

				Minimum Annual Commitment Each Year
($ thousands)		Total		2019		2020		2021		2022		2023		Thereafter
Senior notes(1)	$		696,850	$	60,001	$	111,278	$	111,278	$	109,914	$	108,551	$	195,828
Transportation commitments(2)			367,646		36,817		37,951		34,102		31,410		30,317		197,049
Processing commitments			16,174		3,506		3,174		1,519		1,519		1,519		4,937
Drilling and completions			51,433		20,005		20,005		11,423		—		—		—
Office lease commitments			73,746		9,421		10,662		11,146		11,328		11,453		19,736
Sublease recoveries			(15,405)		(3,151)		(3,401)		(3,198)		(2,434)		(1,720)		(1,501)
Net office lease commitments(5)			58,341		6,270		7,261		7,948		8,894		9,733		18,235
Total commitments(3)(4)	$		1,190,444	$	126,599	$	179,669	$	166,270	$	151,737	$	150,120	$	416,049

(1) Interest payments have not been included.

(2) Includes additional firm transportation commitments executed subsequent to year-end.

(3) Crown and surface royalties, production taxes, lease rentals and mineral taxes (hydrocarbon production rights) have not been included as amounts paid depend on future ownership, production, prices and the legislative environment.

(4) US$ commitments have been converted to CDN$ using the December 31, 2018 foreign exchange rate of 1.3637.

(5) Net office lease payments in 2018 were $8.0 million (2017 – $9.7 million, 2016 – $10.5 million).

b) Contingencies

Enerplus is subject to various legal claims and actions arising in the normal course of business. Although the outcome of such claims and actions cannot be predicted with certainty, the Company does not expect these matters to have a material impact on the Consolidated Financial Statements.  In instances where the Company determines that a loss is probable and the amount can be reasonably estimated, an accrual is recorded.

16) GEOGRAPHICAL INFORMATION

As at and for the year ended December 31, 2018 ($ thousands)	Canada		U.S.		Total
Oil and natural gas sales, net of royalties	$	198,263	$	1,094,473	$	1,292,736
Depletion, depreciation and accretion		58,333		245,941		304,274
Property, plant and equipment		262,159		1,044,912		1,307,071
Goodwill		451,121		203,678		654,799
Long term income tax receivable		—		27,195		27,195

As at and for the year ended December 31, 2017 ($ thousands)	Canada		U.S.		Total
Oil and natural gas sales, net of royalties	$	227,031	$	693,662	$	920,693
Depletion, depreciation and accretion		89,936		160,838		250,774
Property, plant and equipment		246,604		653,427		900,031
Goodwill		451,121		187,757		638,878
Long term income tax receivable		—		50,108		50,108

As at and for the year ended December 31, 2016 ($ thousands)	Canada		U.S.		Total
Oil and natural gas sales, net of royalties	$	233,391	$	489,341	$	722,732
Depletion, depreciation and accretion		126,062		202,902		328,964
Property, plant and equipment		304,048		434,382		738,430
Goodwill		451,121		200,542		651,663
Long term income tax receivable		—		—		—

ENERPLUS 2018 FINANCIAL SUMMARY61

17) SUPPLEMENTAL CASH FLOW INFORMATION

a) Changes in Non‑Cash Operating Working Capital

($ thousands)	December 31, 2018		December 31, 2017		December 31, 2016
Accounts receivable	$	(45,385)	$	(66,860)	$	16,982
Other current assets		(3,026)		(154)		2,154
Accounts payable		44,952		31,982		(4,061)
	$	(3,459)	$	(35,032)	$	15,075

b) Changes in Other Non-Cash Working Capital

($ thousands)	December 31, 2018		December 31, 2017		December 31, 2016
Non-cash financing activities(1)	$	(26)	$	16	$	(3,791)
Non-cash investing activities(2)	$	(3,753)	$	1,523	$	(49,472)

(1) Relates to changes in dividends payable and included in dividends on the Consolidated Statements of Cash Flows.

(2) Relates to changes in accounts payable for capital and office expenditures and included in capital and office expenditures on the Consolidated Statements of Cash Flows.

c) Other

($ thousands)	December 31, 2018		December 31, 2017		December 31, 2016
Income taxes paid/(received)	$	(481)	$	2,640	$	(21,244)
Interest paid	$	36,161	$	38,149	$	48,545

62              ENERPLUS 2018 FINANCIAL SUMMARY