ERF - Earnings call transcript Q2 2021

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Operator

Good morning, ladies and gentlemen, and welcome to the Enerplus' Q2 2021 Results Conference Call. At this time, all lines are in listen-only mode.

Following the presentation, we’ll conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Friday, August 6, 2021. I would now like to turn the conference over to Drew Mair. ahead. go Please

Drew Mair

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

Before of take at please we started, get note of news the today's the release. end located advisories

GAAP. are and Jodi on Chief here otherwise gross been and accordance prepared financial morning Our and Labrie, interest specified. Executive a Wade of VP our with Canadian this Chief figures financials today VP with I'm Officer; are company have Ian in US Marketing. volumes Hutchings, Morihira, and production All and Chief VP basis President in Operating Shaina VP all working Jenson Dundas, discussion unless Senior Senior Officer; Garth Officer; Financial Finance; dollars Doll,

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

Ian Dundas

morning Thank you Good all. Drew.

the scale over results second our quarterly along with quarter Our achieved quarter. BOE operational the XXX,XXX production than per quarter, acquisitions reflect record our following We in XX% momentum. higher second strong the of prior business of increased day

second sequential another which first the of third the which quarter, reflects expect production first in year. increase be We that the and in two the Bakken will fully closed our acquisitions, quarter to quarters meaningful

and outperformance to guidance we midpoint in most period guidance by our the was and spending quarter second CADXXX day and higher The drilling of terms the and execution our of strong XXX active track. capital year-to-date move production annual execution to on We year per of million. of our the activity completions plan remains million our operate BOE continue CADXXX of capital within following

over commodity since capital forward production and higher the start on flow flow driven the generate now cash CADXXX profile disciplined to year, free is million in our by cash the based in We our free to commodity move XXXX improved stripped prices expect Our prices. increased allocation. outlook of continuing

free this prioritize continue remainder of the reduction. debt For directing we majority cash year, of flow will this to for the

have funds next aligns current reduction million a CADXX target or target, debt net anticipate commodity to ratio year. highlighted At flow of price a we CADXXX mid prices, one-time which this We achieving environment. oil in by debt target WTI with our less

change base step significantly sustainable the second dividend the sight driven to line our generation increase our the by consistent target, to approach the our cash of this higher With we flow time increases. with our and in hitting year long-term debt production elected for dividend of

approved our to to our bid. while course free a Board we cash our Our of expect flow of allocate approximately normal after XX% plan. renewal we issuer also our dividends deleveraging progress framework, Under reduction, debt

With XX%, evaluate will the incremental including potential through to and increases shareholder the share we continue further remaining repurchases. returns, dividend

to of in leave it and position Looking Wade ahead, to as our we meaningfully comments. call target, to free over long-term we expect to debt there, flow returns. turn for increase shareholder a our cash allocation his be achieve I will the

Wade Hutchings

morning good everyone. and Ian, Thanks

completions Our on in be efficiency second quarter, day, up and is last in continues from production operational this solid. our completed performance approximately the Bakken per We wells and brought year stages the year. XX averaging to X.X XX

drilling in record drilling section company quarter We a Our been has second XX in two-mile set also performance the strong. hours. lateral a

compared represents previous to the a our over structure in million. year performance, estimates this to of down back compared XX% This Bakken to compared XX% the million the US$X.X our couple a of US$X.X estimate On we years reduction XXXX. of last significant and cost well our updated in were XXXX last to cost

with the the In in legacy peak we quarter, Bruin rates closing BOE Total XX% connection driven over completions of production This Basin acquisitions well The the the per was online. that completed Fort the average anticipate another tracking in our quarter by acreage. first to Enerplus. acquisition. based XX,XXX program. wells X,XXX that the following per with As our XX-day six BOE acquired higher expectations Williston quarter on are third quarter eight of day the were Ian wells second on noted, approximately production. than than in quarter, more in the quarter, quarterly second Bakken record active and was XX pad production of production per for first was pad higher we achieved the our Berthold adjacent an day had in have of be volumes days our wells We eight-well record which to

of Bakken production see QX. to impact production we mid which quarter in assets I'll now Jodi. closed the operations We and call the growth another Hess completion acquired following strong active to pass expect of the full from

Jodi Jenson Labrie

Thanks Wade.

second was million. CADXX Our million CADXXX million capital CADXXX of free flow with cash funds spending quarter in resulting and flow of adjusted

Effective annual day, day barrels barrels from DAPL. firm XXX,XXX has now year-to-date given per per to recently comments pipeline day of previously. below US$X.XX price our and per there oil Bakken was Refining capacity the pipeline available to Enerplus US$X.XX be differential in differentials expansion, averaged to barrel from expansion. Dakota below the on basin, on Coast August its pricing. our the U.S. was demand access transportation broader narrowed strong XXX,XXX supporting pipeline's on per The we the realized DAPL's in to increased Bakken X, Our and our per capacity improved by continues barrel, crude barrel WTI Dakota quarter. capacity WTI as second based from realizations differential pipeline, for expanded operator. oil we've XX,XXX committed to the Gulf system approximately North guidance Based US$X.XX from outlook have of significant per deliver in part barrels

Marcellus. to the Turning

was we significantly a Our Northeast realized the normal and maintenance. US$X.XX price markets pipeline combination unplanned per the to gas differential US below prior NYMEX natural in Marcellus quarter, of than the seasonality Mcf see quarter regional due in weaker

from guidance differential natural price NYMEX to As our gas US$X.XX a previously. Mcf annual widened per below have Mcf result, per we Marcellus US$X.XX

in CAD X.X weak quarter, million relatively remain of fourth then XXXX. current into strengthen a to federal second third of US and expense winter. a the quarter consisting higher regional recorded income through tax, in differentials the the U.S. We tax the as expected in of quarter, primarily in result as increases heading demand expect We

between year, full income expense and the tax expect US$X US$X we For million of million.

Turning to our free flow cash outlook.

materially on We CAD free the With second full million expect over a the generation free points that CAD free we million. generate estimate we will the cash flow cash the XXX commodity half for increase reducing over June million current our to as balance we number this flow the one half to XXX work XXX Priority net XXXX, prices. XXX the sheet, generated million cash that CAD in XX is On based in current CAD half of first flow during at of year. year. in year toward of basis, debt by second

in debt term. XX% Although, this we in also financial XX% to to remain our a to shareholder on of XX% in for the announced our We repurchases. normal shares. Ian after return return dividend today we of flow our free progressing mentioned opportunities, come strong of our plan. us are reduction, prioritizing Board increase gives we could And share the capital This deleveraging approved flexibility the dividends are course that and/or dividend would issuer position cash allocate up while of the our as announced we bid increases today we has shareholders form outstanding incremental of a near and enhance additional renewal to our and

the year. reflect flow over in to we the CAD this the X.XX year-to-date to based X an oil five-year operator we free and and that have remaining open cumulative updated The prices to leave update to over to the be XXXX it of for XXXX call for flat it introduced CAD to as to this cash Finally, XXXX billion. there WTI April, on I update, the estimate billion to a forward period years strip CAD our five-year we'll up XX XX and balance will questions. CAD plan commodity price. With continue increased turn the

Operator

first Thank Pardy comes begin and ahead. please Instructions] you. from gentlemen, now Greg, Capital Greg from RBC Your question go session. the Markets. question-and-answer we’ll Ladies [Operator

Greg Pardy

Yeah. the curious time. in the from you're might sounds changes efficiency you're Thanks. cost, to really increased it the Maybe or everything be for made wondering if Good either of just well But D&C saying question I'm less how like in just first it's Just morning. terms any wells? reduction like construction Wade. these there. And you've completing

Wade Hutchings

of Sure. year this and years. the last the that quarters design had Happy for really to we wells and the address that. follow that completed second first we've several drilled The in

aspects about seeing the no to drilling of projecting material stages, drilling Most that's year is that that completions. with an X.X% super-spec to on at side there's completion be last been the change rate of we from from side. we're multiple half the that come look for When on from of year on this I years. would that dropped the X.X%. and of of that kind at part existing is of several the We're where there. rig So the multiple change note essentially that we've half improved from important using there new side contract drilling just efficiencies a on and last

that the relative And in market as up. years ago in to that so, year, the change from several we're for kind signed this we earlier of of benefiting rates when

pace our completion efficiency were saw drilling So even at we we're certainly faster actually pleased. than in and We've a improvements efficiency anticipating.

Greg Pardy

then like year? a tax Terrific. terms wondering should but cash Thanks cash is And percent thumb there's that. there for XXXX Maybe maybe of a more can taxes. of just this about rule Okay. to wondering about pre-tax is Jodi, of we if I'm next I'm think use. the in shifting we

Jodi Jenson Labrie

Yes.

it just that operating think thumb net X% be the you US I in would the to of call think, of if maybe ballpark. you could of rule income in want

Greg Pardy

the strategically a or And for more consolidate of thinking basin to diversity you And equal last being other about and Great. I'm diversity? prefer kind is the liquids so I company further size approaching more things where oil maybe basin Marcellus the in mean Okay. question is Bakken, Ian, thinking than would you're me

Ian Dundas

Greg. Good morning,

everything got Bakken differentials really your established control an bill, are under think encouraging. tightening. footprint. and Costs We pretty equal in more Bakken is the we've being scale. with While clearly the the We fits are value setup see of setup

clearly so And today. that be the focus would areas

Greg Pardy

very much. Okay. Terrific. Thanks

Ian Dundas

Thanks, Greg.

Operator

please Patrick, O'Rourke Your Capital. go comes ahead. ATB from Patrick next from question

Patrick O'Rourke

Hi. Good morning, guys.

some your if your Just of well offsetting kind wondering comfort now appears are how you're pressures in inflationary order --with for guide sort costs that end it the And the production with year? like with the of, efficiencies. that to the a quarter you us hands you call lower have the of then increase Bakken view here the Obviously, where the new asset. any, base it is seems can wheel steering sitting. with on where had now it you've for wondering give on Wondering decline

As capital level where with you the here last you the would mentioned right a now? see corporate question at maintenance level

Ian Dundas

Yes. Good morning, Patrick.

and have that that what and then a that everything to the it's on pointed low though CAD we of out firm timing corporately Maintenance it million. number So growth -- next their obviously million to to guess don't that bottom decline else We off streams you. sort a capital. CADXXX back There's sets to relative we The lot X% XXX around downtime things XXs. up hits and I there X% part and with growth I was of parcel forecast but in year think start of there, consistent bringing move had of guidance. the

maybe to number offset just ability round good about. think a just a sort costs. it's our to of And think inflationary comment I

it doing think is other steel it. a and and well on hearing we're as a there market producers the this very good in you're We bit -- -- actually like. about job pressure of talk I

out And look that so under be we're hood really performance if that you and there. well bit the a number ahead putting at you closely year-to-date got we'd really of

eating -- built we've any fact into we that great the leading really job into some inflationary over costs higher a and X.X%. picture sort So is seeing. to in we're growing we course anticipated that continue you the we're than year gets and in And of and then big efficiencies more of good year-to-date do to here modestly pressures have the

Patrick O'Rourke

you're Okay. approach Great. on And thoughtful commodities. always then to very Ian, your the

this. So I'd your like on view to hear

a in shift to to in would what planning using XX and of for there your XX out you're have way little allocating wondering business market kind to plan. something a five-year capital? and bit to just You're now right that And see incorporate higher that you bandwidth the the of your

Ian Dundas

Yes. cold I don't very get thoughtful often.

So thank.

way good a day. it's to So the start

way all I think things about thinking there's absolutely this and In volatility. our thinking is a inherent few through here. in sustainability of

And around smart. that not little there bit. there just are that we're a move a that prices So things up lot can are those of

we guide and business. of will we what hedging And higher that like. mid-cycle advantage So think the take are we're through using our price some as we about prices environments think of to strategies

what don't know strong, strong So -- we had a that I would activity if higher view behaviors? honestly. would that would market a of influence it

the Board to -- things we have market. market be is to meet We mitigate view some that would on there if the of And very of have. activities we Some able strong only that a do. the any not

As as you prices money that. think meaningfully we than about prices in But we're the look higher forecast bank. our right things is like -- realize higher realizing now not

actual are we very so And cognizant of versus forecast. results

you price in fact sort stronger easily anything, like XX. strong of, out So would think -- create there fundamentally if dramatically in I than forecast we don't to can rise that XX do a And different. the there's

very I think it's plausible.

with it's actually higher assumptions we're likely that think in inflationary baking probably now. comes potentially I that

So our of balance take management be tools to on think out as is make management spending dollars. we'll equation, to using focusing means, the able returns, we're sheet this. that be And on risk cycles. goal we balanced conservative And in that, risk all to price money

the years what setup continue see. we right told future. Guess, and years. if us of so about But think oil And averaging XX, wouldn't now. feels And that we'll good guide I for that's the pretty of sort going the couple against us guided bet were in is you I to me, next over to

Patrick O'Rourke

you. Okay. Thank

Ian Dundas

Thanks, Greg.

Pat. Thanks, Sorry,

Operator

question from Cody go Kwong next from Cody, Stifel. ahead. please Your comes

Cody Kwong

debt, if in got Hi just guys. does I guys you call. through return of numbers you capital you that, in for you And threshold XX% Thanks taking XX% maybe your Ian, when that talking you about you want, that for or question kind expand that probably cash free a my priority once that change to mind? of for if you whether had target? until theory actual upon your how were flow get debt can meet some it's had your being

Ian Dundas

Cody. morning Thanks Good Yeah. question. for that

I from we've through here. year, we've could think see a be stay is returns the debt. level, to shareholders. XX% we The laid away Once which that that concepts higher we'll to out numbers within sent we're that, possibly signal

at we've priorities to if moment and a got attractive We us exactly pining want you're in to haven't well. tools the great we provide at think price rock-solid put base that as growing do in which really continue a environment because what you that a position we needs in like But and looks think the highlighted grows is important plan look are we've will it The shareholders delever really competing the exist. part, to puts something sustainable sustain to how think that that capital volatility to that company and to be a attractive to things shareholders. means, dividend, we

So path move to the to continuing we're forward. that on

role, see we think intrinsic in role. plays a base plays buyback the significant unlocking that. the buyback at and of also we it share share helps plan support in when that sustainability our And valuations strong. particularly look on we and nice of think structure a company, role also you capital It your We keep the dividend value plays a

those guess out So things. guiding dividends are and and have others specials are who a us. those There's the variable there, that I principles

Cody Kwong

Yeah.

Ian Dundas

I like. And debt that get as what dividend, of think, see think to once buybacks I to closer we'll then, those valuation we've work more remain as right we sorts And shareholders. to share we targets then, for attuned more sustainable to particularly more provide our right that things. And think the coming now. looks visibility, base seeing when we'll hit market we're But and the now growing

Cody Kwong

Great. very Thank much. you

Ian Dundas

Thank you.

Operator

no it [Operator Instructions] to There this back turn are Ian further at for questions I'll time. remarks. closing

Ian Dundas

Appreciate, everybody. last the you of Well, today. thank in summer. little Enjoy, you dialing bit

Enjoy, your watching those the who rest Sweden, are about it. For of you say medal Canadians gold I the very much. match. Thank anything soccer day. won't

Operator

Ladies please call And and lines. for you ask conference for disconnect you thank today. gentlemen, participating. your concludes your We that this

Enerplus (ERF) 6 Aug 212021 Q2 Earnings call transcript