Enerplus' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Enerplus Corporation (ERF)

Q2 2012 Earnings Call

August 10, 2012, 11:00 am ET

Executives

Jo-Anne Caza - VP, Corporate & Investor Relations

Gordon Kerr - President & CEO

Ian Dundas - EVP & COO

Rob Waters - SVP & CFO

Eric Le Dain - SVP, Strategic Planning, Reserves & Marketing

Analysts

Greg Pardy - RBC Capital Markets

Robert Bellinski - Morningstar

Roger Serin - TD Securities

Gordon Tait - BMO Capital Markets

Bruce Robinson - Equity Pacific

Jason Frew - Credit Suisse

Presentation

Operator

Good morning. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Enerplus Corporation 2012 second quarter results conference call. All lines have been placed on-mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

I would now like to turn the call over to Ms. Jo-Anne Caza, Vice President, Corporate and Investor Relations. Please go ahead.

Jo-Anne Caza

Thank you, operator, and good morning everyone. I would like to welcome you to our second quarter conference call. Gordon Kerr, our President and CEO will be summarizing the results of the quarter this morning and Ian Dundas, our Executive Vice President and Chief Operating Officer will provide an update on our operational result. To help answer some of the questions at the end of the call, we also have with us Mr. Rob Waters our Senior Vice President and Chief Financial Officer; Mr. Ray Daniels, our Senior Vice President of Operation; Mr. Eric Le Dain, our Senior Vice President of Strategic Planning, Reserves and Marketing and Mr. Rod Gray, our Vice President of Finance.

Before we get started, please note that this call will contain forward-looking information. Listeners should understand the risks and limitations of this type of information and review our advisory on forward-looking information at the end of our news release issued this morning and included within our MD&A and financial statement filed on SEDAR and EDGAR and also available on our website at enerplus.com. Our financial statements were also prepared in accordance with International Financial Reporting Standards [IFRS].

All financial figures referenced during this call are in Canadian dollars unless otherwise specified and all conversions of natural gas to barrels of oil equivalent are done on a six to one energy equivalent conversion ratio which does not necessarily represent the current value equivalent. Following our review, we’ll open up the phone lines and answer questions you may have and we will also have a replay of this call available later today on our website.

With that, it’s over to you Gordon.

Gordon Kerr

Well, thanks Jo-Anne and good morning everyone and thanks for joining us on the call today. I want to give you a brief overview of our financial and operating results and then I am going to it over to Ian who will provide more detail on our operations before we open up for questions.

Starting-off, Q2 marked another quarter of production growth through the drill bit for Enerplus. Our daily production averaged to 82,100 BOE per day and it's 4% higher than the first quarter and 9% higher year-over-year.

Notably our oil volumes increased by 7% quarter-over-quarter as a result of our successful drilling at Fort Berthold and in our waterflood properties. Accrued oil and liquids volumes now account for 49% of our total production helping support our funds flow through a period of weak gas prices.

We spent a total of CAD$209 million on capital expenditures during the quarter; 80% of which was focused on our oil assets. The majority of spending continued to be on tight oil play in the Williston Basin area of North Dakota. And we continue to have an active operated program in this area.

We've also seen a substantial increase in activity by our non-operated partners in this region. In addition, we have increased spending on infrastructure related to pipeline connecting our wells both to capture associated gas production and reduce the hauling of oil. Spending on our natural gas assets has been limited with the majority of activity occurring on our non-operated properties in the Marcellus in Northeastern Pennsylvania.

Operating cost were on-track with our forecast for the quarter of CAD$10.78 per BOE and G&A expenses were CAD$$2.81 per BOE including both cash and equity based compensation. Our funds flow during the quarter was CAD$$147 million, down 10% versus Q1 but ahead of analyst consensus of CAD$$131 million.

Higher oil production volumes during the quarter provided the additional support to our cash flows. We took three important steps during the quarter to manage our balance sheet. First, we issued C CAD$405 million of long term senior unsecured notes at approximately 4.4% coupon rate and the proceeds of this issue were used to reduce the borrowing under our bank credit facility.

Secondly, we implemented the stock dividend program which gives all of our shareholders the choice to receive their dividends as shares in Enerplus instead of cash. This replaces our DRIP, which was available only to Canadian shareholders.

As a result of opening the [STP] up to our entire shareholder base, we have seen early participation of about 17% of total dividends paid. This compares to around 11% for the first five months of 2012 under the old DRIP.

Thirdly, we reduced our monthly dividend from CAD$0.18 per share to CAD$0.09 per share.

As a result of these measures and our activity in the quarter, our debt for the 12-month trailing funds flow was two times and 68% of our CAD$1 billion line of credit was available to us at the end of the quarter. We also continue to increase our hedge positions for better funds flow.

Read the rest of this transcript for free on seekingalpha.com

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