Enerplus Corporation (ERF)

ERF 
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Enerplus Corporation (ERF)

Bank of America Merrill Lynch Global Energy Conference Call

November 13, 2012 2:50 pm ET

Executives

Gordon J. Kerr, President & Chief Executive Officer

Analyst

Peter Tateishi – Bank of America Merrill Lynch

Presentation

Peter Tateishi – Bank of America Merrill Lynch

The next company on our schedule is Enerplus. Enerplus is a Mid Cap yield oriented oil and gas company. Key assets in the Marcellus and oil assets across Western Canada and North Dakota.

I’d like to introduce, Gordon Kerr, CEO and President.

Gordon J. Kerr

Thank you, Peter. Thanks for joining me. I’m going to talk a bit about the company from a profile perspective, then I’m going to talk about some of our key plays, and in terms of our strategy as we go forward.

First of all, in terms of the corporate overview, and with Enerplus it’s really about is the – we are looking to deliver what we’ve now labeled the modern growth for our shareholders, but also an income component. Our current yield is in the order of 8%, and over last few years we really worked to redefine our portfolio of oil and gas assets, and we think we’ve positioned ourselves in some of the best resource plays in North America, some of which offer earlier stage growth opportunity with both scale and scope in terms of the option value, and then producing assets that also generate cash flow and offer further development opportunity.

We have consistently worked to maintain financial strength in terms of keeping flexibility, so that we can execute on both our capital spend program as well as strengthen sales up for any M&A opportunities that come.

When you look at the corporate profile of Enerplus, we do trade on both the Toronto stock exchange and the New York stock exchange under the ERF symbol. Our current enterprise value is about $3.5 billion, and we’ve got a fairly healthy trading in terms of our stock and liquidity there.

For 2012, we announced that our guidance has been shifted down to 82,000 BOE a day equivalent, and if you listen to our call, lot of that has to do with the tie-in of natural gas in the Marcellus shale play area.

We expect that production through the course of the year, and we’re there now to be above 50% oil and natural gas liquids as well as 50% natural gas itself.

With regard to our 2012 capital spend program, we’re sticking with an $850 million spend for this year, and you can see that the waiting is largely to the oil and liquids plays that’s 75%. Post the Q3 or at the Q3 quarter end, our debt-to-cash flow or funds flow was about 1.9 times, and then we pointed the fact that we’ve entered into a transaction to sell our assets in Manitoba, if you put it in on a pro forma basis, would take us to about 1.5 times in terms of the leverage factor.

Just looking at where our assets are in North America, we hope number of waterflood properties in Central Alberta region, as I said we’re selling out of Manitoba here, but also extending over into Saskatchewan.

We have some new play areas up in Canada, the Montney, the Stacked Mannville and the Duvernay, and I’ll speak more to those in a moment. And then we have our interest in the U.S., we’ve been in the Bakken oil play in Montana going back to 2005, and we got into the Marcellus shale gas play back in 2009 when we did a structured financing deal, and we satisfied the carry obligations of that here in our third quarter.

In terms of what we look forward to in terms of growth, as I said, we did modify our projected outlook for annual average production this year, but what this is showing you is that since Q3, 2011, we’ve realized somewhere in the order of 11% growth, up to the third quarter of 2012, and notably as I said, an increase in our oil activity here, we are expecting annual growth this year, and again with that 82,000 and the next set in the order of 85,000 to 88,000 BOE a day equivalent. In the order of about 9% over the year, and 47% on exit.

Now we indicated the range here in terms of our exit again, back to principally the Marcellus shale gas play in the timing of those tie, but since fourth quarter of 2011 as noted here, we’ve grown our oil production by about 16%.

It has been and continues to be a key element of how we manage ourselves is to retaining financial flexibility. So if we look at what we did in 2012 to manage our balance sheet, first of all we did raise equity at the beginning of the year, $330 million of equity, we did a private placement of debt, largely here in the U.S. market with a 7 to 12 year term, at about a 4.4% coupon rate. We did reduce our dividend, we cut it in a half here with the July dividend payment, and we also implemented a stock dividend program, which expanded the access to not only our continuing shareholders under the old DRIP, but also to our U.S. shareholders.

Now, we also monetized our equity position in Laricina, which is an entity player and up in Canada, and we monetized that for $141 million. We’re basically with that disposition right out of the oil sands space and we reported in our third quarter, the economic gain was around $86 million on that disposition.

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