Enerplus Corporation (ERF)

ERF 
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Enerplus Corporation (ERF)

Q3 2012 Results Earnings Call

November 9, 2012 11:00 AM ET

Executives

Jo-Anne Caza - Vice President, Corporate and Investor Relations

Gord Kerr - President and CEO

Ian Dundas - Executive Vice President and COO

Rob Waters - Senior Vice President and CFO

Ray Daniels - Senior Vice President, Operations

Eric Le Dain - Senior Vice President, Strategic Planning, Reserves and Marketing

Rod Gray - Vice President, Finance

Analysts

Robert Bellinski - Morningstar

Roger Serin - TD Securities

Presentation

Operator

Good morning. My name is Laurel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Enerplus Corporation 2012 Third 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)

Thank you. Ms. Jo-Anne Caza, Vice President of Corporate and Investor Relations. You may begin your conference.

Jo-Anne Caza

Thank you, Operator, and good morning, everyone. I’d like to welcome you our third quarter conference call. Gord Kerr, our President and CEO will be summarizing the results of the quarter; and Ian Dundas, Executive Vice President and Chief Operating Officer will provide an update on our operations.

To help answer some of your questions at the end of the call, we also have with us Rob Waters, Senior Vice President and Chief Financial Officer; Ray Daniels, our Senior Vice President of Operations; Eric Le Dain, Senior Vice President of Strategic Planning, Reserves and Marketing; and 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 information and review our advisory on forward-looking information found at the end of our news release issued this morning, and included within our MD&A and financial statements filed on SEDAR and EDGAR, and also are available on our website at enerplus.com.

Our financial statements were also prepared in accordance with International Financial Reporting Standards. 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 6:1 energy equivalent conversion ratio, which is not represent the current value equivalent.

Following our review we’ll open up the phone lines and answer any questions you may have, and we’ll also have a replay of this call available later today on our website.

With that, I’ll turn the call over to Gord.

Gord Kerr

Thanks for joining us this morning. I’ll be reviewing our results for the third quarter that we released this morning and then I’ll turn the call over to Ian to provide you with more detail on our operations and the progress we are making in our key plays.

Now during the third quarter, we continued to focus the majority of our spending on our oil plays. We also executed on our plans to strengthen our financial position through the sale of some of our non-core assets.

Our production averaged 81,573 BOE per day, up approximately 11% from the same quarter last year and down marginally from the second quarter. Our crude oil volumes continued to increase through the quarter. However, our natural gas volumes were lower than we expected due to delays in our non-operated Marcellus production coming on-stream.

Our oil production from Fort Berthold grew by 10% from last quarter to average 12,800 BOE per day and our oil and liquids now account for almost half of our daily production volumes, consistent with our expectations of increasing our oil and liquids to approximately 50% this year.

We’ve continued to invest in our non-operated natural gas assets in the Marcellus throughout the year in order to retain leases. However, activity levels with our partners have slowed versus what we expected.

We’ve seen fewer wells being tied in this year and Ian will provide color on this point. As a result, we are reducing our production guidance and I’ll walk you through the impact of this on our guidance in a moment.

We generated funds flow of $135 million or $0.68 per share during the quarter down approximately 8% from the second quarter. Our realized pricing improved along with commodity prices during the quarter, but we had a couple of one-time items that impacted us.

Our operating costs were higher than expected by approximately $11 million related to charges either seasonal or non-routine. These costs included a newly enacted state impact tax fee in Pennsylvania that has application to newly drilled wells back to 2011.

Charges for upgrading our U.S. Bakken facilities for emission controls and costs for a pipeline repair at Giltedge property. We expect operating costs in the fourth quarter will be lower. Fluctuations in the foreign exchange rate relating to our U.S. operations also impacted funds flow by about $10 million compared to the second quarter.

During the quarter a portion of our exploration and evaluation assets were written-off which impacted our net income. We recorded impairments of approximately $114 million, $66 million of which relates to Marcellus operated leases in West Virginia and Maryland, that are expected to expire over the next 12 months as we don’t anticipate renewing them given our spending plans next year and the current outlook for natural gas prices.

Now, certainly, these impairments have negatively affected our net income and reflect decisions we made to invest in certain place even though they had no impact on our reported funds flow.

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