As the price of crude oil has risen by $20 a barrel in the past year, this Canadian stock has seen its cash flow and share price jump.
The company also aims to boost output with increased spending on exploration and development. It is concentrating the bulk of those funds on its oil properties in North Dakota, partly to take advantage of tax cuts brought in by the U.S. Congress last year. So far in 2018, the shares have risen almost 40%.
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ENERPLUS CORP (Toronto symbol ERF; www.enerplus.com) produces oil and gas from properties in Western Canada—Alberta, Saskatchewan and B.C.—as well as North Dakota and Montana. The company also has properties in the Marcellus Shale. That rock formation runs through Pennsylvania, New York, Ohio and West Virginia.
Enerplus’s output rose slightly in the latest quarter, to an average of 85,080 barrels of oil equivalent per day (51% gas and 49% oil) from 84,937 a year earlier.
Cash flow jumped 29.4%, to $155.2 million, or $0.64 a share, from $119.9 million, or $0.50, a year earlier. The big increase came mostly from higher oil prices. The company’s realized oil price rose 21.1%, to $69.67 U.S. per barrel from $57.53.
On March 31, 2018, Enerplus’s long-term debt stood at $660.0 million, or a manageable 16% of its market cap. That’s down from $1.2 billion at the start of 2016. The company also has cash of $396.4 million from its property sales.
Energy stocks: Exploration and development spending up $450 million this year
For 2018, Enerplus is spending between $535 million and $585 million on exploration and development. That’s up from $450 million in 2017. The higher spending should expand output and cash flow.
The company is investing 90% of those funds in its light oil properties in the Williston Basin of North Dakota. It expects to boost output by up to 30% in that region. Enerplus also plans to drill up to three new oil wells in Colorado. Drilling there last year yielded strong results.
The company believes that concentrating on North Dakota offers the best chance of success. The 2017 U.S. tax cuts add to the appeal of drilling in that country. With roughly 80% of Enerplus’s current production originating from its U.S. assets, it will realize tax savings starting this year based on the new, lower 21% federal tax rate.
Enerplus will also realize a tax refund of about $85 million U.S. between 2018 and 2021.
Enerplus pays a monthly dividend of $0.01. The annual rate of $0.12 currently yields 0.7%.
The shares are up nearly 40% for 2018. The stock trades at 6.1 times the company’s forecast 2018 cash flow of $2.81 per share.
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