ENERPLUS CORP. $8.69 (Toronto symbol ERF; Shares outstanding: 207.1 million; Market cap: $2.1 billion; TSINetwork Rating: Speculative; Dividend yield: 1.4%) produces oil and gas from properties in Alberta, Saskatchewan, B.C., North Dakota and Montana, as well as in the Marcellus Shale. That rock formation runs through Pennsylvania, New York, Ohio and West Virginia.
Enerplus’s output fell by 3.0% in the three months ended March 31, 2016, to an average of 97,860 barrels of oil equivalent per day (54% gas and 46% oil), from 100,855 a year earlier.
The decline came after the company sold some of its non-core properties to raise $188.0 million and pay down debt. The production drop, plus lower oil and gas prices, pushed cash flow per share down sharply, to $0.20 from $0.53.
On March 31, 2016, long-term debt stood at $994.1 million, or 52.3% of market cap. That was down from $1.2 billion at the start of this year.
To lower its debt to just 35% of its market cap, Enerplus has since sold more non-core assets for $95.5 million. As well, it issued an additional 33.4 million shares at $6.90 each to raise $230.1 million.
Enerplus is cutting exploration spending this year, to $200.0 million, down 31.4% from $510.0 million in 2015. It also cut its monthly dividend by 66.7% with the April 2016 payment, to $0.01 from $0.03 The shares yield 1.4%.
The company’s asset sales will cut this year’s cash flow per share to an estimated $1.11 a share. However, the stock trades at just 7.8 times that forecast. As well, its much lower debt will let it quickly raise funds to accelerate drilling when oil and gas prices recover.
Enerplus Corp. is a buy.
