Enerplus (NYSE:ERF) is a Canadian based exploration and production company focused on organic growth through the development of its current portfolio of oil and gas assets, while also trying to continue its historical record of paying a generous dividend to shareholders. The company is focused on crude oil and liquids development while trying to minimize any natural gas activity.
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Crude Oil Development
The company has been shifting away from natural gas for several years and is focused on production growth from tight oil and water flood properties. Crude oil and liquids comprised 57% of the it's proved and probable reserves in 2011, up from 41% in 2007. It expects that 50% of total production will be crude oil and natural gas liquids in 2012.
2012 Capital Budget
It plans to spend $800 million in capital in 2012 on various parts of its oil and gas portfolio, with 70% directed towards crude oil and liquids development. The company will put $300 million towards the Bakken in North Dakota and $190 million into the Marcellus Shale play. Another $150 million will be spent to grow oil production on water flood properties in 2012.
Enerplus expects this budget to result in crude oil production growth of 22% in 2012, and estimates that production will exit 2012 at a rate of 88,000 barrels of oil equivalent (BOE) per day.
SEE: Oil And Gas Industry Primer
Enerplus has 74,000 net acres in the Fort Berthold area of North Dakota and estimates that production will exit 2012 at a rate of 15,600 BOE per day, up from 9,000 BOE per day at the end of 2011. The company has 78 Bakken and Three Forks drilling locations on its acreage here, and will drill 30 horizontal wells in 2012. Enerplus is counting on these properties to generate substantial growth in the future and expects production to reach 25,000 BOE per day by 2015.
SEE: What Determines Oil Prices?
Enerplus is involved with the development of the Marcellus Shale on both an operated and non-operated basis. The company is partnering with EXCO Resources (NYSE:XCO), Chesapeake Energy (NYSE:CHK) and a private oil and gas property and will spend $150 million in 2012 to drill 19 net wells. Enerplus will also spend $40 million on its operated properties as it seeks to convert leases from term to held by production.
Enerplus has waterflood properties spread across Western Canada and estimates that these properties will produce an average of 17,000 BOE per day in 2012. The development plan for 2012 includes drilling 40 horizontal wells in various areas to generate growth. The company will also begin several enhanced oil recovery projects that involve polymer injection to stimulate production.
Another company involved with water flood operations is Mid-Con Energy Partners LP (Nasdaq:MCEP), which has a number of properties in southern Oklahoma.
SEE: A Guide To Investing In Oil Markets
Dividends have been a key component of total return for investors over the last decade, with the company paying a total of $91.89 per share in dividends through the end of 2011. The payout has been volatile due to the company's leverage to commodity prices, with the 2011 dividend of $2.16 per share less than half of the 2008 payout.
Enerplus has a current yield of 15.4% and recently started to offer a stock dividend option to manage a cash shortfall due to low gas prices. The company also raised capital through debt and equity offerings to fund its capital program for 2012.
The Bottom Line
Enerplus is a Canadian based exploration and production company that offers investors growth and income, and like most of its peers, it is focused on crude oil and liquids development.
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.