Enerplus plans more North Dakota growth as higher oil prices fuel Q4 income beat
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Calgary-based Enerplus Corp. plans to continue to pour money into its North Dakota light oil play this year after crediting it with fourth-quarter profits that handily beat analyst expectations.
The company will invest 90 per cent of its 2018 capital budget of between $535 million and $585 million in the United States, most in North Dakota Bakken light oil wells, where production is expected to grow by 30 per cent.
It is also planning to drill up to three new oil wells on a new project in Colorado after strong results from its first well drilled last year.
"For the last while, it's been pretty easy to put money into the U.S. and it's been harder to put money into Canada," CEO Ian Dundas said on a conference call.
He said the decision by Enerplus to concentrate on North Dakota a few years ago was based on its superior prospects and wasn't an "anti-Canada call." But he added falling corporate taxes in the U.S. and higher taxes in Canada since then have reinforced the wisdom of the move.
"The Canadian regulators could make life a lot better for Canadians if they started to really pay attention to what's happening in the U.S.," he said. "It just needs to compete."
His comments echo those of Suncor Energy Inc. CEO Steve Williams, who said on a conference call earlier this month that Suncor is "having to look at Canada quite hard" when deciding to invest because of the regulation and higher taxes.
"Other jurisdictions are doing much more to attract businesses so Canada needs to up its game," he said.
Canadian operations accounted for less than 20 per cent of production for Enerplus in 2017.
The company said Friday it earned net income of $15 million or six cents per share in the last three months of 2017, compared with $840 million or $3.43 per share in the year-earlier period, with the latter figures boosted by asset sales.
Stripping out non-recurring items, its fourth quarter 2017 earnings were $61.5 million or 25 cents per share, beating analyst predictions of $5.8 million or 17 cents per share, according to Thomson Reuters.
Enerplus said its average realized selling price for oil jumped 22 per cent to C$65.91 in the fourth quarter. Eric Le Dain, senior vice-president of corporate development, pointed out on the call that was partly because of less competition from light oil stranded in Canada due to pipeline constraints.
The company reported the discount in its realized price compared with benchmark West Texas Intermediate fell to US$1.61 per barrel in the last three months of 2017, half of the US$3.24 per barrel discount in the previous quarter.
By comparison, the average discount paid for Western Canadian Select oilsands blend crude from Alberta in the fourth quarter was US$12.26 per barrel and it has since spiked at times to around US$30 per barrel, a trend also blamed on constrained pipeline access.
Enerplus said it is trying to sell Canadian natural gas-prone properties producing about 5,000 boe/d after selling similar assets with about 7,700 boe/d of production in 2017.
The company said higher-than-expected fourth-quarter corporate production of nearly 89,000 boe/d, an increase of 12 per cent from the third quarter, was realized mainly due to growth in oil output from North Dakota and natural gas from its Pennsylvania Marcellus wells.
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Companies in this story: (TSX:ERF, TSX:SU)