Enerplus To Acquire Strategic Williston Basin Assets, Updates 2021 Guidance And Provides Five Year Outlook

Calgary, AB /CNW/ - Enerplus Corporation ("Enerplus" or the "Company") today announced that it has entered into a definitive agreement to acquire assets in the Williston Basin from Hess Corporation for total cash consideration of US$312M (the "Acquisition"). In connection with the Acquisition, the Company has updated its 2021 guidance including an increased production outlook due to operational outperformance year to date. The Company has also provided a five-year outlook based on principles of maintaining low financial leverage, generating meaningful free cash flow and returning capital to shareholders.

• Core acreage with substantial high-return drilling inventory – Acquiring 78,700 largely contiguous net acres in Dunn County, North Dakota, strategically adjacent to Enerplus' core Bakken position. The Acquisition includes 110 net tier one undrilled locations (77% operated) which immediately compete for capital with Enerplus' existing locations. The Acquisition is accretive to Enerplus' drilling inventory, extending its development drilling by an additional two to three years based on these tier one locations. After the Acquisition, Enerplus estimates it will have approximately 10 years of drilling inventory under mid-single digit annual liquids production growth rates. In addition to these tier one locations, the Acquisition includes 120 net operated undrilled locations which are economic based on current crude oil prices, and which offer the potential for more compelling returns with the application of modern stimulation and production technologies.
• Significant potential in undeveloped acreage evidenced by active proximal development – Unique opportunity in an extensive, largely undeveloped core position. The acreage is 100% held by production with an average of two producing wells per drilling spacing unit. Recent development by offset operators deploying modern stimulation designs (high proppant and fluid intensity) has delivered strong well results in both the Middle Bakken and Three Forks formations. The total 230 net undrilled inventory locations referenced above are almost exclusively focused in the Middle Bakken formation; additional development potential exists beyond this in the Three Forks formation. In addition, the acquired acreage has very limited exposure to federal land (less than 3% of the total net acreage).
• Low decline base production – The Acquisition includes approximately 6,000 BOE per day (76% tight oil, 10% natural gas liquids ("NGL") and 14% natural gas) of working interest⁽¹⁾ production (estimated at the time of closing), with a base decline rate under 20% (10% on the operated production, 37% on the non-operated production). An independent reserves report on the properties, prepared by McDaniel & Associates, effective as of March 1, 2021 has assigned proved plus probable reserves of 62.7 MMBOE consisting of 49.7 MMbbls of tight oil, 7.1 MMbbls of NGL and 35.1 Bcf of shale gas (working interest⁽¹⁾).
• Meaningful near-term accretion – Expected to be accretive to per share metrics in the first year, including adjusted funds flow, free cash flow and net asset value. Accretion levels are expected to increase after the first year with adjusted funds flow per share and free cash flow per share accretion expected to be 13% and 7%, respectively, by the end of 2022, increasing to approximately 20% for each metric by the end of 2024 based on the Company's five year outlook outlined below and assuming a US$55 per barrel WTI crude oil price.⁽²⁾
• Acquisition contributes to free cash flow outlook – The acquired assets are expected to consistently generate free cash flow. Planned development is estimated to be self-funded in-line with an annual capital spending reinvestment rate of approximately 60% to 70% of adjusted funds flow assuming a US$50 to $55 WTI crude oil price. The Acquisition and Enerplus' production outperformance are expected to increase the Company's free cash flow generation in 2021, which is now estimated at over $330 million, based on a US$55 per barrel WTI crude oil price.⁽²⁾
• Balance sheet remains strong – The pro forma business retains a solid financial position with an estimated net debt to adjusted funds flow ratio at or below 1.3x at December 31, 2021 (annualized for 2021 acquisitions), reducing to approximately 1.0x or less by year-end 2022 based on a US$55 per barrel WTI crude oil price.⁽²⁾ Enerplus will continue to have ample liquidity and maintain significant financial flexibility subsequent to the Acquisition and anticipates increasing the size of its bank credit facility up to US$900M prior to the Acquisition closing.
• Drives continued operational synergies – The Acquisition is expected to support a more efficient capital and operating plan through more consistent activity levels and high-graded development. In addition, there are no incremental general and administrative costs associated with the Acquisition.

"These assets are a strong strategic and operational fit for Enerplus, further extending our high-return Bakken drilling inventory," said Ian C. Dundas, President and CEO of Enerplus. "The addition of this tier one resource into our development plan is expected to generate strong financial returns and enhance our free cash flow growth. In connection with the acquisition, we have highlighted a five-year outlook with projected cumulative free cash flow of between $1.2 to $1.8B between 2021 and 2025, assuming US$50 to $55 per barrel WTI."

Transaction Details
Enerplus has agreed to acquire the properties for total cash consideration of US$312M pursuant to a purchase and sale agreement, subject to customary purchase price adjustments. The Acquisition will be funded with the Company's existing cash position of approximately US$150M with the remaining portion funded through borrowing on its undrawn bank credit facility. Closing of the Acquisition is subject to customary closing conditions and is expected to occur in May 2021.

2021 Guidance Update
Enerplus is increasing its 2021 production guidance to 111,000 to 115,000 BOE per day (from 103,500 to 108,500 BOE per day), including 68,500 to 71,500 barrels per day of liquids (from 63,000 to 67,000 barrels per day) based on an eight month contribution from the Acquisition to the Company's 2021 production. The increased production guidance was also driven by strong operating performance in North Dakota and higher than expected production in the Marcellus through the first three months of the year. Capital spending in 2021 is revised to $360 to $400M (from $335 to $385M) in connection with the acquired assets.

The Company's 2021 Bakken oil price differential outlook is unchanged at $3.25 per barrel below WTI, which assumes the Dakota Access Pipeline ("DAPL") continues to operate. In the event DAPL is required to cease operations, Enerplus expects sufficient rail egress to be available, however, Bakken oil price differentials would be expected to widen reflecting rail economics. The Company estimates this would result in a realized 2021 differential of approximately $6.00 per barrel below WTI, assuming eight months of wider differentials if DAPL cannot operate. The impact to Enerplus' corporate netback in this scenario is estimated to be approximately $0.90 per BOE. The Acquisition is expected to continue to provide attractive financial returns at a wider differential, as outlined above.

2021 Production And Capital Spending Guidance Summary

(1) Production is stated on a working interest basis before the deduction of royalties.

Maintain low financial leverage: Target a long-term net debt to adjusted funds flow ratio of less than 1.0x.In connection with its five-year outlook, Enerplus has provided a capital allocation framework with the following key principles:Five Year Outlook

• Committed to free cash flow generation: Target a long-term capital spending reinvestment rate of less than 75% of annual adjusted funds flow.
• Return capital to shareholders: Sustainably grow the Company's base dividend supported by an increasing cash flow base. Consider share repurchases to further enhance the return of capital to shareholders.

The key principles above and the macro environment will drive Enerplus' disciplined approach to growth, maximizing free cash flow and shareholder returns.

To highlight Enerplus' financial sustainability and robust free cash flow growth potential, the Company has provided an outlook through 2025. Assuming a constructive commodity price environment (WTI oil prices at approximately US$50 to $55 per barrel or higher), the Company projects annual capital spending of approximately $500M from 2022 to 2025 focused on generating substantial levels of free cash flow. Under this capital spending plan, cumulative free cash flow is estimated at $1.2 to $1.8B between 2021 and 2025 based on a US$50 to $55 per barrel WTI crude oil price and US$2.75 per Mcf NYMEX natural gas price.⁽²⁾ This is expected to result in an average capital spending reinvestment rate of approximately 60% to 70% of adjusted funds flow over the period. Enerplus projects 3% to 5% annual liquids production growth from 2022 to 2025 based on this outlook. This growth rate is based on approximately 75,000 barrels per day, being the Company's implied liquids production in 2021 assuming a full year contribution from its recent acquisitions.

Advisors
Stifel FirstEnergy acted as financial advisor, BMO Capital Markets acted as strategic advisor. Vinson & Elkins LLP acted as U.S. legal advisor and Blake, Cassels & Graydon LLP acted as Canadian legal advisor to Enerplus on the Acquisition.

Presentation
An investor presentation in connection with the Acquisition has been added to the Company's website at www.enerplus.com.

About Enerplus
Enerplus is an independent North American oil and gas exploration and production company focused on creating long-term value for its shareholders through a disciplined, returns-based capital allocation strategy and a commitment to safe, responsible operations.

Footnotes:

⁽¹⁾ Production and reserves are stated on a working interest basis before deduction of royalties.
⁽²⁾ Assumes NYMEX natural gas prices of US$3.00 per Mcf in 2021 and US$2.75 per Mcf in 2022 and thereafter.