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  • Enerplus Corp. (ERF): Stronger Production To Drive Growth 1 comment
    Jan 21, 2014 5:32 PM | about stocks: ERF

    Enerplus continues to provide strong production growth from its different reserves. This allowed the company to raise its production guidance for the year 2013, which increased from 87,500 barrels of oil equivalent per day, or boepd, to around 89,000 boepd. Additionally, Enerplus emphasized that the production growth in 2014 would be around 10%, and it is targeting a production range between 96,000 and 100,000 boepd. The company's Fort Berthold asset continues to be one of the pillars of production growth. Located in the Williston Basin in North Dakota and Montana, this region is expected to contribute around 25% of the production in 2014. Fort Berthold produces oil and natural gas from the Bakken and Three Forks formation.

    There is huge oil and natural gas potential in the Bakken and Three Forks formation. The combined oil potential in the Bakken and Three Forks formation is around 7.38 billion barrels of oil, or bbo, with around 3.65 bbo in the Bakken formation and 3.73 bbo in the Three Forks formation. Enerplus expects that Fort Berthold is likely to provide a growth of around 33% to around 22,000 boepd. Another major producer in the Bakken and Three Forks, Continental Resources (NYSE:CLR), has also been stepping up its investment in the region. The oil and gas potential in the Bakken formation has been the major growth driver for Continental, which has increased its acreage position in the region from around 1.14 million net acres in 2012 to around 1.2 million net acres in 2013.

    Future growth is also determined by the amount of drilling inventory a company carries. Enerplus has an impressive drilling inventory in the Fort Berthold region. This is mainly due to downspacing wells in the region. Enerplus has around 150 undrilled locations, which indicates an eight-year drilling inventory. The downspacing program is carried out in the Middle Bakken. Enerplus' acreage is located in the core region (consisting major regions in North Dakota and Montana) of the Bakken formation and has huge potential to increase production by downspacing. The per section oil content in the Middle Bakken of the core region contains around 6 million barrels to 10 million barrels of original oil in place, or OOIP. OOIP is an estimate of the oil reserve in a region. The Fort Berthold project consists of around 114 sections, giving the company the base for multi-year production growth.

    In addition to the Bakken formation, Enerplus is also carrying out its downspacing tests in the Upper Three Forks. Production from Three Forks is largely carried out from the Upper Bench, where Three Forks lies close to the lower Bakken. However, studies suggest production from the Three Forks formations could vary across the company's acreage depending on thickness and thermal maturity. The thickness of Three Forks could vary between 175 feet to more than 250 feet. In Enerplus' case, the Upper Three Forks is productive throughout its acreage, so it is expected that the downspacing in the Three Forks could yield varying results for Enerplus. Continental, being the major leaseholder in the Bakken, is banking on its downspacing program to increase its well drilling inventory and potential reserve in the region. Continental plans to carry around three density programs in 2014.

    In addition to downspacing, Continental is also delineating its Lower Three Forks formation within its acreage. Delineation is the technique to understand the extent and boundaries of an oil and natural gas reservoir. The company has around 3,800 square miles of productive Three Forks region, and it completed around 20 wells during 2013. Further, it plans to drill around 26 exploratory wells in the Lower Three Forks during 2014. Continental is taking a leading role in the development of the Lower Three Forks within its acreage.

    Cash Flow Growth From Gas

    Enerplus' acreage in the Marcellus region will continue to be a major area of growth during the coming quarters. Enerplus plans to increase production from the Marcellus by around 42% to a range between 120 million cubic feet per day, or mcfpd, to 140 mcfpd in 2014. The increase in production is mainly due to the acquisition of assets that have a production capacity of around 42 mcfpd. In addition to the production increase, Marcellus shale provides a long-term inventory for Enerplus because of its huge drilling inventory. With more than 60,000 acres, Enerplus estimates around 250 future drilling locations. The Marcellus shale still has a potential of around 90,000 well locations in need of drilling to extract its reserve. So this huge reserve potential is likely to provide revenue growth in the coming quarters.

    Enerplus' acreage in Marcellus, located in Northeastern Pennsylvania, provides a major advantage to the company. This region of operation is likely to create greater cash flow for Enerplus compared to other regions in the Marcellus shale formation. The breakeven for a well in the Northeastern Pennsylvania is around $2.68 per thousand cubic feet compared to $8 per thousand cubic feet in Central and Northwestern Pennsylvania. This is likely to increase the profitability of the company compared to other gas producers in the region.

    Yielding more production

    Enerplus' acreage in the Bakken and the Marcellus continue to provide value to investors by providing production growth over the previous years. These acreages also show potential for growth in the coming quarters because of their large future drilling locations, which make them the basis for long-term growth. Development of these acreages in the Bakken and Marcellus is likely to provide production growth in the coming quarters as well. Enerplus is likely to keep up with its production growth targets in the coming quarters just as it has achieved in the past.

    Stocks: ERF
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  • Michael Blair
    , contributor
    Comments (5099) | Send Message
    Thanks for the update. Long ERF.
    21 Jan 2014, 06:11 PM Reply Like
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