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Enerplus: The Recent Weakness Is Unjustified

Feb. 06, 2019 1:43 PM ETEnerplus Corporation (ERF), ERF:CA7 Comments
David Lojkasek profile picture
David Lojkasek


  • ERF is a monthly dividend payer with a strong balance sheet.
  • The company managed a very nice turnaround since 2015.
  • The recent weakness in the share price offers a nice opportunity.

In my first article on an O&G name, I analyze Enerplus Corporation (NYSE:ERF). The company was established 1986 and is currently traded on the Toronto Stock Exchange and NYSE. This North American energy producer with operations in Western Canada and the U.S. is a monthly dividend payer, yielding c. 1% annually.

From the historical perspective, the company has been fairly profitable until 2015, when the prices of oil plummeted to their historical lows and the company's revenues fell some 42% compared to 2014. By the end of 2015, the company had also accumulated more than C$1 billion in debt. Since then, however, the company managed to turn things around and the recent weakness in the share price nudged me to sit down and have a closer look-if only because I am quite interested in turnaround stories and this seems to be a good one to look at.

*2018 includes only revenues for 9M2018

Source: Author based on Macrotrends and company data

So what happened in 2015?

As I have briefly discussed earlier, the oil prices fell from their highs in 2013 and 2014 to c. $35 per barrel in 2015 and continued to fall to as low as $27 per barrel in 2016. A more detailed chart is provided below. Due to the depressed prices, the company not only had lower revenues but had to test its assets for impairment as well which led to an impairment charge of C$ 1,352.4 million.

ChartData by YCharts

This was, however, not the only problem the company faced. The company accumulated more than C$ 1 billion in debt and because of a continuously small cash position, the net debt had remained above C$ 1 billion from 2012 until 2015. This all led to the share price touching the $2.3 level in January 2016.

ChartData by YCharts
ChartData by YCharts

This article was written by

David Lojkasek profile picture
I am a long-only investor mainly focused on small-cap companies which interest me for the lack of coverage and, hence, abundance of opportunities. I am a graduate of the University of Economics in Prague in Finance and Accounting, currently employed as an Equity Analyst in Prague, Czech Republic."Essentially, all models are wrong but some are useful." - George E. P. Box, one of the great statistical minds of the 20th century

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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