A Strong Financial Outlook

Transcription

1 Financial Strategy

2 A Strong Financial Outlook Significantly improved sustainability Increased funds flow as a result of: Growth in production Higher margin projects with better netbacks Improving commodity prices Improving capital efficiencies Non-core asset divestments improving our focus and profitability, improving financial flexibility and providing capital for new play delineation Balance sheet remains strong Ample unused credit capacity Reasonable 1.6x debt-to-funds flow ratio forecast by YE2013 Active hedging program providing protection on a significant portion of funds flow 1

3 Dividend Strategy Designed to attract both income and growth investors Dividend stability is important Never jeopardize balance sheet strength May fluctuate with commodity prices and overall sustainability No plans to adjust the current dividend rate 2

4 TransAlta Crescent Point Canadian Oil Sands Enerplus BCE CIBC IAMGOLD BMO Sun Life Penn West National Bank Encana Shaw Barrick ARC Resources Husky Energy BNS Power Corp RBC TD Thomson Reuters TransCanada TELUS Teck Fortis Rogers Potash Corp Cenovus Manulife Agnico Eagle Mines Kinross Gold Enbridge Suncor Shoppers Drug Mart Yamana Gold Agrium Talisman Bombardier Goldcorp Silver Wheaton SNC-Lavalin George Weston Loblaw Eldorado Gold Tim Hortons Magna Cameco Saputo CN Rail Canadian Tire CNRL Brookfield Metro First Quantum Imperial Oil CP Rail Gildan Activewear BlackBerry Catamaran Valeant Yield Current Yield 9% 8% 7% TSX 60 Current Yield 6% 5% 4% 3% Average = 2.9% 2% 1% 0% Source: Bloomberg, as of June 18,

5 Funding Shortfall* ($ Millions) Improving Sustainability Enerplus sustainability has improved considerably $800 $700 $600 $500 $400 $300 $200 $100 $0 $680 million DRIP Debt Net asset sales $630 million DRIP/SDP Dividend Cut Debt Net asset sales Equity ~$175 million Remaining gap Net asset sales Estimate** SDP * Defined as funds flow less capital spending less gross dividends ** Calculated using analyst consensus estimate of $725 million for 2013 funds flow 4

6 Debt to Funds Flow Preserving our Financial Flexibility YE Debt: $900 MM 1.6X YE Debt: $1,064 MM 1.7X Est. YE Debt: $1,115 MM 1.6X Maintaining production guidance despite the sale of 1,400 BOE/day of net production Generated ~$115 million in net proceeds from noncore asset sales YTD Est. 5

7 2013E APO (%) Competitive Sustainability vs Peers Enerplus debt to cash flow and APO better than most peers in Baytex Tourmaline ARC Crescent Point Peyto Average of peers Bonavista 120 Enerplus Pengrowth Lightstream Penn West E Debt to Cash Flow Source: RBC Capital Markets, June 17,

8 Improving Focus and Sustainability through A&D Activity Purchase Price ($ 000s) Acquisition Disposition Acquisition Disposition Sleeping Giant Manitoba Pouce Coupe $118,000 $218,000 Purchase Price ($ 000s) Working Interest Increased to 90% 52% Working Interest Taylorton / Turner Valley $30,000 $57,800 Increased to 100% 8%-25% Funds Flow multiple Funds Flow multiple $/BOE/day $84,000 $142,000 $/BOE/day $80,000 $100,000 2P $/BOE $23.00 $ P $/BOE $16.00 $21.00 Production (BOE/day) 2013 Forecast Netback 2013 Forecast Recycle Ratio 1,560 1,550 $49.00 $ Production (BOE/day) 2013 Forecast Netback 2013 Forecast Recycle Ratio $51.00 $ Base Decline 14% 12.5% Base Decline 4.5% 15% Based on internal evaluations and pricing at time of transactions, before adjustments. 7

9 Millions of shares Stock Dividends Provide Additional Funding SDP Participation Canada DRIP Canada SDP US SDP June participation was 22% of outstanding shares (equivalent to $48 million annualized) 8

10 Debt Composition* Unutilized Capacity $686MM Senior Notes* US$742MM CAD$70MM Bank Credit Facility - $1 billion 11 banks in Enerplus bank credit facility Unsecured, covenant-based with current borrowing rate of less than 3% Credit facility matures October 31, 2015 Bank Debt $314MM Senior Notes - $812 MM Notes are rated NAIC 2 and rank equally with bank credit facility; average interest rate of 5.5% * As at March 31, 2013, US$ amounts converted at $1 US/CDN 9

11 $ Millions Senior Notes Maturities* $700 Average interest rate of 5.5%** $600 $585 $500 $400 $300 $200 $100 $46 $46 $91 $45 $ and beyond * As at March 31, 2013, US$ amounts converted at $1 US/CDN ** Including impact of Cross Currency Interest Rate Swaps 10

12 2013 Financial Outlook Cash Inflows: $880 million Funds Flow: $725 Net Divestments: $115 SDP: $ 40 Cash Outflows: $900 million Capex: $685 Dividends: $215 APO including net A&D activity YTD is virtually 100%

13 Enerplus Tax Position* Pool Type Canadian U.S. C$ Millions Canadian Oil & Gas Property Expense $ 315 Canadian Development Expense 316 Undepreciated Capital Cost 375 Canadian Exploration Expense 216 Non-capital Losses 488 $1,710 Alternative Minimum Tax Credit 84 Tax Losses 462 Other (including depletable and depreciable assets) 1,048 $1,594 Total Tax Pools $3,304 Available Capital Losses (Canadian) $1,212 We don t expect to pay cash taxes in Canada until 2016 U.S. cash taxes are estimated at ~3% of U.S. funds flow until 2016 Non-core asset sales in 2013 are not expected to impact our tax horizon * As at December 31,

14 Financial Strategy Summary Growth and improving efficiencies are the long-term solutions to sustainability Realized net proceeds of approximately $115 million, effectively bridging the funding gap Sustainability is not an issue - manageable APO of approximately 125% APO after A&D of approximately 100% Balance sheet remains strong with expected debt-to-funds flow ratio of 1.6x at year end Hedging provides funds flow protection into