enerplus is increasing its interests in the Bakken tight oil play in both the
United States and canada.
Enerplus, which built its formidable 85,000 barrels a day equivalent production under a low-risk optimization model, has some
major cultural realigning to do as it sets its sails for greater
organic rather than accretive growth.
“Now we’re looking to move forward as a growth and income
company that will basically provide the total return to our unit-holders through a combination of distributions in the form of
dividends and a growth element, so that investors will see greater
appreciation in the trading price of the stock,” Kerr says.
To this end, Enerplus is reshaping its portfolio with the addition of a number of early-stage growth assets. As the company
takes on more risk, it has to ensure it has the culture to assess
that risk, understand it, and accept it.
“Historically, we didn’t necessarily have the talents in our
organization to deal with that,” he says.
To drive the shift away from a reliance on mature assets,
Enerplus hired key people to fill senior executive positions. It
also brought in top-drawer technical people with expertise in
shale gas and tight oil.
The downturn in the industry last year conveniently played
into this hiring process and made the job of finding talent a little
easier than it might have been during a boom. But the company’s
new direction also helped attract certain employees who otherwise may not have found working for a trust compelling.
ASSETS
The growth assets Enerplus decided on aren’t particularly a
surprise. They’re early-stage resource plays in the Marcellus
shale gas and the Bakken tight oil plays. Enerplus entered the
Marcellus last year, when the meltdown in the markets drove
down prices, making the prospect more attractive.
Acknowledging its inexperience in this type of play, Enerplus
took a conservative approach, buying a 30 per cent stake in a play
enerplus controls about 136,000 net acres in the hot marcellus shale gas
play in Pennsylvania and west virginia.
operated by Chief Oil & Gas, a company that boasts a wealth of
shale gas experience gained in the Texas Barnett shales, where it
drilled some 400 wells. Part of the arrangement is that Enerplus
has secondees in Chief’s offices to learn the game.
“So now we have a line of sight to over two trillion cubic feet
of gas,” Kerr says. “This could potentially triple our booked gas
reserves. It’s a significant growth opportunity for us, but it’s early.
We’re just in the drilling phase of that to delineate the resource.”
In the Bakken, Enerplus is working both sides of the border,
in the deeper North Dakota and Montana Bakken as well as in
the shallower Saskatchewan play. It has established production
in Montana, where it has been since 2005. That is the Sleeping
Giant field, which is now considered a more mature phase of
Bakken development, but Enerplus also has 170,000 net acres
of prospective, early-stage Bakken assets.
The third leg in Enerplus’s growth platform is the Deep Basin,
where it has assembled a 34,000-acre position in the Montney
and stacked Mannville. “These are stacked zones where you can
complete in various zones with multi-stage fracture technology as an add,” Kerr says.
So now, with a healthy balance of growth and cash-generating
assets, including its bulwark of conventional oil under waterflood and shallow gas production, Enerplus is about 60 per cent
gas weighted and 40 per cent oil and liquids. And as it moves
forward, it will continue to sharpen its focus, disposing of non-core assets.
“But we don’t have to sell. We have a very strong balance
sheet,” Kerr says. “As we came out of the first quarter, we had
zero drawn on our $1.4-billion line of credit. But certain assets
are not going to fit into our strategy, so we’re working to move
those out of our portfolio, based on the market and pricing.”
