Enerplus Earnings Call Nuggets: Marcellus Pricing and Wilrich Plans

Enerplus Corp (NYSE:ERF) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Marcellus Pricing

Cristina Lopez – Macquarie Capital Markets: Just a few quick questions. The first one has to do with the current Marcellus pricing. Can you give us a sort of benchmark as to what you’re receiving currently in the Marcellus for your pricing, understanding that most of it is under contract?

Ian C. Dundas – President and CEO: Sure, Cristina. We’ll turn over to Eric to talk to you about that.

Eric G. Le Dain – SVP, Corporate Development, Commercial: Sure. I think, as you say, Christina, we are contracted. However, those contracts, keep in mind, are based on the indices; largely, the great majority, Dominion South, which is the strongest index in that area. What that contracting (assures us) there’s takeaway access to the marketplace. As I think probably everyone is aware, the basis in particular on Tennessee Gas Pipeline Zone 4 Line 300 widened considerably in June. And what’s happening through July and into August is it’s actually – we’re seeing a widening extend from the Tennessee Pipeline through even into the Transco points of market. I think we’re seeing something like still beyond $1.50 and MMBtu at Tennessee and we’re seeing markets on even into Transco at – in the – say the minus $0.50 range on the spot market. Our pricing for June was all in rolled in minus $0.41 and MMBtu, and we see definite potential through the remainder of the summer period of the gas market to see those kind of levels or even wider.

Cristina Lopez – Macquarie Capital Markets: Also, if you were to undertake no asset sales for the remainder of the year, what would your production look like in the second half of the year or sort of in line with your budget?

Robert J. Waters – SVP and CFO: We haven’t given that number, Cristina, but I think we’re being pretty transparent that we’re positioned to beat the 85 AA and I guess we’re still reaffirming our exit of 84 to 88. So, I think you can say we’d probably be above 85 and potentially to the high end of that exit range…

Cristina Lopez – Macquarie Capital Markets: Is there – and they my last question, is there any plans for drilling a exploration well into the lower Three Forks following the results that we’ve seen from Continental this week?

Ian C. Dundas – President and CEO: We’re looking at that very carefully. Obviously, it’s quite exciting for us. We have acreage that’s relatively proximal in the northern ends, certainly northern ends of our play. This year, we’ve got about a third of our drilling is targeted to the Three Forks. Nothing in the second bench at this moment, but I’d say it’s – the guys are looking at it very carefully and it’s pretty likely a Q – a 2014 event for us.

 

Wilrich Plans

Greg Pardy – RBC Capital Markets: Just a couple of questions maybe. First to start with the Marcellus, can you let us know just how many wells you would have brought on line in the second quarter? Then what you backlog looks like there? Then maybe just shifting to the Wilrich, I just didn’t catch what your current production is, and how you would see that program shifting up over the next couple of years?

Ian C. Dundas – President and CEO: Sure. So maybe we’ll split this between Ray and I. The plans for the Wilrich, we could see taking that production in the quarter, it was in the 25 million a day range. We see taking that to 60 million potentially higher. It’s going to be a function of success, and how broadly it is of our acreage block. On the wells behind pipe partially completed, I’ll turn it over to Ray to take you through.

Raymond J. Daniels – SVP, Operations: We have the 10.5 non-operated wells not tied in. There’s a number of different reasons for that. There’s operational reasons, there’s waiting for price, and a few of them may never be tied in…

Greg Pardy – RBC Capital Markets: So, sorry Ray, that was 10.5?

Raymond J. Daniels – SVP, Operations: 10.5 net of non-operated.

Greg Pardy – RBC Capital Markets: Then the reason that they wouldn’t be – why wouldn’t they be tied in, or is it just the economics on some of those of this competitive is some of the new stuff or…?

Raymond J. Daniels – SVP, Operations: That’s right. There’s a 169 gross wells – a lot of that, we get 10.5 from.

Greg Pardy – RBC Capital Markets: Okay, got it.

Ian C. Dundas – President and CEO: So then the ones that we get very few – a small working interest in.

Greg Pardy – RBC Capital Markets: Maybe just for planning assumptions now, what kind of an EUR and IP are you using, even though there’s probably multiple type curves for the Marcellus? How are you planning for it?

Ian C. Dundas – President and CEO: It’s area by area. So we have a series of various type curves with them – I’d say, ever increasing levels of confidence in many of them. This year, the activity is in – very concentrated in Bradford and Susquehanna, and even within those areas, it’s high-graded. These would be plays that are 10 to 12 Bcf kind of plays; and on an unconstrained basis, why, you can see some of the rates that come on pretty dramatically. From a planning perspective, it’s tied to specific locations and we’ve got pretty good visibility around that. Then it’s further tied to the nature of the specific infrastructure in the area. If you look in our corporate presentations, we’ve given a pretty good flavor for where we see relatively flat production in some of these areas. So that’s sort of in part of how the teams have been managing it. Type curve in one of these areas is sort of six months, that 8 million a day, flat and you see some variability within that. Clearly, one of the things that has been going on of late has been – we’ve been exceeding that, and generally good, but it’s also been impacting some of the bases, discussions and pricing that we’re seeing recently…

Greg Pardy – RBC Capital Markets: Maybe just last question – oh, go ahead, Ray.

Raymond J. Daniels – SVP, Operations: I was going to say just one more thing. And if we look at those gross and net wells, the vast majority of them will come on. And it’s just effectively been timetables. But if you sort of go back over time in the amount of delineation activity, some of those wells would have been first well into an area and then there is no real follow-up that’s gone associated with that as the play has been sort of cored up and high-graded over the last couple of years.

Jo-Anne M. Caza – VP, Corporate and IR: I was just going to say, I’d also that now that we’re through the carry commitment, we have this ability to take a look at the individual wells that we’re going to participate in and decide whether or not we’ll consent. So, we have that ability to really high-grade our capital spending and make sure that we’re spending in those areas where we’ll see the best economic return.

Greg Pardy – RBC Capital Markets: Last question for me, is the 60 million, Ian, that you referred to is – I don’t want to pin you down too much, but is that the number that you could see getting to by, say, 2015 exit?

Ian C. Dundas – President and CEO: What was 60…?

Greg Pardy – RBC Capital Markets: Well, I think it was the well rates…

Ian C. Dundas – President and CEO: No, no, no. No, that’s not an exit. That’s a development plan over a couple of years, kind of, scenario. If you look like going to (indiscernible), it’s really quite exciting. We’ve got 55,000 acres available to us, with various levels of delineation around it. One area looks quite exceptional and that’s where we’re going to be starting in our development. There’s other areas that we have less information on is well. And so, you can see quite wide variability around how big this thing actually gets and then that’s sort of going to impact the ultimate development kind of scenario. But the 60 million; it’s not a bad number to think about in the context of a pretty risked way of thinking about this asset at this moment.