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 (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.
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