Thursday, June 11, 2015

Fracklog: Bakken Producer Enerplus Is Looking At 60% ROI For New Money Spent Completing Wells (ERF)

Some hard numbers from one of the Exploration & Production outfits.
Press release via Yahoo:
CALGARY , June 10, 2015 /CNW/ - Enerplus Corporation ("Enerplus") (ERF) (ERF) is announcing an increase to its production guidance and capital spending in 2015. 

Year to date, we have been producing at the high end of our guidance range while maintaining cost discipline.  Additionally, we have decided to accelerate the completion of eight North Dakota oil wells at a cost of $60 million .  This activity is underpinned by strong economics and is expected to provide increased funds flow and reduced leverage ratios in 2015 and 2016. 

As a result of the combination of operational success and the additional completions, we are increasing our 2015 annual average production guidance range to 97,000 – 103,000 BOE per day, and our crude oil and natural gas liquids to 43 – 45% of the production mix.  
  • We are revising our 2015 annual average production guidance upwards from 93,000 – 100,000 BOE per day to 97,000 – 103,000 BOE per day.
  • We are increasing our 2015 capital budget by $60 million from $480 million to $540 million .
  • The additional completions are underpinned by robust economics. The average expected rate of return for the completions (excluding the drilling capital already spent), using a flat West Texas Intermediate oil price of US$60 per barrel, is approximately 60%. The average expected payout period for the completions is less than two years under a flat WTI oil price of US$60 per barrel.

As a Macquarie MD said to the Financial Post:
“The real reason Enerplus is getting back into the field here is really premised on the notion of sunk capital. The wells are drilled and cased, so when you take a look at the capital remaining to bring that oil on production, the internal rate of return is about 60 per cent,”