Enerplus Corporation (ERF) inked a deal worth $115 million to sell its interests in the developed Sleeping Giant field in Montana and the southernmost portion of its North Dakota position in the Russian Creek area.
Shares of the oil and gas exploration and production company have gained 113% over the past year. (See Enerplus stock charts on TipRanks)
Per the terms of the deal, Enerplus is entitled to receive an additional amount of up to $5 million if the WTI oil price averages over $65 per barrel in 2022 and over $60 per barrel in 2023.
Notably, the sale does not include any future drilling locations in Enerplus’ Williston Basin drilling inventory.
The sold interests, which include 244 net wells, generated production of approximately 3,000 barrels of oil equivalent (BOE) per day during the second quarter of 2021.
Based on a $60 WTI oil price, the sold-out wells were forecast to generate $22 million in net operating income in 2022.
The company plans to utilize the sale proceeds to reduce $400 million of debt by the end of the first quarter of 2022.
In addition, management will allocate 10% of the sale proceeds to make incremental share repurchases.
Enerplus CEO Ian Dundas commented, “The sale of our legacy position in Montana and the Russian Creek acreage in North Dakota, properties which were not attracting capital in our portfolio, brings significant value forward and accelerates our debt reduction plans.”
Subject to certain conditions, the deal is expected to complete at the end of October 2021.
Scotiabank analyst Jason Bouvier recently upgraded Enerplus from Hold to Buy and maintained the price target of $7.92 (36.3% upside potential).
Bouvier favors the company’s “attractive valuation, strong balance sheet, and natural gas exposure” and believes the current share price levels serve as a “good opportunity to buy a quality name.”
Overall, the stock has a Strong Buy consensus rating based on 8 unanimous Buys. The average Enerplus price target of $9.41 implies 62% upside potential from current levels.
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