Enerplus Corp (USA) (NYSE:ERF), which develops crude oil and natural gas assets in Canada and the United States, put on the block its natural gas assets in the U.S. Marcellus shale region.
Shares jumped nearly 3% yesterday, closing at $6.89, after trading 2.46 million shares.
According to unnamed sources, the sale could unlock as much as US$ 530 million, which the company may use to pay down debt, or alternatively, make an acquisition.
The company did not confirm the media report.
Enerplus Corp (USA) (NYSE:ERF) sale draws interest
The report further said that buyers in the US and Asia had shown interest in the assets, and speculated that these buyers may in fact be private equity players.
Enerplus may also be pursuing the sale to concentrate its interests geographically on a more strategic basis. The company said recently in an investor presentation that only three territories represented 90% of its production.
Combined with a reduction in costs and lower debt, the refocus may be good for the company’s operational profitability.
Enerplus Corp (USA) (NYSE:ERF) takes a scalpel to debt
The company has managed to slash its net debt by 45% since December 2015, primarily due to divestments which freed up C$281 million, and an equity issue of C$220.4 million.
It had an undrawn bank credit facility of C$800 million, according to the investor presentation, and Q2 debt to funds flow ratio of 2.0X; senior debt to adjusted EBITDA ratio of 1.2X.
The company’s balance sheet has been significantly strengthened.
Technically, the stock put in a bottom of $1.79 in January this year, and quadrupled when it made a high of $7.80 in August.
It appears to have resumed its uptrend over the last three weekly sessions.
The stock therefore has potential for appreciation if oil prices remain firm and the recent OPEC decision to cut output gets implemented in letter and spirit.