EX-99.2 4 erf-20161130ex9925b81ed.htm erf_Financial_MDA_Ex99_2

Exhibit 99.2

 

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

(CDN$ thousands) unaudited

    

Note

    

  September 30, 2016

    

December 31, 2015

 

Assets

 

 

 

 

  

 

 

  

 

Current Assets

 

 

 

 

  

 

 

  

 

Cash

 

 

 

$
75,005

 

$
7,498

 

Accounts receivable

 

 3

 

 
82,165

 

 
132,156

 

Deferred financial assets

 

15

 

 
11,339

 

 
71,438

 

Other current assets

 

 

 

 
5,715

 

 
9,953

 

 

 

 

 

 
174,224

 

 
221,045

 

Property, plant and equipment:

 

 

 

 

  

 

 

 

 

Oil and natural gas properties (full cost method)

 

 4

 

 
696,490

 

 
1,166,587

 

Other capital assets, net

 

 4

 

 
13,425

 

 
19,686

 

Property, plant and equipment

 

 

 

 
709,915

 

 
1,186,273

 

Goodwill

 

 

 

 
647,033

 

 
657,831

 

Deferred income tax asset

 

13

 

 
163,969

 

 
516,085

 

Total Assets

 

 

 

$
1,695,141

 

$
2,581,234

 

 

 

 

 

 

  

 

 

  

 

Liabilities

 

 

 

 

  

 

 

  

 

Current liabilities

 

 

 

 

  

 

 

  

 

Accounts payable

 

 6

 

$
164,094

 

$
239,950

 

Dividends payable

 

 

 

 
2,405

 

 
6,196

 

Current portion of long-term debt

 

 7

 

 
28,857

 

 

 —

 

Deferred financial liabilities

 

15

 

 
8,597

 

 
4,100

 

 

 

 

 

 
203,953

 

 
250,246

 

Deferred financial liabilities

 

15

 

 
3,968

 

 
3,193

 

Long-term debt

 

 7

 

 
700,219

 

 
1,223,682

 

Asset retirement obligation

 

 8

 

 
185,833

 

 
206,359

 

 

 

 

 

 
890,020

 

 
1,433,234

 

Total Liabilities

 

 

 

 
1,093,973

 

 
1,683,480

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

  

 

 

  

 

Share capital – authorized unlimited common shares, no par value
Issued and outstanding: September 30, 2016 – 240 million shares
                                       December 31, 2015 – 206 million shares

 

14

 

 
3,365,962

 

 
3,133,524

 

Paid-in capital

 

 

 

 
58,520

 

 
56,176

 

Accumulated deficit

 

 

 

 
(3,165,752)

 

 
(2,694,618)

 

Accumulated other comprehensive income/(loss)

 

 

 

 
342,438

 

 
402,672

 

 

 

 

 

 
601,168

 

 
897,754

 

Total Liabilities & Equity

 

 

 

$
1,695,141

 

$
2,581,234

 

 

 

 

 

 

 

 

 

 

 

Contingencies

 

16

 

 

  

 

 

  

 

Subsequent events 

 

18

 

 

 

 

 

 

 

 

The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Page 1 of 15

 

Condensed Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

 

 

September 30, 

 

September 30, 

 

(CDN$ thousands) unaudited

 

Note

 
2016

 
2015

 
2016

 
2015

 

Revenues

    

 

    

 

    

    

 

    

    

 

    

    

 

    

 

Oil and natural gas sales, net of royalties

 

 9

 

$
188,318

 

$
228,271

 

$
505,309

 

$
684,961

 

Commodity derivative instruments gain/(loss)

 

15

 

 
12,072

 

 
81,032

 

 
3,629

 

 
111,679

 

 

 

 

 

 
200,390

 

 
309,303

 

 
508,938

 

 
796,640

 

Expenses

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

Operating

 

 

 

 
56,238

 

 
90,405

 

 
189,368

 

 
254,876

 

Transportation

 

 

 

 
28,755

 

 
30,879

 

 
78,968

 

 
85,380

 

Production taxes

 

 

 

 
10,408

 

 
13,913

 

 
26,385

 

 
38,946

 

General and administrative

 

10

 

 
16,612

 

 
29,028

 

 
58,309

 

 
85,370

 

Depletion, depreciation and accretion

 

 

 

 
91,584

 

 
131,498

 

 
265,067

 

 
401,251

 

Asset impairment

 

 5

 

 
60,956

 

 
321,150

 

 
255,812

 

 
1,086,008

 

Interest

 

11

 

 
9,867

 

 
16,514

 

 
35,217

 

 
49,668

 

Foreign exchange (gain)/loss

 

12

 

 
3,085

 

 
69,638

 

 
(50,940)

 

 
146,184

 

Gain on divestment of assets

 

 4

 

 

 —

 

 

 —

 

 
(219,800)

 

 

 —

 

Gain on prepayment of senior notes

 

 7

 

 

 —

 

 

 —

 

 
(19,270)

 

 

 —

 

Other expense/(income)

 

 

 

 
247

 

 
70

 

 
5

 

 
8,597

 

 

 

 

 

 
277,752

 

 
703,095

 

 
619,121

 

 
2,156,280

 

Income/(Loss) before taxes

 

 

 

 
(77,362)

 

 
(393,792)

 

 
(110,183)

 

 
(1,359,640)

 

Current income tax expense/(recovery)

 

13

 

 
126

 

 
(16,202)

 

 
(260)

 

 
(16,241)

 

Deferred income tax expense/(recovery)

 

13

 

 
23,201

 

 
(84,924)

 

 
332,986

 

 
(444,983)

 

Net Income/(Loss)

 

 

 

$
(100,689)

 

$
(292,666)

 

$
(442,909)

 

$
(898,416)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income/(Loss)

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

Change in cumulative translation adjustment

 

 

 

 
4,480

 

 
115,759

 

 
(60,234)

 

 
262,029

 

Other Comprehensive Income/(Loss)

 

 

 

 
4,480

 

 
115,759

 

 
(60,234)

 

 
262,029

 

Total Comprehensive Income/(Loss)

 

 

 

$
(96,209)

 

$
(176,907)

 

$
(503,143)

 

$
(636,387)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income/(Loss) per share

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

Basic

 

14

 

$
(0.42)

 

$
(1.42)

 

$
(2.00)

 

$
(4.36)

 

Diluted

 

14

 

$
(0.42)

 

$
(1.42)

 

$
(2.00)

 

$
(4.36)

 

 

The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Page 2 of 15

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Nine months ended September 30 (CDN$ thousands) unaudited

    
2016

    
2015

 

Share Capital

 

 

  

 

 

  

 

Balance, beginning of year

 

$
3,133,524

 

$
3,120,002

 

Issue of shares (net of issue costs)

 

 
223,031

 

 

 —

 

Stock Option Plan - cash

 

 

 —

 

 
3,205

 

Share-based compensation – settled

 

 
9,407

 

 
9,449

 

Stock Option Plan - exercised

 

 

 —

 

 
267

 

Balance, end of period

 

$
3,365,962

 

$
3,132,923

 

 

 

 

  

 

 

  

 

Paid-in Capital

 

 

  

 

 

  

 

Balance, beginning of year

 

$
56,176

 

$
46,906

 

Share-based compensation – settled

 

 
(9,407)

 

 
(9,449)

 

Stock Option Plan - exercised

 

 

 —

 

 
(267)

 

Share-based compensation – non-cash

 

 
11,751

 

 
17,372

 

Balance, end of period

 

$
58,520

 

$
54,562

 

 

 

 

  

 

 

  

 

Accumulated Deficit

 

 

  

 

 

  

 

Balance, beginning of year

 

$
(2,694,618)

 

$
(1,039,260)

 

Net income/(loss)

 

 
(442,909)

 

 
(898,416)

 

Dividends

 

 
(28,225)

 

 
(109,238)

 

Balance, end of period

 

$
(3,165,752)

 

$
(2,046,914)

 

 

 

 

  

 

 

  

 

Accumulated Other Comprehensive Income/(Loss)

 

 

  

 

 

  

 

Balance, beginning of year

 

$
402,672

 

$
95,478

 

Change in cumulative translation adjustment

 

 
(60,234)

 

 
262,029

 

Balance, end of period

 

$
342,438

 

$
357,507

 

Total Shareholders’ Equity

 

$
601,168

 

$
1,498,078

 

 

The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

 

Page 3 of 15

 

Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

 

 

September 30, 

 

September 30, 

 

(CDN$ thousands) unaudited

 

Note

 
2016

 
2015

 
2016

 
2015

 

Operating Activities

  

 

  

 

  

    

 

  

    

 

  

    

 

  

 

Net income/(loss)

 

 

 

$
(100,689)

 

$
(292,666)

 

$
(442,909)

 

$
(898,416)

 

Non-cash items add/(deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depletion, depreciation and accretion

 

 

 

 
91,584

 

 
131,498 

 

 
265,067

 

 
401,251

 

Asset impairment

 

5

 

 
60,956

 

 
321,150 

 

 
255,812

 

 
1,086,008

 

Changes in fair value of derivative instruments

 

15

 

 
(2,024)

 

 
(26,395)

 

 
65,371

 

 
134,842

 

Deferred income tax expense/(recovery)

 

13

 

 
23,201

 

 
(84,924)

 

 
332,986

 

 
(444,983)

 

Foreign exchange (gain)/loss on debt and

working capital

 

12

 

 
3,960

 

 
64,148 

 

 
(52,067)

 

 
133,536

 

Share-based compensation

 

14

 

 
2,931

 

 
7,793 

 

 
11,751

 

 
17,372

 

Amortization of debt issue costs

 

11

 

 
182

 

 
241 

 

 
934

 

 
721

 

Gain on divestment of assets

 

4

 

 

 —

 

 

 —

 

 
(219,800)

 

 

 —

 

Gain on prepayment of senior notes

 

7

 

 

 —

 

 

 —

 

 
(19,270)

 

 

 —

 

Derivative settlement of foreign exchange swaps

 

 

 

 

 —

 

 

 —

 

 

 —

 

 
(39,904)

 

Asset retirement obligation expenditures

 

8

 

 
(1,237)

 

 
(4,172)

 

 
(4,441)

 

 
(10,631)

 

Changes in non-cash operating working capital

 

17

 

 
27,077

 

 
5,994 

 

 
44,141

 

 
9,045

 

Cash flow from/(used in) operating activities

 

 

 

 
105,941

 

 
122,667 

 

 
237,575

 

 
388,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

Proceeds from the issuance of shares

 

14

 

 

 —

 

 

 —

 

 
220,410

 

 
3,205

 

Cash dividends

 

14

 

 
(7,214)

 

 
(30,944)

 

 
(28,225)

 

 
(109,238)

 

Increase/(decrease) in bank credit facility

 

 

 

 

 —

 

 
33,192 

 

 
(79,223)

 

 
33,626

 

Proceeds/(repayment) of senior notes

 

7

 

 

 —

 

 

 —

 

 
(335,400)

 

 
(88,897)

 

Derivative settlement of foreign exchange swaps

 

 

 

 

 —

 

 

 —

 

 

 —

 

 
39,904

 

Changes in non-cash financing working capital

 

 

 

 

 —

 

 
14 

 

 
(3,791)

 

 
(8,191)

 

Cash flow from/(used in) financing activities

 

 

 

 
(7,214)

 

 
2,262 

 

 
(226,229)

 

 
(129,591)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

Capital and office expenditures

 

 

 

 
(60,856)

 

 
(89,902)

 

 
(152,354)

 

 
(407,229)

 

Property and land acquisitions

 

 

 

 
(3,777)

 

 
(2,005)

 

 
(7,674)

 

 
(758)

 

Property divestments

 

 4

 

 
111

 

 
11,865 

 

 
280,614

 

 
203,378

 

Changes in non-cash investing working capital

 

 

 

 
(9,055)

 

 
(40,697)

 

 
(63,090)

 

 
(51,914)

 

Cash flow from/(used in) investing activities

 

 

 

 
(73,577)

 

 
(120,739)

 

 
57,496

 

 
(256,523)

 

Effect of exchange rate changes on cash

 

 

 

 
683

 

 
(2,276)

 

 
(1,335)

 

 
(1,847)

 

Change in cash

 

 

 

 
25,833

 

 
1,914 

 

 
67,507

 

 
880

 

Cash, beginning of period

 

 

 

 
49,172

 

 
1,002 

 

 
7,498

 

 
2,036

 

Cash, end of period

 

 

 

$
75,005

 

$
2,916 

 

$
75,005

 

$
2,916

 

 

The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Page 4 of 15

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

1)REPORTING ENTITY

 

These interim Condensed Consolidated Financial Statements (“interim Consolidated Financial Statements”) and notes present the financial position and results of Enerplus Corporation (“The Company” or “Enerplus”) including its Canadian and U.S. subsidiaries. Enerplus is a North American crude oil and natural gas exploration and development company. Enerplus is publicly traded on the Toronto and New York stock exchanges under the ticker symbol ERF. Enerplus’ head office is located in Calgary, Alberta, Canada. The interim Consolidated Financial Statements were authorized for issue by the Board of Directors on November 10, 2016.

 

2)BASIS OF PREPARATION

 

Enerplus’ interim Consolidated Financial Statements present its results of operations and financial position under accounting principles generally accepted in the United States of America (“U.S. GAAP”) for the three and nine months ended September 30, 2016 and the 2015 comparative periods. Certain information and notes normally included with the annual audited Consolidated Financial Statements have been condensed or have been disclosed on an annual basis only. Accordingly, these interim Consolidated Financial Statements should be read in conjunction with Enerplus’ audited Consolidated Financial Statements as of December 31, 2015. There are no differences in the use of estimates or judgments between these interim Consolidated Financial Statements and the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2015.

 

These unaudited interim Consolidated Financial Statements reflect, in the opinion of Management, all normal and recurring adjustments necessary to present fairly the financial position and results of the Company as at and for the periods presented.

 

3)ACCOUNTS RECEIVABLE

 

 

 

 

 

 

 

 

 

($ thousands)

    

September 30, 2016

    

December 31, 2015

 

Accrued receivables

 

$
64,363

 

$
91,378

 

Accounts receivable – trade

 

 
19,471

 

 
22,615

 

Current income tax receivable

 

 
1,578

 

 
21,410

 

Allowance for doubtful accounts

 

 
(3,247)

 

 
(3,247)

 

Total accounts receivable

 

$
82,165

 

$
132,156

 

 

 

4)PROPERTY, PLANT AND EQUIPMENT (“PP&E”)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Depletion,

 

 

 

 

As of September 30, 2016

    

 

 

    

Depreciation, and 

    

 

 

 

($ thousands)

 

 

Cost

 

Impairment

 

 

Net Book Value

 

Oil and natural gas properties

 

$
13,310,612

 

$
(12,614,122)

 

$
696,490

 

Other capital assets

 

 
104,872

 

 
(91,447)

 

 
13,425

 

Total PP&E

 

$
13,415,484

 

$
(12,705,569)

 

$
709,915

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Depletion,

 

 

 

 

As of December 31, 2015

    

 

 

    

Depreciation, and 

    

 

 

 

($ thousands)

 

 

Cost

 

Impairment

 

 

Net Book Value

 

Oil and natural gas properties

 

$
13,541,670

 

$
(12,375,083)

 

$
1,166,587

 

Other capital assets

 

 
105,124

 

 
(85,438)

 

 
19,686

 

Total PP&E

 

$
13,646,794

 

$
(12,460,521)

 

$
1,186,273

 

 

For the nine months ended September 30, 2016, Enerplus disposed of certain Canadian properties for proceeds of $280.6 million, resulting in gains on asset divestments of $219.8 million (2015 – proceeds of $203.4 million, gains of nil). 

 

Under full cost accounting rules, divestitures of oil and gas properties are generally accounted for as adjustments to capitalized costs, with no recognition of a gain or loss.  However, if not recognizing a gain or loss on the transaction would have otherwise significantly altered the relationship between a cost centre’s capitalized costs and proved reserves, then a gain or loss must be recognized.

 

Page 5 of 15

 

 

5)ASSET IMPAIRMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Oil and natural gas properties:

    

 

  

    

 

  

    

 

  

    

 

  

 

Canada cost centre

 

$
9,800

 

$
258,600

 

$
44,000

 

$
286,700

 

U.S. cost centre

 

 
51,156

 

 
62,550

 

 
211,812

 

 
799,308

 

Impairment expense

 

$
60,956

 

$
321,150

 

$
255,812

 

$
1,086,008

 

 

The impairments for the three and nine months ended September 30, 2016 were due to lower 12-month average trailing crude oil and natural gas prices.  

 

The following table outlines the 12-month average trailing benchmark prices and exchange rates used in Enerplus’ ceiling tests from September 30, 2015 through September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

    

 

 

    

 

 

    

AECO Natural

 

 

 

WTI Crude Oil

 

Exchange Rate

 

Edm Light Crude

 

U.S. Henry Hub

 

Gas Spot

 

Period

 

US$/bbl

 

US$/CDN$

 

CDN$/bbl

 

Gas US$/Mcf

 

CDN$/Mcf

 

Q3 2016

 

$
41.68

 
1.32

 

$
51.17

 

$
2.27

 

$
2.06

 

Q2 2016

 

 
43.12

 
1.32

 

 
53.16

 

 
2.25

 

 
2.14

 

Q1 2016

 

 
46.26

 
1.32

 

 
56.97

 

 
2.41

 

 
2.47

 

Q4 2015

 

 
50.28

 
1.27

 

 
59.38

 

 
2.58

 

 
2.69

 

Q3 2015

 

 
59.21

 
1.22

 

 
66.51

 

 
3.08

 

 
3.00

 

 

 

6)ACCOUNTS PAYABLE

 

 

 

 

 

 

 

 

 

($ thousands)

    

September 30, 2016

    

December 31, 2015

 

Accrued payables

 

$
91,298

 

$
167,253

 

Accounts payable - trade

 

 
72,796

 

 
72,697

 

Total accounts payable

 

$
164,094

 

$
239,950

 

 

 

7)DEBT

 

 

 

 

 

 

 

 

 

($ thousands)

    

September 30, 2016

    

December 31, 2015

 

Current:

 

 

  

 

 

  

 

Senior notes

 

$
28,857

 

$

 —

 

 

 

 
28,857

 

 

 —

 

Long-term:

 

 

  

 

 

  

 

Bank credit facility

 

$

 —

 

$
86,543

 

Senior notes

 

 
700,219

 

 
1,137,139

 

 

 

 
700,219

 

 
1,223,682

 

Total debt

 

$
729,076

 

$
1,223,682

 

 

For the nine months ended September 30, 2016, Enerplus repurchased US$267 million in outstanding senior notes at a discount, resulting in gains of $19.3 million.  These repurchases have resulted in total payments of $335.4 million for the nine months ended September 30, 2016.

 

The terms and rates of the Company’s outstanding senior notes are provided below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

Original

    

Remaining

    

CDN$ Carrying

 

 

 

Interest

 

 

 

Coupon

 

Principal

 

Principal

 

Value

 

Issue Date

 

Payment Dates

 

Principal Repayment

 

Rate

 

($ thousands)

 

($ thousands)

 

($ thousands)

 

September 3, 2014

 

March 3 and Sept 3

 

5 equal annual installments beginning September 3, 2022

 

3.79%

 

US$200,000

 

US$105,000

 

$
137,668

 

May 15, 2012

 

May 15 and Nov 15

 

Bullet payment on May 15, 2019

 

4.34%

 

CDN$30,000

 

CDN$30,000

 

 
30,000

 

May 15, 2012

 

May 15 and Nov 15

 

Bullet payment on May 15, 2022

 

4.40%

 

US$20,000

 

US$20,000

 

 
26,234

 

May 15, 2012

 

May 15 and Nov 15

 

5 equal annual installments beginning May 15, 2020

 

4.40%

 

US$355,000

 

US$298,000

 

 
390,887

 

June 18, 2009

 

June 18 and Dec 18

 

5 equal annual installments beginning June 18, 2017

 

7.97%

 

US$225,000

 

US$110,000

 

 
144,287

 

 

 

 

 

 

 

Total carrying value

 

$
729,076

 

 

 

 

Page 6 of 15

 

8)ASSET RETIREMENT OBLIGATION

 

Enerplus has estimated the present value of its asset retirement obligation to be $185.8 million at September 30, 2016 compared to $206.4 million at December 31, 2015 based on a total undiscounted liability of $466.0 million and $556.4 million, respectively. The asset retirement obligation was calculated using a weighted credit-adjusted risk-free rate of 5.89% (December 31, 2015 – 5.91%).

 

 

 

 

 

 

 

 

 

 

    

Nine months ended

    

Year ended

 

($ thousands)

 

September 30, 2016

 

December 31, 2015

 

Balance, beginning of year

 

$
206,359

 

$
288,692

 

Change in estimates

 

 
3,568

 

 
(35,386)

 

Property acquisitions and development activity

 

 
386

 

 
761

 

Dispositions

 

 
(28,341)

 

 
(48,748)

 

Settlements

 

 
(4,441)

 

 
(14,935)

 

Accretion expense

 

 
8,302

 

 
15,975

 

Balance, end of period

 

$
185,833

 

$
206,359

 

 

 

9)OIL AND NATURAL GAS SALES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Oil and natural gas sales

    

$
230,421

    

$
275,663

    

$
613,585

    

$
818,173

 

Royalties(1)

 

 
(42,103)

 

 
(47,392)

 

 
(108,276)

 

 
(133,212)

 

Oil and natural gas sales, net of royalties

 

$
188,318

 

$
228,271

 

$
505,309

 

$
684,961

 

(1) Royalties above do not include production taxes which are reported separately on the Condensed Consolidated Statements of Income/(Loss).

 

10)GENERAL AND ADMINISTRATIVE EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

General and administrative expense

    

$
13,390

    

$
22,827

    

$
46,386

    

$
64,134

 

Share-based compensation expense

 

 
3,222

 

 
6,201

 

 
11,923

 

 
21,236

 

General and administrative expense

 

$
16,612

 

$
29,028

 

$
58,309

 

$
85,370

 

 

 

11)INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Realized:

    

 

    

    

 

    

    

 

    

    

 

    

 

Interest on bank debt and senior notes

 

$
9,685

 

$
16,273

 

$
34,283

 

$
48,947

 

Unrealized:

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt issue costs

 

 
182

 

 
241

 

 
934

 

 
721

 

Interest expense

 

$
9,867

 

$
16,514

 

$
35,217

 

$
49,668

 

 

 

12)FOREIGN EXCHANGE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Realized:

    

 

    

    

 

    

    

 

    

    

 

    

 

Foreign exchange (gain)/loss

 

$
(875)

 

$
8,786

 

$
1,127

 

$
(18,350)

 

Unrealized:

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation of U.S. dollar debt and working capital (gain)/loss

 

 
3,960

 

 
64,148

 

 
(52,067)

 

 
133,536

 

Foreign exchange derivatives (gain)/loss

 

 

 —

 

 
(3,296)

 

 

 —

 

 
30,998

 

Foreign exchange (gain)/loss

 

$
3,085

 

$
69,638

 

$
(50,940)

 

$
146,184

 

 

 

 

 

 

Page 7 of 15

 

13)INCOME TAXES

 

Enerplus’ provision for income tax is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Current tax expense/(recovery)

    

 

    

    

 

    

    

 

    

    

 

    

 

Canada

 

$

 —

 

$
3

 

$
(669)

 

$
(397)

 

United States

 

 
126

 

 
(16,205)

 

 
409

 

 
(15,844)

 

Current tax expense/(recovery)

 

 
126

 

 
(16,202)

 

 
(260)

 

 
(16,241)

 

Deferred tax expense/(recovery)

 

 

  

 

 

  

 

 

  

 

 

  

 

Canada

 

$
28,118

 

$
(62,778)

 

$
62,033

 

$
(99,717)

 

United States

 

 
(4,917)

 

 
(22,146)

 

 
270,953

 

 
(345,266)

 

Deferred tax expense/(recovery)

 

 
23,201

 

 
(84,924)

 

 
332,986

 

 
(444,983)

 

Income tax expense/(recovery)

 

$
23,327

 

$
(101,126)

 

$
332,726

 

$
(461,224)

 

 

The difference between expected income taxes based on the statutory income tax rate and the effective income tax rate for the current and prior period is impacted by the following: expected annual earnings, recognition or reversal of valuation allowance, foreign rate differentials for foreign operations, statutory and other rate differentials, non-taxable portions of capital gains and losses, and non-deductible share-based compensation.  Enerplus recorded an additional valuation allowance of $56.6 million and $420.1 million for the three and nine months ended September 30, 2016, respectively (2015- $9.9 million and $18.2 million, respectively). 

 

14)SHAREHOLDERS’ EQUITY

 

a)Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

Year ended 

 

 

 

September 30, 2016

 

December 31, 2015

 

Authorized unlimited number of common shares issued: 

(thousands)

 

Shares

 

 

Amount

 

Shares

 

 

Amount

 

Balance, beginning of year

    
206,539

    

$
3,133,524

    
205,732

    

$
3,120,002

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued for cash:

 

  

 

 

  

 

  

 

 

  

 

Stock Option Plan

 

 —

 

 

 —

 
234

 

 
3,205

 

Issue of shares 

 
33,350

 

 
230,115

 

 —

 

 

 —

 

Share issue costs (net of tax of $2,620)

 

 —

 

 
(7,084)

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash:

 

 

 

 

 

 

  

 

 

  

 

Share-based compensation – settled

 
594

 

 
9,407

 
573

 

 
10,050

 

Stock Option Plan – exercised

 

 —

 

 

 —

 

 —

 

 
267

 

Balance, end of period

 
240,483

 

$
3,365,962

 
206,539

 

$
3,133,524

 

 

Dividends declared to shareholders for the three and nine months ended September 30, 2016 were $7.2 million and $28.2 million, respectively (2015 - $30.9 million and $109.2 million, respectively).

 

On May 31, 2016, Enerplus issued 33,350,000 common shares at a price of $6.90 per share for gross proceeds of $230,115,000 ($220,410,400, net of issue costs).   

 

At the Company’s Annual General Meeting on May 6, 2016, the Shareholders of the Company approved a reduction in Enerplus’ legal stated capital to $1 per share to be reflected in the contributed surplus account of the Company.  This transaction does not result in an adjustment to the financial statements under U.S. GAAP.

 

 

 

 

 

 

 

 

 

 

Page 8 of 15

 

b)   Share-based Compensation

 

The following table summarizes Enerplus’ share-based compensation expense, which is included in General and Administrative expense on the Consolidated Statements of Income/(Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Cash:

    

 

    

    

 

    

    

 

    

    

 

    

 

Long-term incentive plans expense

 

$
233

 

$
(3,565)

 

$
1,769

 

$
2,458

 

Non-cash:

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term incentive plans and stock option expense

 

 
2,931

 

 
7,793

 

 
11,751

 

 
17,372

 

Equity swap (gain)/loss

 

 
58

 

 
1,973

 

 
(1,597)

 

 
1,406

 

Share-based compensation expense

 

$
3,222

 

$
6,201

 

$
11,923

 

$
21,236

 

 

i)Long-term Incentive (“LTI”) Plans

 

In 2014, the Performance Share Unit (“PSU”) and Restricted Share Unit (“RSU”) plans were amended such that grants under the plans are settled through the issuance of treasury shares. The amendment was effective beginning with our grant in March of 2014 and any prior grants were settled in cash.  The final cash-settled PSU and RSU grants were settled in December, 2015 and March, 2016, respectively.  The Company’s Director Share Units (“DSU”) continue to be granted as cash-settled awards. 

 

The following table summarizes the PSU, RSU and DSU activity for the nine months ended September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2016

 

Cash-settled LTI plans

 

Equity-settled LTI plans

 

Total

 

(thousands of units)

 

RSU

 

DSU

 

PSU

 

RSU

 

 

 

Balance, beginning of year

    
92

 
166

 
1,222

 
1,627

 
3,107

 

Granted

 

 —

 
139

 
1,426

 
1,997

 
3,562

 

Vested

 
(89)

 

 —

 
(9)

 
(594)

 
(692)

 

Forfeited

 
(3)

 

 —

 
(109)

 
(264)

 
(376)

 

Balance, end of period

 

 —

 
305

 
2,530

 
2,766

 
5,601

 

 

Cash-settled LTI Plans

 

For the three and nine months ended September 30, 2016, the Company recorded cash share-based compensation of $0.2 million and $1.8 million, respectively (September 30, 2015 - recovery of $3.6 million and expense of $2.5 million). For the three and nine months ended September 30, 2016 the Company made cash payments of nil and $2.7 million, respectively, related to its cash-settled plans (September 30, 2015 - $3.0 million and $8.6 million).

 

As of September 30, 2016, a liability of $2.6 million (December 31, 2015 - $2.3 million) with respect to the DSU plan has been recorded to Accounts Payable on the Consolidated Balance Sheets.

 

Equity-settled LTI Plans

 

For the three and nine months ended September 30, 2016 the Company recorded non-cash share-based compensation expense of $2.9 million and $11.8 million, respectively (2015 – $7.8 million and $17.4 million, respectively).

 

The following table summarizes the cumulative share-based compensation expense recognized to-date which is recorded to Paid-in Capital on the Consolidated Balance Sheets. Unrecognized amounts will be recorded to non-cash share-based compensation expense over the remaining vesting terms.

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2016 ($ thousands, except for years)

    

PSU(1)

    

RSU

    

Total

 

Cumulative recognized share-based compensation expense

 

$
10,351

 

$
13,202

 

$
23,553

 

Unrecognized share-based compensation expense

 

 
6,971

 

 
7,158

 

 
14,129

 

Fair value

 

$
17,322

 

$
20,360

 

$
37,682

 

Weighted-average remaining contractual term (years)

 

 
1.8

 

 
1.3

 

 

  

 

(1) Includes estimated performance multipliers.

 

Page 9 of 15

 

ii)Stock Option Plan

 

The Company did not grant any stock options for the three and nine months ended September 30, 2016.  At September 30, 2016 all stock options are fully vested and any related non-cash share-based compensation expense has been fully recognized. 

 

The following table summarizes the stock option plan activity for the period ended September 30, 2016:

 

 

 

 

 

 

 

 

 

    

Number of Options

    

Weighted Average

 

Period ended September 30, 2016

 

(thousands)

 

Exercise Price

 

Options outstanding, beginning of year

 
7,580

 

$
18.49

 

Forfeited

 
(1,421)

 

 
18.76

 

Options outstanding, end of period

 
6,159

 

$
18.43

 

Options exercisable, end of period

 
6,159

 

$
18.43

 

 

At September 30, 2016, Enerplus had 6,159,000 options that were exercisable at a weighted average reduced exercise price of $18.43 with a weighted average remaining contractual term of 2.8 years, giving an aggregate intrinsic value of nil (2015 – 3.5 years and nil). The intrinsic value of options exercised for both the three and nine months ended September 30, 2016 was nil (September 30, 2015 – nil and $0.2 million, respectively).

 

c)Basic and Diluted Net Income/(Loss) Per Share

 

Net income/(loss) per share has been determined as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

(thousands, except per share amounts)

 
2016

 
2015

 
2016

 
2015

 

Net income/(loss)

    

$
(100,689)

    

$
(292,666)

    

$
(442,909)

    

$
(898,416)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – Basic

 

 
240,483

 

 
206,243

 

 
221,843

 

 
206,100

 

Dilutive impact of share-based compensation(1)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Weighted average shares outstanding – Diluted

 

 
240,483

 

 
206,243

 

 
221,843

 

 
206,100

 

Net income/(loss) per share

 

 

  

 

 

  

 

 

  

 

 

  

 

Basic

 

$
(0.42)

 

$
(1.42)

 

$
(2.00)

 

$
(4.36)

 

Diluted(1)

 

$
(0.42)

 

$
(1.42)

 

$
(2.00)

 

$
(4.36)

 

(1) For the three and nine months ended September 30, 2016 the impact of share-based compensation was anti-dilutive as a conversion to shares would not increase the loss per share.

 

15)FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

 

a)Fair Value Measurements

 

At September 30, 2016 the carrying value of cash, accounts receivable, accounts payable, dividends payable and bank credit facilities approximated their fair value due to the short-term maturity of the instruments.

 

At September 30, 2016 senior notes had a carrying value of $729.1 million and a fair value of $795.7 million (December 31, 2015 - $1,137.2 million and $1,220.8 million, respectively).

 

There were no transfers between fair value hierarchy levels during the period.

 

b)Derivative Financial Instruments

 

The deferred financial assets and liabilities on the Consolidated Balance Sheets result from recording derivative financial instruments at fair value.

 

The following table summarizes the change in fair value for the three and nine months ended September 30, 2016 and 2015:

 

Page 10 of 15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

 

 

September 30, 

 

September 30, 

 

 

 

Gain/(Loss) ($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Income Statement 
Presentation

 

Foreign Exchange Derivatives

  

$

 —

    

$
3,296

  

$

 —

    

$
(30,998)

  

Foreign exchange

 

Electricity Swaps

 

 
(25)

 

 
(1,855)

 

 
552

 

 
(141)

 

Operating expense

 

Equity Swaps

 

 
(58)

 

 
(1,973)

 

 
1,597

 

 
(1,406)

 

General and administrative expense

 

Commodity Derivative Instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Oil

 

 
(1,684)

 

 
35,135

 

 
(60,104)

 

 
(71,909)

 

Commodity derivative instruments

 

Gas

 

 
3,791

 

 
(8,208)

 

 
(7,416)

 

 
(30,388)

 

 

Total

 

$
2,024

 

$
26,395

 

$
(65,371)

 

$
(134,842)

 

  

 

 

The following table summarizes the income statement effects of Enerplus’ commodity derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Change in fair value gain/(loss)

    

$
2,107

    

$
26,927

    

$
(67,520)

    

$
(102,297)

 

Net realized cash gain/(loss)

 

 
9,965

 

 
54,105

 

 
71,149

 

 
213,976

 

Commodity derivative instruments gain/(loss)

 

$
12,072

 

$
81,032

 

$
3,629

 

$
111,679

 

 

The following table summarizes the fair values at the respective period ends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

Assets

 

        Liabilities

 

Assets

 

        Liabilities

 

($ thousands)

 

Current

 

Current

 

Long-term

 

Current

 

Current

 

Long-term

 

Electricity Swaps

    

$

 —

    

$
1,084

    

$
140

    

$

 —

    

$
1,776

    

$

 —

 

Equity Swaps

 

 

 —

 

 
2,622

 

 
1,298

 

 

 —

 

 
2,324

 

 
3,193

 

Commodity Derivative Instruments:

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

  

 

Oil

 

 
11,339

 

 
2,110

 

 
1,936

 

 
67,397

 

 

 —

 

 

 —

 

Gas

 

 

 —

 

 
2,781

 

 
594

 

 
4,041

 

 

 —

 

 

 —

 

Total

 

$
11,339

 

$
8,597

 

$
3,968

 

$
71,438

 

$
4,100

 

$
3,193

 

 

c)Risk Management

 

i)Market Risk

 

Market risk is comprised of commodity price, foreign exchange, interest rate and equity price risk.

 

Commodity Price Risk:

 

Enerplus manages a portion of commodity price risk through a combination of financial derivative and physical delivery sales contracts. Enerplus’ policy is to enter into commodity contracts subject to a maximum of 80% of forecasted production volumes net of royalties and production taxes.

 

Page 11 of 15

 

The following tables summarize the Corporation’s price risk management positions at November 1, 2016:

 

Crude Oil Instruments:

 

 

 

 

 

 

 

Instrument Type(1)

    

bbls/day

    

US$/bbl

 

 

 

 

 

 

 

Oct 1, 2016 – Oct 31, 2016

 

  

 

  

 

WTI Purchased Put

 
12,000

 
57.82

 

WTI Sold Call

 
12,000

 
71.75

 

WTI Sold Put

 
12,000

 
45.09

 

WCS Differential Swap

 
3,000

 
(14.03)

 

MSW Differential Swap

 
1,000

 
(3.50)

 

 

 

 

 

 

 

Nov 1, 2016 – Dec 31, 2016

 

 

 

 

 

WTI Swap

 
2,000

 
52.33

 

WTI Purchased Put

 
12,000

 
57.82

 

WTI Sold Call

 
12,000

 
71.75

 

WTI Sold Put

 
12,000

 
45.09

 

WCS Differential Swap

 
3,000

 
(14.03)

 

MSW Differential Swap

 
1,000

 
(3.50)

 

 

 

 

 

 

 

Jan 1, 2017 – Jun 30, 2017

 

  

 

  

 

WTI Swap

 
2,000

 
53.50

 

WTI Purchased Put

 
14,000

 
50.29

 

WTI Sold Call

 
14,000

 
61.14

 

WTI Sold Put

 
14,000

 
38.94

 

WCS Differential Swap

 
2,000

 
(14.75)

 

 

 

 

 

 

 

Jul 1, 2017 – Dec 31, 2017

 

 

 

 

 

WTI Swap

 
2,000

 
53.50

 

WTI Purchased Put

 
17,000

 
50.41

 

WTI Sold Call

 
17,000

 
60.41

 

WTI Sold Put

 
17,000

 
39.48

 

WCS Differential Swap

 
2,000

 
(14.75)

 

 

 

 

 

 

 

Jan 1, 2018 – Dec 31, 2018

 

 

 

 

 

WTI Swap

 
3,000

 
53.73

 

WTI Purchased Put

 
1,000

 
54.00

 

WTI Sold Call

 
1,000

 
62.00

 

WTI Sold Put

 
1,000

 
41.00

 

 

 

 

 

 

 

Jan 1, 2019 – Mar 31, 2019

 

 

 

 

 

WTI Swap

 
3,000

 
53.73

 

 (1) Transactions with a common term have been aggregated and presented at a weighted average price/bbl.

 

Natural Gas Instruments:

 

 

 

 

 

 

 

Instrument Type(1)

    

MMcf/day

    

US$/Mcf

 

 

 

 

 

 

 

Oct 1, 2016 – Oct 31, 2016

 

  

 

  

 

NYMEX Swap

 
50.0

 
2.53

 

NYMEX Purchased Put

 
25.0

 
3.00

 

NYMEX Sold Call

 
25.0

 
3.75

 

NYMEX Sold Put

 
25.0

 
2.50

 

 

 

 

 

 

 

Nov 1, 2016 – Dec 31, 2016

 

  

 

  

 

NYMEX Swap

 
25.0

 
2.48

 

NYMEX Purchased Put

 
25.0

 
3.00

 

NYMEX Sold Call

 
25.0

 
3.75

 

NYMEX Sold Put

 
25.0

 
2.50

 

 

 

 

 

 

 

Jan 1, 2017 – Dec 31, 2017

 

  

 

  

 

NYMEX Purchased Put

 
50.0

 
2.75

 

NYMEX Sold Call

 
50.0

 
3.41

 

NYMEX Sold Put

 
50.0

 
2.06

 

 

 

 

 

 

 

(1) Transactions with a common term have been aggregated and presented at a weighted average price/Mcf.

Page 12 of 15

 

 

Electricity Instruments:

 

 

 

 

 

 

 

Instrument Type

    

MWh

    

CDN$/Mwh

 

 

 

 

 

 

 

Oct 1, 2016 – Oct 31, 2016

 

 

 

 

 

AESO Power Swap(1)

 
15.0

 

AESO(1) + 16.45

 

 

 

 

 

 

 

Nov 1, 2016 – Dec 31, 2016

 

  

 

  

 

AESO Power Swap(1)

 
15.0

 
46.60

 

 

 

 

 

 

 

Jan 1, 2017 – Dec 31, 2017

 

  

 

  

 

AESO Power Swap(1)

 
6.0

 
44.38

 

 

 

 

 

 

 

(1) Alberta Electrical System Operator (“AESO”) fixed pricing.

 

 

Physical Contracts:

 

 

 

 

 

 

 

 

Instrument Type

    

MMcf/day

    

US$/Mcf

 

 

 

 

 

 

 

 

Purchases:

 

 

 

 

 

 

 

 

 

 

 

 

 

Nov 1, 2016 – Oct 31, 2017

 
45.0

 

$
(0.92)

 

AECO-NYMEX Basis

 

  

 

 

  

 

 

 

 

 

 

 

 

Nov 1, 2017 – Oct 31, 2018

 
45.0

 

$
(0.78)

 

AECO-NYMEX Basis

 

  

 

 

  

 

 

 

 

 

 

 

 

Nov 1, 2018  – Oct 31, 2019

 
45.0

 

$
(0.72)

 

AECO-NYMEX Basis

 

  

 

 

  

 

 

 

 

 

 

 

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Oct 1, 2016 – Oct 31, 2016

 
21.1

 

$
(0.68)

 

AECO-NYMEX Basis

 

 

 

 

  

 

 

 

 

 

 

 

 

Nov 1, 2016 – Oct 31, 2017

 
80.0

 

$
(0.65)

 

AECO-NYMEX Basis

 

 

 

 

  

 

 

 

 

 

 

 

 

Nov 1, 2017 – Oct 31, 2018

 
80.0

 

$
(0.65)

 

AECO-NYMEX Basis

 

 

 

 

 

 

 

 

 

 

 

 

 

Nov 1, 2018  – Oct 31, 2019

 
80.0

 

$
(0.64)

 

AECO-NYMEX Basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Exchange Risk:

 

Enerplus is exposed to foreign exchange risk in relation to its U.S. operations, and U.S. dollar denominated senior notes and working capital. Additionally, Enerplus’ crude oil sales and a portion of its natural gas sales are based on U.S. dollar indices. To mitigate exposure to fluctuations in foreign exchange, Enerplus may enter into foreign exchange derivatives.  At September 30, 2016 Enerplus did not have any foreign exchange derivatives outstanding.

 

Interest Rate Risk:

 

As of September 30, 2016 all of Enerplus’ debt was based on fixed interest rates, and Enerplus had no interest rate derivatives outstanding.

 

Equity Price Risk:

Enerplus is exposed to equity price risk in relation to its long-term incentive plans detailed in Note 14. Enerplus has entered into various equity swaps maturing between 2016 and 2018 and has effectively fixed the figure settlement cost on 470,000 shares at weighted average price of $16.89 per share.

Page 13 of 15

 

ii)Credit Risk

 

Credit risk represents the financial loss Enerplus would experience due to the potential non-performance of counterparties to its financial instruments. Enerplus is exposed to credit risk mainly through its joint venture, marketing and financial counterparty receivables.

 

Enerplus mitigates credit risk through credit management techniques including conducting financial assessments to establish and monitor counterparties’ credit worthiness, setting exposure limits, monitoring exposures against these limits and obtaining financial assurances such as letters of credit, parental guarantees, or third party credit insurance where warranted. Enerplus monitors and manages its concentration of counterparty credit risk on an ongoing basis.

 

Enerplus’ maximum credit exposure at the balance sheet date consists of the carrying amount of its non-derivative financial assets and the fair value of its derivative financial assets. At September 30, 2016 approximately 51% of Enerplus’ marketing receivables were with companies considered investment grade.    

 

At September 30, 2016 approximately $1.8 million or 2% of Enerplus’ total accounts receivable were aged over 120 days and considered past due. The majority of these accounts are due from various joint venture partners. Enerplus actively monitors past due accounts and takes the necessary actions to expedite collection, which can include withholding production, netting amounts of future payments or seeking other remedies including legal action. Should Enerplus determine that the ultimate collection of a receivable is in doubt, it will provide the necessary provision in its allowance for doubtful accounts with a corresponding charge to earnings. If Enerplus subsequently determines an account is uncollectable the account is written off with a corresponding charge to the allowance account. Enerplus’ allowance for doubtful accounts balance at September 30, 2016 was $3.2 million (December 31, 2015 - $3.2 million).

 

iii)Liquidity Risk & Capital Management

 

Liquidity risk represents the risk that Enerplus will be unable to meet its financial obligations as they become due. Enerplus mitigates liquidity risk through actively managing its capital, which it defines as debt (net of cash) and shareholders’ capital. Enerplus’ objective is to provide adequate short and longer term liquidity while maintaining a flexible capital structure to sustain the future development of its business. Enerplus strives to balance the portion of debt and equity in its capital structure given its current oil and natural gas assets and planned investment opportunities.

 

Management monitors a number of key variables with respect to its capital structure, including debt levels, capital spending plans, dividends, access to capital markets, as well as acquisition and divestment activity.

 

At September 30, 2016 Enerplus was in full compliance with all covenants under the bank credit facility and outstanding senior notes.

 

16)CONTINGENCIES

 

Enerplus is subject to various legal claims and actions arising in the normal course of business. Although the outcome of such claims and actions cannot be predicted with certainty, the Company does not expect these matters to have a material impact on the Consolidated Financial Statements. In instances where the Company determines that a loss is probable and the amount can be reasonably estimated, an accrual is recorded.

 

17)SUPPLEMENTAL CASH FLOW INFORMATION

 

a)Changes in Non-Cash Operating Working Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Accounts receivable

    

$
20,255

    

$
1,347

    

$
49,895

    

$
20,043

 

Other current assets

 

 
3,401

 

 
9,657

 

 
3,305

 

 
(5,220)

 

Accounts payable

 

 
3,421

 

 
(5,010)

 

 
(9,059)

 

 
(5,778)

 

 

 

$
27,077

 

$
5,994

 

$
44,141

 

$
9,045

 

 

Page 14 of 15

 

b)Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30, 

 

September 30, 

 

($ thousands)

 
2016

 
2015

 
2016

 
2015

 

Income taxes paid/(received)

    

$
42

    

$
(972)

    

$
(19,076)

    

$
(20,169)

 

Interest paid

 

 
3,221

 

 
6,428

 

 
30,859

 

 
38,846

 

 

 

 

18)SUBSEQUENT EVENTS

 

Subsequent to September 30, 2016, Enerplus entered into an agreement to purchase Canadian waterflood assets for approximately $110 million, net of closing adjustments.  The purchase is expected to close in November, 2016.

 

Subsequent to September 30, 2016, Enerplus extended its $800 million senior, unsecured bank credit facility to October 31, 2019.

 

 

 

 

 

 

 

 

 

Page 15 of 15