REPORTS
Exhibit 99.2
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of our Chief Executive Officer and our Chief Financial Officer we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, we have concluded that as of December 31, 2022, our internal control over financial reporting is effective.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even those systems determined to be effective can provide only reasonable assurance with respect to the financial statement preparation and presentation.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, has been audited by KPMG LLP, the Independent Registered Public Accounting Firm, who also audited the Company’s Consolidated Financial Statements for the year ended December 31, 2022.
/s/ Ian C. Dundas | /s/ Jodine J. Jenson Labrie |
President and | Senior Vice President and |
Calgary, Alberta
February 23, 2023
ENERPLUS 2022 FINANCIAL SUMMARY 1
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Enerplus Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Enerplus Corporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity, and cash flow for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 23, 2023 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Chartered Professional Accountants
Calgary, Canada
February 23, 2023
2 ENERPLUS 2022 FINANCIAL SUMMARY
Management’s Responsibility for Financial Statements
In management’s opinion, the accompanying consolidated financial statements of Enerplus Corporation have been prepared within reasonable limits of materiality and in accordance with accounting principles generally accepted in the United States of America. Since a precise determination of many assets and liabilities is dependent on future events, the preparation of financial statements necessarily involves the use of estimates and approximations. These have been made using careful judgment and with all information available up to February 23, 2023. Management is responsible for all information in the annual report and for the consistency, therewith, of all other financial and operating data presented in this report.
To meet its responsibility for reliable and accurate financial statements, management has established and monitors systems of internal control which are designed to provide reasonable assurance that financial information is relevant, reliable and accurate, and that assets are safeguarded and transactions are executed in accordance with management’s authorization.
The consolidated financial statements have been examined by KPMG LLP, Independent Registered Public Accountants. Their responsibility is to express a professional opinion on the fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The Report of Independent Registered Public Accounting Firm outlines the scope of their examination and sets forth their opinion.
The Audit Committee, consisting exclusively of independent directors, has reviewed these statements with management and the Independent Registered Public Accounting Firm and has recommended their approval to the Board of Directors. The Board of Directors has approved the consolidated financial statements of the Company.
/s/ Ian C. Dundas | /s/ Jodine J. Jenson Labrie |
President and | Senior Vice President and |
Calgary, Alberta
February 23, 2023
ENERPLUS 2022 FINANCIAL SUMMARY 3
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Enerplus Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Enerplus Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022 in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
4 ENERPLUS 2022 FINANCIAL SUMMARY
Impact of estimated proved oil and gas reserves on the calculations of depletion expense and the ceiling test related to United States of America (“US”) oil and gas properties
As discussed in Note 2(d) to the consolidated financial statements, the Company depletes its oil and gas properties each quarter using the unit-of-production method on a country-by-country basis. Under such method, capitalized costs for the US oil and gas properties are depleted over the estimated proved oil and gas reserves (“country proved reserves”). For the year ended December 31, 2022, the Company recorded depletion, depreciation and accretion expense of $309.4 million, a portion of which related to depletion expense on the US oil and gas properties. Additionally, as discussed in Notes 2(d) and 6 to the consolidated financial statements, the Company is required to perform a quarterly ceiling test calculation on a country-by-country basis. For the year ended December 31, 2022, the Company recorded no ceiling test impairments related to the US oil and gas properties. The Company limits the capitalized costs of proved and unproved oil and natural gas properties, net of accumulated depletion and the related deferred income tax effects, by country to the estimated future net cash flows from country proved reserves discounted at 10 percent, net of related tax effects, plus the lower of cost or fair value of unproved oil and gas properties. The estimation of country proved reserves, which are used in the calculations of depletion and the ceiling test, requires the expertise of independent reservoir engineering specialists, who take into consideration assumptions related to forecasted production and forecasted operating and capital costs. The estimated future net cash flows are calculated using the simple average of the preceding twelve months’ first-day-of-the-month commodity prices. The Company engages independent reservoir engineering specialists to estimate country proved reserves.
We identified the impact of estimated country proved reserves on the calculations of depletion expense and the ceiling test related to US oil and gas properties as a critical audit matter. Changes in reserve assumptions related to forecasted production and forecasted operating and capital costs could have had a significant impact on the calculations of depletion expense and the ceiling test. A high degree of auditor judgment was required in evaluating the country proved reserves, and assumptions related to forecasted production and forecasted operating and capital costs, which were an input to the calculations of depletion expense and the ceiling test.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to:
● | the calculations of depletion expense and the ceiling test, and |
● | the estimation of the country proved reserves and the assumptions related to forecasted production and forecasted operating and capital costs. |
We assessed the calculations of depletion expense and the ceiling test for compliance with regulatory standards. We evaluated the competence, capabilities and objectivity of the independent reservoir engineering specialists engaged by the Company, who estimated the country proved reserves. We evaluated the methodology used by the independent reservoir engineering specialists to estimate country proved reserves for compliance with regulatory standards. We compared the Company’s 2022 actual production and operating and capital costs by country to those estimates used in the prior year estimate of country proved reserves to assess the Company’s ability to accurately forecast. We assessed the estimates of forecasted production and forecasted operating and capital cost assumptions used in the country proved reserves by comparing them to historical results.
/s/ KPMG LLP
Chartered Professional Accountants
We have served as the Company’s auditor since 2017
Calgary, Canada
February 23, 2023
ENERPLUS 2022 FINANCIAL SUMMARY 5
STATEMENTS
Consolidated Balance Sheets
(US$ thousands) |
| Note |
| December 31, 2022 |
| December 31, 2021 | ||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | | $ | | ||||
Accounts receivable |
| 4 |
| |
| | ||
Other current assets | 3 | |
| | ||||
Derivative financial assets |
| 16 |
| |
| | ||
| |
| | |||||
Property, plant and equipment: | ||||||||
Crude oil and natural gas properties (full cost method) |
| 5, 6 |
| |
| | ||
Other capital assets |
| 5 |
| |
| | ||
Property, plant and equipment |
| |
| | ||||
Other long-term assets | 3 | | | |||||
Right-of-use assets | 10 | | | |||||
Deferred income tax asset |
| 14 |
| |
| | ||
Total Assets | $ | | $ | | ||||
Liabilities | ||||||||
Current liabilities | ||||||||
Accounts payable |
| 7 | $ | | $ | | ||
Current portion of long-term debt |
| 8 |
| |
| | ||
Derivative financial liabilities |
| 16 |
| |
| | ||
Current portion of lease liabilities | 10 | | | |||||
| |
| | |||||
Long-term debt |
| 8 |
| |
| | ||
Asset retirement obligation |
| 9 |
| |
| | ||
Derivative financial liabilities | 16 | — | | |||||
Lease liabilities | 10 | | | |||||
Deferred income tax liability | 14 | | — | |||||
Total Liabilities |
| |
| | ||||
Shareholders’ Equity | ||||||||
Share capital – authorized unlimited common shares, |
| |||||||
Issued and outstanding: December 31, 2022 – |
|
| ||||||
December 31, 2021 – | 15 | | | |||||
Paid-in capital |
|
| |
| | |||
Accumulated deficit |
| ( |
| ( | ||||
Accumulated other comprehensive loss |
| ( |
| ( | ||||
| |
| | |||||
Total Liabilities & Shareholders' Equity | $ | | $ | | ||||
Commitments and Contingencies |
| 17 | ||||||
Subsequent Events | 3, 15 |
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.
Approved on behalf of the Board of Directors:
/s/ Hilary Foulkes | /s/ Jeffrey Sheets |
Director | Director |
6 ENERPLUS 2022 FINANCIAL SUMMARY
Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)
For the year ended December 31 (US$ thousands) |
| Note |
| 2022 |
| 2021 |
| 2020 | |||
Revenues | |||||||||||
Crude oil and natural gas sales |
| 11 | $ | | $ | | $ | | |||
Commodity derivative instruments gain/(loss) |
| 16 |
| ( |
| ( |
| | |||
| |
| |
| | ||||||
Expenses | |||||||||||
Operating |
| |
| |
| | |||||
Transportation |
| |
| |
| | |||||
Production taxes |
| |
| |
| | |||||
General and administrative |
| 12 |
| |
| |
| | |||
Depletion, depreciation and accretion |
| |
| |
| | |||||
Asset impairment | 6 | — | | | |||||||
Goodwill impairment |
| 6 |
| — |
| — |
| | |||
Interest |
|
| |
| |
| | ||||
Foreign exchange (gain)/loss |
| 13 |
| |
| ( |
| | |||
Gain on divestment of assets | 3 | ( | — | — | |||||||
Transaction costs and other expense/(income) |
| 3, 9 |
| ( |
| ( |
| | |||
| |
| |
| | ||||||
Income/(Loss) Before Taxes |
| |
| |
| ( | |||||
Current income tax expense/(recovery) |
| 14 |
| |
| |
| ( | |||
Deferred income tax expense/(recovery) |
| 14 |
| |
| |
| ( | |||
Net Income/(Loss) | $ | | $ | | $ | ( | |||||
Other Comprehensive Income/(Loss) | |||||||||||
Unrealized gain/(loss) on foreign currency translation |
| |
| ( |
| ( | |||||
Foreign exchange gain/(loss) on net investment hedge, net of tax | 16 | ( | | | |||||||
Total Comprehensive Income/(Loss) | $ | | $ | | $ | ( | |||||
Net Income/(Loss) per Share | |||||||||||
Basic |
| 15 | $ | | $ | | $ | ( | |||
Diluted |
| 15 | $ | | $ | | $ | ( |
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.
ENERPLUS 2022 FINANCIAL SUMMARY 7
Consolidated Statements of Changes in Shareholders’ Equity
For the year ended December 31 (US$ thousands) |
| 2022 |
| 2021 |
| 2020 | |||
Share Capital | |||||||||
Balance, beginning of year | $ | | $ | | $ | | |||
Purchase of common shares under Normal Course Issuer Bid | ( | ( | ( | ||||||
Share-based compensation – treasury settled |
| |
| |
| | |||
Issue of shares (net of tax effected issue costs) | — | | — | ||||||
Cancellation of predecessor shares |
| — |
| — |
| ( | |||
Balance, end of year | $ | | $ | | $ | | |||
Paid-in Capital | |||||||||
Balance, beginning of year | $ | | $ | | $ | | |||
Share-based compensation – tax withholdings settled in cash | ( | ( | ( | ||||||
Share-based compensation – treasury settled |
| ( |
| ( |
| ( | |||
Share-based compensation – non-cash |
| |
| |
| | |||
Balance, end of year | $ | | $ | | $ | | |||
Accumulated Deficit | |||||||||
Balance, beginning of year | $ | ( | $ | ( | $ | ( | |||
Purchase of common shares under Normal Course Issuer Bid | ( | | | ||||||
Cancellation of predecessor shares | — | — | | ||||||
Net income/(loss) |
| |
| |
| ( | |||
Dividends declared(1) |
| ( |
| ( |
| ( | |||
Balance, end of year | $ | ( | $ | ( | $ | ( | |||
Accumulated Other Comprehensive Income/(Loss) | |||||||||
Balance, beginning of year | $ | ( | $ | ( | $ | ( | |||
Unrealized gain/(loss) on foreign currency translation |
| |
| ( |
| ( | |||
Foreign exchange gain/(loss) on net investment hedge, net of tax | ( | | | ||||||
Balance, end of year | $ | ( | $ | ( | $ | ( | |||
Total Shareholders’ Equity | $ | | $ | | $ | |
(1) For the year ended December 31, 2022, dividends declared were $
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.
8 ENERPLUS 2022 FINANCIAL SUMMARY
Consolidated Statements of Cash Flows
For the year ended December 31 (US$ thousands) |
| Note |
| 2022 |
| 2021 |
| 2020 | |||
Operating Activities | |||||||||||
Net income/(loss) | $ | | $ | | $ | ( | |||||
Non-cash items add/(deduct): | |||||||||||
Depletion, depreciation and accretion |
| |
| |
| | |||||
Asset impairment | 6 | — | | | |||||||
Goodwill impairment |
| 6 |
| — |
| — |
| | |||
Changes in fair value of derivative instruments |
| 16 |
| ( |
| |
| | |||
Deferred income tax expense/(recovery) |
| 14 |
| |
| |
| ( | |||
Foreign exchange (gain)/loss on debt and working capital |
| 13 |
| |
| ( |
| | |||
Share-based compensation and general and administrative |
| 12,15 |
| |
| |
| | |||
Other expense/(income) | 3, 9 | ( | ( | — | |||||||
Amortization of debt issuance costs | 8 | | | — | |||||||
Translation of U.S. dollar cash held in parent company | 13 | ( | ( | ( | |||||||
Gain on divestment of assets | 3 | ( | — | — | |||||||
Other expense/(income) reclassified to Investing Activities | 3,19 | | ( | — | |||||||
Asset retirement obligation settlements |
| 9 |
| ( |
| ( |
| ( | |||
Changes in non-cash operating working capital |
| 19 |
| ( |
| ( |
| | |||
Cash flow from/(used in) operating activities |
| |
| |
| | |||||
Financing Activities | |||||||||||
Drawings from/(repayment of) bank credit facilities | 8 | ( | | — | |||||||
Repayment of senior notes | 8 |
| ( |
| ( |
| ( | ||||
Debt issuance costs | 8 | ( | ( | — | |||||||
Purchase of common shares under Normal Course Issuer Bid | 15 | ( | ( | ( | |||||||
Proceeds from the issuance of shares |
| 15 |
| — |
| |
| — | |||
Share-based compensation – tax withholdings settled in cash | 15 | ( | ( | ( | |||||||
Dividends |
| 15,19 |
| ( |
| ( |
| ( | |||
Cash flow from/(used in) financing activities |
| ( |
| |
| ( | |||||
Investing Activities | |||||||||||
Capital and office expenditures | 19 |
| ( |
| ( |
| ( | ||||
Bruin acquisition | 3 | — | ( | — | |||||||
Dunn County acquisition | 3 | — | ( | — | |||||||
Canadian divestments | 3,19 | | — | — | |||||||
Property and land acquisitions | 5 |
| ( |
| ( |
| ( | ||||
Property and land divestments | 3, 5 |
| |
| |
| | ||||
Other (expense)/income | 3,19 | ( | | — | |||||||
Cash flow from/(used in) investing activities |
| ( |
| ( |
| ( | |||||
Effect of exchange rate changes on cash and cash equivalents |
| |
| |
| ( | |||||
Change in cash and cash equivalents |
| ( |
| ( |
| ( | |||||
Cash and cash equivalents, beginning of year |
| |
| |
| | |||||
Cash and cash equivalents, end of year | $ | | $ | | $ | |
The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.
ENERPLUS 2022 FINANCIAL SUMMARY 9
NOTES
Notes to Consolidated Financial Statements
1) REPORTING ENTITY
These annual audited Consolidated Financial Statements (“Consolidated Financial Statements”) and notes present the financial position and results of Enerplus Corporation (the “Company” or “Enerplus”) including its Canadian and United States (“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’ corporate offices are located in Calgary, Alberta, Canada and Denver, Colorado, United States.
2) SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are presented to assist the reader in evaluating these Consolidated Financial Statements and, together with the following notes, are an integral part of the Consolidated Financial Statements.
a) Basis of Preparation
Enerplus’ Consolidated Financial Statements have been prepared by management in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”).
i. Reporting and Functional Currency
These Consolidated Financial Statements are presented in U.S. dollars, which is Enerplus’ reporting currency.
The functional currency of the parent entity is Canadian dollars and the functional currency of the U.S. subsidiaries is U.S. dollars. All references to $ or US$ are to U.S. dollars and references to CDN$ are to Canadian dollars. All financial information presented in U.S. and Canadian dollars has been rounded to the nearest thousand unless otherwise indicated.
Subsequent to the year ended December 31, 2022, the functional currency of the parent entity changed from Canadian dollars to U.S. dollars effective January 1, 2023. This was the result of a gradual change in the primary economic environment in which the entity operates, culminating in the sale of Enerplus’ remaining Canadian operating assets at the end of 2022. This has triggered a prospective change in functional currency of the parent entity to U.S. dollars, consistent with the functional currency of its U.S. subsidiary.
ii. Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. Actual results could differ from these estimates, and changes in estimates are recorded when known. Significant estimates made by management include those that relate to: crude oil and natural gas reserves and related present value of future cash flows, depreciation, depletion and accretion (“DD&A”), impairment of property, plant and equipment, asset retirement obligations, income taxes, ability to realize deferred income tax assets, gains on asset divestments, impairment assessment of goodwill and the fair value of derivative instruments. The estimation of crude oil and natural gas reserves and the related present value of future cash flows involves the use of independent reservoir engineering specialists and numerous inputs and assumptions including forecasted production volumes, forecasted operating, royalty and capital cost assumptions and assumptions around commodity pricing. Inflation and discount rates impacting various items within the Company’s financial statements are also subject to management estimation. When estimating the present value of future cash flows, the discount rate implicitly considers the potential impacts, if any, due to climate change factors. Enerplus uses the most current information available and exercises judgment in making estimates and assumptions. In the opinion of management, these Consolidated Financial Statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies.
iii. Basis of Consolidation
These Consolidated Financial Statements include the accounts of Enerplus and its subsidiaries. Intercompany balances and transactions are eliminated on consolidation. Interests in jointly controlled crude oil and natural gas assets are accounted for following the concept of undivided interest, whereby Enerplus’ proportionate share of revenues, expenses, assets and liabilities are included in the accounts.
10 ENERPLUS 2022 FINANCIAL SUMMARY
iv. Business Combinations
The acquisition method of accounting is used to account for acquisitions that meet the definition of a business under U.S. GAAP. The cost of an acquisition is measured as the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the acquisition date. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values, with limited exceptions, at the acquisition date.
b) Revenue
Enerplus sells the majority of its production pursuant to variable-price contracts. The transaction price for variable priced contracts is based on the commodity price, adjusted for quality, location or other factors, whereby each component of the pricing formula can be either fixed or variable, depending on the contract terms. Under the contracts, the Company is required to deliver a fixed or variable volume of crude oil, natural gas liquids or natural gas to the contract counterparty. Crude oil, natural gas and natural gas liquids are sold under contracts of varying terms, including multi-year contracts. Revenues are typically collected in the month following production.
Revenue from the sale of crude oil, natural gas and natural gas liquids is measured based on the consideration specified in contracts with customers, net of sales taxes. Enerplus recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer. This is generally at the time the customer obtains legal title to the product and when it is physically transferred to the contractual delivery points.
Enerplus evaluates its arrangements with third parties and partners to determine if the Company acts as the principal or as an agent. In making this evaluation, management considers if Enerplus retains control of the product being delivered to the end customer. As part of this assessment, management considers whether the Company retains the economic benefits associated with the good being delivered. Management also considers whether the Company has the primary responsibility for the delivery of the product, the ability to establish prices or the inventory risk, in which case the Company would be the principal and the revenue is recognized on a gross basis. Any associated fees are recorded as an expense. If Enerplus acts in the capacity of an agent rather than as a principal in a transaction, then the revenue is recognized on a net basis, only reflecting the fee, if any, realized by the Company from the transaction.
All references to crude oil and natural gas revenue or production in the Consolidated Financial Statements are net of royalties.
c) Transportation
Enerplus generally sells crude oil and natural gas under
Under the other arrangement, Enerplus sells crude oil or natural gas at a specific delivery point, pays transportation to a third party and receives proceeds from the purchaser with no transportation deduction. In this case, transportation costs are recorded as transportation expense on the Consolidated Statements of Income/(Loss).
d) Crude Oil and Natural Gas Properties
Enerplus uses the full cost method of accounting for its crude oil and natural gas properties. Under this method, all acquisition, exploration and development costs incurred in finding crude oil and natural gas reserves are capitalized, including general and administrative costs attributable to these activities. These costs are recorded on a country-by-country cost centre basis as crude oil and natural gas properties subject to depletion (“full cost pool”). Costs associated with production and general corporate activities are expensed as incurred.
The net carrying value of both proved and unproved crude oil and natural gas properties is depleted using the unit of production method using proved reserves, as determined using a constant price assumption of the simple average of the preceding twelve months’ first-day-of-the-month commodity prices (“SEC prices”). The depletion calculation takes into account estimated future development costs necessary to bring those reserves into production.
ENERPLUS 2022 FINANCIAL SUMMARY 11
Under full cost accounting, a ceiling test is performed on a cost centre basis each quarter. Enerplus limits capitalized costs of proved and unproved crude oil and natural gas properties, net of accumulated depletion and the related deferred income tax effects, to the estimated future net cash flows from proved crude oil and natural gas reserves discounted at
The estimated future net cash flows are calculated using the simple average of the preceding twelve months’ first-day-of-the-month commodity prices. If such capitalized costs exceed the ceiling, a write-down equal to that excess is recorded as a non-cash charge to net income. A write-down is not reversed in future periods even if higher crude oil and natural gas prices subsequently increase the ceiling.
Under certain circumstances, where the carrying value of the full cost centre exceeds the ceiling test limitation, the Company may seek a temporary waiver from the SEC to exclude certain amounts from the full cost ceiling limitation. The Company must demonstrate that the fair value of the excluded properties clearly exceeds the carrying value.
Under full cost accounting rules, divestments of crude oil and natural 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 is recognized.
e) Other Capital Assets
Other capital assets are recorded at historical cost, net of depreciation, and include furniture, fixtures, leasehold improvements, and computer equipment. Depreciation is calculated on a straight-line basis over the estimated useful life of the respective asset. The cost of repairs and maintenance is expensed as incurred.
f) Other Long-term Assets
Other long-term assets include Company-owned line fill in third party pipelines and long-term receivables. Line fill is recorded at lower of cost and net realizable value.
g) Cash and Cash Equivalents
Cash and cash equivalents include cash and highly liquid investments with maturities of less than 90 days.
h) Goodwill
Enerplus recognizes goodwill relating to business acquisitions when the total purchase price exceeds the fair value of the net identifiable assets and liabilities acquired. Goodwill is stated at cost less impairment and is not amortized. Goodwill is not deductible for income tax purposes.
Goodwill is assessed for impairment annually or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Enerplus first performs a qualitative assessment to determine whether events or changes in circumstances indicate that goodwill may be impaired. If it is more likely than not that the fair value of the reporting unit is less than its carrying value, quantitative impairment tests are performed. If the carrying value of the reporting unit exceeds its fair value, goodwill is written down to the reporting unit’s fair value, with an offsetting charge to earnings in the Consolidated Statements of Income/(Loss). The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The estimated fair value of the reporting unit involves numerous estimates including the estimated cash flows from proved reserves (and in certain periods probable reserves) associated with the reporting unit and the appropriate discount rate to apply to the estimated cash flows. The discount rate is based on the estimated cost of capital.
i) Asset Retirement Obligations
Enerplus’ crude oil and natural gas operating activities give rise to dismantling, decommissioning, reclamation, and site remediation activities. Enerplus recognizes a liability for the estimated present value of the future asset retirement obligation liability at each balance sheet date. Upon recognition, the liability is recorded at its estimated fair value. The associated asset retirement cost is capitalized and amortized over the same period as the underlying asset. Changes in the estimated liability and related asset retirement cost can arise as a result of revisions in the estimated amount or timing of cash flows.
12 ENERPLUS 2022 FINANCIAL SUMMARY
Depletion of asset retirement costs and increases in asset retirement obligations resulting from the passage of time are recorded to Depletion, depreciation and accretion and charged against net income in the Consolidated Statements of Income/(Loss).
j) Leases
Enerplus determines at inception, whether a business contract is an operating or finance lease, as defined under U.S. GAAP. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Finance leases are recognized on the commencement date and included in right-of-use (“ROU”) assets and lease liabilities in the Consolidated Balance Sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from such leases. Lease liabilities are recognized at the present value of the lease payments over the lease term. Enerplus’ lease terms may have options to extend or terminate the lease which are included in the calculation of lease liabilities when it is more likely than not that it will exercise those options. A corresponding ROU asset is recognized at the amount of the lease liability, adjusted for payments made prior to lease commencement or initial direct costs, if any. When calculating the present value, Enerplus uses the rate implicit in the lease, or uses its incremental borrowing rate for a similar term and risk profile based on the information available at the commencement date.
Lease expense for operating leases is recognized on a straight-line basis over the lease term.
Lease agreements can contain both lease and non-lease components, which are accounted for separately. For certain equipment leases, a portfolio approach is applied to account for the ROU assets and liabilities.
k) Income Tax
Enerplus uses the liability method of accounting for income taxes. Deferred income tax assets and liabilities are recorded on the temporary differences between the accounting and income tax basis of assets and liabilities, using the enacted tax rates expected to apply when the temporary differences are expected to reverse. Deferred tax assets are reviewed each period and a valuation allowance is provided if, after considering available evidence, it is more likely than not that a deferred tax asset will not be realized. Enerplus considers both positive and negative evidence including historic and expected future taxable income, reversing existing temporary differences and tax basis carry forward periods in making this assessment.
The expected future taxable income considered in the analysis of the valuation allowance is based on cash flows from the proven and probable reserves and other sources of income. The estimated cash flows from proven and probable reserves is subject to numerous estimates and judgments and involves the use of independent reserve evaluators. A valuation allowance is removed in any period where available evidence indicates all or a portion of the valuation allowance is no longer required. The financial statement effect of an uncertain tax position is recognized when it is more likely than not, based on technical merits, that the position will be sustained upon examination by a taxation authority. Penalties and interest expense related to income tax are recognized in income tax expense. Investment tax credits are applied using the flow-through method.
l) Financial Instruments
i. Fair Value Measurements
Financial instruments are initially recorded at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For financial instruments carried at fair value, and when disclosing the fair value of financial instruments on certain non-financial items, inputs used in determining the fair value are characterized according to the following fair value hierarchy:
● Level 1 – Inputs represent quoted market prices in active markets for identical assets or liabilities.
● Level 2 – Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets or other market corroborated inputs.
● Level 3 – Inputs that are not observable from objective sources, such as forward prices supported by little or no market activity or internally developed estimates of future cash flows used in a present value model.
Subsequent measurement is based on classification of the financial instrument into one of the following
ENERPLUS 2022 FINANCIAL SUMMARY 13
ii. Non-derivative financial instruments
The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, bank credit facilities, and marketable securities reported on the Consolidated Balance Sheets approximates their fair value. The fair value of the senior notes and loan receivable are considered a level 2 fair value measurement and details are disclosed in Note 16.
The Company uses the current expected credit loss model in valuing accounts receivable and loan receivable, which requires the use of a lifetime expected loss provision. In making an assessment as to whether financial assets are credit-impaired, the Company considers: (i) historically realized bad debts; (ii) a counterparty’s present financial condition and whether a counterparty has breached certain contracts; (iii) the probability that a counterparty will enter bankruptcy or other financial reorganization; (iv) changes in economic conditions that correlate to increased levels of default; and (v) the term to maturity of the specified receivable. The carrying amounts of receivables are reduced by the amount of the expected credit loss through an allowance account and losses are recognized within general and administrative expense in the Consolidated Statements of Income/(Loss). If the Company subsequently determines an account is uncollectible the account is written off with a corresponding charge to the allowance account.
Enerplus has designated certain U.S. dollar denominated debt that is held in the parent entity as a hedge of its net investment in operations for which the U.S. dollar is the functional currency. As a non-derivative financial instrument, it will be accounted for under hedge accounting.
To be accounted for as a hedge, the U.S. dollar denominated debt must be designated as an effective hedge, both at inception and on an ongoing basis. The required hedge documentation defines the relationship between the U.S. dollar denominated debt and the net investment in the U.S. subsidiary, as well as the Company’s risk management objective and strategy for undertaking the hedging transaction. The Company formally assesses, both at inception and on an ongoing basis, whether the changes in fair value of the U.S. dollar denominated debt are highly effective in offsetting changes in the fair value of the net investment in the U.S. subsidiary. If effective, the unrealized foreign exchange gains and losses arising from the translation of the U.S. denominated debt are recorded in Other Comprehensive Income/(Loss) (“OCI”), net of tax, to the extent the net investment in the U.S. subsidiary supports the U.S. denominated debt.
A reduction in the fair value of the net investment in the U.S. subsidiary or increase in the U.S. dollar denominated debt may result in a portion of the hedge becoming ineffective. If the hedging relationship ceases to be effective or is terminated, hedge accounting is not applied and subsequent gains or losses are recorded through net income/(loss).
In connection with the sale of certain Canadian assets during the year, the Company provided a loan to the purchaser. The loan receivable is recorded at its amortized cost basis on the Consolidated Balance Sheets.
Marketable securities are classified as held for trading and carried at fair value based on a level 1 designation, with changes in fair value recorded in Transaction costs and other expense/(income). When the instruments are ultimately sold any gains or losses are recognized in Transaction costs and other expense/(income).
iii. Derivative financial instruments
Enerplus enters into financial derivative contracts in order to manage its exposure to market risks from fluctuations in commodity prices, foreign exchange rates and interest rates in the normal course of operations.
Enerplus has not designated its financial derivative contracts as effective accounting hedges and thus has not applied hedge accounting, even though it considers most of these contracts to be economic hedges. As a result, financial derivative contracts are classified as held-for-trading and are recorded at fair value based on a Level 2 designation, with changes in fair value recorded in net income/(loss). The fair values of these derivative instruments are generally based on an estimate of the amounts that would be paid or received to settle these instruments at the balance sheet date. Enerplus’ accounting policy is to not offset the fair values of its financial derivative assets and liabilities.
Realized gains and losses from commodity price risk management activities are recognized in income when the contract is settled. Unrealized gains and losses on commodity price risk management activities are recognized in income based on the changes in fair value of the contracts at the end of the respective reporting period.
Enerplus’ crude oil, natural gas and natural gas liquids physical delivery purchase and sales contracts qualify as normal purchases and sales as they are entered into and held for the purpose of receipt or delivery of products in accordance with the Company’s expected purchase, sale or usage requirements. As such, these contracts are not considered derivative financial instruments. Settlements on these physical contracts are recognized in net income over the term of the contracts as they occur.
14 ENERPLUS 2022 FINANCIAL SUMMARY
m) Foreign Currency
i. Foreign currency transactions
Transactions denominated in foreign currencies are translated to the functional currency of the entity (Canadian dollars in Canada and U.S. dollars in the U.S.) using the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency of the entity using the rate of exchange in effect at the balance sheet date whereas non-monetary assets and liabilities are translated at the historical rate of exchange in effect on the date of the transaction. Foreign currency differences arising on translation are recognized in net income/(loss) in the period in which they arise.
ii. Foreign currency translation
For financial statement presentation, assets and liabilities of Enerplus’ Canadian operations, which have a Canadian dollar functional currency, are translated into U.S. dollars at period end exchange rates while revenues and expenses are translated using average rates for the period. Gains and losses from the translation are deferred and included in the cumulative translation adjustment which is recorded in accumulated other comprehensive income.
n) Share-Based Compensation
Enerplus’ share-based compensation plans include equity-settled Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”) awards made pursuant to its Share Award Incentive Plan (“SAIP”). The Company is authorized to issue up to
i. Long-term Incentive (“LTI”) Plans
For RSU awards granted under the SAIP, employees receive compensation in relation to the value of a specified number of underlying notional shares. The number of notional shares awarded varies by individual and vests each year for
For PSU awards granted under the SAIP, executives and management receive compensation in relation to the value of a specified number of underlying notional shares. The number of notional shares awarded varies by individual and they vest at the end of
Under Enerplus’ Director DSU Plan and Director RSU Plan, directors receive compensation in relation to the value of a specified number of underlying notional shares. The number of notional shares awarded is based on the annual equity retainer value. Directors may elect to receive all or a portion of their notional shares under either plan. Under the Director DSU Plan, units vest and are paid at a specified date following the director leaving the Board. Under the Director RSU Plan, units vest each year for
Enerplus recognizes non-cash share-based compensation expense over the vesting period of the equity-settled long-term incentive plans, net of realized forfeitures, based on the estimated grant date share price fair value of the respective awards. The fair value for the PSUs is adjusted for the outcome of the performance condition. Share-based compensation charges are recorded on the Consolidated Statements of Income/(Loss) with an offset to paid-in capital. Each period, management performs an estimate of the PSU plan multiplier. Any differences that arise between the actual multiplier on plan settlement and management’s estimate is recorded to share-based compensation. On settlement of these plans, amounts previously recorded to paid-in capital are reclassified to share capital.
Enerplus recognizes a liability with respect to its cash-settled long-term incentive plans based on their estimated fair value. The liability is re-measured at each reporting date and at settlement date with any changes in the fair value recorded as share-based compensation, included in general and administrative expense.
o) Net Income/(Loss) Per Share
Basic net income/(loss) per common share is computed by dividing net income/(loss) by the weighted average number of common shares outstanding during the period.
ENERPLUS 2022 FINANCIAL SUMMARY 15
For the diluted net income per common share calculation, the weighted average number of shares outstanding is adjusted for the potential number of shares which may have a dilutive effect on net income. The weighted average number of diluted shares is calculated in accordance with the treasury stock method which assumes that the proceeds received from outstanding RSU’s and PSU’s would be used to repurchase common shares at the average market price.
p) Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, environmental and other sources are recognized when it is probable that a liability has been incurred and the amount can be reasonably estimated. Contingencies are adjusted as additional information becomes available or circumstances change.
q) Government Assistance
In 2020, the Alberta, Saskatchewan, and British Columbia provincial governments created programs and provided funding to support the clean-up of inactive or abandoned crude oil and natural gas wells. Enerplus applied for and benefited from these programs in 2022 and 2021. The programs provide funding directly to oil field service contractors engaged by companies to perform abandonment, remediation, and reclamation work. As work is completed, the contractors submit invoices to the provincial government for reimbursement for the pre-approved funding amounts. Enerplus recognizes the assistance as the abandonment, remediation, and reclamation work is completed by the contractor. The benefit of the funding received by the contractor is reflected as a reduction of asset retirement obligation and recorded as part of Transaction costs and other expense/(income) in the Consolidated Statements of Income/(Loss).
3) ACQUISITIONS & DIVESTMENTS
a) | Canadian Asset Divestments |
On October 31, 2022, the Company completed a disposition of certain Canadian assets to Journey Energy Inc. (“Journey”) for total consideration of $
On December 19, 2022, the Company completed a disposition of substantially all of the remaining Canadian assets to Surge Energy Inc. (“Surge”) for total consideration of $
At December 31, 2022, the current and long-term portion of the outstanding loan receivable of $
At December 31, 2022, the common shares of Surge had a fair value of $
b) | Bruin E&P HoldCo, LLC Acquisition |
On
c) | Dunn County Acquisition |
On
16 ENERPLUS 2022 FINANCIAL SUMMARY
d) | Sleeping Giant and Russian Creek Divestment |
On November 2, 2021, the Company completed a disposition of its interests in the Sleeping Giant field in Montana and the Russian Creek area in North Dakota in the Williston Basin, for total cash consideration of $
4) ACCOUNTS RECEIVABLE
($ thousands) |
| December 31, 2022 |
| December 31, 2021 | ||
Accrued revenue | $ | | $ | | ||
Accounts receivable – trade |
| |
| | ||
Allowance for doubtful accounts |
| ( |
| ( | ||
Total accounts receivable, net of allowance for doubtful accounts | $ | | $ | |
5) PROPERTY, PLANT AND EQUIPMENT (“PP&E”)
|
| Accumulated Depletion, |
| ||||||
At December 31, 2022 | Depreciation, | ||||||||
($ thousands) | Cost | and Impairment | Net Book Value | ||||||
Crude oil and natural gas properties(1) | $ | | $ | ( | $ | | |||
Crude oil and natural gas properties – Canadian divestments(2) | ( | | | ||||||
Other capital assets |
| |
| ( |
| | |||
Total PP&E | $ | | $ | ( | $ | |
|
| Accumulated Depletion, |
| ||||||
At December 31, 2021 | Depreciation, | ||||||||
($ thousands) | Cost |
| and Impairment | Net Book Value | |||||
Crude oil and natural gas properties(1) | $ | | $ | ( | $ | | |||
Other capital assets |
| |
| ( |
| | |||
Total PP&E | $ | | $ | ( | $ | |
(1) | All of the Company’s unproved properties are included in the full cost pool. |
(2) | The Company removed the Canadian cost centre’s historical PP&E balances upon the divestment of the Canadian assets. |
Acquisitions:
For the years ended December 31, 2022 and 2021, Enerplus acquired property and land totaling $
Divestments:
For the years ended December 31, 2022 and 2021, Enerplus disposed of properties for proceeds of $
6) IMPAIRMENT
a) | Impairment of PP&E |
($ thousands) |
| 2022 |
| 2021 |
| 2020 | |||
Crude oil and natural gas properties: | |||||||||
U.S. cost centre | $ | — | $ | — | $ | | |||
Canada cost centre | — | | | ||||||
Total impairment expense | $ | — | $ | | $ | |
ENERPLUS 2022 FINANCIAL SUMMARY 17
The following table outlines the 12-month average trailing benchmark prices and exchange rates used in Enerplus’ ceiling test at December 31, 2022, 2021 and 2020:
|
|
|
| |||||||||
WTI Crude Oil | Edm Light Crude | U.S. Henry Hub Gas | Exchange Rate | |||||||||
Period | $/bbl | CDN$/bbl | $/Mcf | CDN$/US$ | ||||||||
2022 | $ | | $ | | $ | | | |||||
2021 |
| | | | | |||||||
2020 |
| | | | |
b) | Impairment of Goodwill |
At December 31, 2022 and 2021, there was
7) ACCOUNTS PAYABLE
($ thousands) |
| December 31, 2022 |
| December 31, 2021 | ||
Accrued payables | $ | | $ | | ||
Accounts payable – trade |
| |
| | ||
Total accounts payable | $ | | $ | |
8) DEBT
($ thousands) |
| December 31, 2022 |
| December 31, 2021 | ||
Current: | ||||||
Senior notes | $ | | $ | | ||
Long-term: | ||||||
Bank credit facilities | | | ||||
Senior notes |
| |
| | ||
Total debt | $ | | $ | |
Bank Credit Facilities
In February 2022, Enerplus converted its senior unsecured, covenant-based, $
Enerplus also has a senior unsecured, covenant-based, $
The SLL bank credit facilities incorporate environmental, social and governance (“ESG”)-linked incentive pricing terms which reduce or increase the borrowing costs by up to
● | GHG Emissions: continuous progress toward Enerplus’ stated goal of a |
● | Water Management: achieve a |
● | Health & Safety: achieve and maintain a |
18 ENERPLUS 2022 FINANCIAL SUMMARY
For the year ended December 31, 2022, total amortization of debt issuance costs amounted to $
Senior Notes
During 2022, Enerplus made a $
The terms and rates of the Company’s outstanding senior notes are detailed below:
|
|
| Original |
| Remaining | |||||
Coupon | Principal | Principal | ||||||||
Issue Date | Interest Payment Dates | Principal Repayment | Rate | ($ thousands) | ($ thousands) | |||||
September 3, 2014 | March 3 and Sept 3 | 4 equal annual installments beginning September 3, 2023 | $ | $ | ||||||
May 15, 2012 |
| May 15 and Nov 15 |
| 2 equal annual installments beginning May 15, 2023 |
| $ |
| $ | ||
Total carrying value at December 31, 2022 | $ |
Capital Management
Enerplus' capital consists of cash and cash equivalents, debt and shareholders' equity. The Company’s objective for managing capital is to prioritize balance sheet strength while maintaining flexibility to repay debt, fund sustaining capital, return capital to shareholders or fund future production growth. Capital management measures are useful to investors and securities analysts in analyzing operating and financial performance, leverage, and liquidity. Enerplus’ key capital management measures are as follows:
a) | Net Debt |
Enerplus calculates net debt as current and long-term debt associated with senior notes plus any outstanding bank credit facility balances, minus cash and cash equivalents.
($ thousands) | December 31, 2022 | December 31, 2021 | ||||
Current portion of long-term debt | $ | |
| $ | | |
Long-term debt | | | ||||
Total debt | $ | | $ | | ||
Less: Cash and cash equivalents | ( | ( | ||||
Net debt | $ | | $ | |
b) | Adjusted funds flow |
Adjusted funds flow is calculated as cash flow from operating activities before asset retirement obligation expenditures and changes in non-cash operating working capital.
($ thousands) | 2022 | 2021 | 2020 | ||||||
Cash flow from/(used in) operating activities |
| $ | |
| $ | | $ | | |
Asset retirement obligation settlements | | | | ||||||
Changes in non-cash operating working capital | | | ( | ||||||
Adjusted funds flow | $ | | $ | | $ | |
c) | Net debt to adjusted funds flow ratio |
The net debt to adjusted funds flow ratio is calculated as net debt divided by a trailing twelve months of adjusted funds flow.
($thousands) | December 31, 2022 | December 31, 2021 | ||||
Net debt | $ | |
| $ | | |
Trailing adjusted funds flow | | | ||||
Net debt to adjusted funds flow ratio | $ | $ |
ENERPLUS 2022 FINANCIAL SUMMARY 19
9) ASSET RETIREMENT OBLIGATION (“ARO”)
($ thousands) |
| December 31, 2022 |
| December 31, 2021 | ||
Balance, beginning of year | $ | | $ | | ||
Change in estimates |
| |
| | ||
Property acquisition and development activity |
| |
| | ||
Bruin acquisition (Note 3) | — | | ||||
Dunn County acquisition (Note 3) | — | | ||||
Divestments (Note 3) |
| ( |
| ( | ||
Settlements |
| ( |
| ( | ||
Government assistance | ( | ( | ||||
Accretion expense |
| |
| | ||
Balance, end of year | $ | | $ | |
Enerplus has estimated the present value of its asset retirement obligation to be $
Enerplus benefited from provincial government assistance to support the clean-up of inactive or abandoned crude oil and natural gas wells. These programs provide funding directly to oil field service contractors engaged by Enerplus to perform abandonment, remediation, and reclamation work. The funding received by the contractor is reflected as a reduction to ARO. For the year ended December 31, 2022, Enerplus benefited from $
During 2022, Enerplus recognized $
10) LEASES
The Company has entered into various lease contracts related to office space, drilling rig commitments, vehicles and other equipment. Leases are entered into and exited in coordination with specific business requirements which include the assessment of the appropriate durations for the related leased assets. Short-term leases with a lease term of 12 months or less are not recorded on the Consolidated Balance Sheets. Such items are charged to operating expenses or general and administrative expenses, as appropriate, in the Consolidated Statements of Income/(Loss), unless the costs are included in the carrying amount of another asset in accordance with U.S. GAAP.
($ thousands) | December 31, 2022 | December 31, 2021 | ||||
Assets | ||||||
Operating right-of-use assets | $ | | $ | | ||
Liabilities | ||||||
Current operating lease liabilities | $ | | $ | | ||
Non-current operating lease liabilities | | | ||||
Total lease liabilities | $ | | $ | | ||
Weighted average remaining lease term (years) | ||||||
Operating leases | ||||||
Weighted average discount rate | ||||||
Operating leases |
20 ENERPLUS 2022 FINANCIAL SUMMARY
The Company’s lease contract expenditures/(income) for the years ended December 31, 2022 and 2021 are as follows:
($ thousands) | 2022 | 2021 | |||
Operating lease cost | $ | |
| $ | |
Variable lease cost | | | |||
Short-term lease cost |
| |
| | |
Sublease income | ( | ( | |||
Total | $ | | $ | |
Variable lease payments are determined through analysis of day rate fees under applicable rig contracts. The amounts in the table above are recorded as part of general and administrative or operating expenses or property, plant, and equipment depending on the nature of the contract to which they relate. Although Enerplus has various leases containing extensions and/or termination options, none were determined to be reasonably certain to be exercised. As a result, none of these options are recognized as part of the ROU assets or lease liabilities at December 31, 2022 or 2021.
Maturities of lease liabilities, all of which are classified as operating leases at December 31, 2022, are as follows:
| |||
($ thousands) | Operating Leases | ||
2023 | $ | | |
2024 |
| | |
2025 |
| | |
2026 |
| | |
2027 | | ||
After 2027 |
| | |
Total lease payments | $ | | |
Less imputed interest | ( | ||
Total discounted lease payments | $ | | |
Current portion of lease liabilities | $ | | |
Non-current portion of lease liabilities | $ | |
Supplemental information related to leases is as follows:
($ thousands) | 2022 | 2021 | ||||
Cash amounts paid to settle lease liabilities: | ||||||
Operating cash flow used for operating leases | $ | | $ | | ||
Right-of-use assets obtained/(terminated) in exchange for lease liabilities: |
|
| ||||
Operating leases | $ | | $ | |
11) CRUDE OIL AND NATURAL GAS SALES
Crude oil and natural gas sales by country and by product for the years ended December 31, 2022, 2021 and 2020 are as follows:
2022 | Natural | Natural gas | |||||||||||||
($ thousands) | Total revenue | Crude oil(1) | gas(1) | liquids(1) | Other(2) | ||||||||||
United States | $ | | $ | |
| $ | | $ | | $ | | ||||
Canada |
| | |
| |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | $ | |
2021 | Natural | Natural gas | |||||||||||||
($ thousands) | Total revenue | Crude oil(1) | gas(1) | liquids(1) | Other(2) | ||||||||||
United States | $ | | $ | | $ | | $ | | $ | | |||||
Canada |
| | | |
| | | ||||||||
Total | $ | | $ | | $ | | $ | | $ | |
ENERPLUS 2022 FINANCIAL SUMMARY 21
2020 | Natural | Natural gas | |||||||||||||
($ thousands) | Total revenue | Crude oil(1) | gas(1) | liquids(1) | Other(2) | ||||||||||
United States |
| $ | | $ | | $ | | $ | | $ | | ||||
Canada |
| | |
| |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | $ | |
(1) | U.S. sales of crude oil, natural gas and natural gas liquids relate primarily to the Company’s North Dakota and Marcellus properties. Canadian crude oil sales relate primarily to the Company’s waterflood properties. |
(2) | Includes third party processing income. |
12) GENERAL AND ADMINISTRATIVE EXPENSE
($ thousands) |
| 2022 |
| 2021 |
| 2020 | |||
General and administrative expense excluding share-based compensation(1) |
| $ | | $ | | $ | | ||
Share-based compensation expense |
| |
| |
| | |||
General and administrative expense |
| $ | | $ | | $ | |
(1) | Includes non-cash lease credit of $ |
13) FOREIGN EXCHANGE
($ thousands) |
| 2022 |
| 2021 |
| 2020 | |||
Realized: | |||||||||
Foreign exchange (gain)/loss | $ | ( | $ | | $ | | |||
Foreign exchange (gain)/loss on U.S. dollar cash held in parent company | ( | ( | ( | ||||||
Unrealized: | |||||||||
Foreign exchange (gain)/loss on U.S. dollar working capital in parent company |
| |
| ( |
| | |||
Foreign exchange (gain)/loss | $ | | $ | ( | $ | |
14) INCOME TAXES
Enerplus’ provision for income tax is as follows:
($ thousands) |
| 2022 |
| 2021 |
| 2020 | |||
Current tax | |||||||||
United States | $ | | $ | | $ | ( | |||
Canada | — | ( | — | ||||||
Current tax expense/(recovery) | | | ( | ||||||
Deferred tax | |||||||||
United States | $ | | $ | | $ | ( | |||
Canada | | ( | ( | ||||||
Deferred tax expense/(recovery) | | | ( | ||||||
Income tax expense/(recovery) | $ | | $ | | $ | ( |
The following provides a reconciliation of income taxes calculated at the Canadian statutory rate to the actual income taxes:
($ thousands) |
| 2022 |
| 2021 | 2020 | ||||
Income/(loss) before taxes | |||||||||
United States | $ | | $ | | $ | ( | |||
Canada | | ( | ( | ||||||
Total income/(loss) before taxes | | | ( | ||||||
Canadian statutory rate |
|
| |||||||
Expected income tax expense/(recovery) | $ | | $ | | ( | ||||
Impact on taxes resulting from: | |||||||||
Foreign and statutory rate differences | $ | | $ | | $ | ( | |||
Investment tax credit | ( | — | ( | ||||||
Non-taxable capital (gains)/losses | ( |
| ( |
| | ||||
Change in valuation allowance | |
| ( |
| ( | ||||
Goodwill impairment, share-based compensation and other | ( | | | ||||||
Income tax expense/(recovery) | $ | | $ | | $ | ( |
22 ENERPLUS 2022 FINANCIAL SUMMARY
The deferred income tax asset/(liability) consists of the following:
At December 31 ($ thousands) | 2022 | 2021 | ||||
Canadian deferred income tax asset/(liability) | ||||||
Property, plant and equipment | $ | | $ | | ||
Tax loss carry-forwards and other credits |
| |
| | ||
Capital loss carryforwards and other capital items | | | ||||
Asset retirement obligation |
| |
| | ||
Derivative financial instruments |
| ( |
| | ||
Other | | | ||||
Valuation allowance | ( | ( | ||||
Canadian deferred income tax asset/(liability) | | | ||||
United States deferred income tax asset/(liability) | ||||||
Property, plant and equipment | $ | ( | $ | ( | ||
Tax loss carry-forwards and other credits | | | ||||
Asset retirement obligation | | | ||||
Other | | ( | ||||
United States deferred income tax asset/(liability) | ( | | ||||
Total deferred income tax asset/(liability) | $ | | $ | |
Loss carry-forwards available for tax reporting purposes:
At December 31 ($ thousands) |
| 2022 |
| Expiration Date | |
Canada Federal | |||||
Non-capital losses | $ | |
| 2031-2042 |
Changes in the balance of Enerplus’ unrecognized tax benefits are as follows:
($ thousands) |
| 2022 |
| 2021 | 2020 | ||||
Balance, beginning of year | $ | | $ | | $ | | |||
Increase – tax positions in prior periods |
| |
| |
| | |||
Balance, end of year | $ | | $ | | $ | |
If recognized, of Enerplus’ unrecognized tax benefits at December 31, 2022 would affect Enerplus’ effective income tax rate. It is not anticipated that the amount of unrecognized tax benefits will significantly change during the next 12 months.
A summary of the taxation years, by jurisdiction, that remain subject to examination by the taxation authorities are as follows:
Jurisdiction |
| Taxation Years |
United States – Federal |
| |
Canada – Federal |
|
Enerplus and its subsidiaries file income tax returns primarily in Canada and the United States. Matters in dispute with the taxation authorities are ongoing and in various stages of completion.
ENERPLUS 2022 FINANCIAL SUMMARY 23
15) SHAREHOLDERS’ EQUITY
a) Share Capital
2022 | 2021 | 2020 | |||||||||||||
(thousands) |
| Shares |
| Amount | Shares |
| Amount |
| Shares |
| Amount | ||||
Balance, beginning of year |
| $ | | | $ | | | $ | |||||||
Issued/(Purchased) for cash: | |||||||||||||||
Purchase of common shares under Normal Course Issuer Bid | ( | ( | ( | ( | ( | ( | |||||||||
Issue of shares (net of tax effected issue costs) | — | — | | | — | — | |||||||||
Non-cash: | |||||||||||||||
Share-based compensation – treasury settled(1) |
| |
| | |
| | |
| | |||||
Cancellation of predecessor shares | — |
| — | — |
| — | ( |
| ( | ||||||
Balance, end of year |
| $ | | | $ | | | $ |
(1) | The amount of shares issued on LTI settlement is net of employee withholding taxes. |
The Company is authorized to issue an unlimited number of common shares without par value.
For the year ended December 31, 2022, Enerplus declared dividends of $
On August 16, 2022 Enerplus renewed its Normal Course Issuer Bid (“NCIB”) to purchase up to
For the year ended December 31, 2021, the Company repurchased
For the year ended December 31, 2020, the Company repurchased
Subsequent to December 31, 2022 and up to and including February 22, 2023, the Company repurchased
For the year ended December 31, 2021, Enerplus issued
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):
($ thousands) |
| 2022 |
| 2021 |
| 2020 | |||
Cash: | |||||||||
Long-term incentive plans (recovery)/expense | $ | | $ | | $ | ( | |||
Non-Cash: | |||||||||
Long-term incentive plans expense | | | | ||||||
Equity swap (gain)/loss |
| ( |
| ( |
| | |||
Share-based compensation expense | $ | | $ | | $ | |
24 ENERPLUS 2022 FINANCIAL SUMMARY
LTI Plans
The following table summarizes the PSU, RSU, DSU and DRSU activity for the year ended December 31, 2022:
For the year ended December 31, 2022 | Cash-settled LTI Plans | Equity-settled LTI Plans | Total | |||||
(thousands of units) |
| DSU/DRSU |
| PSU(1) |
| RSU |
| |
Balance, beginning of year |
| | | | | |||
Granted |
| | | | | |||
Vested |
| ( | ( | ( | ( | |||
Forfeited |
| — | ( | ( | ( | |||
Balance, end of year | | | | |
(1) | Based on underlying awards before any effect of the performance multiplier. |
Cash-settled LTI Plans
For the year ended December 31, 2022, the Company recorded a cash share-based compensation expense of $
At December 31, 2022, a liability of $
Equity-settled LTI Plans
The following table summarizes the cumulative share-based compensation expense recognized to-date which is recorded as 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 December 31, 2022 ($ thousands, except for years) |
| PSU(1) |
| RSU |
| Total | |||
Cumulative recognized share-based compensation expense | $ | | $ | | $ | | |||
Unrecognized share-based compensation expense |
| |
| |
| | |||
Fair value | $ | | $ | | $ | | |||
Weighted-average remaining contractual term (years) |
|
(1) | Includes estimated performance multipliers. |
The Company directly withholds shares on PSU and RSU settlements for tax-withholding purposes. For the year ended December 31, 2022, $
c) Basic and Diluted Net Income/(Loss) Per Share
Net income/(loss) per share has been determined as follows:
(thousands, except per share amounts) |
| 2022 |
| 2021 |
| 2020 | |||
Net income/(loss) | $ | | $ | | $ | ( | |||
Weighted average shares outstanding – Basic |
| |
| |
| | |||
Dilutive impact of share-based compensation(1) |
| |
| |
| — | |||
Weighted average shares outstanding – Diluted | | | | ||||||
Net income/(loss) per share | |||||||||
Basic | $ | | $ | | $ | ( | |||
Diluted | $ | | $ | | $ | ( |
(1) | For the year ended December 31, 2020, the impact of share-based compensation was anti-dilutive as a conversion to shares would not increase the loss per share. |
ENERPLUS 2022 FINANCIAL SUMMARY 25
16) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
a) Fair Value Measurements
At December 31, 2022, the carrying value of cash and cash equivalents, accounts receivable and accounts payable approximated their fair value due to the short-term nature of these instruments. The fair values of the bank credit facilities approximate their carrying values as they bear interest at floating rates and the credit spread approximates current market rates.
At December 31, 2022, the senior notes had a carrying value of $
At December 31, 2022, the loan receivable had a carrying value of $
The fair value of marketable securities are considered level 1 fair value measurements, while the derivative contracts, senior notes, bank credit facilities and loan receivable are considered level 2 fair value measurements. There were
b) Derivative Financial Instruments
The derivative 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 associated with equity and commodity contracts for the respective years:
|
|
|
| Income | |||||||
Gain/(Loss) ($ thousands) | 2022 | 2021 | 2020 | Statement Presentation | |||||||
Equity Swaps | $ | | $ | | $ | ( |
| G&A expense | |||
Commodity Contracts: | |||||||||||
Crude oil |
| |
| ( |
| ( |
| Commodity derivative | |||
Natural gas |
| |
| |
| |
| instruments | |||
Total Unrealized Gain/(Loss) | $ | | $ | ( | $ | ( |
The following table summarizes the effect of Enerplus’ commodity contracts on the Consolidated Statements of Income/(Loss):
($ thousands) |
| 2022 |
| 2021 |
| 2020 | |||
Unrealized change in fair value gain/(loss) | $ | | $ | ( | $ | ( | |||
Net realized cash gain/(loss) |
| ( |
| ( |
| | |||
Commodity contracts gain/(loss) | $ | ( | $ | ( | $ | |
The following table summarizes the presentation of fair values on the Consolidated Balance Sheets:
December 31, 2022 | December 31, 2021 | ||||||||||||||
Assets | Liabilities | Assets | Liabilities | ||||||||||||
($ thousands) |
| Current | Current | Current | Current | Long-term | |||||||||
Equity Swaps | $ | — | $ | — | $ | — | $ | | $ | — | |||||
Commodity Contracts: | |||||||||||||||
Crude oil |
| |
| |
| |
| |
| | |||||
Natural gas |
| |
| — |
| |
| |
| — | |||||
Total | $ | | $ | | $ | | $ | | $ | |
The fair value of commodity contracts and the equity swaps is estimated based on commodity and option pricing models that incorporate various factors including forecasted commodity prices, volatility and the credit risk of the entities party to the contract. Changes and variability in commodity prices over the term of the contracts can result in material differences between the estimated fair value at a point in time and the actual settlement amounts.
26 ENERPLUS 2022 FINANCIAL SUMMARY
At December 31, 2022, the fair value of Enerplus’ commodity contracts totaled a net asset of $
c) Risk Management
In the normal course of operations, Enerplus is exposed to various market risks, including commodity prices, foreign exchange, interest rates, equity prices, credit risk, liquidity risk, and the risks associated with environmental/climate change risk, social and governance regulation, and compliance.
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
The following tables summarize Enerplus’ price risk management positions at February 22, 2023:
Crude Oil Instruments:
Instrument Type(1)(2) | ||||||||
Jan 1, 2023 - Jun 30, 2023 | Jul 1, 2023 - Oct 31, 2023 | Nov 1, 2023 - Dec 31, 2023 | ||||||
bbls/day | $/bbl | bbls/day | $/bbl | bbls/day | $/bbl | |||
WTI Purchased Put | ||||||||
WTI Sold Put | ||||||||
WTI Sold Call | ||||||||
Brent – WTI Spread | ||||||||
WTI Purchased Swap | — | — | ||||||
WTI Sold Swap(3) | — | — | ||||||
WTI Purchased Put(3) | ||||||||
WTI Sold Call(3) |
(1) | The total average deferred premium spent on the Company’s outstanding crude oil contracts is $ |
(2) | Transactions with a common term have been aggregated and presented at weighted average prices and volumes. |
(3) | Outstanding commodity derivative instruments acquired as part of the Bruin Acquisition. |
Natural Gas Instruments:
Instrument Type(1) | Jan 1, 2023 – Jan 31, 2023 | Feb 1, 2023 – Feb 28, 2023 | Mar 1, 2023 – Mar 31, 2023 | |||||
MMcf/day | $/Mcf | MMcf/day | $/Mcf | MMcf/day | $/Mcf | |||
NYMEX Purchased Swap | — | — | | |||||
NYMEX Purchased Put | ||||||||
NYMEX Sold Call | ||||||||
TZ6 NNY Basis Swap | — | — | — | — | | |
(1) | Transactions with a common term have been aggregated and presented at weighted average prices/Mcf. |
Instrument Type(1) | Apr 1, 2023 – Oct 31, 2023 | |
MMcf/day | $/Mcf | |
NYMEX Purchased Put | ||
NYMEX Sold Call |
(1) | Transactions with a common term have been aggregated and presented at weighted average prices/Mcf. |
ENERPLUS 2022 FINANCIAL SUMMARY 27
Foreign Exchange Risk & Net Investment Hedge:
Enerplus is exposed to foreign exchange risk as it relates to certain activity transacted in Canadian or United States dollars. Enerplus has a U.S. dollar reporting currency, however Enerplus’ parent company has a Canadian functional currency until December 31, 2022. Activity in the Canadian parent company that is transacted in U.S. dollars results in realized and unrealized foreign exchange gains and losses and is recorded on the Consolidated Statements of Income/(Loss).
Enerplus may designate certain U.S. dollar denominated debt held in the parent entity as a hedge of its net investment in its U.S. subsidiary, which has a U.S. dollar functional currency. The unrealized foreign exchange gains and losses arising from the translation of the debt are recorded in Other Comprehensive Income/(Loss), net of tax, and are limited by the cumulative translation gain or loss on the net investment in the foreign subsidiary. At December 31, 2022, $
Interest Rate Risk:
The Company’s senior notes bear interest at fixed rates while the bank credit facilities bear interest at floating rates. At December 31, 2022, approximately
Equity Price Risk:
Enerplus is exposed to equity price risk in relation to its long-term incentive plans detailed in Note 15. The Company may enter into various equity swaps to fix the future settlement cost on a portion of its cash settled LTI plans. At December 31, 2022, Enerplus did not have any equity swaps outstanding.
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, divestments and financial counterparty receivables. Enerplus has appropriate policies and procedures in place to manage its credit risk; however, given the volatility in commodity prices, Enerplus is subject to an increased risk of financial loss due to non-performance or insolvency of its counterparties.
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.
The Company’s maximum credit exposure consists of the carrying amount of its non-derivative financial assets and the fair value of its derivative financial assets. At December 31, 2022, approximately
Enerplus actively monitors past due accounts and takes the necessary actions to expedite collection, which can include withholding production, netting amounts off 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 uncollectible the account is written off with a corresponding charge to the allowance account. Enerplus’ allowance for doubtful accounts balance at December 31, 2022 was $
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 cash equivalents) 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 crude oil and natural gas assets and planned investment opportunities.
28 ENERPLUS 2022 FINANCIAL SUMMARY
Management monitors a number of key variables with respect to its capital structure, including debt levels, capital spending plans, dividends, share repurchases, access to capital markets, as well as acquisition and divestment activity.
At December 31, 2022, Enerplus was in full compliance with all covenants under the bank credit facilities and outstanding senior notes. If the Company breaches or anticipates breaching its covenants, the Company may be required to repay, refinance, or renegotiate the terms of the debt.
iv) Climate Change Risk
The following provides certain considerations as to the impact of climate change on the amounts recorded in the financial statements for the year ended December 31, 2022. The below is not a comprehensive list or analysis of all climate change impacts and risks. In addition, the focus is with respect to the impact of climate change on amounts recognized in the Company’s financial statements as at and for the year ended December 31, 2022.
Changing regulation
Emissions, carbon and other regulations impacting climate and climate related matters are constantly evolving. The Canadian Securities Administrators have issued proposed National Instrument 51-107 Disclosure of Climate-related Matters and the U.S. Securities and Exchange Commission has issued proposed Rule 33-11042 The Enhancement and Standardization of Climate-Related Disclosures for Investors. The cost to comply with these standards, and others that may be developed or evolve over time, has not been quantified.
Impact of climate events and change on amounts recorded in the 2022 financial statements
Reserves:
The Company engages a third party external reserve engineer to review the reserve report. Enerplus considers the impact of the evolving worldwide demand for energy and global advancement of alternative sources of energy that are not sourced from fossil fuels in its assessment of economic recovery of crude oil and natural gas reserves. The reserve report includes anticipated impacts from emissions related taxes, most notably the reserve report includes estimated carbon tax related to the Company’s operations.
Ceiling test:
Given the prescriptive nature of the ceiling test and depletion calculations, climate change risk is only considered in the determination of reserves, which will impact the ceiling test and depletion calculations. At December 31, 2022,
Expenditures on property, plant and equipment:
The Company incurs capital expenditures related to emissions reduction initiatives. The extent of spending on projects directly linked to reducing the climate impact of the Company’s operations will vary, however, management anticipates funding future projects through cash flow from operations and bank credit facilities.
Current assets and current liabilities:
These amounts are short term in nature and management is not aware of any material impacts on these items related to climate change and climate events. The Company did not experience material credit losses on its accounts receivable during 2022.
Access to Capital:
There is risk that access to capital may be restricted to the oil and gas industry. Management plans to continue to monitor and adjust the capital structure where necessary. At December 31, 2022, Enerplus had two SLL bank credit facilities with three sustainability performance targets. See Note 8 for further detail.
Physical effects of climate events (i.e. fire, flood, extreme weather) on the financial results
The Company’s financial results for 2022 were not materially impacted by a climate event.
ENERPLUS 2022 FINANCIAL SUMMARY 29
17) COMMITMENTS AND CONTINGENCIES
a) Commitments
Enerplus has the following minimum annual commitments, excluding operating leases which are recorded in the lease liability (see Note 10):
Minimum Annual Commitment Each Year | ||||||||||||||||||||
($ thousands) | Total | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | |||||||||||||
Senior notes(1) | $ | | $ | | $ | | $ | | $ | | $ | — | $ | — | ||||||
Transportation commitments | |
| | | | | | | ||||||||||||
Service workover rigs commitments | | | — | — | — | — | — | |||||||||||||
Purchase commitments | | | — | — | — | — | — | |||||||||||||
Total commitments(2) | $ | | $ | | $ | | $ | | $ | | $ | | $ | |
(1) | Interest payments have not been included. |
(2) | Crown and surface royalties, production taxes, lease rentals and mineral taxes (hydrocarbon production rights) have not been included as amounts paid depend on future ownership, production, prices and the legislative environment. |
b) 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.
18) GEOGRAPHICAL INFORMATION
As at and for the year ended December 31, 2022 ($ thousands) |
| U.S. | Canada |
| Total | ||||
Crude oil and natural gas sales | $ | | $ | | $ | | |||
Depletion, depreciation and accretion | | | | ||||||
Property, plant and equipment |
| |
| |
| | |||
Deferred income tax asset | — | | | ||||||
Deferred income tax liability | | — | |
As at and for the year ended December 31, 2021 ($ thousands) |
| U.S. |
| Canada |
| Total | |||
Crude oil and natural gas sales | $ | | $ | | $ | | |||
Depletion, depreciation and accretion | | | | ||||||
Property, plant and equipment |
| |
| |
| | |||
Deferred income tax asset | | | |
As at and for the year ended December 31, 2020 ($ thousands) |
| U.S. |
| Canada |
| Total | |||
Crude oil and natural gas sales | $ | | $ | | $ | | |||
Depletion, depreciation and accretion | | | | ||||||
Property, plant and equipment |
| |
| |
| | |||
Deferred income tax asset | | | |
19) SUPPLEMENTAL CASH FLOW INFORMATION
a) | Changes in Non-Cash Operating Working Capital |
($ thousands) |
| December 31, 2022 |
| December 31, 2021 |
| December 31, 2020 | |||
Accounts receivable | $ | ( | $ | ( | $ | | |||
Other assets |
| ( |
| ( |
| ( | |||
Accounts payable – operating |
| |
| |
| | |||
Non-cash operating activities | $ | ( | $ | ( | $ | |
30 ENERPLUS 2022 FINANCIAL SUMMARY
b) | Changes in Non-Cash Financing Working Capital |
($ thousands) |
| December 31, 2022 |
| December 31, 2021 |
| December 31, 2020 | |||
Dividends payable | $ | — | $ | ( | $ | | |||
Non-cash financing activities | $ | — | $ | ( | $ | |
c) | Changes in Non-Cash Investing Working Capital |
($ thousands) |
| December 31, 2022 |
| December 31, 2021 |
| December 31, 2020 | |||
Accounts payable – investing(1) | $ | | $ | | $ | ( |
(1) | Relates to changes in accounts payable for capital and office expenditures and included in Capital and office expenditures on the Consolidated Statements of Cash Flows. |
($ thousands) |
| December 31, 2022 |
| December 31, 2021 |
| December 31, 2020 | |||
Settlement on divestment'(1) | $ | ( | $ | — | $ | — |
(1) | Relates to funding abandonment and reclamation obligation requirements on previously disposed assets. Refer to Note 9. |
($ thousands) |
| December 31, 2022 |
| December 31, 2021 |
| December 31, 2020 | |||
Loan receivable | $ | ( | $ | — | $ | — | |||
Marketable securities | ( | — | — | ||||||
Accounts receivable | ( | — | — | ||||||
Non-cash working capital – Canadian divestments(1) | $ | ( | $ | — | $ | — |
(1) | Refer to Note 3. |
d) | Cash Income taxes and Interest payments |
($ thousands) |
| December 31, 2022 |
| December 31, 2021 |
| December 31, 2020 | |||
Income taxes paid/(received) | $ | | $ | | $ | ( | |||
Interest paid | $ | | $ | | $ | |
e) | Other |
During the year ended December 31, 2021, Enerplus received a $
ENERPLUS 2022 FINANCIAL SUMMARY 31