Enerplus is well positioned to capture an increasingly
attractive acquisition market in 2002. The Fund
reviewed a large number of acquisition opportunities
during 2001, acquiring only $85 million in producing
oil and natural gas properties in core areas during
the year. This was approximately the same value of
the properties divested during the year. The high
commodity price environment for much of 2001
created a high priced acquisition market, and Enerplus
found it difficult to match the prices being paid
for assets while at the same time adhering to its
disciplined acquisition criteria. As commodity prices
have fallen, however, acquisition opportunities are
improving and Enerplus is well positioned to capture
an increasing share. Enerplus has a strong balance
sheet and an experienced acquisitions team with an
excellent knowledge of the Western Canadian
Sedimentary Basin.
Consolidation occurred at a record pace in the
Canadian oil and natural gas industry during 2001 as
U.S. buyers drove gas-oriented company valuations
to unprecedented levels. This activity was a
continuation of the strong merger and acquisition
activity seen in 2000 and left the industry markedly
different from what it was two years ago. Many of
the junior and mid-cap exploration and production
("E&P") companies disappeared through takeover
activity. Today, a new model for the Canadian energy
sector has emerged in which the royalty trusts, and
specifically Enerplus, have assumed a role as the new
mid-cap players in the industry.
Royalty trusts such as Enerplus offer investors an
efficient opportunity for extracting value from the
maturing Western Canadian Sedimentary Basin.
Enerplus maintains a low cost of capital by focusing
on mature, predictable long life properties that
generate strong cash flow for Unitholders. This focus
complements an E&P company’s strategy as it provides
a market for mature properties and the opportunity
for the E&P company to re-deploy proceeds from
property sales towards higher risk, higher return
exploration that will satisfy their higher cost of capital
requirements.
Enerplus attempts to match its acquisition and
development strategy with the cyclical nature of oil
and natural gas prices. During periods of high
commodity prices, Enerplus will emphasize internal
development projects that provide better economic
return to Unitholders than the relatively high priced
acquisition market. The year 2001 was such a period,
and Enerplus spent $148 million on development
projects and drilled approximately 350 net wells. In
comparison, during periods of low commodity price
cycles, Enerplus searches aggressively for acquisition
opportunities that meet or exceed our criteria.
Entering 2002, there is evidence that there will be a
greater number of quality assets offered for sale as
companies rationalize their property portfolios and
strengthen their balance sheets after the high activity
levels seen during the last two years.
Enerplus focuses its acquisition efforts on properties
with the following attributes:
- Mature assets with a long history of performance
- Long life reserve indices
- Attractive, low-risk, low-capital development
opportunities
- High proportion of proven reserves
- Located in areas where Enerplus enjoys a
competitive advantage
Enerplus focuses its divestment efforts on smaller,
marginal properties with production, reserve
or operational issues which can be sold above
book value.
During 2001, Enerplus and EnerMark, on a combined basis, acquired and divested of approximately the same
amount of crude oil and natural gas reserves and daily production. The positive results of this activity saw the Fund’s
working interest percentage increase in core areas while those in non-core areas were reduced.
 |
| 2001 Combined Acquisition & Divestment Summary - Combined Basis |
Acquired |
Divested |
Net |
|
| Production (BOE/day) |
3,025 |
2,901 |
124 |
| Cost per Daily Producing BOE |
$ 28,100 |
$ 29,645 |
|
| Reserves (MBOE) |
10,692 |
11,194 |
(502) |
| Cost per BOE |
$ 7.95 |
$ 7.68 |
|
| Capital ($million) |
$ 85 |
$ 86 |
$(1) |
|
2001 Acquisitions
During 2001, Enerplus and EnerMark, on a combined basis, invested approximately
$85 million on property
acquisitions. The focus was to increase reserves in core areas and to buy new properties that meet the criteria
previously stated. Enerplus increased its ownership in eight core areas including Medicine Hat, Hanna/Garden
Plains, Kaybob, Ferrier, Joarcam, and Gleneath. This 2001 acquisition activity added established reserves of
6.1 MMbbls of liquids and 27.7 Bcf of natural gas, and production volumes of 1,272 bbls/day of liquids and 10.5
MMcf/day of gas. The average acquisition price was approximately $7.95 per BOE of established reserves, and
$28,100 per BOE per day.
|
| |
|
Crude oil
bbls/day |
Natural gas
Mcf/day |
NGLs
bbls/day |
Total
BOE/day |
|
| Daily Production |
Enerplus Jan. - Jun. |
157 |
70 |
2 |
171 |
| |
EnerMark Jan. - Jun. |
125 |
75 |
1 |
137 |
| |
Enerplus Jul. - Dec. |
791 |
10,382 |
196 |
2,717 |
| |
|
|
| |
Total |
1,073 |
10,527 |
199 |
3,025 |
|
|
| |
|
Crude oil
Mbbl |
Natural gas
MMcf |
NGLs
Mbbl |
Total
MBOE |
|
Reserves:
Proven |
Enerplus Jan. - Jun. |
1,311 |
238 |
17 |
1,368 |
| EnerMark Jan. - Jun. |
111 |
69 |
2 |
121 |
| |
Enerplus Jul. - Dec. |
3,462 |
24,312 |
491 |
8,005 |
| |
|
|
| |
Total |
4,884 |
24,619 |
510 |
9,494 |
|
| Established |
Enerplus Jan. - Jun. |
1,509 |
274 |
20 |
1,575 |
| |
EnerMark Jan. - Jun. |
120 |
79 |
2 |
137 |
| |
Enerplus Jul. - Dec. |
3,904 |
27,306 |
525 |
8,980 |
| |
|
|
| |
Total |
5,533 |
27,659 |
547 |
10,692 |
|
Note: Established reserves are defined as proven reserves plus 50% of probable reserves.
2001 Divestments
In addition to our acquisition program, Enerplus manages its asset base through an effective program of property
rationalization designed to enable the Fund to capture value for smaller, marginal properties which have production,
reserve or operational issues. The divestment of many non-core assets was well timed with the commodity price
cycle resulting in the sale of 62 properties in 2001. In total, approximately
$86 million was received on the sale of
11.2 MMBOE of established reserves. Combined daily production from these properties was approximately
2,900 BOE per day. The combined average selling price was approximately $7.68 per BOE of established reserves, and
$29,645 per BOE per day.
|
| |
|
Crude oil
bbls/day |
Natural gas
Mcf/day |
NGLs
bbls/day |
Total
BOE/day |
|
| Daily Production |
Enerplus Jan. - Jun. |
410 |
2,169 |
62 |
834 |
| |
EnerMark Jan. - Jun. |
336 |
1,552 |
61 |
656 |
| |
Enerplus Jul. - Dec. |
857 |
3,251 |
12 |
1,411 |
| |
|
|
| |
Total |
1,603 |
6,972 |
135 |
2,901 |
|
|
| |
|
Crude oil
Mbbl |
Natural gas
MMcf |
NGLs
Mbbl |
Total
MBOE |
|
Reserves:
Proven |
Enerplus Jan. - Jun. |
996 |
5,689 |
257 |
2,201 |
| EnerMark Jan. - Jun. |
857 |
8,443 |
264 |
2,528 |
| |
Enerplus Jul. - Dec. |
3,306 |
8,534 |
80 |
4,689 |
| |
|
|
| |
Total |
5,159 |
22,666 |
601 |
9,418 |
|
| Established |
Enerplus Jan. - Jun. |
1,102 |
6,560 |
277 |
2,472 |
| |
EnerMark Jan. - Jun. |
1,061 |
8,524 |
283 |
2,765 |
| |
Enerplus Jul. - Dec. |
3,909 |
11,723 |
94 |
5,957 |
| |
|
|
| |
Total |
6,072 |
26,807 |
654 |
11,194 |
|
Enerplus plans to continue to actively manage its portfolio by focusing on acquisitions in areas where there are competitive advantages as well as to divest of undesirable properties outside of our strategic focus.
|
