Five Canadian oil and gas stocks with improving fundamentals, SeekingAlpha, one of the five:
Enerplus Resources, with a dividend rate of just under 5%, and a sold expansion plan with a reasonable balance sheet. SA author IAE Research makes the case for Enerplus in a recent article.Can these opportunities fuel dividend growth at ERF? -- Motley Fool:
Enerplus has drilled just over 100 wells in the Bakken Shale so far. It estimates that it has about 145 wells left to drill in the future. While some of those wells will be necessary to offset the production declines of the wells already drilled in the Bakken, many of these future drilling locations represent an opportunity for production growth. However, there are two interesting opportunities beyond those 145 future drilling locations that could really fuel growth for Enerplus’ investors.
The first opportunity is that Enerplus is working on downspacing tests to determine how closely it can drill its wells. Many of its Bakken-focused peers, including Continental Resources and Kodiak Oil & Gas, are working on similar tests. So far these peers are finding that wells can be drilled much closer together and in some cases can be drilled just 600 feet apart. If this proves to be true on Enerplus’ acreage, it could add another 150 drilling locations. That would double the company’s drilling locations in the Bakken.
Enerplus’ second compelling opportunity in the Bakken is its potential to drill into the second and third benches of the Three Forks formation found below the Bakken.
While it’s still delineating its acreage position for the potential of these two additional hydrocarbon producing zones, there is the opportunity that it will find these areas to be productive as well.
Both Continental Resources and Kodiak Oil & Gas have had success in the lower benches of the Three Forks formation.
The final opportunity that I find to be especially compelling is Enerplus’ 85,000 net acres of undeveloped land that’s prospective for the Duvernay Shale. Peers like Encana see the Durvernay being a simply massive resource as its fairway is nearly twice the size of the Eagle Ford Shale.
This potential bodes well for Enerplus as its acreage is located in close proximity to Encana’s. Further, core analysis from vertical tests showed that there’s a lot of hydrocarbons on Enerplus’ acreage. Because of this the current plan is to drill two horizontal wells this year, however, the company sees the potential for 300-400 horizontal wells on its acreage in the future. That’s pretty compelling upside potential that could fuel the dividend for years to come.Is ERF's dividend at risk (Motley Fool)? -- safe for at least the next year --
Enerplus’s dividend, like Penn West’s, has been falling in recent years and while both payouts look to have bottomed, neither is expected to grow anytime soon. For Enerplus that means its $1.08 per share dividend rate from last year is about what investors can expect this year. However, a falling or static dividend is usually a sign of weakness for a company.
For Enerplus this weakness comes down to the fact that its adjusted payout ratio is just too high. The company continues to pay out more than 100% of its income. That said, its simplified payout ratio is improving as Enerplus grows its cash flow by improving its costs and being disciplined with its capital. That said, these two ratios need to continue improving as weakness here is a leading sign that the dividend is in danger.
None of these weaknesses suggest that Enerplus is doomed to fail. While its dividend isn’t as secure as it could be, it would appear to be safe for at least the next year.Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here.