Chord Energy and Enerplus to Combine in $11 Billion Transaction Creating Premier Williston-Focused E&P Company with Top-Tier Shareholder Returns
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Insights
The proposed merger between Chord Energy Corporation and Enerplus Corporation is a significant event that could reshape the competitive landscape within the energy sector, specifically the Williston Basin. The transaction's estimated value of approximately $11 billion, inclusive of net debt, suggests a major strategic move to consolidate assets and streamline operations. The combined entity's projected free cash flow of $1.2 billion for 2024, based on specific commodity price assumptions, signals a robust financial position that could appeal to investors looking for stable returns in a volatile market.
Moreover, the expected synergies of up to $150 million annually could lead to operational efficiencies and cost reductions, potentially enhancing the bottom line. However, it is crucial for investors to monitor the realization of these synergies post-merger, as such projections can be optimistic. The transaction's accretive nature to various financial metrics, including cash flow per share and net asset value, indicates a positive outlook for shareholder value creation. The commitment to a return of capital framework of 75%+ of free cash flow could be particularly attractive to income-focused investors.
The merger between Chord and Enerplus highlights the trend of consolidation within the energy industry, aimed at achieving economies of scale and operational efficiencies. The combined company's enlarged acreage position totaling 1.3 million net acres and a production rate of 287,000 Boepd will likely enhance its bargaining power with service providers and may lead to improved market positioning. This scale is essential for maintaining competitiveness, especially in a sector where cost management is critical due to fluctuating commodity prices.
The focus on maintaining a low leverage and a relatively unlevered balance sheet is indicative of a strategic approach to financial management that prioritizes financial flexibility and risk mitigation. This could be reassuring for stakeholders concerned about the financial risks associated with mergers and acquisitions. The emphasis on ESG and sustainability excellence also aligns with the increasing investor and regulatory demand for responsible corporate behavior, which could enhance the company's reputation and long-term viability.
The Williston Basin is a mature oil-producing region and the merger's focus on this area suggests a strategy of leveraging existing infrastructure and expertise to maximize returns from known reserves. The mention of three-mile lateral development opportunities is significant, as longer laterals typically lead to more efficient resource extraction and reduced costs on a per-unit basis. This technical capability could set the combined entity apart from competitors and provide a pathway to sustained profitability, especially in a low-price environment.
Given that the combined production is heavily weighted towards oil, with approximately 56%, the company's financial health will be closely tied to oil prices. The reference to a sub $60 WTI breakeven inventory indicates the combined company's resilience to price fluctuations, which is a critical factor for stability in the energy sector. Stakeholders should consider the potential impact of global oil price dynamics on the company's performance, especially in the context of geopolitical events and energy transition trends.
Enhanced Operating Scale to Drive Returns and Free Cash Flow; Combined Acreage Position
Totaling 1.3 Million Net Acres and Combined 4Q23 Production of 287,000 Boepd
Combined Company has Approximately 10 years of Low-Breakeven Inventory with Significant Opportunity to Enhance Returns through Efficiencies and Expanding Three-Mile Lateral Opportunities
Transaction Accretive to Key Metrics
While Preserving Low Leverage; Strong Balance Sheet and Significant Liquidity at Close
Transaction Expected to Generate Administrative, Capital and Operational Cost Synergies of
Up To
Post-Combination Return of Capital Expected to Remain at Chord's Pre-Combination Level of
Commitment to ESG and Sustainability Excellence and Capitalizing on Combined
Best Practices
Danny Brown to Serve as President and CEO; Ian Dundas to Serve as Advisor to the CEO and Director; Three Additional Enerplus Directors to Join Combined Company Board
Companies to Host Conference Call Today at 6:00 p.m. ET (5:00 p.m. CT and 4:00 p.m. MT)
Under the terms of the transaction, each common share of Enerplus will be exchanged for 0.10125 shares of Chord common stock and
"This combination further strengthens our
"This transaction brings together Chord's and Enerplus' premier asset bases, operational abilities and technical acumen to create a combined company positioned to drive further success, deliver competitive returns and peer-leading shareholder distributions," said Ian Dundas, Enerplus' President and Chief Executive Officer. "Joining forces with Chord will provide Enerplus shareholders with immediate value for their investment and the opportunity to participate in the future upside potential from ownership in the stronger, larger company with enhanced shareholder returns. I want to thank our employees for their dedication and hard work over the years that has allowed us to build such a great organization and reach this exciting milestone."
Combined Company Positioned to Drive Value Through Commodity Cycles
- Enhances
Williston Basin Position with Increased Scale. The combined company is expected to be a premier operator in theWilliston Basin, with approximately 1.3 million net acres (98% Williston ) and 4Q23 production of 287 MBoepd (over90% Williston ). Oil is expected to be approximately56% of the combined company's production, supporting peer-leading EBITDA margins. - Adds Significant High-Quality Inventory. The combined company is expected to benefit from an enhanced inventory position, increasing its sub
$60 60% , improved returns and resilient free cash flow through commodity cycles. The pro forma inventory supports approximately 10 years of development at the current pace and expands the company's opportunities for three-mile lateral development. - Accretive to All Financial Metrics. The transaction is expected to be accretive to all metrics, including: i) cash flow per share, ii) free cash flow per share, iii) net asset value and iv) return of capital. Significant synergies allow for additional potential accretion in 2025 and beyond.
- Delivers Significant Cost Saving and Synergy Opportunities. The combined company expects to benefit from administrative, capital and operating synergies of up to
$150 million $40 million $55 million $55 million $750 million - Supports Top-Tier Shareholder Returns. The combined company is expected to generate meaningful free cash flow from its low-cost asset base, improving efficiencies and disciplined capital spending through a wide range of commodity price scenarios. The combined company is expected to generate approximately
$1.2 billion 51% in 2024 at$79 $2.50 75% + of free cash flow through base and variable dividends and share repurchases. - Creates Stronger Financial Position and Relatively Unlevered Balance Sheet. The combined company is expected to have an improved credit profile and cost of capital, with a strong balance sheet with expected leverage of ~0.2x at close.
- Continued ESG Commitment. The combined company will maintain and build upon its commitment to ESG and sustainability excellence and capitalize on combined best practices.
Transaction Details
Under the terms of the agreement, Enerplus shareholders will receive 0.10125 shares of Chord common stock and
It is anticipated that the quarterly dividend payments made by Enerplus until closing of the transaction will be equalized to those made by Chord, after giving effect to the exchange ratio, through an additional Enerplus dividend declared shortly prior to the closing.
The transaction will be structured as a plan of arrangement under the Business Corporations Act (
Governance and Leadership
Following close of the transaction, the board of directors of the combined company will increase to 11 members and will initially comprise seven representatives from Chord and four representatives from Enerplus, including Ian Dundas, who will also serve as Advisor to the CEO of Chord.
Danny Brown will serve as Director, President and Chief Executive Officer of the combined company. The remainder of the company's leadership team will include Michael Lou, Chord's Chief Financial Officer, Darrin Henke, Chord's Chief Operating Officer and Shannon Kinney, Chord's General Counsel, who will continue to serve in their respective capacities in the combined company.
Timing and Approvals
The combination has been unanimously approved by the boards of directors of both companies. The transaction is expected to close by mid-year 2024. The transaction is subject to customary closing conditions in
Further information regarding the transaction will be contained in a management information circular that Enerplus will prepare, file and mail to Enerplus shareholders in advance of its shareholder meeting and a proxy statement that Chord will file with the SEC and mail to Chord stockholders in advance of its stockholder meeting. Copies of the arrangement agreement and management information circular will be available on Enerplus' profile on SEDAR+ at www.sedarplus.ca and the arrangement agreement and proxy statement will be available on the SEC's website at www.sec.gov under Chord's profile.
Commitment to ESG
Chord remains committed to continuous improvement across its business, including its environmental footprint. Please refer to the Chord website (www.chordenergy.com) and the Enerplus website (www.enerplus.com) for ESG disclosure and reporting. Enerplus published it latest ESG report in June 2023.
Advisors
Citi is serving as lead financial advisor and Vinson & Elkins LLP, Wachtell,
Conference Call and Additional Materials
Chord and Enerplus will hold a joint conference call today, February 21, 2024 at 6:00 p.m. Eastern Time / 5:00 p.m. Central Time / 4:00 p.m. Mountain Time to discuss the transaction. An investor presentation regarding the transaction can also be found at www.chordenergy.com and www.enerplus.com.
Investors, analysts, and other interested parties are invited to listen to the webcast:
Date: | Wednesday, February 21, 2024 | |
Time: | 5:00 p.m. Central | |
Live Webcast: |
To join the conference call by phone without operator assistance (including sell-side analysts wishing to ask a question), you may register and enter your phone number at https://emportal.ink/42KxiYW to receive an instant automated call back and be immediately placed into the call.
You may also use the following dial-in information to join the conference call by phone with operator assistance:
Dial-in: | 888-664-6383 | |
Intl. Dial-in: | 1-617-892-4906 | |
Conference ID: | 51301393 |
A recording of the conference call will be available until Wednesday, February 28, 2024 by dialing:
Replay dial-in: | 1-888-390-0541 |
Intl. replay: | 1-617-849-9026 |
Replay access: | 301393 # |
The call will also be available for replay for approximately 30 days at https://www.chordenergy.com and https://www.enerplus.com/
Chord's fourth quarter 2023 earnings conference call originally scheduled for February 22, 2024 has been cancelled and replaced with today's joint conference call.
About Chord Energy
Chord Energy Corporation is an independent exploration and production company with quality and sustainable long-lived assets in the
About Enerplus
Enerplus is an independent North American oil and gas exploration and production company focused on creating long-term value for its shareholders through a disciplined, returns-based capital allocation strategy and a commitment to safe, responsible operations. For more information, visit the Company's website at www.enerplus.com.
NOTICE REGARDING INFORMATION CONTAINED IN THIS NEWS RELEASE
All amounts in this news release are stated in
This news release contains references to "BOE" (barrels of oil equivalent) and "MBOE" (one thousand barrels of oil equivalent). The parties have adopted the standard of six thousand cubic feet of gas to one barrel of oil (6 Mcf: 1 bbl) when converting natural gas to BOEs. BOE and MBOE may be misleading, particularly if used in isolation. The foregoing conversion ratios are based on an energy equivalency conversion method primarily applicable at the burner tip and do not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalent of 6:1, utilizing a conversion on a 6:1 basis may be misleading.
All production volumes presented in this news release are reported on a "net" basis (a company's working interest share after deduction of royalty obligations, plus the company's royalty interests), which differs from "gross" basis (a company's working interest before deduction of royalties) for reporting production under National Instrument 51-101 and industry practice in
All references to "oil" in this news release include light and tight crude oil.
Forward-Looking Statements
Certain statements in this document concerning the transaction, including any statements regarding the expected timetable for completing the transaction, the results, effects, benefits and synergies of the transaction, future opportunities for the combined company, future financial performance and condition, guidance and any other statements regarding Chord's or Enerplus' future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts are "forward-looking" statements based on assumptions currently believed to be valid. Forward-looking statements are all statements other than statements of historical facts. The words "anticipate," "believe," "ensure," "expect," "if," "intend," "estimate," "probable," "project," "forecasts," "predict," "outlook," "aim," "will," "could," "should," "would," "potential," "may," "might," "anticipate," "likely" "plan," "positioned," "strategy," and similar expressions or other words of similar meaning, and the negatives thereof, are intended to identify forward-looking statements. Specific forward-looking statements include statements regarding Chord's or Enerplus' plans and expectations with respect to the transaction, timing of closing, and the anticipated impact of the transaction on the combined company's results of operations, financial position, growth opportunities and competitive position. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, the possibility that shareholders of Chord may not approve the issuance of new shares of Chord common stock in the transaction or that shareholders of Enerplus may not approve the transaction; the risk that a condition to closing of the transaction may not be satisfied; that either party may terminate the arrangement agreement or that the closing of the transaction might be delayed or not occur at all; potential adverse reactions or changes to business or employee relationships of Chord or Enerplus, including those resulting from the announcement or completion of the transaction; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of Chord and Enerplus; the effects of the business combination of Chord and Enerplus, including the combined company's future financial condition, results of operations, strategy and plans; the ability of the combined company to realize anticipated synergies in the timeframe expected or at all; changes in capital markets and the ability of the combined company to finance operations in the manner expected; regulatory approval of the transaction; the effects of commodity prices; the risks of oil and gas activities; and the fact that operating costs and business disruption may be greater than expected following the public announcement or consummation of the transaction. Expectations regarding business outlook, including changes in revenue, pricing, capital expenditures, cash flow generation, strategies for the combined company's operations, oil and natural gas market conditions, legal, economic and regulatory conditions, and environmental matters are only forecasts regarding these matters.
Additional factors that could cause results to differ materially from those described above can be found in Chord's Annual Report on Form 10-K for the year ended December 31, 2022, and subsequent Quarterly Reports on Form 10-Q, which are on file with the Securities and Exchange Commission (the "SEC") and available from Chord's website at www.chordenergy.com under the "Investors" tab, and in other documents Chord files with the SEC; and in Enerplus' annual information form for the year ended December 31, 2022, which is on file with the SEC, TSX and on SEDAR+ and available from Enerplus' website at www.enerplus.com under the "Investors" tab, and in other documents Enerplus files with the SEC, TSX or on SEDAR+.
All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither Chord nor Enerplus assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by applicable securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
No Offer or Solicitation
Communications in this news release do not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any securities or a solicitation of any vote or approval with respect to the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
Additional Information and Where You Can Find It
In connection with the proposed transaction, Chord and Enerplus intend to file materials with the SEC and on SEDAR+, as applicable. Chord intends to file a preliminary Proxy Statement on Schedule 14A (the "Proxy Statement") with the SEC in connection with the solicitation of proxies to obtain Chord stockholder approval of the proposed transaction, and Enerplus intends to file an information circular and proxy statement (the "Circular") with the SEC, TSX, and on SEDAR+ in connection with the solicitation of proxies to obtain Enerplus shareholder approval of the proposed transaction. After the Proxy Statement is cleared by the SEC, Chord intends to mail a definitive Proxy Statement to the shareholders of Chord. This news release is not a substitute for the Proxy Statement, the Circular or for any other document that Chord or Enerplus may file with the SEC or on SEDAR+ and/or send to 'Chord's shareholders and/or Enerplus' shareholders in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF CHORD AND ENERPLUS ARE URGED TO CAREFULLY AND THOROUGHLY READ THE PROXY STATEMENT AND THE CIRCULAR, RESPECTIVELY, AS EACH MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND OTHER RELEVANT DOCUMENTS FILED BY CHORD AND/OR ENERPLUS WITH THE SEC OR ON SEDAR+, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT CHORD, ENERPLUS, THE PROPOSED TRANSACTION, THE RISKS RELATED THERETO AND RELATED MATTERS.
Shareholders of Chord and Enerplus will be able to obtain free copies of the Proxy Statement and the Circular, as each may be amended from time to time, and other relevant documents filed by Chord and/or Enerplus with the SEC, TSX or on SEDAR+ (when they become available) through the website maintained by the SEC at www.sec.gov or at www.sedarplus.ca, as applicable. Copies of documents filed with the SEC by Chord will be available free of charge from Chord's website at www.chordenergy.com under the "Investors" tab or by contacting Chord's Investor Relations Department at (281) 404-9600 or ir@chordenergy.com. Copies of documents filed with the SEC or on SEDAR+ by Enerplus will be available free of charge from Enerplus' website at www.enerplus.com under the "Investors" tab or by contacting Enerplus' Investor Relations Department at (403) 298-1707.
Participants in the Solicitation
Chord, Enerplus and their respective directors and certain of their executive officers and other members of management and employees may be deemed, under SEC rules, to be participants in the solicitation of proxies from Chord's shareholders and Enerplus' shareholders in connection with the transaction. Information regarding the executive officers and directors of Chord is included in its definitive proxy statement for its 2023 annual meeting under the headings "Item 1 – Election of Directors", "Our Executive Officers", "Compensation Discussion and Analysis", "Executive Compensation" and "Security Ownership of Certain Beneficial Owners and Management", which was filed with the SEC on March 16, 2023 and is available at https://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/data/1486159/000148615923000007/chrd-20230316.htm. Information regarding the executive officers and directors of Enerplus is included in its information circular and proxy statement for its 2023 annual meeting under the headings "Director Compensation" and "Executive Compensation", which was filed on SEDAR+ on April 4, 2023 and is available at https://www.sec.gov/Archives/edgar/data/1126874/000110465923041270/tm235372d3_ex99-2.htm. Additional information regarding the persons who may be deemed participants and their direct and indirect interests, by security holdings or otherwise, will be set forth in the Proxy Statement, the Circular and other materials when they are filed with the SEC, TSX, or on SEDAR+ in connection with the transaction. Free copies of these documents may be obtained as described in the paragraphs above.
For further information:
Contact:
Chord Energy Corporation
Danny Brown, President and Chief Executive Officer
Michael Lou, Executive Vice President and Chief Financial Officer
Bob Bakanauskas, Managing Director, Investor Relations
(281) 404-9600
ir@chordenergy.com
Enerplus Corporation
Drew Mair, Sr. Manager, Investor Relations, Corporate Planning, Reserves
Krista Norlin, Sr. Investor Relations Analyst
1-800-319-6462
investorrelations@enerplus.com
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2 Pro forma 2024 estimates based on mid-point of management guidance at
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SOURCE Chord Energy Corp.; Enerplus Corporation
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