Why Enerplus Is Increasing CAPEX When Other Energy Producers Are Reducing It? CEO Explains

The fall in oil prices last year caused many oil producers to hold back or reduce their capex spending. However, Enerplus Corp (USA)ERF recently announced that it will be increasing its capex this year.

Ian Dundas, Enerplus president & CEO, was on CNBC Thursday to explain the reason for that.

A Positive Thing 

“We got a press release out yesterday that had two things in it,” Dundas said. “First and foremost, we just announced strong operating results that we come into this year […] operationally and that operational momentum continued to the first half of the year and so production was strong and at the high end of the guidance and that’s always a positive story for investors.”

He continued, “We are also modestly increased our capital and I think that drives strong production growth, but more importantly strong funds flow growth and helps our financial metrics and so I think that was a positive thing in the context of our business.”

Strong Financials + Ability To Hedge

Dundas was asked why his company is increasing its CAPEX, while other oil and gas majors are reducing it. He replied, “We must go back to the beginning of this year. Our company like many others reacted quite quickly to this crisis that the industry has found itself in. With falling prices, we are absolutely convinced that our primary goal was to maintain our financial strength and we came into this market moment in a very good position, strong financially.”

“We had a good hedge book, a good portfolio and again our primary goal is to maintain that financial strength and assure that our focus was on shareholder returns…Now we have better economics we are dealing with and we all have seen price of oil come up a bit, but more importantly we now have an ability to hedge some of that,” Dundas concluded.