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Energy Summary for Jan. 12, 2016

2016-01-12 19:52 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for February delivery dipped briefly below $30 for the first time in 12 years before closing at $30.44, down 97 cents, on the New York Merc (all figures in this para U.S.). Brent for February lost 69 cents to $30.86. Western Canadian Select traded at a discount of $14.80 to WTI ($15.64), down from a discount of $14.45. Natural gas for February lost 13.9 cents to $2.257. The TSX energy index lost a fraction to close at 142.96.

Enerplus Corp. (ERF) lost six cents to $3.45 on 5.19 million shares, after agreeing to sell $193-million worth of Alberta gas properties producing about 5,400 barrels a day. It did not identify the buyer. This is Enerplus's third significant asset sale in less than a year. In the second quarter of 2015, it sold about 1,900 barrels a day of Alberta Cardium production for $182-million, and in the fourth quarter, it sold about 1,000 barrels a day of non-operated production in North Dakota for $80-million. (There were other, smaller asset sales that did not warrant mentions anywhere besides SEDAR filings.) Despite the sales, Enerplus's debt has hovered steadily around $1.1-billion to $1.2-billion, worrying investors and analysts, one of whom (Grant Hofer of Barclays) predicted in November that Enerplus risks breaching its debt covenants this year. Enerplus has sought to downplay debt fears by reminding investors that nothing is due until mid-2017 and emphasizing in its on-line presentation, "Fully Funded 2016 Program: No Debt Build Expected." The 2016 program, released in November, calls for production of 100,000 to 105,000 barrels a day on a budget of $350-million, and assumes the continued payment of the three-cent monthly dividend, which was cut from five cents in November (and from nine cents last February) but still yields a generous 10.4 per cent. Enerplus says it will update the guidance in February to reflect the asset sale announced today. Investors seem worried that the update will contain more than just a proportional snip to the production target. Enerplus's outlook assumes a WTI oil price of $50 (U.S.), well above today's level of around $30 (U.S.), meaning that if Enerplus wants to use its cash flow to cover its budget and dividend, either or both may be in for a cut. The updated guidance is scheduled to arrive with the company's year-end 2015 financials on Feb. 19.

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