Tomorrow, Enerplus will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
Enerplus is just one of many ways to play the explosion in energy production activity across the North American continent. But legislative changes in Canada forced the former royalty trust to incorporate, losing a key tax advantage. That move plus more recent developments led to reduced earnings and dividends from the company. Let's take an early look at what's been happening with Enerplus over the past quarter and what we're likely to see in its quarterly report.
Stats on Enerplus
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
How can Enerplus grow faster?
Analysts have had mixed opinions in recent months about the prospects for Enerplus and its earnings. They've boosted their consensus for the 2013 year by $0.15 per share, but they've cut their 2014 estimates by a dime per share, suggesting much slower long-term growth. The shares, though, have reacted favorably, rising about 10% since early February.
Many investors haven't forgiven Enerplus for cutting its dividend in half last year. With the company facing a tough pricing environment, it made the hard decision to sell off assets in order to focus on its highest-potential plays in the Bakken and Three Forks formations. Moreover, Enerplus followed in the footsteps of Chesapeake Energy by simply walking away from natural gas leases, due to a lack of capital to drill wells on the properties and the relatively low risk-reward potential at current prices. With boosts in well-completion efficiency and better cash flow margins despite weak prices, Enerplus has benefited from its shift away from dry gas toward oil and gas liquids to bolster overall profits.
Still, Enerplus faces several challenges. In the Bakken, EOG Resources still has a huge cost advantage over Enerplus in terms of well costs, spending a third less on its Bakken wells than Enerplus. In addition, although Enbridge and Plains All American have helped increase the availability of rail transport to help get energy products out of the region, the additional costs involved still keep Enerplus from realizing the full value of its oil and gas.
In its quarterly report, Enerplus needs to reassure investors of its prospects in the Three Forks play. Although most investors are comfortable with the Bakken, companies have had mixed results from the Three Forks. Enerplus' progress there could be instrumental in maximizing the company's growth going forward.
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The article Enerplus Seeks Faster Growth originally appeared on Fool.com.
Motley Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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