The low point for Enerplus Corp. came in June 2012. The company, which had made its name providing investors with a steady income from its oil and gas wells, cut its dividend in half as capital spending rose and energy prices fell. Its stock, which had traded above $60 in 2006, sank to the $12 range.
“There were dark times,” concedes Ian Dundas, then chief operating officer. “You couldn’t see the business working well.” But Dundas, who would succeed Gordon Kerr as president and CEO the following year, had one advantage. “The expectations were exceptionally low for us,” says Dundas, 47, a lawyer and former merchant banker.
In the two years since that nadir, Enerplus has posted double-digit year-over-year growth in production, reserves and cash flow. “There is no question that this management team continues to deliver on its business strategy,” wrote FirstEnergy Capital analyst Katrina Karkkainen in a conference briefing in September.
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Enerplus is probably still best known as Canada’s original royalty trust. Instead of exploring for resources, it would buy up mature properties and pump them dry, all the while passing earnings directly to unitholders in the form of monthly distributions and paying little tax itself. That was until 2006’s “Halloween Surprise,” when then finance minister Jim Flaherty introduced a law to make those kinds of earnings fully taxable at the corporate level, beginning in 2011.
Other factors—including the financial crisis and business lost to the fracking boom—put the company into crisis mode by 2011. It divested its oilsands and conventional gas assets, and redeployed capital in earlier-stage resource plays.
The asset turnover necessitated an upgrade in expertise. “We needed a different organizational skill set,” says Dundas. The change started from the top and ran right down the organization. The board, previously dominated by financiers, welcomed new members with technical know-how. There were new hires in the business development group and, later, at ground level. The company’s properties in the Bakken oilfields in North Dakota and the gas-rich Marcellus shale in Pennsylvania have proven much more bountiful than first thought, a windfall Dundas attributes to the company’s skills upgrade. Still, Dundas deserves a good deal of the credit for Enerplus’s turnaround. “He’s incredibly bright,” says Dirk Lever, managing director of institutional equity research at AltaCorp Capital. “He’s one of the smartest guys in Calgary.”