Back on track and ready for 2017

Enerplus (NYSE:ERF), likewise, spent the bulk of the downturn cutting costs to bolster its balance sheet with it cutting spending by 60% this year to just $200 million. In addition to that, it sold several assets and issued equity, which combined to reduce its net debt by 45% since the end of 2015. As a result, its balance sheet is back on solid ground and with commodity prices improving Enerplus is ready to return to growth mode.

The company took its first step forward last month when it added $15 million to its capex budget. That incremental capital will enable the company to complete three more wells this year to add about 1,000 BOE/d of production. Also, the company plans to use a portion of that capital to pre-order some equipment for its 2017 drilling program. These moves put the company in a much stronger position to grow production in 2017.

Not quite there yet

While Penn West Petroleum and Enerplus are looking forward to growing once again in 2017, not all of their peers are in a position to boost spending just yet. That is primarily because these companies still have some issues to work out. For example, Pengrowth Energy (NYSE:PGH) is focused on capital preservation right now because it has more than $500 million in debt maturing in 2017. That is why Pengrowth Energy cut its capex budget to just $65 million this year, which was well below the $183.8 million it spent last year and a fraction of the $904 million it spent in 2014. However, that spending cut should allow the company to build up about $200 million in cash by the end of this year, which it intends to use to pay down some of its maturing debt.

Meanwhile, Baytex Energy (NYSE:BTE) recently made another cut to its 2016 capex budget. The company initially planned to spend between $325 million and $400 million this year, which at the mid-point would have been a 53% reduction from the $521 million it spent last year. However, in early March it cut spending by another 33% to a range of $225 million to $265 million and then cut spending again in July to $200 million to $225 million. Baytex Energy did so not only because crude prices remain depressed, but it wanted to generate excess cash flow to trim debt. While Baytex Energy does not have the near-term debt maturity concerns of Pengrowth Energy, it still has more than $1.9 billion of long-term debt outstanding, which is a lot for the current commodity price environment.

Investor takeaway