Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Enerplus Corporation

Opinion on Internal Control Over Financial Reporting

We have audited Enerplus Corporation’s (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of income (loss) and comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements), and our report dated February 20, 2020 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control and Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Chartered Professional Accountants
Calgary, Canada
February 20, 2020

2 ENERPLUS 2019 FINANCIAL SUMMARY

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Enerplus Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Enerplus Corporation (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Corporation Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 20, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of the carrying value of goodwill for the Canadian reporting unit

As discussed in note 5(b) to the consolidated financial statements, the Company recorded goodwill impairment of $451,121 thousand related to the Canadian reporting unit. The Company assesses goodwill for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying value of the reporting unit likely exceeds the fair value. If it is more likely than not that the fair value of the reporting unit is less than its carrying value, quantitative impairment tests are performed. If the carrying value of the reporting unit exceeds its fair value, goodwill is written down to its implied fair value. The estimated fair value of the Canadian reporting unit involves a number of estimates, including the cash flows associated with the estimated proved and probable oil and gas reserves of the Canadian reporting unit (“Canadian reserves”) and the discount rate. The estimation of the Canadian reserves require the expertise of independent reservoir engineering specialists, who take into consideration assumptions related to its forecasted production, forecasted operating, royalty and capital cost assumptions and forecasted oil and gas prices (“reserve assumptions”). The Company engages independent reservoir engineering specialists to estimate the Canadian reserves.

We identified the assessment of the carrying value of goodwill for the Canadian reporting unit as a critical audit matter. Complex auditor judgment was required in evaluating the Company’s estimate of the Canadian reserves and the discount rate, which were inputs to the calculation of the fair value of the Canadian reporting unit. Auditor judgment was also required to evaluate the reserve assumptions used in the Canadian reserves.

4 ENERPLUS 2019 FINANCIAL SUMMARY

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s determination of the fair value of the Canadian reporting unit, including controls related to the development of the discount rate and the estimation of the Canadian reserves. We performed sensitivity analyses over the discount rate used to estimate the fair value of the Canadian reporting unit to assess the impact of a change in the discount rate on the goodwill impairment charge. We evaluated the competence, capabilities and objectivity of the independent reservoir engineering specialists engaged by the Company, who estimated the Canadian reserves. We evaluated the methodology used by the independent reservoir engineering specialists to estimate the Canadian reserves for compliance with regulatory standards. We compared the 2019 actual production, operating, royalty and capital costs of the Canadian reporting unit to those estimates used in the prior year’s estimate of the proved reserves associated with the Canadian reporting unit to assess the Company’s ability to accurately forecast. We compared the forecasted commodity prices used in the estimate of the Canadian reserves to those published by other reserve engineering firms. We compared estimates of forecasted production and forecasted operating, royalty and capital cost assumptions used in the Canadian reserves to historical results.

Evaluation of the realizability of the deferred income tax asset associated with the Company’s Canadian operation.

As discussed in note 17 to the consolidated financial statements, as of December 31, 2019, the Company had recognized a deferred income tax asset of $372,502 thousand of which $185,880 thousand relates to the Company’s Canadian operations. The Company estimated that there is a greater than 50 percent likelihood that the deferred income tax asset will be realized. The determination of the deferred income tax asset associated with the Canadian operation involves a number of estimates, including the future cash flows associated with the estimated Canadian reserves. Changes in assumptions regarding future cash flows, which are based on the estimate of the Canadian reserves, could have a significant impact on the determination on the Company’s ability to realize the Canadian operation’s deferred income tax asset and the amount of a valuation allowance, if any. The estimation of the Canadian reserves requires the expertise of independent reservoir engineering specialists, who take into consideration reserve assumptions. The Company engages independent reservoir engineering specialists to estimate the Canadian reserves.

We identified the evaluation of the realizability of the Canadian operation’s deferred income tax asset as a critical audit matter. Complex auditor judgment was required in evaluating the Canadian reserves which were an input to derive the recognized deferred income tax asset. Auditor judgment was also required to evaluate the reserve assumptions used in the Canadian reserves.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s process to evaluate the realizability of the Canadian deferred income tax assets, including controls related to the estimation of the Canadian reserves. We evaluated the competence, capabilities and objectivity of the independent reservoir engineering specialists engaged by the Company, who estimated the Canadian reserves. We evaluated the methodology used by independent reservoir engineering specialists to estimate the Canadian reserves for compliance with regulatory standards. We compared the 2019 actual production, operating, royalty and capital costs of the Canadian operations to those estimates used in the prior year’s estimate of the proved reserves associated with the Canadian operations to assess the Company’s ability to accurately forecast. We compared the forecasted commodity prices used in the Canadian reserves to those published by other reserve engineering firms. We compared estimates of forecasted production and forecasted operating, royalty and capital cost assumptions used in the Canadian reserves to historical results. We involved Canadian income tax professionals with specialized skills and knowledge who assisted in evaluating the application of relevant tax laws and regulations used in the determination of the recorded deferred tax asset.

Assessment of the impact of estimated proved oil and gas reserves on the calculations of depletion expense and the ceiling test related to oil and gas properties

As discussed in Note 2(d) to the consolidated financial statements, the Company depletes its oil and gas properties using the unit-of-production method on a country-by-country basis for Canada and the United States of America. Under such method, capitalized costs by country are depleted over the estimated proved oil and gas reserves by for each of Canada and the United States of America (“country proved reserves”). For the year ended December 31, 2019, the Company recorded depletion, depreciation and accretion expense of $356,830 thousand. Additionally, as discussed in Note 2(d) to the consolidated financial statements, the Company is required to perform a ceiling test calculation on a country-by-country basis for Canada and the United States of America. The Company limits the capitalized costs of proved and unproved oil and natural gas properties, net of accumulated depletion and the related deferred income tax effects, by country, to the estimated future net cash flows from country proved reserves discounted at 10 percent, net of related tax effects, plus the lower of cost or fair value of unproved oil and gas properties. The estimated future net cash flows are calculated using the simple average of the preceding twelve months’ first-day-of-the-month commodity prices. The estimation of country proved reserves, which are used in the calculations of depletion and the ceiling test, requires the expertise of independent reservoir engineering specialists, who take into consideration reserve assumptions. The Company engages independent reservoir engineering specialists to estimate country proved reserves.

ENERPLUS 2019 FINANCIAL SUMMARY 5

STATEMENTS

Consolidated Balance Sheets


(CDN$ thousands)	Note	December 31, 2019		December 31, 2018
Assets
Current assets
Cash and cash equivalents		$	151,649	$	363,327
Accounts receivable	3		176,119		145,206
Income tax receivable	13		27,770		55,172
Derivative financial assets	15(b)		10,570		59,258
Other current assets			2,990		8,928
			369,098		631,891
Property, plant and equipment:
Oil and natural gas properties (full cost method)	4		1,547,362		1,293,941
Other capital assets, net	4		20,244		13,130
Property, plant and equipment			1,567,606		1,307,071
Right-of-use assets	9		48,729		—
Goodwill	5(b)		194,015		654,799
Derivative financial assets	15(b)		—		32,220
Deferred income tax asset	13		372,502		465,124
Income tax receivable	13		13,852		27,195
Total Assets		$	2,565,802	$	3,118,300

Liabilities
Current liabilities
Accounts payable	6	$	291,540	$	290,045
Dividends payable			2,217		2,395
Current portion of long-term debt	7		105,998		60,001
Derivative financial liabilities	15(b)		2,734		1,909
Current portion of lease liabilities	9		17,541		—
			420,030		354,350
Long-term debt	7		500,635		636,849
Asset retirement obligation	8		138,049		126,112
Lease liabilities	9		35,530		—
			674,214		762,961
Total Liabilities			1,094,244		1,117,311

Shareholders’ Equity
Share capital – authorized unlimited common shares, no par value
Issued and outstanding: December 31, 2019 – 222 million shares
December 31, 2018 – 239 million shares	14(a)		3,088,094		3,337,608
Paid-in capital			59,490		46,524
Accumulated deficit			(1,984,365)		(1,772,084)
Accumulated other comprehensive income			308,339		388,941
			1,471,558		2,000,989
Total Liabilities & Shareholders' Equity		$	2,565,802	$	3,118,300

Commitments and Contingencies	16
Subsequent Event	14(a)

The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

Approved on behalf of the Board of Directors:


/s/ Elliott Pew	/s/ Robert B. Hodgins
Director	Director

ENERPLUS 2019 FINANCIAL SUMMARY 7

Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)


For the year ended December 31 (CDN$ thousands)	Note	2019		2018		2017
Revenues
Oil and natural gas sales, net of royalties	10	$	1,254,806	$	1,292,736	$	920,693
Commodity derivative instruments gain/(loss)	15(b)		(66,071)		88,232		14,310
			1,188,735		1,380,968		935,003
Expenses
Operating			290,766		238,261		197,101
Transportation			144,903		123,463		111,265
Production taxes			83,109		87,286		54,318
General and administrative	11		72,853		75,783		74,301
Depletion, depreciation and accretion			356,830		304,274		250,774
Goodwill impairment	5(b)		451,121		—		—
Interest			33,919		36,799		38,714
Foreign exchange (gain)/loss	12		(25,378)		39,521		(30,150)
Gain on divestment of assets	4		—		—		(78,400)
Other expense/(income)			(7,529)		(5,909)		(1,906)
			1,400,594		899,478		616,017
Income/(Loss) Before Taxes			(211,859)		481,490		318,986
Current income tax expense/(recovery)	13		(33,414)		(27,093)		(47,957)
Deferred income tax expense/(recovery)	13		81,275		130,304		129,945
Net Income/(Loss)		$	(259,720)	$	378,279	$	236,998

Other Comprehensive Income/(Loss)
Unrealized gain/(loss) on foreign currency translation			(80,602)		125,817		(90,277)
Total Comprehensive Income/(Loss)		$	(340,322)	$	504,096	$	146,721

Net Income/(Loss) per Share
Basic	14(c)	$	(1.12)	$	1.55	$	0.98
Diluted	14(c)	$	(1.12)	$	1.53	$	0.96

The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

8 ENERPLUS 2019 FINANCIAL SUMMARY

Consolidated Statements of Changes in Shareholders’ Equity


For the year ended December 31 (CDN$ thousands)	2019		2018		2017
Share Capital
Balance, beginning of year	$	3,337,608	$	3,386,946	$	3,365,962
Purchase of common shares under Normal Course Issuer Bid		(253,920)		(82,596)		—
Share-based compensation – treasury settled		4,406		23,389		20,984
Stock Option Plan – cash		—		9,138		—
Stock Option Plan – exercised		—		731		—
Balance, end of year	$	3,088,094	$	3,337,608	$	3,386,946

Paid-in Capital
Balance, beginning of year	$	46,524	$	75,375	$	73,783
Share-based compensation – cash settled (tax withholding)		(4,952)		—		—
Share-based compensation – cash settled		—		(30,648)		—
Share-based compensation – treasury settled		(4,406)		(23,389)		(20,984)
Share-based compensation – non-cash		22,324		25,917		22,576
Stock Option Plan – exercised		—		(731)		—
Balance, end of year	$	59,490	$	46,524	$	75,375

Accumulated Deficit
Balance, beginning of year	$	(1,772,084)	$	(2,124,676)	$	(2,332,641)
Purchase of common shares under Normal Course Issuer Bid		75,127		3,569		—
Net income/(loss)		(259,720)		378,279		236,998
Dividends declared ($0.01 per share)		(27,688)		(29,256)		(29,033)
Balance, end of year	$	(1,984,365)	$	(1,772,084)	$	(2,124,676)

Accumulated Other Comprehensive Income
Balance, beginning of year	$	388,941	$	263,124	$	353,401
Unrealized gain/(loss) on foreign currency translation		(80,602)		125,817		(90,277)
Balance, end of year	$	308,339	$	388,941	$	263,124
Total Shareholders’ Equity	$	1,471,558	$	2,000,989	$	1,600,769

The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

ENERPLUS 2019 FINANCIAL SUMMARY 9

Consolidated Statements of Cash Flows


For the year ended December 31 (CDN$ thousands)	Note	2019		2018		2017
Operating Activities
Net income/(loss)		$	(259,720)	$	378,279	$	236,998
Non-cash items add/(deduct):
Depletion, depreciation and accretion			356,830		304,274		250,774
Goodwill impairment	5(b)		451,121		—		—
Changes in fair value of derivative instruments	15(b)		81,733		(124,266)		(6,184)
Deferred income tax expense/(recovery)	13		81,275		130,304		129,945
Foreign exchange (gain)/loss on debt and working capital	12		(34,085)		58,628		(42,623)
Share-based compensation and general and administrative	11, 14(b)		23,044		25,917		22,576
Translation of U.S. dollar cash held in Canada (gain)/loss	12		8,794		(19,630)		10,978
Gain on the divestment of assets	4		—		—		(78,400)
Asset retirement obligation expenditures	8		(16,715)		(11,263)		(12,907)
Changes in non-cash operating working capital	18(a)		1,963		(3,459)		(35,032)
Cash flow from operating activities			694,240		738,784		476,125

Financing Activities
Proceeds from the issuance of shares (net of issue costs)	14(a)		—		9,138		—
Dividends	14(a),18(b)		(27,866)		(29,282)		(29,017)
Bank credit facility	7		—		—		(23,272)
Senior notes	7		(59,429)		(29,044)		(29,084)
Purchase of common shares under Normal Course Issuer Bid	14(a)		(178,793)		(79,027)		—
Share-based compensation – cash settled (tax withholding)	14(b)		(4,952)		—		—
Cash flow from/(used in) financing activities			(271,040)		(128,215)		(81,373)

Investing Activities
Capital and office expenditures	18(b)		(606,966)		(604,110)		(459,152)
Property and land acquisitions	4		(24,362)		(18,009)		(13,276)
Property divestments	4		9,539		(919)		56,196
Cash flow from/(used in) investing activities			(621,789)		(623,038)		(416,232)
Effect of exchange rate changes on cash and cash equivalents			(13,089)		29,248		(25,277)
Change in cash and cash equivalents			(211,678)		16,779		(46,757)
Cash and cash equivalents, beginning of year			363,327		346,548		393,305
Cash and cash equivalents, end of year		$	151,649	$	363,327	$	346,548

The accompanying notes to the Consolidated Financial Statements are an integral part of these statements.

10 ENERPLUS 2019 FINANCIAL SUMMARY

Notes to Consolidated Financial Statements

1) REPORTING ENTITY

These annual audited Consolidated Financial Statements (“Consolidated Financial Statements”) and notes present the financial position and results of Enerplus Corporation (the “Company” or “Enerplus”) including its Canadian and U.S. subsidiaries. Enerplus is a North American crude oil and natural gas exploration and development company. Enerplus is publicly traded on the Toronto and New York stock exchanges under the ticker symbol ERF. Enerplus’ head office is located in Calgary, Alberta, Canada.

2) SIGNIFICANT ACCOUNTING POLICIES

The following significant accounting policies are presented to assist the reader in evaluating these Consolidated Financial Statements and, together with the following notes, are an integral part of the Consolidated Financial Statements.

a) Basis of Preparation

Enerplus’ Consolidated Financial Statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain prior period amounts have been restated to conform with current period presentation.

i. Reporting Currency

These Consolidated Financial Statements are presented in Canadian dollars, which is Enerplus’ reporting currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand unless otherwise indicated.

ii. Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. Actual results could differ from these estimates, and changes in estimates are recorded when known. Significant estimates made by management include: oil and natural gas reserves and related present value of future cash flows, depreciation, depletion and accretion (“DD&A”), impairment of property, plant and equipment, asset retirement obligations, income taxes, ability to realize deferred income tax assets, impairment assessments of goodwill and the fair value of derivative instruments. Enerplus uses the most current information available and exercises judgment in making these estimates and assumptions. In the opinion of management, these Consolidated Financial Statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies.

iii. Basis of Consolidation

These Consolidated Financial Statements include the accounts of Enerplus and its subsidiaries. Intercompany balances and transactions are eliminated on consolidation. Interests in jointly controlled oil and natural gas assets are accounted for following the concept of undivided interest, whereby Enerplus’ proportionate share of revenues, expenses, assets and liabilities are included in the accounts.

The acquisition method of accounting is used to account for acquisitions that meet the definition of a business under U.S. GAAP. The cost of an acquisition is measured as the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the acquisition date. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

b) Revenue

Revenue from the sale of crude oil, natural gas and natural gas liquids is measured based on the consideration specified in contracts with customers, net of sales taxes. Enerplus recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer. This is generally at the time the customer obtains legal title to the product and when it is physically transferred to the contractual delivery points.

Enerplus evaluates its arrangements with third parties and partners to determine if the Company acts as the principal or as an agent. In making this evaluation, management considers if Enerplus retains control of the product being delivered to the end customer. As part of this assessment, management considers whether the Company retains the economic benefits associated with the good being delivered to the end customer. Management also considers whether the Company has the primary responsibility for the delivery of the product, the ability to establish prices or the inventory risk. If Enerplus acts in the capacity of an agent rather than as a principal in a transaction, then the revenue is recognized on a net basis, only reflecting the fee, if any, realized by the Company from the transaction.

ENERPLUS 2019 FINANCIAL SUMMARY 11

c) Transportation

Enerplus generally sells oil and natural gas under two types of agreements which are common in our industry. Both types of agreements include a transportation charge. One is a net-back arrangement, under which the Company sells crude oil or natural gas at the wellhead and collects a price, net of the transportation incurred by the purchaser. In this case, sales are recorded at the price received from the purchaser, net of transportation costs.

Under the other arrangement, Enerplus sells crude oil or natural gas at a specific delivery point, pays transportation to a third party and receives proceeds from the purchaser with no transportation deduction. In this case, transportation costs are recorded as transportation expense on the Consolidated Statements of Income/(Loss). Due to these two distinct selling arrangements, Enerplus’ computed realized prices, before the impact of derivative instruments, include revenues which are reported under two separate bases.

d) Oil and Natural Gas Properties

Enerplus uses the full cost method of accounting for its oil and natural gas properties. Under this method, all acquisition, exploration and development costs incurred in finding oil and natural gas reserves are capitalized, including general and administrative costs attributable to these activities. These costs are recorded on a country-by-country cost centre basis as oil and natural gas properties subject to depletion (“full cost pool”). Costs associated with production and general corporate activities are expensed as incurred.

The net carrying value of both proved and unproved oil and natural gas properties is depleted using the unit of production method using proved reserves, as determined using a constant price assumption of the simple average of the preceding twelve months’ first-day-of-the-month commodity prices (“SEC prices”). The depletion calculation takes into account estimated future development costs necessary to bring those reserves into production.

Under full cost accounting, a ceiling test is performed on a cost centre basis. Enerplus limits capitalized costs of proved and unproved oil and natural gas properties, net of accumulated depletion and the related deferred income tax effects, to the estimated future net cash flows from proved oil and natural gas reserves discounted at 10%, net of related tax effects, plus the lower of cost or fair value of unproved properties (“the ceiling”). The estimated future net cash flows are calculated using the simple average of the preceding twelve months’ first-day-of-the-month commodity prices. If such capitalized costs exceed the ceiling, a write-down equal to that excess is recorded as a non-cash charge to net income. A write-down is not reversed in future periods even if higher oil and natural gas prices subsequently increase the ceiling.

Under full cost accounting rules, divestitures of oil and natural gas properties are generally accounted for as adjustments to capitalized costs, with no recognition of a gain or loss. However, if not recognizing a gain or loss on the transaction would have otherwise significantly altered the relationship between a cost centre’s capitalized costs and proved reserves, then a gain or loss must be recognized.

e) Other Capital Assets

Other capital assets are recorded at historical cost, net of depreciation, and include furniture, fixtures, leasehold improvements, computer equipment and Company owned line-fill in third party pipelines. Line fill is recorded at lower of cost and net realizable value. Depreciation is calculated on a straight-line basis over the estimated useful life of the respective asset. The cost of repairs and maintenance is expensed as incurred.

f) Cash and Cash Equivalents

Cash and cash equivalents includes cash and highly liquid investments with maturities of less than 90 days.

g) Goodwill

Enerplus recognizes goodwill relating to business acquisitions when the total purchase price exceeds the fair value of the net identifiable assets and liabilities acquired. The portion of goodwill that relates to U.S. operations fluctuates due to changes in foreign exchange rates. Goodwill is stated at cost less impairment and is not amortized. Goodwill is not deductible for income tax purposes.

Goodwill is assessed for impairment annually or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Enerplus first performs a qualitative assessment to determine whether events or changes in circumstances indicate that goodwill may be impaired. If it is more likely than not that the fair value of the reporting unit is less than its carrying value, quantitative impairment tests are performed. If the carrying value of the reporting unit exceeds its fair value, goodwill is written down to its implied fair value with an offsetting charge to earnings in the Consolidated Statements of Income/(Loss). The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. For the purposes of goodwill impairment testing, Enerplus has two reporting units.

12 ENERPLUS 2019 FINANCIAL SUMMARY

h) Asset Retirement Obligations

Enerplus’ oil and natural gas operating activities give rise to dismantling, decommissioning and site remediation activities. Enerplus recognizes a liability for the estimated present value of the future asset retirement obligation liability at each balance sheet date. Upon recognition, the liability is recorded at its estimated fair value. The associated asset retirement cost is capitalized and amortized over the same period as the underlying asset. Changes in the estimated liability and related asset retirement cost can arise as a result of revisions in the estimated amount or timing of cash flows.

Depletion of asset retirement costs and increases in asset retirement obligations resulting from the passage of time are recorded to depreciation, depletion and accretion and charged against net income in the Consolidated Statements of Income/(Loss).

i) Leases

Enerplus determines if an arrangement is a lease at inception. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Operating and finance leases are included in right-of-use (“ROU”) assets and the associated lease liability in the Consolidated Balance Sheet.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Lease liabilities are recognized at lease commencement date based on the present value of remaining lease payments over the lease term. A corresponding ROU asset is recognized at the amount of the lease liability, adjusted for lease incentives received. Enerplus uses the implicit rate when readily available, or uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Enerplus’ lease terms may have options to extend or terminate the lease which are included in the calculation of lease liabilities when it is reasonably certain that it will exercise those options. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Lease agreements contain both lease and non-lease components which are accounted for separately. For certain equipment leases, a portfolio approach is applied to effectively account for the ROU assets and liabilities. Prior to January 1, 2019, the Company applied lease accounting in accordance with ASC 840.

j) Income Tax

Enerplus uses the liability method of accounting for income taxes. Deferred income tax assets and liabilities are recorded on the temporary differences between the accounting and income tax basis of assets and liabilities, using the enacted tax rates expected to apply when the temporary differences are expected to reverse. Deferred tax assets are reviewed each period and a valuation allowance is provided if, after considering available evidence, it is more likely than not that a deferred tax asset will not be realized. Enerplus considers both positive and negative evidence including historic and expected future taxable income, reversing existing temporary differences and tax basis carry forward periods in making this assessment. A valuation allowance is removed in any period where available evidence indicates all or a portion of the valuation allowance is no longer required. The financial statement effect of an uncertain tax position is recognized when it is more likely than not, based on technical merits, that the position will be sustained upon examination by a taxation authority. Penalties and interest expense related to income tax are recognized in income tax expense.

k) Financial Instruments

i. Fair Value Measurements

Financial instruments are initially recorded at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For financial instruments carried at fair value, and when disclosing the fair value of financial instruments on certain non-financial items, inputs used in determining the fair value are characterized according to the following fair value hierarchy:

● Level 1 – Inputs represent quoted market prices in active markets for identical assets or liabilities.

● Level 2 – Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets or other market corroborated inputs.

● Level 3 – Inputs that are not observable from objective sources, such as forward prices supported by little or no market activity or internally developed estimates of future cash flows used in a present value model.

Subsequent measurement is based on classification of the financial instrument into one of the following five categories: held-for-trading, held-to-maturity, available-for-sale, loans and receivables or other financial liabilities.

ENERPLUS 2019 FINANCIAL SUMMARY 13

ii. Non-derivative financial instruments

The carrying amount of cash, accounts receivable, income tax receivable, accounts payable, dividends payable and bank credit facilities reported on the Consolidated Balance Sheets approximates fair value. The fair value of the senior notes are considered a level 2 fair value measurement. The fair value of debt has been disclosed in Note 15.

iii. Derivative financial instruments

Enerplus enters into financial derivative contracts in order to manage its exposure to market risks from fluctuations in commodity prices, foreign exchange rates and interest rates in the normal course of operations. Enerplus has not designated its financial derivative contracts as effective accounting hedges, and thus has not applied hedge accounting, even though it considers most of these contracts to be economic hedges. As a result, all financial derivative contracts are classified as held-for-trading and are recorded at fair value based on a Level 2 designation, with changes in fair value recorded in net income. The fair values of these derivative instruments are generally based on an estimate of the amounts that would be paid or received to settle these instruments at the balance sheet date. Enerplus’ accounting policy is to not offset the fair values of its financial derivative assets and liabilities.

Realized gains and losses from commodity price risk management activities are recognized in income when the contract is settled. Unrealized gains and losses on commodity price risk management activities are recognized in income based on the changes in fair value of the contracts at the end of the respective reporting period.

Enerplus’ crude oil, natural gas and natural gas liquids physical delivery purchase and sales contracts qualify as normal purchases and sales as they are entered into and held for the purpose of receipt or delivery of products in accordance with the Company’s expected purchase, sale or usage requirements. As such, these contracts are not considered derivative financial instruments. Settlements on these physical contracts are recognized in net income over the term of the contracts as they occur.

l) Foreign Currency

i. Foreign currency transactions

Transactions denominated in foreign currencies are translated to the functional currency of the entity (Canadian dollars) using the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency of the entity using the rate of exchange in effect at the balance sheet date whereas non-monetary assets and liabilities are translated at the historical rate of exchange in effect on the date of the transaction. Foreign currency differences arising on translation are recognized in net income in the period in which they arise.

ii. Foreign operations

Assets and liabilities of Enerplus’ U.S. operations, which has a U.S. dollar functional currency, are translated into Canadian dollars at period end exchange rates while revenues and expenses are translated using average rates for the period. Gains and losses from the translation are deferred and included in the cumulative translation adjustment which is recorded in accumulated other comprehensive income.

m) Share-Based Compensation

Enerplus’ share-based compensation plans include equity-settled Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”) awards made pursuant to its Share Award Incentive Plan (“SAIP”). The Company is authorized to issue up to 3.8% of outstanding common shares from treasury under the SAIP. Enerplus also has a cash-settled Deferred Share Unit (“DSU”) Plan for Directors (“Director DSU Plan”) and a cash-settled RSU Plan for Directors (“Director RSU Plan”).

i. Long-term Incentive (“LTI”) Plans

For RSU awards granted under the SAIP, employees receive compensation in relation to the value of a specified number of underlying notional shares. The number of notional shares awarded varies by individual and vests one-third each year for three years. The value upon vesting is based on the value of the underlying notional shares plus notional accrued dividends over the vesting period.

For PSU awards granted under the SAIP, executives and management receive compensation in relation to the value of a specified number of underlying notional shares. The number of notional shares awarded varies by individual and they vest at the end of three years. The value upon vesting is based on value of the underlying shares plus notional accrued dividends along with a multiplier that ranges from 0 to 2 depending on Enerplus’ performance compared to a peer group of both Canadian and U.S. oil and natural gas producers over the vesting period.

14 ENERPLUS 2019 FINANCIAL SUMMARY

Under Enerplus’ Director DSU Plan and Director RSU Plan, directors receive compensation in relation to the value of a specified number of underlying notional shares. The number of notional shares awarded is based on the annual equity retainer value. Directors may elect to receive all or a portion of their notional shares under either plan. Under the Director DSU Plan, units vest and are paid at a specified date following the director leaving the Board. Under the Director RSU Plan, units vest one-third each year for three years. The value upon vesting is based on the value of the underlying notional shares plus notional accrued dividends over the vesting period. All Director DSU and RSU grants are settled in cash.

Enerplus recognizes non-cash share-based compensation expense over the vesting period of the equity-settled long-term incentive plans, net of realized forfeitures, based on the estimated grant date fair value of the respective awards. The grant date fair value is based on the Company’s 20-day volume weighted average price on December 31 prior to the grant date. The fair value for the PSUs is adjusted for the outcome of the performance condition. Share-based compensation charges are recorded on the Consolidated Statements of Income/(Loss) with an offset to paid-in capital. Each period, management performs an estimate of the PSU plan multiplier. Any differences that arise between the actual multiplier on plan settlement and management’s estimate is recorded to share-based compensation. On settlement of these plans, amounts previously recorded to paid-in capital are reclassified to share capital.

Enerplus recognizes a liability with respect to its cash-settled long-term incentive plans based on their estimated fair value. The liability is re-measured at each reporting date and at settlement date with any changes in the fair value recorded as share-based compensation, included in general and administrative expense.

ii. Stock options

Enerplus’ Stock Option Plan was suspended in 2014 and is now closed. All options outstanding under the plan are fully vested and the expense has been fully recognized. The remaining outstanding stock options will expire in 2020.

n) Net Income/(Loss) Per Share

Basic net income/(loss) per common share is computed by dividing net income/(loss) by the weighted average number of common shares outstanding during the period.

For the diluted net income per common share calculation, the weighted average number of shares outstanding is adjusted for the potential number of shares which may have a dilutive effect on net income. The weighted average number of diluted shares is calculated in accordance with the treasury stock method which assumes that the proceeds received from the exercise of all stock options and outstanding RSU’s and PSU’s would be used to repurchase common shares at the average market price.

o) Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, environmental and other sources are recognized when it is probable that a liability has been incurred and the amount can be reasonably estimated. Contingencies are adjusted as additional information becomes available or circumstances change.

p) Accounting Changes and Recent Pronouncements Issued

i. Recently adopted accounting standards

Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these Consolidated Financial Statements.

Enerplus adopted ASC 842 Leases effective January 1, 2019 using the modified retrospective method, with ASC 842 applied to all contracts not yet completed as of the date of adoption with the cumulative effect on comparative periods reflected as an adjustment to retained earnings, if applicable. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while accounting for finance leases and lessor accounting remained unchanged.

Enerplus elected the practical expedient related to land easements, allowing it to carry forward its accounting treatment for land easements on existing agreements.

The impacts of the adoption of ASC 842 as at January 1, 2019 are as follows:


		As reported as at				Balance as at
($ thousands)		December 31, 2018		Adjustments		January 1, 2019
Right-of-use assets	$	—	$	50,193	$	50,193
Current portion of lease liabilities		—		(10,648)		(10,648)
Lease liabilities		—		(39,545)		(39,545)
Total	$	—	$	—	$	—

ENERPLUS 2019 FINANCIAL SUMMARY 15

The standard did not materially impact the Company’s Consolidated Statement of Income/(Loss) or Consolidated Statements of Cash Flows.

ii. Future accounting changes

In future accounting periods, the Company will adopt the following Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”):

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). The ASU changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance amends the impairment model of financial instruments basing it on expected losses rather than incurred losses. These expected credit losses will be recognized as an allowance rather than a direct write down of the amortized cost basis. The new guidance is effective January 1, 2020, and will be applied using a modified retrospective approach. Enerplus has not early adopted the standard and does not expect a material impact to the Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350). This standard eliminates Step 2 of the goodwill impairment test, and requires a goodwill impairment charge for the amount that the carrying amount of the reporting unit exceeds the reporting unit’s fair value. The updated guidance is effective January 1, 2020 and will be applied prospectively. Enerplus has not early adopted this ASU. The amended standard simplifies the goodwill impairment test and will impact the amount of any impairment recorded post adoption.

3) ACCOUNTS RECEIVABLE


($ thousands)	December 31, 2019		December 31, 2018
Accrued revenue	$	142,048	$	118,821
Accounts receivable – trade		37,736		30,252
Allowance for doubtful accounts		(3,665)		(3,867)
Total accounts receivable, net of allowance for doubtful accounts	$	176,119	$	145,206

4) PROPERTY, PLANT AND EQUIPMENT (“PP&E”)


			Accumulated Depletion,
As at December 31, 2019			Depreciation,
($ thousands)	Cost		and Impairment		Net Book Value
Oil and natural gas properties⁽¹⁾	$	15,088,724	$	(13,541,362)	$	1,547,362
Other capital assets		125,265		(105,021)		20,244
Total PP&E	$	15,213,989	$	(13,646,383)	$	1,567,606


			Accumulated Depletion,
As at December 31, 2018			Depreciation,
($ thousands)	Cost		and Impairment		Net Book Value
Oil and natural gas properties⁽¹⁾	$	14,773,082	$	(13,479,141)	$	1,293,941
Other capital assets		115,510		(102,380)		13,130
Total PP&E	$	14,888,592	$	(13,581,521)	$	1,307,071

(1)	All of the Company’s unproved properties are included in the full cost pool.

Acquisitions:

For the years ended December 31, 2019 and 2018, Enerplus acquired property and land totaling $24.4 million, and $25.8 million, respectively.

Divestments:

For the years ended December 31, 2019 and 2018, Enerplus disposed of properties for proceeds of $9.6 million and $6.9 million, respectively. Certain asset divestments may result in gains if the divestments cause a significant alteration in the relationship between the cost centre’s capitalized costs and proved reserves. During 2019, Enerplus did not recognize any gains on asset divestments (2018 – nil, 2017 – $78.4 million).

16 ENERPLUS 2019 FINANCIAL SUMMARY

5) IMPAIRMENT

a) Impairment of PP&E

There was no impairment recorded for the years ended December 31, 2019, 2018 and 2017.

The following table outlines the 12-month average trailing benchmark prices and exchange rates used in Enerplus’ ceiling test as at December 31, 2019, 2018 and 2017:


						U.S. Henry
	WTI Crude Oil		Edm Light Crude		Hub Gas		Exchange Rate
Period	US$/bbl		CDN$/bbl		US$/Mcf		US$/CDN
2019	$	55.85	$	66.73	$	2.58		1.33
2018		65.56		69.58		3.10		1.28
2017		51.34		63.57		2.98		1.30

b) Impairment of Goodwill

Enerplus recorded goodwill impairment of $451.1 million on its Canadian reporting unit for the period ended December 31, 2019. The impairment was due to the carrying value of the Canadian reporting unit exceeding its fair value as a result of the cumulative impact of Canadian asset divestments, the shut-in of uneconomic natural gas production in Canada and lower forecasted commodity prices. The estimated fair value of the Canadian reporting unit for the goodwill impairment test was based on the discounted after-tax cash flows associated with the proved and probable reserves of the reporting unit. Other changes in goodwill relate to the impact of foreign exchange movements on U.S. dollar denominated goodwill balances. At December 31, 2019, goodwill consisted entirely of US$149.4 million related to Enerplus’ U.S. reporting unit. There was no goodwill impairment for the years ended December 31, 2018 and 2017.

6) ACCOUNTS PAYABLE


($ thousands)	December 31, 2019		December 31, 2018
Accrued payables	$	105,928	$	115,388
Accounts payable – trade		185,612		174,657
Total accounts payable	$	291,540	$	290,045

7) DEBT


($ thousands)	December 31, 2019		December 31, 2018
Current:
Senior notes	$	105,998	$	60,001
Long-term:
Bank credit facility	$	—	$	—
Senior notes		500,635		636,849
Total debt	$	606,633	$	696,850

Bank Credit Facility

Enerplus has a senior unsecured, covenant-based, US$600 million bank credit facility that matures on October 31, 2023. Drawn fees range between 125 and 315 basis points over bankers’ acceptance rates. Standby fees on the undrawn portion of the facility are based on 20% of the drawn pricing. The Company has the ability to request an extension of the facility or repay the entire balance at the end of the term. At December 31, 2019, Enerplus was undrawn on the facility (December 31, 2018 –undrawn).

Senior Notes

During 2019 and 2018, Enerplus made its second and third US$22 million principal repayments on its 2009 senior notes. During 2019, Enerplus made a $30 million bullet repayment on its 2012 senior notes.

ENERPLUS 2019 FINANCIAL SUMMARY 17

The terms and rates of the Company’s outstanding senior notes are detailed below:

Original

Remaining

CDN$ Carrying

Coupon

Principal

Value

Issue Date

Interest Payment Dates

Principal Repayment

Rate

($ thousands)

September 3, 2014

March 3 and Sept 3

5 equal annual installments beginning September 3, 2022

3.79%

US$200,000

US$105,000

136,395

May 15, 2012

May 15 and Nov 15

Bullet payment on May 15, 2022

4.40%

US$20,000

25,980

May 15, 2012

May 15 and Nov 15

5 equal annual installments beginning May 15, 2020

4.40%

US$355,000

US$298,000

387,102

June 18, 2009

June 18 and Dec 18

2 equal annual installments on June 18, 2020 and 2021

7.97%

US$225,000

US$44,000

57,156

Total carrying value

606,633

8) ASSET RETIREMENT OBLIGATION


($ thousands)	December 31, 2019		December 31, 2018
Balance, beginning of year	$	126,112	$	117,736
Change in estimates		23,362		16,755
Property acquisition and development activity		2,068		1,565
Divestments		(2,760)		(4,585)
Settlements		(16,715)		(11,263)
Accretion expense		5,982		5,904
Balance, end of year	$	138,049	$	126,112

Enerplus has estimated the present value of its asset retirement obligation to be $138.0 million at December 31, 2019 based on a total undiscounted, uninflated liability of $344.7 million (December 31, 2018 – $126.1 million and $343.9 million, respectively). The asset retirement obligation was calculated using a weighted average credit-adjusted risk-free rate of 5.50% and inflation rate of 1.8% (December 31, 2018 – 5.59% and 1.8%, respectively). The majority of Enerplus’ asset retirement obligation expenditures are expected to be incurred between 2025 and 2055.

9) LEASES

The Company incurs lease payments related to office space, drilling rig commitments, vehicles and other equipment. Leases are entered into and exited in coordination with specific business requirements which include the assessment of the appropriate durations for the related leased assets. Short-term leases with a lease term of 12 months or less are not recorded on the Consolidated Balance Sheet. Such items are charged to operating expenses and general and administrative expenses in the Consolidated Statement of Income/(Loss), unless the costs are included in the carrying amount of another asset in accordance with other U.S. GAAP.


($ thousands)	At December 31, 2019
Assets
Operating right-of-use assets	$	48,729
Liabilities
Current operating lease liabilities	$	17,541
Non-current operating lease liabilities		35,530
Total lease liabilities	$	53,071

Weighted average remaining lease term (years)
Operating leases		4.3

Weighted average discount rate
Operating leases		4.1%

18 ENERPLUS 2019 FINANCIAL SUMMARY

The components of lease expense for the year ended December 31, 2019 are as follows:



($ thousands)	2019
Operating lease cost	$	19,483
Short-term lease cost		15,332
Sublease income		(1,072)
Total	$	33,743

Maturities of lease liabilities, all of which are classified as operating leases at December 31, 2019, are as follows:


Maturity of Lease Liabilities
($ thousands)	Operating Leases
2020	$	19,371
2021		14,098
2022		7,674
2023		6,706
2024		6,200
After 2024		3,979
Total lease payments	$	58,028
Less imputed interest		(4,957)
Total discounted lease payments	$	53,071
Current portion of lease liabilities	$	17,541
Non-current portion of lease liabilities	$	35,530

Supplemental information related to leases are as follows:



($ thousands)		December 31, 2019
Cash amounts paid to settle lease liabilities:
Operating cash flow used for operating leases	$	18,637
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	20,818

10) OIL AND NATURAL GAS SALES


($ thousands)	2019		2018		2017
Oil and natural gas sales	$	1,572,955	$	1,610,899	$	1,141,770
Royalties⁽¹⁾		(318,149)		(318,163)		(221,077)
Oil and natural gas sales, net of royalties	$	1,254,806	$	1,292,736	$	920,693

(1)	Royalties above do not include production taxes which are reported separately on the Consolidated Statements of Income/(Loss).

Oil and natural gas revenue by country and by product for the years ended December 31, 2019 and 2018 are as follows:


2019		Total revenue, net				Natural		Natural gas
($ thousands)		of royalties⁽¹⁾		Crude oil⁽²⁾		gas⁽²⁾		liquids⁽²⁾		Other⁽³⁾
Canada	$	177,299	$	145,814	$	21,776	$	7,158	$	2,551
United States		1,077,507		847,182		215,963		14,355		7
Total	$	1,254,806	$	992,996	$	237,739	$	21,513	$	2,558


2018		Total revenue, net				Natural		Natural gas
($ thousands)		of royalties⁽¹⁾		Crude oil⁽²⁾		gas⁽²⁾		liquids⁽²⁾		Other⁽³⁾
Canada	$	198,263	$	148,949	$	32,109	$	14,075	$	3,130
United States		1,094,473		834,146		236,825		23,502		—
Total	$	1,292,736	$	983,095	$	268,934	$	37,577	$	3,130

(1)	Royalties above do not include production taxes which are reported separately on the Consolidated Statements of Income/(Loss).

(2)	U.S. sales of crude oil and natural gas relate primarily to the Company’s North Dakota and Marcellus properties, respectively. Canadian crude oil sales relate primarily to the Company’s waterflood properties.

ENERPLUS 2019 FINANCIAL SUMMARY 19

(3)	Includes third party processing income.

Enerplus sells the majority of its production pursuant to variable-price contracts. The transaction price for variable priced contracts is based on the commodity price, adjusted for quality, location or other factors, whereby each component of the pricing formula can be either fixed or variable, depending on the contract terms. Under the contracts, the Company is required to deliver a fixed or variable volume of crude oil, natural gas liquids or natural gas to the contract counterparty.

Crude oil, natural gas and natural gas liquids are sold under contracts of varying terms, including multi-year contracts. Revenues are typically collected in the month following production.

11) GENERAL AND ADMINISTRATIVE EXPENSE


($ thousands)	2019		2018		2017
General and administrative expense	$	49,532	$	49,943	$	50,544
Share-based compensation expense		23,321		25,840		23,757
General and administrative expense⁽¹⁾	$	72,853	$	75,783	$	74,301

(1)	Includes cash and non-cash amounts.

12) FOREIGN EXCHANGE


($ thousands)	2019		2018		2017
Realized:
Foreign exchange (gain)/loss	$	(87)	$	523	$	1,495
Translation of U.S. dollar cash held in Canada (gain)/loss		8,794		(19,630)		10,978
Unrealized:
Translation of U.S. dollar debt and working capital (gain)/loss		(34,085)		58,628		(42,623)
Foreign exchange (gain)/loss	$	(25,378)	$	39,521	$	(30,150)

13) INCOME TAXES

Enerplus’ provision for income tax is as follows:


($ thousands)	2019		2018		2017
Current tax
Canada	$	(13,910)	$	(400)	$	(407)
United States		(19,504)		(26,693)		(47,550)
Current tax expense/(recovery)		(33,414)		(27,093)		(47,957)
Deferred tax
Canada	$	11,023	$	3,915	$	(17,127)
United States		70,252		126,389		147,072
Deferred tax expense/(recovery)		81,275		130,304		129,945
Income tax expense/(recovery)	$	47,861	$	103,211	$	81,988

The following provides a reconciliation of income taxes calculated at the Canadian statutory rate to the actual income taxes:


($ thousands)	2019		2018		2017
Income/(loss) before taxes
Canada	$	(437,571)	$	104,204	$	146,953
United States		225,712		377,286		172,033
Total income/(loss) before taxes		(211,859)		481,490		318,986
Canadian statutory rate		26.50%		27.00%		27.00%
Expected income tax expense/(recovery)	$	(56,143)	$	130,002	$	86,126
Impact on taxes resulting from:
Foreign and statutory rate differences	$	27,446	$	(23,859)	$	157,320
Share-based compensation		(5,398)		(18,102)		5,067
Capital gains and losses		3,994		7,254		(6,337)
Change in valuation allowance		(22,038)		6,292		(162,992)
Amounts in respect of prior periods		(19,451)		—		—
Non-deductible goodwill impairment		119,547		—		—
Other		(96)		1,624		2,804

20 ENERPLUS 2019 FINANCIAL SUMMARY

Income tax expense/(recovery)

47,861

103,211

81,988

During the year, the Alberta corporate income tax rate change resulted in a decrease to the Canadian statutory rate by 0.5% for 2019.

The deferred income tax asset consists of the following:


As at December 31 ($ thousands)	2019		2018
Deferred income tax assets
Property, plant and equipment	$	59,896	$	60,665
Tax loss carry-forwards and other credits		383,600		429,651
Capital loss carryforwards and other capital items		154,532		188,409
Asset retirement obligation		33,569		33,935
Other assets		12,219		14,099
Deferred income tax assets before valuation allowance		643,816		726,759
Valuation allowance		(169,129)		(191,167)
Deferred income tax assets, net		474,687		535,592
Deferred income tax liabilities
Property, plant and equipment	$	(100,328)	$	(46,284)
Derivative financial instruments		(1,857)		(24,184)
Total deferred income tax liabilities		(102,185)		(70,468)
Total deferred income tax asset	$	372,502	$	465,124

As of December 31, 2019, $13.9 million was reclassified from deferred income tax asset to income tax receivable for the AMT refund expected to be realized in 2020 (December 31, 2018 – $27.2 million).

Loss carry-forwards and tax credits available for tax reporting purposes:


As at December 31 ($ thousands)	2019		Expiration Date
Canada
Capital losses	$	1,170,000	Indefinite
Non-capital losses		405,000	2028-2039
United States
Net operating losses – prior to 2018	$	889,000	2030-2039
Net operating losses – 2018 and thereafter		102,000	Indefinite

Changes in the balance of Enerplus' unrecognized tax benefits are as follows:


($ thousands)	2019		2018		2017
Balance, beginning of year	$	13,300	$	13,300	$	13,300
Settlements		(13,300)		—		—
Balance, end of year	$	—	$	13,300	$	13,300

Enerplus settled an outstanding dispute with the Canadian tax authorities in the Company's favor reducing the balance of its unrecognized tax benefit to nil and recorded a current tax recovery of $13.9 million including tax and interest.

A summary of the taxation years, by jurisdiction, that remain subject to examination by the taxation authorities are as follows:


Jurisdiction		Taxation Years
Canada – Federal		2014-2019
United States – Federal		2016-2019

Enerplus and its subsidiaries file income tax returns primarily in Canada and the United States. Matters in dispute with the taxation authorities are ongoing and in various stages of completion.

ENERPLUS 2019 FINANCIAL SUMMARY 21

14) SHAREHOLDERS’ EQUITY

a) Share Capital


	2019			2018			2017
Authorized: unlimited number of common shares Issued: (thousands)	Shares	Amount		Shares	Amount		Shares	Amount
Balance, beginning of year	239,411	$	3,337,608	242,129	$	3,386,946	240,483	$	3,365,962
Issued for cash:
Purchase of common shares under Normal Course Issuer Bid	(18,231)		(253,920)	(5,925)		(82,596)	—		—
Stock Option Plan	—		—	668		9,138	—		—
Non-cash:
Share-based compensation – settled⁽¹⁾	564		4,406	2,539		23,389	1,646		20,984
Stock Option Plan – exercised	—		—	—		731	—		—
Balance, end of year	221,744	$	3,088,094	239,411	$	3,337,608	242,129	$	3,386,946

(1)	The amount of shares issued on LTI settlement is net of employee withholding taxes in 2019.

The Company is authorized to issue an unlimited number of common shares without par value.

For the year ended December 31, 2019, Enerplus declared dividends of $0.12 per weighted average common share totaling $27.7 million (December 31, 2018 – $0.12 per share and $29.3 million, December 31, 2017 – $0.12 per share and $29.0 million).

On March 21, 2019, Enerplus renewed its Normal Course Issuer Bid (“NCIB”) to continue to repurchase shares through the facilities of the Toronto Stock Exchange (the “TSX”), New York Stock Exchange and/or alternative Canadian trading systems. Pursuant to the NCIB, the Company was permitted to repurchase for cancellation up to 16,673,015 common shares over a period of twelve months commencing on March 26, 2019. All repurchases are made in accordance with the NCIB at prevailing market prices plus brokerage fees, with consideration allocated to share capital up to the average carrying amount of the shares, and any excess is allocated to accumulated deficit. On November 7, 2019, the Company’s Board of Directors approved an increase to the maximum number of common shares that may be repurchased under the NCIB for up to 10% of the public float (or an additional 7,145,578 common shares) until the expiry of the NCIB on March 25, 2020.

For the year ended December 31, 2019, the Company repurchased 18,231,401 common shares under the NCIB at an average price of $9.80 per share, for total consideration of $178.8 million. Of the amount paid, $253.9 million was charged to share capital and $75.1 million was credited to accumulated deficit.

For the year ended December 31, 2018, the Company repurchased 5,925,084 common shares under the NCIB at an average price of $13.33 per share, for total consideration of $79.0 million. Of the amount paid, $82.6 million was charged to share capital and $3.6 million was credited to accumulated deficit.

Subsequent to the year, and up to February 20, 2020, the Company repurchased approximately 340,000 common shares under the NCIB at an average price of $7.44 per share, for total consideration of $2.5 million. The Company also received approval from the Board of Directors to renew the NCIB upon expiry of the existing term on March 25, 2020, subject to approval by the TSX. The proposed renewal is anticipated to be for 10% of the public float (within the meaning under the TSX rules), consistent with the current bid.

b) Share-based Compensation

The following table summarizes Enerplus' share-based compensation expense, which is included in General and Administrative expense on the Consolidated Statements of Income/(Loss):


($ thousands)	2019		2018		2017
Cash:
Long-term incentive plans expense	$	689	$	133	$	997
Non-Cash:
Long-term incentive plans expense		22,324		25,917		22,576
Equity swap (gain)/loss		308		(210)		184
Share-based compensation expense	$	23,321	$	25,840	$	23,757

22 ENERPLUS 2019 FINANCIAL SUMMARY

i) LTI Plans

The following table summarizes the PSU, RSU and DSU activity for the twelve months ended December 31, 2019:


For the year ended December 31, 2019	Cash-settled LTI Plans	Equity-settled LTI Plans		Total
(thousands of units)	DSU	PSU⁽¹⁾	RSU
Balance, beginning of year	391	1,371	1,753	3,515
Granted	99	817	862	1,778
Vested	(68)	—	(1,007)	(1,075)
Forfeited	—	(49)	(77)	(126)
Balance, end of year	422	2,139	1,531	4,092

(1)	Based on underlying awards before any effect of the performance multiplier.

Cash-settled LTI Plans

For the year ended December 31, 2019, the Company made cash payments of $0.9 million related to its cash-settled plans (2018 – $0.5 million, 2017 – $0.1 million).

As of December 31, 2019, a liability of $3.9 million (December 31, 2018 – $4.1 million) with respect to the Director DSU Plan has been recorded to Accounts Payable on the Consolidated Balance Sheets.

Equity-settled LTI Plans

The following table summarizes the cumulative share-based compensation expense recognized to-date which is recorded to Paid-in Capital on the Consolidated Balance Sheets. Unrecognized amounts will be recorded to non-cash share-based compensation expense over the remaining vesting terms.


At December 31, 2019 ($ thousands, except for years)	PSU⁽¹⁾		RSU		Total
Cumulative recognized share-based compensation expense	$	30,768	$	13,495	$	44,263
Unrecognized share-based compensation expense		11,971		5,582		17,553
Fair value	$	42,739	$	19,077	$	61,816
Weighted-average remaining contractual term (years)		1.7		1.4

(1)	Includes estimated performance multipliers.

The Company directly withholds shares on PSU and RSU settlements for tax-withholding purposes. For the year ended December 31, 2019, $5.0 million (2018, 2017 – nil) in cash withholding taxes were paid.

ii) Stock Option Plan

At December 31, 2019, all stock options are fully vested and all non-cash share-based compensation expense has been fully recognized.

The following table summarizes the stock option plan activity for the year ended December 31, 2019:


	Number of Options	Weighted Average
Year ended December 31, 2019	(thousands)	Exercise Price
Options outstanding, beginning of year	4,131	$	17.12
Exercised	—		—
Forfeited	(96)		15.22
Expired	(1,928)		20.35
Options outstanding and exercisable, end of year	2,107	$	14.24

At December 31, 2019, 2,106,944 options were exercisable at a weighted average exercise price of $14.24 with a weighted average remaining contractual term of 0.2 years, giving an aggregate intrinsic value of nil (December 31, 2018 – nil, December 31, 2017 – nil).

ENERPLUS 2019 FINANCIAL SUMMARY 23

c) Basic and Diluted Net Income/(Loss) Per Share

Net income/(loss) per share has been determined as follows:


(thousands, except per share amounts)	2019		2018		2017
Net income/(loss)	$	(259,720)	$	378,279	$	236,998

Weighted average shares outstanding – Basic		231,334		244,076		241,929
Dilutive impact of share-based compensation⁽¹⁾		—		3,185		5,945
Weighted average shares outstanding – Diluted		231,334		247,261		247,874
Net income/(loss) per share
Basic	$	(1.12)	$	1.55	$	0.98
Diluted	$	(1.12)	$	1.53	$	0.96

(1)	For the year ended December 31, 2019, the impact of share-based compensation was anti-dilutive as a conversion to shares would not increase the loss per share.

15) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

a) Fair Value Measurements

At December 31, 2019, senior notes had a carrying value of $606.6 million and a fair value of $613.8 million (December 31, 2018 – $696.9 million and $695.4 million, respectively).

There were no transfers between fair value hierarchy levels during the year.

b) Derivative Financial Instruments

The derivative financial assets and liabilities on the Consolidated Balance Sheets result from recording derivative financial instruments at fair value.

The following tables summarize the change in fair value for the respective years:


							Income
Gain/(Loss) ($ thousands)	2019		2018		2017		Statement Presentation
Equity Swaps	$	(308)	$	210	$	(184)	G&A expense
Electricity Swaps		—		—		639	Operating expense
Commodity Derivative Instruments:
Oil		(70,481)		114,822		(5,445)	Commodity derivative
Gas		(10,944)		9,234		11,174	instruments
Total Unrealized Gain/(Loss)	$	(81,733)	$	124,266	$	6,184

The following table summarizes the effect of Enerplus’ commodity derivative instruments on the Consolidated Statements of Income/(Loss):


($ thousands)	2019		2018		2017
Change in fair value gain/(loss)	$	(81,425)	$	124,056	$	5,729
Net realized cash gain/(loss)		15,354		(35,824)		8,581
Commodity derivative instruments gain/(loss)	$	(66,071)	$	88,232	$	14,310

The following table summarizes the fair values at the respective year ends:


	December 31, 2019				December 31, 2018
	Assets		Liabilities			Assets			Liabilities
($ thousands)	Current		Current			Current	Long-term		Current
Equity Swaps	$	—	$	2,217	$	—	$	—	$	1,909
Commodity Derivative Instruments:
Oil		10,570		517		48,314		32,220		—
Gas		—		—		10,944		—		—
Total	$	10,570	$	2,734	$	59,258	$	32,220	$	1,909

24 ENERPLUS 2019 FINANCIAL SUMMARY

c) Risk Management

In the normal course of operations, Enerplus is exposed to various market risks, including commodity prices, foreign exchange, interest rates and equity prices, credit risk and liquidity risk.

i) Market Risk

Market risk is comprised of commodity price, foreign exchange, interest rate and equity price risk.

Commodity Price Risk:

Enerplus manages a portion of commodity price risk through a combination of financial derivative and physical delivery sales contracts. Enerplus’ policy is to enter into commodity contracts subject to a maximum of 80% of forecasted production volumes net of royalties and production taxes.

The following tables summarize Enerplus’ price risk management positions at February 20, 2020:

Crude Oil Instruments:


Instrument Type⁽¹⁾⁽²⁾	bbls/day	US$/bbl

Jan 1, 2020 – Jan 31, 2020
WTI Swap	5,000	57.05
WTI Purchased Put	16,000	57.50
WTI Sold Put	16,000	46.88
WTI – Brent Swap (Purchase)	4,400	(8.03)
WTI – Brent Swap (Sale)	4,400	(3.98)
WCS Differential Swap	1,000	(19.25)

Feb 1, 2020 – Mar 31, 2020
WTI Swap	10,000	54.56
WTI Purchased Put	16,000	57.50
WTI Sold Put	16,000	46.88
WTI – Brent Swap (Purchase)	4,400	(8.03)
WTI – Brent Swap (Sale)	4,400	(3.98)
WCS Differential Swap	1,000	(19.25)

Apr 1, 2020 – Jun 30, 2020
WTI Swap	12,000	55.23
WTI Purchased Put	16,000	57.50
WTI Sold Put	16,000	46.88
WTI – Brent Swap (Purchase)	4,400	(8.03)
WTI – Brent Swap (Sale)	4,400	(3.98)

Jul 1, 2020 – Sep 30, 2020
WTI Swap	2,000	57.18
WTI Purchased Put	21,000	57.20
WTI Sold Put	21,000	47.14
WTI Sold Call	5,000	65.00
WTI – Brent Swap (Purchase)	4,400	(8.03)

Oct 1, 2020 – Dec 31, 2020
WTI Purchased Put	21,000	57.20
WTI Sold Put	21,000	47.14
WTI Sold Call	5,000	65.00
WTI – Brent Swap (Purchase)	4,400	(8.03)

(1)	Transactions with a common term have been aggregated and presented as the weighted average price/bbl before premiums.

(2)	The total average deferred premium on outstanding hedges is US$1.69/bbl from January 1, 2020 to December 31, 2020.

Foreign Exchange Risk:

Enerplus is exposed to foreign exchange risk in relation to its U.S. operations, U.S. dollar denominated senior notes, cash deposits and working capital. Additionally, Enerplus’ crude oil sales and a significant portion of its natural gas sales are based on U.S. dollar indices. To mitigate exposure to fluctuations in foreign exchange, Enerplus may enter into foreign exchange derivatives. At December 31, 2019, Enerplus did not have any foreign exchange derivatives outstanding.

ENERPLUS 2019 FINANCIAL SUMMARY 25

Interest Rate Risk:

At December 31, 2019, all of Enerplus’ debt was based on fixed interest rates, and Enerplus did not have any interest rate derivatives outstanding.

Equity Price Risk:

Enerplus is exposed to equity price risk in relation to its long-term incentive plans detailed in Note 14. Enerplus has entered into various equity swaps maturing in 2020 and has effectively fixed the future settlement cost on 264,000 shares at a weighted average price of $17.82 per share.

ii) Credit Risk

Credit risk represents the financial loss Enerplus would experience due to the potential non-performance of counterparties to its financial instruments. Enerplus is exposed to credit risk mainly through its joint venture, marketing and financial counterparty receivables.

Enerplus mitigates credit risk through credit management techniques, including conducting financial assessments to establish and monitor counterparties’ credit worthiness, setting exposure limits, monitoring exposures against these limits and obtaining financial assurances such as letters of credit, parental guarantees, or third party credit insurance where warranted. Enerplus monitors and manages its concentration of counterparty credit risk on an ongoing basis.

Enerplus’ maximum credit exposure at the balance sheet date consists of the carrying amount of its non-derivative financial assets and the fair value of its derivative financial assets. At December 31, 2019, approximately 77% of Enerplus’ marketing receivables were with companies considered investment grade.

Enerplus actively monitors past due accounts and takes the necessary actions to expedite collection, which can include withholding production, netting amounts off future payments or seeking other remedies including legal action. Should Enerplus determine that the ultimate collection of a receivable is in doubt, it will provide the necessary provision in its allowance for doubtful accounts with a corresponding charge to earnings. If Enerplus subsequently determines an account is uncollectible the account is written off with a corresponding charge to the allowance account. Enerplus’ allowance for doubtful accounts balance at December 31, 2019 was $3.7 million (December 31, 2018 – $3.9 million).

iii) Liquidity Risk & Capital Management

Liquidity risk represents the risk that Enerplus will be unable to meet its financial obligations as they become due. Enerplus mitigates liquidity risk through actively managing its capital, which it defines as debt (net of cash and cash equivalents) and shareholders’ capital. Enerplus’ objective is to provide adequate short and longer term liquidity while maintaining a flexible capital structure to sustain the future development of its business. Enerplus strives to balance the portion of debt and equity in its capital structure given its current oil and natural gas assets and planned investment opportunities.

Management monitors a number of key variables with respect to its capital structure, including debt levels, capital spending plans, dividends, share repurchases, access to capital markets, as well as acquisition and divestment activity.

At December 31, 2019, Enerplus was in full compliance with all covenants under the bank credit facility and outstanding senior notes.

16) COMMITMENTS AND CONTINGENCIES

a) Commitments

Enerplus has the following minimum annual commitments, excluding operating leases which are recorded in the lease liability (see Note 9):


				Minimum Annual Commitment Each Year
($ thousands)		Total		2020		2021		2022		2023		2024		Thereafter
Senior notes⁽¹⁾	$		606,633	$	105,998	$	105,998	$	130,680	$	104,700	$	104,699	$	54,558
Transportation commitments			313,197		34,829		31,651		29,271		28,981		28,719		159,746
Processing commitments			12,663		3,174		1,519		1,519		1,519		1,519		3,413
Total commitments⁽²⁾⁽³⁾	$		932,493	$	144,001	$	139,168	$	161,470	$	135,200	$	134,937	$	217,717

(1)	Interest payments have not been included.

(2)	Crown and surface royalties, production taxes, lease rentals and mineral taxes (hydrocarbon production rights) have not been included as amounts paid depend on future ownership, production, prices and the legislative environment.

(3)	US$ commitments have been converted to CDN$ using the December 31, 2019 foreign exchange rate of 1.2990.

26 ENERPLUS 2019 FINANCIAL SUMMARY

b) Contingencies

Enerplus is subject to various legal claims and actions arising in the normal course of business. Although the outcome of such claims and actions cannot be predicted with certainty, the Company does not expect these matters to have a material impact on the Consolidated Financial Statements. In instances where the Company determines that a loss is probable and the amount can be reasonably estimated, an accrual is recorded.

17) GEOGRAPHICAL INFORMATION


As at and for the year ended December 31, 2019 ($ thousands)	Canada		U.S.		Total
Oil and natural gas sales, net of royalties	$	177,299	$	1,077,507	$	1,254,806
Depletion, depreciation and accretion		59,936		296,894		356,830
Property, plant and equipment		259,514		1,308,092		1,567,606
Deferred income tax asset		185,880		186,622		372,502
Goodwill		—		194,015		194,015
Long term income tax receivable		—		13,852		13,852


As at and for the year ended December 31, 2018 ($ thousands)	Canada		U.S.		Total
Oil and natural gas sales, net of royalties	$	198,263	$	1,094,473	$	1,292,736
Depletion, depreciation and accretion		58,333		245,941		304,274
Property, plant and equipment		262,159		1,044,912		1,307,071
Deferred income tax asset		196,903		268,221		465,124
Goodwill		451,121		203,678		654,799
Long term income tax receivable		—		27,195		27,195


As at and for the year ended December 31, 2017 ($ thousands)	Canada		U.S.		Total
Oil and natural gas sales, net of royalties	$	227,031	$	693,662	$	920,693
Depletion, depreciation and accretion		89,936		160,838		250,774
Property, plant and equipment		246,604		653,427		900,031
Deferred income tax asset		200,818		369,119		569,937
Goodwill		451,121		187,757		638,878
Long term income tax receivable		—		50,108		50,108

18) SUPPLEMENTAL CASH FLOW INFORMATION

a) Changes in Non-Cash Operating Working Capital


($ thousands)	December 31, 2019		December 31, 2018		December 31, 2017
Accounts receivable	$	8,493	$	(45,385)	$	(66,860)
Other assets		4,475		(3,026)		(154)
Accounts payable		(11,005)		44,952		31,982
	$	1,963	$	(3,459)	$	(35,032)

b) Changes in Other Non-Cash Working Capital


($ thousands)	December 31, 2019		December 31, 2018		December 31, 2017
Non-cash financing activities⁽¹⁾	$	(178)	$	(26)	$	16
Non-cash investing activities⁽²⁾	$	17,682	$	(3,753)	$	1,523

(1)	Relates to changes in dividends payable and included in dividends on the Consolidated Statements of Cash Flows.

(2)	Relates to changes in accounts payable for capital and office expenditures and included in capital and office expenditures on the Consolidated Statements of Cash Flows.

c) Other


($ thousands)	December 31, 2019		December 31, 2018		December 31, 2017
Income taxes paid/(received)	$	(71,890)	$	(481)	$	2,640
Interest paid	$	33,991	$	36,161	$	38,149

ENERPLUS 2019 FINANCIAL SUMMARY 27