Laredo Petroleum, Inc. (NYSE:LPI) ("Laredo" or "the Company") today
announced its 2018 first-quarter results, reporting net income
attributable to common stockholders of $86.5 million, or $0.36 per
diluted share. Adjusted Net Income, a non-GAAP financial measure,
for the first quarter of 2018 was $57.6 million, or $0.24 per
diluted share. Adjusted EBITDA, a non-GAAP financial measure, for
the first quarter of 2018 was $143.4 million. Please see
supplemental financial information at the end of this news release
for reconciliations of non-GAAP financial measures.
2018 First-Quarter Highlights
- Produced a Company record 63,314 barrels of oil equivalent
("BOE") per day and increased anticipated production growth for
full-year 2018 to greater than 12%
- Reduced unit cash costs to $8.74 per BOE, a decrease of
approximately 4% from the first quarter of 2017
- Increased Adjusted EBITDA to $143.4 million, up 33% from the
first quarter of 2017
- Repurchased 6,727,901 shares of common stock at a
weighted-average price of $8.69 per share for $58.5 million under
the Company's share repurchase program
"Operational results in the first quarter were in-line with
expectations as we overcame delays from adverse weather at the
beginning of the quarter," stated Randy A. Foutch, Chairman and
Chief Executive Officer. "We completed four more wells than
projected, driven by efficiency gains in our completions operations
that pulled wells forward from the second quarter. The results our
drilling and completions teams were able to accomplish to shorten
cycle times significantly improved efficiency during the
quarter."
"We are increasing our production expectations for 2018 as our
work to optimize contract areas on our contiguous acreage is
increasing both the working interest and lateral lengths of our
wells. Additionally, the longer-term results from well packages
designed to test tighter spacing are encouraging. We are
aggressively moving forward with our development utilizing 32
Upper/Middle Wolfcamp wells per drilling spacing unit which,
coupled with shorter cycle times and an accelerated pace of
drilling, is expected to drive improved capital efficiency. We now
anticipate adding a fifth horizontal drilling rig around the end of
2018 or beginning of 2019."
E&P Update
In the first quarter of 2018, Laredo produced a Company record
63,314 BOE per day, completing 20 gross (20 net) horizontal wells
with an average completed lateral length of approximately 9,700
feet. The number of completions in first-quarter 2018 was
positively impacted by shortened cycle times, reflecting efficiency
improvements related to contracting a second dedicated completions
crew and completion design modifications.
Laredo continued to utilize various completion designs during
the first quarter with the goal of improving productivity, reducing
capital costs and driving improved capital efficiency. Design
refinements included lengthening stages, reducing fluid
concentrations and utilizing PerfExtra, the Gas Technology
Institutes' patented hydraulic fracturing technology. These
completion designs were planned as parts of larger well packages
wherein the remaining wells were completed with the Company's
standard design in order to obtain a direct comparison of the
wells' productivity. Well productivity is balanced with the capital
savings to assess the value of the completion design modifications.
Lengthening stages and reducing fluid concentrations both
contributed to cycle time and capital costs reductions. The initial
productivity of the wells with reduced fluid concentration has been
below expectations, although additional production data will be
needed to determine the impact on longer-term capital efficiency.
The Company does expect to continue to phase in longer stage
lengths and PerfExtra on wells throughout the year, as they are
positive for capital efficiency.
Unit lease operating expenses ("LOE") were $3.85 per BOE in the
first quarter of 2018, the seventh consecutive quarter of unit LOE
less than $4.00 per BOE. Cost pressure and non-recurring well work
contributed to the increase from fourth-quarter 2017. The Company's
guidance for second-quarter 2018 unit LOE of $3.70 per BOE is
expected to be more reflective of unit LOE for the remainder of
2018.
Laredo expects to complete 17 gross horizontal wells (16.5 net)
in the second quarter of 2018 with an average completed lateral
length of approximately 10,800 feet. Eleven of these wells are
being developed as a package and are not expected to begin flowback
until the end of second-quarter 2018. The Company is currently
operating three horizontal drilling rigs and is in the process of
adding a fourth rig at the beginning of the third quarter. Laredo
also expects to add a fifth horizontal rig around the end of 2018
or beginning of 2019 as completion efficiency gains and the current
commodity price environment drive increasing operating cash
flow.
The Company expects average completed lateral length to increase
throughout 2018. Laredo's first three 15,000-foot horizontal wells
have continued to improve since they were completed in the third
quarter of 2017 and their average cumulative production is now
performing in-line with the Company's Upper/Middle Wolfcamp type
curve, adjusted for their lateral length. Laredo's contiguous
acreage currently supports more than 500 land-ready Upper/Middle
Wolfcamp locations of at least 15,000 feet.
Positive results from previously drilled co-developed packages
support Laredo's transition to a 32 Upper/Middle Wolfcamp wells per
drilling spacing unit ("DSU") development plan. The Sugg-A 157/158
five-well package, developed on 32 Upper/Middle Wolfcamp wells per
DSU spacing and completed in the second and third quarters of 2017,
is performing above type curve after approximately nine months. The
nine-well Lane Trust package, developed on 24 Upper/Middle Wolfcamp
wells per DSU spacing and completed in the fourth quarter of 2017,
is also performing above type curve. Throughout the remainder
of 2018, Laredo expects approximately 20 to 25 of its remaining
completions in 2018 to be developed on 32 Upper/Middle Wolfcamp
wells per DSU spacing.
The Company is increasing its anticipated full-year 2018 total
production growth guidance to greater than 12% and reiterating
previously-issued oil production growth guidance of greater than
10% as compared to 2017. Quarterly production growth is expected to
be uneven as three packages of at least eight wells are scheduled
to be brought on production throughout the last seven months of
2018.
Crude Marketing
Laredo crude marketing has focused on achieving the ability to
sell crude in multiple markets and protecting the Company's oil
pricing from basin differentials. The Company entered into a crude
oil purchase agreement with Shell Trading (US) Company ("Shell")
effective October 1, 2016 through June 30, 2020 ("the Contract"),
for this purpose. The Contract provided a menu of pricing
alternatives that enabled Laredo, at the Company's option, to take
advantage of Midland market pricing as well as U.S. Gulf Coast
market pricing.
As previously reported, on May 3, 2017, Shell sued Laredo,
alleging that the Contract did not accurately reflect the
compensation to be paid to Shell under one of the pricing options
due to a drafting mistake, despite clear language in the Contract
to the contrary. Laredo does not believe that there was a drafting
mistake. Although the Contract is still the subject of litigation
regarding the alleged mistake and other related claims asserted by
Shell, as of May 1, 2018, Shell has terminated the Contract and
informed Laredo that it will no longer continue to purchase crude
oil from Laredo, as well as sell crude oil to Laredo, as it is
required to do under the Contract. Laredo believes the termination
was improper and the Company intends to vigorously pursue its
rights under the terminated Contract and seek all appropriate
damages from Shell. The Company continues to believe that Shell's
claims are without merit.
Although not reflective of the total damages caused by Shell's
wrongful termination, the estimated current net impact to Laredo's
crude oil price realization as a result of the Shell breach is the
reduction of aggregate second-quarter 2018 forecasted crude oil
price realizations from 95% of West Texas Intermediate ("WTI") to
91% of WTI. The Company estimates that approximately 70% of its
anticipated crude oil production for the remainder of 2018 is still
protected from the Midland basis differential through a combination
of 10,000 barrels of oil per day ("BOPD") of Midland-Cushing basis
swaps and 10,000 BOPD of Laredo's firm capacity on the Bridgetex
pipeline, hedged with Midland-Houston basis swaps, providing Laredo
exposure to pricing at the U.S. Gulf Coast market.
Further discussion regarding the litigation will be included in
the Company's Quarterly Report on Form 10-Q.
Natural Gas Marketing
The Company, through Laredo Midstream Services, LLC ("LMS"), a
wholly-owned subsidiary of Laredo, owns approximately 170 miles of
natural gas gathering pipelines. By owning the pipelines that
deliver natural gas to processors' systems instead of utilizing
gathering infrastructure owned by a processor, Laredo is better
able to manage the delivery of its gas for sales. Should a
processor be unable to accept the Company's natural gas production
due to curtailments, Laredo's owned natural gas gathering system
has the ability to shift production to another processor for
continued natural gas sales.
In addition to the Company's focus on field-level flow
assurance, Laredo makes substantial efforts to protect anticipated
cash flows generated from the sales of the Company's produced
natural gas. For 2018, the Company has hedged approximately 75% of
anticipated natural gas production to protect from a widening Waha
basis. For the second quarter of 2018, resulting from a severe
widening of the Waha basis, Laredo anticipates the Company's
realized price for natural gas will be approximately 36% of Henry
Hub. If the Company's natural gas hedges and basis swaps were
included in realized pricing, the anticipated realized price would
rise to 62% of Henry Hub.
2018 Capital Program
During the first quarter of 2018, Laredo invested approximately
$140 million in drilling and completion activities. Other
expenditures incurred during the quarter included approximately $3
million in bolt-on land acquisitions, lease extensions and data,
approximately $8 million in infrastructure, including LMS
investments, and approximately $10 million in other capitalized
costs.
The Company's expected working interest and lateral length for
wells completed in 2018 has increased from original budget
expectations to approximately 95% and 10,600 feet, respectively.
Additionally, delayed implementation of in-basin sand is impacting
well costs. Including these new expectations, drilling and
completion capital for 2018 is expected to increase $30 million to
$500 million. Other capital expenditures are expected to remain
unchanged at $85 million, bringing total annual capital
expenditures to $585 million.
Liquidity
At March 31, 2018, the Company had cash and cash equivalents of
approximately $56 million and undrawn capacity under the senior
secured credit facility of $945 million, resulting in total
liquidity of approximately $1.0 billion.
On April 19, 2018, in connection with the semi-annual
redetermination of the Company's senior secured credit facility,
lenders increased the Company's borrowing base to $1.3 billion and
Laredo increased its elected commitment to $1.2 billion. The
pricing grid for the facility was reduced by 75 basis points for
drawn amounts at all utilization breakpoints.
At May 1, 2018, the Company had cash and equivalents of
approximately $81 million and available capacity under the senior
secured credit facility of $1.09 billion, resulting in total
available liquidity of approximately $1.17 billion.
Commodity Derivatives
Laredo maintains a disciplined hedging program to reduce the
variability in its anticipated cash flow due to fluctuations in
commodity prices. The Company utilizes a combination of puts, swaps
and collars, entering into contracts solely with banks that are
part of its senior secured credit facility. Laredo currently has
hedges in place for approximately 90% of anticipated oil production
in 2018 and has oil hedges through 2020. Laredo has also entered
into NGL and natural gas hedges through 2018 and basis hedges
through 2020. Details of the Company's hedge positions are included
in the current Corporate Presentation available on the Company's
website at www.laredopetro.com.
Guidance
The Company is increasing its anticipated full-year 2018 total
production growth guidance to greater than 12% and reiterating
previously issued oil production growth guidance of greater than
10% as compared to 2017. The table below reflects the Company's
guidance for the second quarter of 2018.
|
2Q-2018E |
Total production
(MBOE/d) |
64.0 |
Oil production
(MBO/d) |
27.4 |
|
|
Price Realizations
(pre-hedge): |
|
Crude oil
(% of WTI) |
91% |
Natural
gas liquids (% of WTI) |
28% |
Natural
gas (% of Henry Hub) |
36% |
|
|
Operating Costs &
Expenses: |
|
Lease
operating expenses ($/BOE) |
$ 3.70 |
Midstream
expenses ($/BOE) |
$ 0.15 |
Production and ad valorem taxes (% of oil, NGL and natural gas
revenue) |
6.25% |
General
and administrative expenses: |
|
Cash
($/BOE) |
$ 2.70 |
Non-cash
stock-based compensation ($/BOE) |
$ 1.85 |
Depletion, depreciation and amortization ($/BOE) |
$ 8.00 |
|
|
Conference Call Details
On Thursday, May 3, 2018, at 7:30 a.m. CT, Laredo will host a
conference call to discuss its first-quarter 2018 financial and
operating results and management’s outlook, the content of which is
not part of this earnings release. A slide presentation providing
summary financial and statistical information that will be
discussed on the call will be posted to the Company’s website and
available for review. The Company invites interested parties to
listen to the call via the Company’s website at
www.laredopetro.com, under the tab for "Investor Relations."
Portfolio managers and analysts who would like to participate on
the call should dial 877.930.8286, using conference code 3698623,
approximately 10 minutes prior to the scheduled conference time.
International participants should dial 253.336.8309, also using
conference code 3698623. A telephonic replay will be available
approximately two hours after the call on May 3, 2018 through
Thursday, May 10, 2018. Participants may access this replay by
dialing 855.859.2056, using conference code 3698623.
About Laredo
Laredo Petroleum, Inc. is an independent energy company with
headquarters in Tulsa, Oklahoma. Laredo’s business strategy is
focused on the acquisition, exploration and development of oil and
natural gas properties and midstream and marketing services,
primarily in the Permian Basin of West Texas.
Additional information about Laredo may be found on its website
at www.laredopetro.com.
Forward-Looking Statements
This press release and any oral statements made regarding the
subject of this release, including in the conference call
referenced herein, contain forward-looking statements as defined
under Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, that address
activities that Laredo assumes, plans, expects, believes, intends,
projects, estimates or anticipates (and other similar expressions)
will, should or may occur in the future are forward-looking
statements. The forward-looking statements are based on
management’s current belief, based on currently available
information, as to the outcome and timing of future events.
General risks relating to Laredo include, but are not limited
to, the decline in prices of oil, natural gas liquids and natural
gas and the related impact to financial statements as a result of
asset impairments and revisions to reserve estimates, the increase
in service costs, hedging activities, possible impacts of pending
or potential litigation, the suspension or discontinuance of share
repurchases at any time and other factors, including those and
other risks described in its Annual Report on Form 10-K for the
year ended December 31, 2017, and those set forth from time to time
in other filings with the Securities and Exchange Commission
("SEC"). These documents are available through Laredo’s website at
www.laredopetro.com under the tab “Investor Relations” or
through the SEC’s Electronic Data Gathering and Analysis Retrieval
System at www.sec.gov. Any of these factors could cause Laredo’s
actual results and plans to differ materially from those in the
forward-looking statements. Therefore, Laredo can give no assurance
that its future results will be as estimated. Laredo does not
intend to, and disclaims any obligation to, update or revise any
forward-looking statement.
The SEC generally permits oil and natural gas companies, in
filings made with the SEC, to disclose proved reserves, which are
reserve estimates that geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions
and certain probable and possible reserves that meet the SEC’s
definitions for such terms. In this press release and the
conference call, the Company may use the terms “resource potential”
and “estimated ultimate recovery,” or "EURs," each of which the SEC
guidelines restrict from being included in filings with the SEC
without strict compliance with SEC definitions. These terms refer
to the Company’s internal estimates of unbooked hydrocarbon
quantities that may be potentially added to proved reserves,
largely from a specified resource play. A resource play is a term
used by the Company to describe an accumulation of hydrocarbons
known to exist over a large areal expanse and/or thick vertical
section potentially supporting numerous drilling locations, which,
when compared to a conventional play, typically has a lower
geological and/or commercial development risk. EURs are based on
the Company’s previous operating experience in a given area and
publicly available information relating to the operations of
producers who are conducting operations in these areas. Unbooked
resource potential or EURs do not constitute reserves within the
meaning of the Society of Petroleum Engineer’s Petroleum Resource
Management System or SEC rules and do not include any proved
reserves. Actual quantities of reserves that may be ultimately
recovered from the Company’s interests may differ substantially
from those presented herein. Factors affecting ultimate recovery
include the scope of the Company’s ongoing drilling program, which
will be directly affected by the availability of capital, decreases
in oil and natural gas prices, drilling costs and production costs,
availability of drilling services and equipment, drilling results,
lease expirations, transportation constraints, regulatory
approvals, negative revisions to reserve estimates and other
factors as well as actual drilling results, including geological
and mechanical factors affecting recovery rates. Estimates of
unproved reserves may change significantly as development of the
Company’s core assets provides additional data. In addition, our
production forecasts and expectations for future periods are
dependent upon many assumptions, including estimates of production
decline rates from existing wells and the undertaking and outcome
of future drilling activity, which may be affected by significant
commodity price declines or drilling cost increases.
Laredo Petroleum,
Inc.Condensed consolidated statements of
operations
|
|
Three months ended March 31, |
(in thousands, except per share data) |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
(unaudited) |
Revenues: |
|
|
|
|
Oil, NGL
and natural gas sales |
|
$ |
197,434 |
|
|
$ |
138,736 |
|
Midstream
service revenues |
|
2,359 |
|
|
2,999 |
|
Sales of
purchased oil |
|
59,903 |
|
|
47,271 |
|
Total
revenues |
|
259,696 |
|
|
189,006 |
|
Costs and
expenses: |
|
|
|
|
Lease
operating expenses |
|
21,951 |
|
|
16,992 |
|
Production and ad valorem taxes |
|
11,812 |
|
|
8,781 |
|
Midstream
service expenses |
|
693 |
|
|
916 |
|
Costs of
purchased oil |
|
60,664 |
|
|
50,256 |
|
General
and administrative |
|
24,725 |
|
|
25,597 |
|
Depletion, depreciation and amortization |
|
45,553 |
|
|
34,112 |
|
Other
operating expenses |
|
1,106 |
|
|
1,026 |
|
Total
costs and expenses |
|
166,504 |
|
|
137,680 |
|
Operating
income |
|
93,192 |
|
|
51,326 |
|
Non-operating income
(expense): |
|
|
|
|
Gain on
derivatives, net |
|
9,010 |
|
|
36,671 |
|
Income
from equity method investee(1) |
|
— |
|
|
3,068 |
|
Interest
expense |
|
(13,518 |
) |
|
(22,720 |
) |
Other,
net |
|
(2,164 |
) |
|
(69 |
) |
Non-operating income (expense), net |
|
(6,672 |
) |
|
16,950 |
|
Income
before income taxes |
|
86,520 |
|
|
68,276 |
|
Income tax: |
|
|
|
|
Deferred |
|
— |
|
|
— |
|
Total
income tax |
|
— |
|
|
— |
|
Net income |
|
$ |
86,520 |
|
|
$ |
68,276 |
|
Net income per common
share: |
|
|
|
|
Basic |
|
$ |
0.36 |
|
|
$ |
0.29 |
|
Diluted |
|
$ |
0.36 |
|
|
$ |
0.28 |
|
Weighted-average common
shares outstanding: |
|
|
|
|
Basic |
|
238,228 |
|
|
238,505 |
|
Diluted |
|
239,319 |
|
|
244,379 |
|
____________________________________________________________ |
(1) |
On October 30,
2017, LMS, together with Medallion Midstream Holdings, LLC, which
is owned and controlled by an affiliate of the third-party interest
holder, The Energy & Minerals Group, completed the sale of 100%
of the ownership interests in Medallion Gathering & Processing,
LLC, a Texas limited liability company formed on October 12, 2012,
which, together with its wholly-owned subsidiaries (collectively,
"Medallion"), to an affiliate of Global Infrastructure Partners
("GIP"), for cash consideration of $1.825 billion (the "Medallion
Sale"). LMS' net cash proceeds for its 49% ownership interest in
Medallion in 2017 were $829.6 million, before post-closing
adjustments and taxes, but after deduction of its proportionate
share of fees and other expenses associated with the Medallion
Sale. On February 1, 2018, closing adjustments were finalized and
LMS received additional net cash of $1.7 million for total net cash
proceeds before taxes of $831.3 million. The Medallion Sale closed
pursuant to the membership interest purchase and sale agreement,
which provides for potential post-closing additional cash
consideration that is structured based on GIP's realized profit at
exit. There can be no assurance as to when and whether the
additional consideration will be paid. |
|
|
Laredo Petroleum,
Inc.Condensed consolidated balance
sheets
(in thousands) |
|
March 31, 2018 |
|
December 31, 2017 |
|
|
|
|
|
|
|
(unaudited) |
Assets: |
|
|
|
|
Current
assets |
|
$ |
185,193 |
|
|
$ |
235,382 |
|
Property
and equipment, net |
|
1,882,249 |
|
|
1,768,385 |
|
Noncurrent assets |
|
20,089 |
|
|
19,522 |
|
Total
assets |
|
$ |
2,087,531 |
|
|
$ |
2,023,289 |
|
Liabilities and
stockholders' equity: |
|
|
|
|
Current
liabilities |
|
$ |
239,666 |
|
|
$ |
277,419 |
|
Long-term
debt, net |
|
847,300 |
|
|
791,855 |
|
Noncurrent liabilities |
|
58,735 |
|
|
188,436 |
|
Stockholders' equity |
|
941,830 |
|
|
765,579 |
|
Total
liabilities and stockholders' equity |
|
$ |
2,087,531 |
|
|
$ |
2,023,289 |
|
|
Laredo Petroleum,
Inc.Condensed consolidated statements of cash
flows
|
|
Three months ended March 31, |
(in thousands) |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
(unaudited) |
Cash flows from
operating activities: |
|
|
|
|
Net
income |
|
$ |
86,520 |
|
|
$ |
68,276 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depletion, depreciation and amortization |
|
45,553 |
|
|
34,112 |
|
Non-cash
stock-based compensation, net |
|
9,339 |
|
|
9,224 |
|
Mark-to-market on derivatives: |
|
|
|
|
Gain on
derivatives, net |
|
(9,010 |
) |
|
(36,671 |
) |
Settlements (paid) received for matured derivatives, net |
|
(2,236 |
) |
|
7,451 |
|
Premiums
paid for derivatives |
|
(4,024 |
) |
|
(2,107 |
) |
Other,
net(1) |
|
5,308 |
|
|
(762 |
) |
Cash
flows from operations before changes in assets and
liabilities |
|
131,450 |
|
|
79,523 |
|
Decrease
(increase) in current assets and liabilities, net |
|
15,495 |
|
|
(15,695 |
) |
Increase
in other noncurrent assets and liabilities, net |
|
(474 |
) |
|
(44 |
) |
Net cash
provided by operating activities |
|
146,471 |
|
|
63,784 |
|
Cash flows from
investing activities: |
|
|
|
|
Capital
expenditures: |
|
|
|
|
Oil and
natural gas properties |
|
(195,025 |
) |
|
(110,542 |
) |
Midstream
service assets |
|
(3,362 |
) |
|
(1,731 |
) |
Other
fixed assets |
|
(3,963 |
) |
|
(1,203 |
) |
Proceeds
from disposition of equity method investee, net of selling
costs(1) |
|
1,655 |
|
|
— |
|
Proceeds
from dispositions of capital assets, net of selling
costs |
|
1,021 |
|
|
59,515 |
|
Net cash
used in investing activities |
|
(199,674 |
) |
|
(53,961 |
) |
Cash flows from
financing activities: |
|
|
|
|
Borrowings on Senior Secured Credit Facility |
|
55,000 |
|
|
50,000 |
|
Payments
on Senior Secured Credit Facility |
|
— |
|
|
(55,000 |
) |
Share
repurchases |
|
(53,714 |
) |
|
— |
|
Other,
net |
|
(4,353 |
) |
|
(7,143 |
) |
Net cash
used in financing activities |
|
(3,067 |
) |
|
(12,143 |
) |
Net decrease in cash
and cash equivalents |
|
(56,270 |
) |
|
(2,320 |
) |
Cash and cash
equivalents, beginning of period |
|
112,159 |
|
|
32,672 |
|
Cash and cash
equivalents, end of period |
|
$ |
55,889 |
|
|
$ |
30,352 |
|
____________________________________________________________ |
(1) |
See footnote 1 to
the condensed consolidated statements of operations. |
|
|
Laredo Petroleum,
Inc.Selected operating data
|
|
Three months ended March 31, |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
(unaudited) |
Sales volumes: |
|
|
|
|
Oil
(MBbl) |
|
2,439 |
|
|
2,120 |
|
NGL
(MBbl) |
|
1,563 |
|
|
1,263 |
|
Natural
gas (MMcf) |
|
10,173 |
|
|
8,000 |
|
Oil
equivalents (MBOE)(1)(2) |
|
5,698 |
|
|
4,716 |
|
Average
daily sales volumes (BOE/D)(2) |
|
63,314 |
|
|
52,405 |
|
%
Oil(2) |
|
43 |
% |
|
45 |
% |
Average sales
prices(2): |
|
|
|
|
Oil,
realized ($/Bbl)(3) |
|
$ |
61.87 |
|
|
$ |
46.91 |
|
NGL,
realized ($/Bbl)(3) |
|
$ |
18.14 |
|
|
$ |
16.49 |
|
Natural
gas, realized ($/Mcf)(3) |
|
$ |
1.79 |
|
|
$ |
2.31 |
|
Average
price, realized ($/BOE)(3) |
|
$ |
34.65 |
|
|
$ |
29.42 |
|
Oil,
hedged ($/Bbl)(4) |
|
$ |
58.53 |
|
|
$ |
49.70 |
|
NGL,
hedged ($/Bbl)(4) |
|
$ |
18.11 |
|
|
$ |
16.04 |
|
Natural
gas, hedged ($/Mcf)(4) |
|
$ |
1.85 |
|
|
$ |
2.31 |
|
Average
price, hedged ($/BOE)(4) |
|
$ |
33.34 |
|
|
$ |
30.55 |
|
Average costs per BOE
sold(2): |
|
|
|
|
Lease
operating expenses |
|
$ |
3.85 |
|
|
$ |
3.60 |
|
Production and ad valorem taxes |
|
2.07 |
|
|
1.86 |
|
Midstream
service expenses |
|
0.12 |
|
|
0.19 |
|
General
and administrative: |
|
|
|
|
Cash |
|
2.70 |
|
|
3.47 |
|
Non-cash
stock-based compensation, net |
|
1.64 |
|
|
1.96 |
|
Depletion, depreciation and amortization |
|
7.99 |
|
|
7.23 |
|
Total
costs and expenses |
|
$ |
18.37 |
|
|
$ |
18.31 |
|
Cash margins per BOE
sold(2): |
|
|
|
|
Realized |
|
$ |
25.91 |
|
|
$ |
20.30 |
|
Hedged |
|
$ |
24.60 |
|
|
$ |
21.43 |
|
____________________________________________________________ |
(1) |
BOE is calculated using a
conversion rate of six Mcf per one Bbl. |
(2) |
The numbers presented are
based on actual results and are not calculated using the rounded
numbers presented in the table above. |
(3) |
Realized oil, NGL and
natural gas prices are the actual prices realized at the wellhead
adjusted for quality, transportation fees, geographical
differentials, marketing bonuses or deductions and other factors
affecting the price received at the wellhead. |
(4) |
Hedged prices reflect the
after-effects of our hedging transactions on our average sales
prices. Our calculation of such after-effects includes current
period settlements of matured derivatives in accordance with GAAP
and an adjustment to reflect premiums incurred previously or upon
settlement that are attributable to instruments that settled in the
period. |
|
|
Laredo Petroleum,
Inc.Costs incurred
The following table presents costs incurred in the acquisition,
exploration and development of oil and natural gas properties:
|
|
Three months ended March 31, |
(in thousands) |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
(unaudited) |
Property acquisition
costs: |
|
|
|
|
Evaluated |
|
$ |
— |
|
|
$ |
— |
|
Unevaluated |
|
— |
|
|
— |
|
Exploration
costs |
|
6,137 |
|
|
15,543 |
|
Development
costs |
|
149,038 |
|
|
111,158 |
|
Total
costs incurred |
|
$ |
155,175 |
|
|
$ |
126,701 |
|
|
Laredo Petroleum,
Inc.Supplemental reconciliations of GAAP to
non-GAAP financial measures
Non-GAAP financial measures
The non-GAAP financial measures of Adjusted Net Income and
Adjusted EBITDA, as defined by us, may not be comparable to
similarly titled measures used by other companies. Therefore, these
non-GAAP measures should be considered in conjunction with net
income or loss and other performance measures prepared in
accordance with GAAP, such as operating income or loss or cash
flows from operating activities. Adjusted Net Income and Adjusted
EBITDA should not be considered in isolation or as a substitute for
GAAP measures, such as net income or loss, operating income or loss
or any other GAAP measure of liquidity or financial
performance.
Adjusted Net Income
Adjusted Net Income is a non-GAAP financial measure we use to
evaluate performance, prior to income tax expense or benefit,
mark-to-market on derivatives, premiums paid for derivatives, gains
or losses on disposal of assets and other non-recurring income and
expenses and after applying adjusted income tax expense. We believe
Adjusted Net Income helps investors in the oil and natural gas
industry to measure and compare our performance to other oil and
natural gas companies by excluding from the calculation items that
can vary significantly from company to company depending upon
accounting methods, the book value of assets and other
non-operational factors.
The following table presents a reconciliation of
income before income taxes (GAAP) to Adjusted Net Income
(non-GAAP):
|
|
Three months ended March 31, |
(in thousands, except per share data) |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
(unaudited) |
Income before income
taxes |
|
$ |
86,520 |
|
|
$ |
68,276 |
|
Plus: |
|
|
|
|
Mark-to-market on derivatives: |
|
|
|
|
Gain on
derivatives, net |
|
(9,010 |
) |
|
(36,671 |
) |
Settlements (paid) received for matured derivatives, net |
|
(2,236 |
) |
|
7,451 |
|
Premiums
paid for derivatives |
|
(4,024 |
) |
|
(2,107 |
) |
Loss on
disposal of assets, net |
|
2,617 |
|
|
214 |
|
Adjusted
income before adjusted income tax expense |
|
73,867 |
|
|
37,163 |
|
Adjusted
income tax expense(1) |
|
(16,251 |
) |
|
(13,379 |
) |
Adjusted
Net Income |
|
$ |
57,616 |
|
|
$ |
23,784 |
|
Net income per common
share: |
|
|
|
|
Basic |
|
$ |
0.36 |
|
|
$ |
0.29 |
|
Diluted |
|
$ |
0.36 |
|
|
$ |
0.28 |
|
Adjusted Net Income per
common share: |
|
|
|
|
Basic |
|
$ |
0.24 |
|
|
$ |
0.10 |
|
Diluted |
|
$ |
0.24 |
|
|
$ |
0.10 |
|
Weighted-average common
shares outstanding: |
|
|
|
|
Basic |
|
238,228 |
|
|
238,505 |
|
Diluted |
|
239,319 |
|
|
244,379 |
|
____________________________________________________________ |
(1) |
Adjusted income tax
expense is calculated by applying a statutory tax rate of 22% for
the three months ended March 31, 2018, in response to recent
changes in the tax code, and 36% for the three months ended March
31, 2017. |
|
|
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define
as net income or loss plus adjustments for depletion, depreciation
and amortization, non-cash stock-based compensation, net, accretion
expense, mark-to-market on derivatives, premiums paid for
derivatives, interest expense, gains or losses on disposal of
assets, income or loss from equity method investee, proportionate
Adjusted EBITDA of equity method investee and other non-recurring
income and expenses. Adjusted EBITDA provides no information
regarding a company’s capital structure, borrowings, interest
costs, capital expenditures, working capital movement or tax
position. Adjusted EBITDA does not represent funds available for
discretionary use because those funds are required for debt
service, capital expenditures, working capital, income taxes,
franchise taxes and other commitments and obligations. However, our
management believes Adjusted EBITDA is useful to an investor in
evaluating our operating performance because this measure:
- is widely used by investors in the oil and natural gas industry
to measure a company's operating performance without regard to
items excluded from the calculation of such term, which can vary
substantially from company to company depending upon accounting
methods, the book value of assets, capital structure and the method
by which assets were acquired, among other
factors;
- helps investors to more meaningfully evaluate and compare the
results of our operations from period to period by removing the
effect of our capital structure from our operating structure;
and
- is used by our management for various purposes, including as a
measure of operating performance, in presentations to our board of
directors and as a basis for strategic planning and
forecasting.
There are significant limitations to the use of Adjusted EBITDA
as a measure of performance, including the inability to analyze the
effect of certain recurring and non-recurring items that materially
affect our net income or loss, the lack of comparability of results
of operations to different companies and the different methods of
calculating Adjusted EBITDA reported by different companies. Our
measurements of Adjusted EBITDA for financial reporting as compared
to compliance under our debt agreements differ.
The following table presents a reconciliation of net income
(GAAP) to Adjusted EBITDA (non-GAAP):
|
|
Three months ended March 31, |
(in thousands) |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
(unaudited) |
Net income |
|
$ |
86,520 |
|
|
$ |
68,276 |
|
Plus: |
|
|
|
|
Depletion, depreciation and amortization |
|
45,553 |
|
|
34,112 |
|
Non-cash
stock-based compensation, net |
|
9,339 |
|
|
9,224 |
|
Accretion
expense |
|
1,106 |
|
|
928 |
|
Mark-to-market on derivatives: |
|
|
|
|
Gain on
derivatives, net |
|
(9,010 |
) |
|
(36,671 |
) |
Settlements (paid) received for matured derivatives, net |
|
(2,236 |
) |
|
7,451 |
|
Premiums
paid for derivatives |
|
(4,024 |
) |
|
(2,107 |
) |
Interest
expense |
|
13,518 |
|
|
22,720 |
|
Loss on
disposal of assets, net |
|
2,617 |
|
|
214 |
|
Income
from equity method investee(1) |
|
— |
|
|
(3,068 |
) |
Proportionate Adjusted EBITDA of equity method
investee(1)(2) |
|
— |
|
|
6,365 |
|
Adjusted
EBITDA |
|
$ |
143,383 |
|
|
$ |
107,444 |
|
____________________________________________________________ |
(1) |
See footnote 1 to the
condensed consolidated statements of operations. |
(2) |
Proportionate Adjusted
EBITDA of Medallion, our equity method investee until its sale on
October 30, 2017, is calculated as follows: |
|
|
|
|
Three months ended March 31, |
(in thousands) |
|
2018
|
|
2017 |
|
|
|
|
|
|
|
(unaudited) |
Income from equity
method investee |
|
$ |
— |
|
|
$ |
3,068 |
|
Adjusted for
proportionate share of depreciation and amortization |
|
— |
|
|
3,297 |
|
Proportionate Adjusted EBITDA of equity method investee |
|
$ |
— |
|
|
$ |
6,365 |
|
|
Contacts:Ron Hagood: (918) 858-5504
-RHagood@laredopetro.com
18-6
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