Laredo Petroleum, Inc. (NYSE:LPI) ("Laredo" or "the Company") today
announced its 2018 second-quarter results, reporting net income
attributable to common stockholders of $33.5 million, or $0.14 per
diluted share. Adjusted Net Income, a non-GAAP financial measure,
for the second quarter of 2018 was $58.9 million, or $0.25 per
diluted share. Adjusted EBITDA, a non-GAAP financial measure, for
the second quarter of 2018 was $152.5 million. Please see
supplemental financial information at the end of this news release
for reconciliations of non-GAAP financial measures.
2018 Second-Quarter Highlights
- Produced a Company record 67,206 barrels of oil equivalent
("BOE") per day, an increase of 15% from second-quarter 2017
- Increased anticipated production growth for full-year 2018 to
greater than 15%
- Increased Adjusted EBITDA to $152.5 million, up 33% from the
second quarter of 2017
- Repurchased 3,150,651 shares of common stock at a
weighted-average price of $9.12 per share for $28.7 million under
the Company's share repurchase program
"The Company continued its impressive operational performance in
the second quarter, with improving efficiencies enabling the
Company to complete more wells than projected and exceed production
guidance," stated Randy A. Foutch, Chairman and Chief Executive
Officer. "We now expect to complete 12% more wells than was
anticipated in our original 2018 budget as a result of reduced
cycle times and we forecast our well costs will decrease in the
second half of the year as we implement the utilization of in-basin
sand. Our low unit operating costs, the positive results of our
co-development activities and continued focus on cost control are
expected to drive further capital-efficient growth and value
enhancement as we accelerate our development by adding a fourth rig
this month."
E&P Update
In the second quarter of 2018, Laredo completed 20 gross (19.9
net) horizontal wells with an average completed lateral length of
approximately 10,700 feet, surpassing Company expectations of 17
gross completions. Laredo produced a Company record 67,206 BOE per
day in second-quarter 2018, an increase of 15% from the second
quarter of 2017 and higher than Company guidance of 64,000 BOE per
day.
Operational efficiency gains experienced in the first quarter of
2018 continued through second-quarter 2018, facilitating higher
than anticipated completion counts in both quarters. Completions
efficiency has increased by approximately 34% compared to 2017,
reflecting the benefits of contracting a second dedicated
completion crew and the Company's focus on best practices in
drilling and completions operations.
At the end of the second quarter of 2018, the Company signed a
one-year contract that is expected to enable the full
implementation of in-basin sand in future completions. Laredo
anticipates savings of approximately $400,000 per well in
second-half 2018 completions from the use of in-basin sand, thus
achieving a substantial portion of the savings anticipated in the
Company's initial budget.
Unit lease operating expenses ("LOE") decreased in the second
quarter of 2018 to $3.70 per BOE, down from $3.85 per BOE in the
previous quarter. This is the eighth consecutive quarter in which
Laredo's unit LOE has been less than $4.00 per BOE. The Company
expects sequential decreases in unit LOE for the remaining two
quarters of 2018.
Previously, the Company announced a fire caused by a lightning
strike on June 30, 2018, at a tank battery in Glasscock County,
Texas. Production was restored in accordance with previously
announced expectations, with minimal production loss, and has now
exceeded pre-fire levels. The cost to replace the damaged equipment
is expected to be less than $2 million.
Laredo expects to complete 16 gross horizontal wells (16 net) in
the third quarter of 2018 with an average lateral length of
approximately 11,400 feet. Third-quarter 2018 production is
expected to be positively impacted by the 14 wells completed at the
end of the second quarter. Eight of the completions during the
third quarter of 2018 are expected to be at the end of the quarter
and thus have limited impact on production for the third
quarter.
The Company has signed a contract for a fourth horizontal rig
and expects to begin drilling with the rig in mid-August. Laredo
anticipates maintaining four horizontal rigs and two completion
crews for the remainder of 2018.
Results from previous co-development packages in the Upper and
Middle Wolfcamp formations continue to be very positive. Both the
five-well Sugg-A 157/158 and the nine-well Lane Trust packages
continue to perform above the Company's Upper/Middle Wolfcamp type
curve. In the second quarter of 2018, the Company completed an
11-well co-development package and has two more co-development
packages, each with at least eight wells, scheduled to be completed
in the second half of 2018. These packages are expected to drive
capital-efficient production growth in 2019 as they reach peak
production.
Crude Marketing
In the second quarter of 2018, Laredo contracted firm
transportation to the Gulf Coast on the Gray Oak crude oil
pipeline, which is expected to begin transporting crude oil in the
fourth quarter of 2019. The agreement allows the Company to
transport 25,000 gross barrels of oil per day ("BOPD") in the first
year of operation and 35,000 gross BOPD in the remaining six years
of the contract. Laredo currently transports 10,000 gross BOPD to
the Gulf Coast on the Bridgetex crude oil pipeline and, when
combined with the Gray Oak volumes, a substantial portion of the
Company's gross production will be priced in the Gulf Coast when
the Gray Oak pipeline begins service.
Laredo's contract with the Medallion intra-basin pipeline
provides flow assurance to multiple long-haul pipelines that
connect to the Cushing, Houston or Corpus Christi markets. The
Company currently has contracts with Medallion that ensure firm
transportation for substantially all of Laredo's current and
expected future volumes through May 2027.
Approximately 85% of the Company's gross operated volumes are
gathered directly on pipe by Laredo Midstream Services, LLC
("LMS")-owned crude oil gathering system or on Medallion-owned
gathering, substantially eliminating the need for trucking the
Company's crude production. The small portion of crude that is
trucked is delivered into either Laredo or Medallion-owned truck
stations, shortening the average trip from tank battery to delivery
to approximately 20 miles.
Water Infrastructure
Through LMS, the Company has built approximately 110 miles of
water gathering and distribution pipelines, recycling facilities
capable of processing 54,000 barrels of water per day and water
storage capacity of 22.5 million barrels of water. In the second
quarter of 2018, Laredo gathered 81% of produced water by pipe and
recycled 35% of produced water. In total, LMS' water assets
produced savings net to the Company of approximately $5.4 million
in the second quarter of 2018.
2018 Capital Program
During the second quarter of 2018, Laredo invested approximately
$169 million in drilling and completions activities. Other budgeted
expenditures incurred during the quarter included approximately $2
million in bolt-on land acquisitions, lease extensions and data,
approximately $8 million in infrastructure, including LMS
investments, and approximately $7 million in other capitalized
costs. Additionally, the Company completed property acquisitions
for approximately $16 million that were not previously
budgeted.
Through the first half of 2018, the Company has completed 40
gross (39.9 net) horizontal wells with an average lateral length of
approximately 10,200 feet, or more than 60% of the total lateral
feet originally expected to be completed during 2018. Operational
efficiencies have shortened cycle times and Laredo now expects to
complete approximately 70 net horizontal wells with an average
lateral length of approximately 10,400 feet during 2018, an
increase from original expectations of 60 - 65 net wells.
Commensurate with the increase in operational efficiencies and
expected completions, the Company is increasing the drilling and
completion portion of its capital budget to $545 million, an
increase of $45 million from the previously announced level. Other
capital expenditures are expected to remain unchanged at $85
million, bringing total annual budgeted capital expenditures,
excluding non-budgeted acquisitions, to $630 million.
Liquidity
At June 30, 2018, the Company had cash and cash equivalents of
approximately $37 million and undrawn capacity under the senior
secured credit facility of $1.09 billion, resulting in total
liquidity of approximately $1.13 billion.
At July 31, 2018, the Company had cash and cash equivalents of
approximately $34 million and available capacity under the senior
secured credit facility of $1.065 billion, resulting in total
available liquidity of approximately $1.1 billion.
Commodity Derivatives
Laredo maintains a disciplined hedging program to reduce the
variability in its anticipated cash flow due to fluctuations in
commodity prices. The Company utilizes a combination of puts, swaps
and collars, entering into contracts solely with banks that are
part of its senior secured credit facility. Laredo currently has
hedges in place for approximately 90% of anticipated oil production
in the second half of 2018 and has oil hedges through 2021. Laredo
has also entered into NGL and natural gas hedges through 2018 and
basis hedges through 2020. Details of the Company's hedge positions
are included in the current Corporate Presentation available on the
Company's website at www.laredopetro.com.
Guidance
The Company is increasing its anticipated full-year 2018 total
production growth guidance to greater than 15% and reiterating
previously issued oil production growth guidance of greater than
10% as compared to 2017. The table below reflects the Company's
guidance for the third quarter of 2018.
|
3Q-2018E |
Total
production (MBOE/d) |
71.0 |
Oil
production (MBO/d) |
29.1 |
|
|
Price
Realizations (pre-hedge): |
|
Crude oil (% of WTI) |
86% |
Natural gas liquids (% of WTI) |
33% |
Natural gas (% of Henry Hub) |
47% |
|
|
Operating
Costs & Expenses: |
|
Lease operating expenses ($/BOE) |
$3.65 |
Midstream expenses ($/BOE) |
$0.15 |
Transportation and marketing expenses ($/BOE) |
$0.80 |
Production and ad valorem taxes (% of oil, NGL and natural
gas revenue) |
6.25% |
General and administrative expenses: |
|
Cash ($/BOE) |
$2.60 |
Non-cash stock-based compensation ($/BOE) |
$1.55 |
Depletion, depreciation and amortization ($/BOE) |
$8.30 |
Conference Call Details
On Thursday, August 2, 2018, at 7:30 a.m. CT, Laredo will host a
conference call to discuss its second-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 3368476,
approximately 10 minutes prior to the scheduled conference time.
International participants should dial 253.336.8309, also using
conference code 3368476. A telephonic replay will be available
approximately two hours after the call on August 2, 2018 through
Thursday, August 9, 2018. Participants may access this replay by
dialing 855.859.2056, using conference code 3368476.
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 and supply costs, tariffs on steel, pipeline
transportation constraints in the Permian Basin, 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") including, but not
limited to, its Quarterly Report on Form 10-Q for the quarter ended
June 30, 2018, to be filed with the 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 June
30, |
|
Six months ended June
30, |
(in thousands, except per share
data) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
(unaudited) |
|
(unaudited) |
Revenues: |
|
|
|
|
|
|
|
|
Oil, NGL and natural gas sales |
|
$ |
208,561 |
|
|
$ |
141,837 |
|
|
$ |
405,995 |
|
|
$ |
280,573 |
|
Midstream service revenues |
|
1,976 |
|
|
2,703 |
|
|
4,335 |
|
|
5,702 |
|
Sales of purchased oil |
|
140,509 |
|
|
42,461 |
|
|
200,412 |
|
|
89,732 |
|
Total revenues |
|
351,046 |
|
|
187,001 |
|
|
610,742 |
|
|
376,007 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Lease operating expenses |
|
22,642 |
|
|
20,104 |
|
|
44,593 |
|
|
37,096 |
|
Production and ad valorem taxes |
|
12,405 |
|
|
8,472 |
|
|
24,217 |
|
|
17,253 |
|
Transportation and marketing expenses |
|
1,534 |
|
|
— |
|
|
1,534 |
|
|
— |
|
Midstream service expenses |
|
403 |
|
|
896 |
|
|
1,096 |
|
|
1,812 |
|
Costs of purchased oil |
|
140,578 |
|
|
44,020 |
|
|
201,242 |
|
|
94,276 |
|
General and administrative |
|
26,834 |
|
|
22,008 |
|
|
51,559 |
|
|
47,605 |
|
Depletion, depreciation and amortization |
|
50,762 |
|
|
38,003 |
|
|
96,315 |
|
|
72,115 |
|
Other operating expenses |
|
1,121 |
|
|
1,437 |
|
|
2,227 |
|
|
2,463 |
|
Total costs and expenses |
|
256,279 |
|
|
134,940 |
|
|
422,783 |
|
|
272,620 |
|
Operating
income |
|
94,767 |
|
|
52,061 |
|
|
187,959 |
|
|
103,387 |
|
Non-operating income (expense): |
|
|
|
|
|
|
|
|
Gain (loss) on derivatives, net |
|
(45,976 |
) |
|
28,897 |
|
|
(36,966 |
) |
|
65,568 |
|
Income from equity method investee(1) |
|
— |
|
|
2,471 |
|
|
— |
|
|
5,539 |
|
Interest expense |
|
(14,424 |
) |
|
(23,173 |
) |
|
(27,942 |
) |
|
(45,893 |
) |
Other, net |
|
(915 |
) |
|
854 |
|
|
(3,079 |
) |
|
785 |
|
Non-operating income (expense), net |
|
(61,315 |
) |
|
9,049 |
|
|
(67,987 |
) |
|
25,999 |
|
Income before income taxes |
|
33,452 |
|
|
61,110 |
|
|
119,972 |
|
|
129,386 |
|
Income
tax: |
|
|
|
|
|
|
|
|
Deferred |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Total income tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Net
income |
|
$ |
33,452 |
|
|
$ |
61,110 |
|
|
$ |
119,972 |
|
|
$ |
129,386 |
|
Net income
per common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.14 |
|
|
$ |
0.26 |
|
|
$ |
0.51 |
|
|
$ |
0.54 |
|
Diluted |
|
$ |
0.14 |
|
|
$ |
0.25 |
|
|
$ |
0.51 |
|
|
$ |
0.53 |
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
230,933 |
|
|
239,231 |
|
|
234,561 |
|
|
238,870 |
|
Diluted |
|
231,706 |
|
|
244,417 |
|
|
235,501 |
|
|
244,385 |
|
_______________________________________________________________________________
(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 statements
of cash flows |
|
|
|
Three months ended June
30, |
|
Six months ended June
30, |
(in thousands) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
(unaudited) |
|
(unaudited) |
Cash flows
from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
33,452 |
|
|
$ |
61,110 |
|
|
$ |
119,972 |
|
|
$ |
129,386 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depletion, depreciation and amortization |
|
50,762 |
|
|
38,003 |
|
|
96,315 |
|
|
72,115 |
|
Non-cash stock-based compensation, net |
|
10,676 |
|
|
8,687 |
|
|
20,015 |
|
|
17,911 |
|
Mark-to-market on derivatives: |
|
|
|
|
|
|
|
|
(Gain) loss on derivatives, net |
|
45,976 |
|
|
(28,897 |
) |
|
36,966 |
|
|
(65,568 |
) |
Settlements received (paid) for matured derivatives, net |
|
181 |
|
|
13,705 |
|
|
(2,055 |
) |
|
21,156 |
|
Settlements received for early terminations of derivatives,
net |
|
— |
|
|
4,234 |
|
|
— |
|
|
4,234 |
|
Premiums paid for derivatives |
|
(5,451 |
) |
|
(9,987 |
) |
|
(9,475 |
) |
|
(12,094 |
) |
Other, net(1) |
|
3,636 |
|
|
(1,158 |
) |
|
8,944 |
|
|
(1,920 |
) |
Cash flows from operations before changes in assets and
liabilities |
|
139,232 |
|
|
85,697 |
|
|
270,682 |
|
|
165,220 |
|
(Increase) decrease in current assets and liabilities,
net |
|
(24,867 |
) |
|
7,512 |
|
|
(9,372 |
) |
|
(8,183 |
) |
Decrease (increase) in other noncurrent assets and
liabilities, net |
|
1,765 |
|
|
(92 |
) |
|
1,291 |
|
|
(136 |
) |
Net cash provided by operating activities |
|
116,130 |
|
|
93,117 |
|
|
262,601 |
|
|
156,901 |
|
Cash flows
from investing activities: |
|
|
|
|
|
|
|
|
Acquisitions of oil and natural gas properties |
|
(16,340 |
) |
|
— |
|
|
(16,340 |
) |
|
— |
|
Capital expenditures: |
|
|
|
|
|
|
|
|
Oil and natural gas properties |
|
(146,509 |
) |
|
(121,677 |
) |
|
(341,534 |
) |
|
(232,219 |
) |
Midstream service assets |
|
(1,843 |
) |
|
(4,386 |
) |
|
(5,205 |
) |
|
(6,117 |
) |
Other fixed assets |
|
(1,002 |
) |
|
(1,480 |
) |
|
(4,965 |
) |
|
(2,683 |
) |
Proceeds from disposition of equity method investee, net of
selling costs(1) |
|
— |
|
|
— |
|
|
1,655 |
|
|
— |
|
Proceeds from dispositions of capital assets, net of selling
costs |
|
11,296 |
|
|
3,926 |
|
|
12,317 |
|
|
63,441 |
|
Net cash used in investing activities |
|
(154,398 |
) |
|
(123,617 |
) |
|
(354,072 |
) |
|
(177,578 |
) |
Cash flows
from financing activities: |
|
|
|
|
|
|
|
|
Borrowings on Senior Secured Credit Facility |
|
55,000 |
|
|
40,000 |
|
|
110,000 |
|
|
90,000 |
|
Payments on Senior Secured Credit Facility |
|
— |
|
|
— |
|
|
— |
|
|
(55,000 |
) |
Share repurchases |
|
(33,504 |
) |
|
— |
|
|
(87,218 |
) |
|
— |
|
Other, net |
|
(2,513 |
) |
|
(4,828 |
) |
|
(6,866 |
) |
|
(11,971 |
) |
Net cash provided by financing activities |
|
18,983 |
|
|
35,172 |
|
|
15,916 |
|
|
23,029 |
|
Net
(decrease) increase in cash and cash equivalents |
|
(19,285 |
) |
|
4,672 |
|
|
(75,555 |
) |
|
2,352 |
|
Cash and
cash equivalents, beginning of period |
|
55,889 |
|
|
30,352 |
|
|
112,159 |
|
|
32,672 |
|
Cash and
cash equivalents, end of period |
|
$ |
36,604 |
|
|
$ |
35,024 |
|
|
$ |
36,604 |
|
|
$ |
35,024 |
|
_______________________________________________________________________________
(1) |
See footnote 1 to the
condensed consolidated statements of operations. |
|
Laredo Petroleum,
Inc. |
Selected operating
data |
|
|
|
Three months ended June
30, |
|
Six months ended June
30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
(unaudited) |
|
(unaudited) |
Sales
volumes: |
|
|
|
|
|
|
|
|
Oil (MBbl) |
|
2,514 |
|
|
2,482 |
|
|
4,953 |
|
|
4,602 |
|
NGL (MBbl) |
|
1,778 |
|
|
1,433 |
|
|
3,341 |
|
|
2,696 |
|
Natural gas (MMcf) |
|
10,947 |
|
|
8,524 |
|
|
21,120 |
|
|
16,524 |
|
Oil equivalents (MBOE)(1)(2) |
|
6,116 |
|
|
5,336 |
|
|
11,814 |
|
|
10,052 |
|
Average daily sales volumes (BOE/D)(2) |
|
67,206 |
|
|
58,632 |
|
|
65,270 |
|
|
55,536 |
|
% Oil(2) |
|
41 |
% |
|
47 |
% |
|
42 |
% |
|
46 |
% |
Average
sales Realized Prices(2): |
|
|
|
|
|
|
|
|
Oil, without derivatives ($/Bbl)(3) |
|
$ |
63.26 |
|
|
$ |
42.00 |
|
|
$ |
62.58 |
|
|
$ |
44.26 |
|
NGL, without derivatives ($/Bbl)(3) |
|
$ |
20.71 |
|
|
$ |
13.82 |
|
|
$ |
19.51 |
|
|
$ |
15.07 |
|
Natural gas, without derivatives ($/Mcf)(3) |
|
$ |
1.16 |
|
|
$ |
2.09 |
|
|
$ |
1.46 |
|
|
$ |
2.19 |
|
Average price, without derivatives ($/BOE)(3) |
|
$ |
34.10 |
|
|
$ |
26.58 |
|
|
$ |
34.37 |
|
|
$ |
27.91 |
|
Oil, with derivatives ($/Bbl)(4) |
|
$ |
58.71 |
|
|
$ |
46.95 |
|
|
$ |
58.62 |
|
|
$ |
48.22 |
|
NGL, with derivatives ($/Bbl)(4) |
|
$ |
20.07 |
|
|
$ |
13.61 |
|
|
$ |
19.15 |
|
|
$ |
14.75 |
|
Natural gas, with derivatives ($/Mcf)(4) |
|
$ |
1.72 |
|
|
$ |
2.12 |
|
|
$ |
1.78 |
|
|
$ |
2.21 |
|
Average price, with derivatives ($/BOE)(4) |
|
$ |
33.04 |
|
|
$ |
28.88 |
|
|
$ |
33.18 |
|
|
$ |
29.66 |
|
Average
costs per BOE sold(2): |
|
|
|
|
|
|
|
|
Lease operating expenses |
|
$ |
3.70 |
|
|
$ |
3.77 |
|
|
$ |
3.78 |
|
|
$ |
3.69 |
|
Production and ad valorem taxes |
|
2.03 |
|
|
1.59 |
|
|
2.05 |
|
|
1.72 |
|
Transportation and marketing expenses |
|
0.25 |
|
|
— |
|
|
0.13 |
|
|
— |
|
Midstream service expenses |
|
0.07 |
|
|
0.17 |
|
|
0.09 |
|
|
0.18 |
|
General and administrative: |
|
|
|
|
|
|
|
|
Cash |
|
2.64 |
|
|
2.50 |
|
|
2.67 |
|
|
2.95 |
|
Non-cash stock-based compensation, net |
|
1.75 |
|
|
1.63 |
|
|
1.69 |
|
|
1.78 |
|
Depletion, depreciation and amortization |
|
8.30 |
|
|
7.12 |
|
|
8.15 |
|
|
7.17 |
|
Total costs and expenses |
|
$ |
18.74 |
|
|
$ |
16.78 |
|
|
$ |
18.56 |
|
|
$ |
17.49 |
|
Cash
margins per BOE sold(2) |
|
|
|
|
|
|
|
|
Realized |
|
$ |
25.41 |
|
|
$ |
18.56 |
|
|
$ |
25.65 |
|
|
$ |
19.37 |
|
Hedged |
|
$ |
24.35 |
|
|
$ |
20.86 |
|
|
$ |
24.46 |
|
|
$ |
21.12 |
|
_______________________________________________________________________________
(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 received when control
passes to the purchaser/customer adjusted for quality,
transportation fees, geographical differentials, marketing bonuses
or deductions and other factors affecting the price received at the
wellhead. See "Transportation and marketing expenses" under
"Average costs per BOE sold" for costs incurred prior to control
passing to the final customer per BOE. |
(4) |
Price reflects the
after-effects of our derivative transactions on our average
Realized 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, with asset retirement obligations included in evaluated
property acquisition costs and development costs, for the periods
presented: |
|
|
|
Three months ended June
30, |
|
Six months ended June
30, |
(in thousands) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
(unaudited) |
|
(unaudited) |
Property
acquisition costs: |
|
|
|
|
|
|
|
|
Evaluated |
|
$ |
13,847 |
|
|
$ |
— |
|
|
$ |
13,847 |
|
|
$ |
— |
|
Unevaluated |
|
2,790 |
|
|
— |
|
|
2,790 |
|
|
— |
|
Exploration
costs |
|
5,108 |
|
|
5,658 |
|
|
11,245 |
|
|
21,201 |
|
Development
costs |
|
178,796 |
|
|
125,738 |
|
|
327,834 |
|
|
236,896 |
|
Total costs incurred |
|
$ |
200,541 |
|
|
$ |
131,396 |
|
|
$ |
355,716 |
|
|
$ |
258,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June
30, |
|
Six months ended June
30, |
(in thousands, except per share
data) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
(unaudited) |
|
(unaudited) |
Income
before income taxes |
|
$ |
33,452 |
|
|
$ |
61,110 |
|
|
$ |
119,972 |
|
|
$ |
129,386 |
|
Plus: |
|
|
|
|
|
|
|
|
Mark-to-market on derivatives: |
|
|
|
|
|
|
|
|
(Gain) loss on derivatives, net |
|
45,976 |
|
|
(28,897 |
) |
|
36,966 |
|
|
(65,568 |
) |
Settlements received (paid) for matured derivatives, net |
|
181 |
|
|
13,705 |
|
|
(2,055 |
) |
|
21,156 |
|
Settlements received for early terminations of derivatives,
net |
|
— |
|
|
4,234 |
|
|
— |
|
|
4,234 |
|
Premiums paid for derivatives |
|
(5,451 |
) |
|
(9,987 |
) |
|
(9,475 |
) |
|
(12,094 |
) |
(Gain) loss on disposal of assets, net |
|
1,358 |
|
|
(805 |
) |
|
3,975 |
|
|
(591 |
) |
Adjusted income before adjusted income tax expense |
|
75,516 |
|
|
39,360 |
|
|
149,383 |
|
|
76,523 |
|
Adjusted income tax expense(1) |
|
(16,614 |
) |
|
(14,170 |
) |
|
(32,864 |
) |
|
(27,548 |
) |
Adjusted Net Income |
|
$ |
58,902 |
|
|
$ |
25,190 |
|
|
$ |
116,519 |
|
|
$ |
48,975 |
|
Net income
per common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.14 |
|
|
$ |
0.26 |
|
|
$ |
0.51 |
|
|
$ |
0.54 |
|
Diluted |
|
$ |
0.14 |
|
|
$ |
0.25 |
|
|
$ |
0.51 |
|
|
$ |
0.53 |
|
Adjusted
Net Income per common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.26 |
|
|
$ |
0.11 |
|
|
$ |
0.50 |
|
|
$ |
0.21 |
|
Diluted |
|
$ |
0.25 |
|
|
$ |
0.10 |
|
|
$ |
0.49 |
|
|
$ |
0.20 |
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
230,933 |
|
|
239,231 |
|
|
234,561 |
|
|
238,870 |
|
Diluted |
|
231,706 |
|
|
244,417 |
|
|
235,501 |
|
|
244,385 |
|
_______________________________________________________________________________
(1) |
Adjusted income tax
expense is calculated by applying a statutory tax rate of 22% for
the three and six months ended June 30, 2018, in response to recent
changes in the tax code, and 36% for the three and six months ended
June 30, 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 June
30, |
|
Six months ended June
30, |
(in thousands) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
(unaudited) |
|
(unaudited) |
Net
income |
|
$ |
33,452 |
|
|
$ |
61,110 |
|
|
$ |
119,972 |
|
|
$ |
129,386 |
|
Plus: |
|
|
|
|
|
|
|
|
Depletion, depreciation and amortization |
|
50,762 |
|
|
38,003 |
|
|
96,315 |
|
|
72,115 |
|
Non-cash stock-based compensation, net |
|
10,676 |
|
|
8,687 |
|
|
20,015 |
|
|
17,911 |
|
Accretion expense |
|
1,121 |
|
|
943 |
|
|
2,227 |
|
|
1,871 |
|
Mark-to-market on derivatives: |
|
|
|
|
|
|
|
|
(Gain) loss on derivatives, net |
|
45,976 |
|
|
(28,897 |
) |
|
36,966 |
|
|
(65,568 |
) |
Settlements (paid) received for matured derivatives, net |
|
181 |
|
|
13,705 |
|
|
(2,055 |
) |
|
21,156 |
|
Settlements received for early terminations of derivatives,
net |
|
— |
|
|
4,234 |
|
|
— |
|
|
4,234 |
|
Premiums paid for derivatives |
|
(5,451 |
) |
|
(9,987 |
) |
|
(9,475 |
) |
|
(12,094 |
) |
Interest expense |
|
14,424 |
|
|
23,173 |
|
|
27,942 |
|
|
45,893 |
|
(Gain) loss on disposal of assets, net |
|
1,358 |
|
|
(805 |
) |
|
3,975 |
|
|
(591 |
) |
Income from equity method investee(1) |
|
— |
|
|
(2,471 |
) |
|
— |
|
|
(5,539 |
) |
Proportionate Adjusted EBITDA of equity method
investee(1)(2) |
|
— |
|
|
6,601 |
|
|
— |
|
|
12,966 |
|
Adjusted EBITDA |
|
$ |
152,499 |
|
|
$ |
114,296 |
|
|
$ |
295,882 |
|
|
$ |
221,740 |
|
_______________________________________________________________________________
(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 June
30, |
|
Six months ended June
30, |
(in thousands) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
(unaudited) |
|
(unaudited) |
Income from
equity method investee |
|
$ |
— |
|
|
$ |
2,471 |
|
|
$ |
— |
|
|
$ |
5,539 |
|
Adjusted
for proportionate share of depreciation and amortization |
|
— |
|
|
4,130 |
|
|
— |
|
|
7,427 |
|
Proportionate Adjusted EBITDA of equity method investee |
|
$ |
— |
|
|
$ |
6,601 |
|
|
$ |
— |
|
|
$ |
12,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contacts:Ron Hagood: (918) 858-5504 -
RHagood@laredopetro.com
18-9
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