Laredo Petroleum, Inc. (NYSE: LPI) ("Laredo" or "the Company")
today announced its first-quarter 2020 results. For the first
quarter of 2020, the Company reported net income attributable to
common stockholders of $235.1 million, or $1.01 per diluted share.
Adjusted Net Income, a non-GAAP financial measure, for the first
quarter of 2020 was $21.1 million, or $0.09 per adjusted diluted
share. Adjusted EBITDA, a non-GAAP financial measure, for the first
quarter of 2020 was $116.8 million.
Please see supplemental financial information at the end of this
news release for reconciliations of non-GAAP financial measures,
including a calculation of Adjusted EBITDA, Adjusted Net Income and
Free Cash Flow.
First-Quarter 2020 Highlights
- Issued $1 billion of new debt to refinance $800 million of
outstanding notes, extending maturities to 2025 and 2028, repay
$100 million of the senior secured credit facility and for general
corporate purposes
- Received net cash of $47.2 million on settlements of commodity
derivatives, resulting in an average hedged sales price of $23.21
per barrel of oil equivalent ("BOE"), a 34% increase versus an
average unhedged sales price of $17.26 per BOE
- Produced an average of 29,178 barrels of oil per day ("BOPD"),
an increase of 7% from fourth-quarter 2019
- Produced an average of 86,532 BOE per day, an increase of 3%
from fourth-quarter 2019
- Invested capital of $155 million during the first quarter of
2020, 11% below budget
- Reduced completed well costs 7%, to $630 per lateral foot
- Reduced unit lease operating expenses ("LOE") to $2.80 per BOE,
a 1% decrease from fourth-quarter 2019
"The challenges presented to the oil and gas industry by the
demand destruction and price volatility related to COVID-19 and
OPEC+ are unprecedented," stated Jason Pigott, President and Chief
Executive Officer. "Protecting the health and safety of our
employees as we operate is paramount. Our workforce has
demonstrated amazing flexibility, adapting to new safety standards
necessitated by COVID-19, and has continued to perform at the high
standards we have set for ourselves."
"Our first-quarter results demonstrate the value of our
commitment to operational excellence," continued Mr. Pigott. "For
the fifth consecutive quarter, we exceeded both our oil and total
production guidance, and we continued to reduce costs as we again
improved both our completed well costs and operational expenses. As
we operate in the current depressed commodity price environment, we
are maintaining our financial discipline and balance sheet focus.
We have reduced our planned capital expenditures by more than 40%
versus our original budget and continue to focus on Free Cash Flow
generation. We have deployed a portion of anticipated Free Cash
Flow to our derivatives program to protect cash flow in 2021 and we
may, from time to time, use a portion of our Free Cash Flow to
reduce debt, either by paying down our senior secured credit
facility or repurchasing our senior notes in open market or
privately negotiated transactions, to enhance liquidity and reduce
interest costs."
Operations Summary
During first-quarter 2020, the Company completed 28 gross (27.7
net) horizontal wells with an average completed lateral length of
8,300 feet. Drilling and completions costs incurred of $140 million
was below budget as Laredo continued to drive down its well costs,
already among the lowest in the Midland Basin. Through a
combination of operational efficiencies and cost reductions, well
costs for the first quarter of 2020 averaged $630 per lateral foot,
a 7% reduction versus expectations.
The Company produced 86,532 BOE per day in the first quarter of
2020, including oil production of 29,178 BOPD, exceeding the
high-end of guidance by 6% and 7%, respectively. The positive
results versus guidance were a combination of wells being turned to
sales sooner than anticipated, as completed feet per day per crew
continued to increase, and well packages exceeding forecasted
production levels.
Laredo's efforts to optimize its established acreage position
continued to drive production and returns improvements. To date,
wider-spaced packages completed since Laredo modified its
development spacing in late 2018 have outperformed the Company's
Upper/Middle Wolfcamp oil type curve by 12%. Additionally, two
Cline wells completed in the first quarter of 2020 have performed
in-line with Laredo's high-graded Cline type curve while their
costs were 8% below expectations.
Unit LOE for first-quarter 2020 decreased to $2.80 per BOE, a
reduction of 16% from the first quarter of 2019. Unit LOE for the
remainder of 2020 is expected to remain below $3.00 per BOE as the
majority of the Company's production in 2020 continues to benefit
from Laredo's in-field infrastructure.
During the first quarter of 2020, the Company operated four
drilling rigs and averaged 1.7 completions crews. Laredo has
subsequently released two of the drilling rigs and the one
remaining completions crew and is currently operating two drilling
rigs, both in Howard County, and zero completions crews. The
Company has completed five wells (4.6 net) in the second quarter of
2020, all in the Company's recently acquired western Glasscock
County acreage, and currently does not expect to resume completions
activity in 2020.
First-Quarter 2020 Costs Incurred
During the first quarter of 2020, excluding non-budgeted
acquisitions, total costs incurred were $155 million, comprised of
$140 million in drilling and completions activities, $6 million in
land, exploration and data related costs, $3 million in
infrastructure, including Laredo Midstream Services investments,
and $6 million in other capitalized costs. Additionally, a
non-budgeted acquisition of $22.5 million was closed during the
quarter.
Credit Facility Redetermination
On April 30, 2020, in association with the semi-annual
redetermination of the Company's senior secured credit facility,
both the borrowing base and aggregate elected commitment under the
facility were reduced to $725 million from $950 million. The net
debt/EBITDAX ratio covenant of 4.25 times was left unchanged.
Increased Oil Hedges
The Company maintains an active, multi-year commodity
derivatives strategy to manage commodity price risk and support
cash flow. Laredo utilizes only puts, swaps and collars and does
not enter into three-way collars, which can limit protection in a
rapidly declining price environment.
For the remainder of 2020, Laredo has hedged 100% of expected
oil production, with 5.4 million barrels swapped at a
weighted-average price of $59.50 WTI and 1.8 million barrels
swapped at a weighted-average price of $63.07 Brent. For 2021, the
Company has hedged 5.6 million barrels of oil at a weighted-average
floor price of $53.13 Brent. Please see the table in the appendix
of Laredo's First-Quarter 2020 Earnings Presentation posted to the
Company's website for the full details of the Company's commodity
derivatives.
2020 Expected Capital Expenditures Further Reduced To
$265 Million
As previously announced on March 23, 2020, to prioritize Free
Cash Flow, balance sheet strength and returns in a volatile
commodity price environment, the Company reduced expected capital
expenditures for 2020 to $290 million from $450 million. The
Company is further reducing expected capital expenditures for 2020
to $265 million, driven by additional refinements, including
savings for drilling and completions services and postponements of
capital projects. The updated expectation includes $220 million for
drilling and completions activities and $45 million for
infrastructure, land and other capitalized costs.
Laredo is reiterating previously-announced guidance for total
production in 2020 to remain approximately flat versus 2019 and for
oil production to decline approximately 8%. Guidance for total
production and oil production in the fourth quarter of 2020 is
72,500 - 74,500 BOE per day and 20,500 - 21,500 BOPD,
respectively.
At current commodity prices, the Company expected net cash
received from commodity derivatives for full-year 2020 to be
approximately $325 million. To strategically manage future
commodity price risk and cash flow generation, Laredo has
redeployed approximately $50 million of expected Free Cash Flow
into oil hedges for full-year 2021, resulting in an updated
full-year 2020 expectation for net cash received from commodity
derivatives to be approximately $275 million. Forecasted Free Cash
Flow for full-year 2020, excluding non-budgeted acquisitions, is
now expected to be approximately $45 million, assuming commodity
prices of approximately $27 WTI and $2.40 Henry Hub for the balance
of 2020.
All Company expectations are subject to current assumptions and
subject to risks as noted below in "Forward-Looking
Statements".
2021 OutlookRemaining anticipated drilling
activity in 2020 positions Laredo for capital efficient development
in 2021, with the Company expecting to enter the year with
approximately 40 drilled but uncompleted wells ("DUCs") on its
tier-one Howard County acreage. Laredo currently estimates that
completing approximately 30 Howard County DUCs in 2021 would keep
average daily production for full-year 2021 flat with the expected
fourth-quarter 2020 exit rate.
Liquidity
At March 31, 2020, the Company had outstanding borrowings of
$275 million on its $950 million senior secured credit facility,
resulting in available capacity, after the reduction for
outstanding letters of credit, of $660 million. Including cash and
cash equivalents of $63 million, total liquidity was $723
million.
At May 6, 2020, the Company had outstanding borrowings of $275
million on its redetermined senior secured credit facility of $725
million, resulting in available capacity, after reduction for
outstanding letters of credit, of $406 million. Including cash and
cash equivalents of $5 million, total liquidity was $411
million.
Second-Quarter and Full-Year 2020 Guidance
The table below reflects the Company's quarterly and full-year
guidance for total and oil production for 2020.
|
|
2Q-20E |
|
3Q-20E |
|
4Q-20E |
|
FY-20E |
Total production (MBOE per
day) |
|
84.8 - 85.8 |
|
78.8 - 80.8 |
|
72.5 - 74.5 |
|
80.6 - 81.9 |
Oil production (MBOPD) |
|
30.0 - 30.5 |
|
24.2 - 25.2 |
|
20.5 - 21.5 |
|
26.0 - 26.6 |
The table below reflects the Company's guidance for selected
revenue and expense items for the second quarter of 2020.
|
|
2Q-20E |
Average sales price
realizations (excluding derivatives): |
|
|
Oil (% of WTI) |
|
82% |
|
NGL (% of WTI) |
|
4% |
|
Natural gas (% of Henry Hub) |
|
29% |
|
|
|
|
Other ($ MM): |
|
|
Net income (expense) of
purchased oil |
|
($1.5) |
|
Net midstream service
income (expense) |
|
$1.5 |
|
|
|
|
Selected average costs &
expenses: |
|
|
Lease operating expenses ($/BOE) |
|
$2.85 |
|
Production and ad valorem taxes (% of oil, NGL and natural gas
sales revenues) |
|
7.00% |
|
Transportation and marketing expenses ($/BOE) |
|
$1.70 |
|
General and administrative expenses (excluding long-term incentive
plan ("LTIP"), $/BOE) |
|
$1.40 |
|
General and administrative expenses (LTIP cash and non-cash,
$/BOE) |
|
$0.45 |
|
Depletion, depreciation and amortization ($/BOE) |
|
$8.00 |
|
Conference Call Details
On Thursday, May 7, 2020, at 7:30 a.m. CT, Laredo will host a
conference call to discuss its first-quarter 2020 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 (international dial-in
253.336.8309), using conference code 5191340, 10 minutes prior to
the scheduled conference time. A telephonic replay will be
available two hours after the call on May 7, 2020 through Thursday,
May 14, 2020. Participants may access this replay by dialing
855.859.2056, using conference code 5191340.
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, 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, indicates, enables, transforms, estimates or anticipates
(and other similar expressions) will, should or may occur in the
future are forward-looking statements. This press release and any
accompanying disclosures may include or reference certain
forward-looking, non-GAAP financial measures, such as Free Cash
Flow, and certain related estimates regarding future performance,
results and financial position. 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, oil production
quotas or other actions that might be imposed by the Organization
of Petroleum Exporting Countries and other producing countries
("OPEC+"), the outbreak of disease, such as the coronavirus
("COVID-19") pandemic, and any related government policies and
actions, changes in domestic and global production, supply and
demand for commodities, including as a result of the COVID-19
pandemic and actions by OPEC+, long-term performance of wells,
drilling and operating risks, the increase in service and supply
costs, tariffs on steel, pipeline transportation and storage
constraints in the Permian Basin, production curtailment, hedging
activities, possible impacts of litigation and regulations, the
impact of repurchases, if any, of securities from time to time and
other factors, including those and other risks described in its
Annual Report on Form 10-K for the year ended December 31, 2019,
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. Any
forward-looking statement speaks only as of the date on which such
statement is made and the Company undertakes no obligation to
correct or update any forward-looking statement, whether as a
result of new information, future events or otherwise, except as
required by applicable law.
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," "type curve" 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 discovered through
exploratory drilling or recovered with additional drilling or
recovery techniques. "Resource potential" is used by the Company to
refer to the estimated quantities of hydrocarbons that may be added
to proved reserves, largely from a specified resource play
potentially supporting numerous drilling locations. 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, natural gas liquids and natural gas prices, well spacing,
drilling and production costs, availability and cost 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. EURs from 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. "Type curve" refers to a
production profile of a well, or a particular category of wells,
for a specific play and/or area. In addition, the Company’s
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. The
"standardized measure" of discounted future new cash flows is
calculated in accordance with SEC regulations and a discount rate
of 10%. The actual results may vary considerably and should not be
considered to represent the fair market value of the Company’s
proved reserves.
All amounts, dollars and percentages presented in this press
release are rounded and therefore approximate.
Laredo Petroleum,
Inc.Selected operating data
|
|
Three months ended March 31, |
|
|
2020 |
|
2019 |
|
|
(unaudited) |
Sales volumes: |
|
|
|
|
Oil (MBbl) |
|
2,655 |
|
|
2,534 |
|
NGL (MBbl) |
|
2,467 |
|
|
2,099 |
|
Natural gas (MMcf) |
|
16,512 |
|
|
12,849 |
|
Oil equivalents (MBOE)(1)(2) |
|
7,874 |
|
|
6,775 |
|
Average daily oil equivalent sales volumes (BOE/D)(2) |
|
86,532 |
|
|
75,276 |
|
Average daily oil sales volumes (BOPD)(2) |
|
29,178 |
|
|
28,157 |
|
Average sales prices(2): |
|
|
|
|
Oil ($/Bbl)(3) |
|
$ |
45.19 |
|
|
$ |
50.97 |
|
NGL ($/Bbl)(3) |
|
$ |
4.68 |
|
|
$ |
15.36 |
|
Natural gas ($/Mcf)(3) |
|
$ |
0.26 |
|
|
$ |
0.93 |
|
Average sales price ($/BOE)(3) |
|
$ |
17.26 |
|
|
$ |
25.59 |
|
Oil, with commodity derivatives ($/Bbl)(4) |
|
$ |
56.59 |
|
|
$ |
47.66 |
|
NGL, with commodity derivatives ($/Bbl)(4) |
|
$ |
6.85 |
|
|
$ |
15.33 |
|
Natural gas, with commodity derivatives ($/Mcf)(4) |
|
$ |
0.94 |
|
|
$ |
1.11 |
|
Average sales price, with commodity derivatives ($/BOE)(4) |
|
$ |
23.21 |
|
|
$ |
24.68 |
|
Selected average costs and
expenses per BOE sold(2): |
|
|
|
|
Lease operating expenses |
|
$ |
2.80 |
|
|
$ |
3.34 |
|
Production and ad valorem taxes |
|
1.17 |
|
|
1.07 |
|
Transportation and marketing expenses |
|
1.72 |
|
|
0.70 |
|
Midstream service expenses |
|
0.15 |
|
|
0.24 |
|
General and administrative (excluding LTIP) |
|
1.33 |
|
|
2.12 |
|
Total selected operating expenses |
|
$ |
7.17 |
|
|
$ |
7.47 |
|
General and administrative (LTIP) |
|
|
|
|
LTIP cash . |
|
$ |
0.02 |
|
|
$ |
0.03 |
|
LTIP non-cash . |
|
$ |
0.25 |
|
|
$ |
1.02 |
|
Depletion, depreciation and amortization |
|
$ |
7.78 |
|
|
$ |
9.31 |
|
_______________________________________________________________________________
- BOE is calculated using a conversion rate of six Mcf per one
Bbl.
- The numbers presented are calculated based on actual amounts
that are not rounded.
- Price reflects the average of actual sales 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
delivery point.
- Price reflects the after-effects of our commodity derivative
transactions on our average sales prices. Our calculation of such
after-effects includes settlements of matured commodity derivatives
during the respective periods in accordance with GAAP and an
adjustment to reflect premiums incurred previously or upon
settlement that are attributable to commodity derivatives that
settled during the respective periods.
Laredo Petroleum,
Inc.Condensed consolidated statements of
operations
|
|
Three months ended March 31, |
(in thousands, except per share data) |
|
2020 |
|
2019 |
|
|
(unaudited) |
Revenues: |
|
|
|
|
Oil, NGL and natural gas sales |
|
$ |
135,885 |
|
|
$ |
173,376 |
|
Midstream service revenues |
|
2,683 |
|
|
2,883 |
|
Sales of purchased oil |
|
66,424 |
|
|
32,688 |
|
Total revenues |
|
204,992 |
|
|
208,947 |
|
Costs and expenses: |
|
|
|
|
Lease operating expenses |
|
22,040 |
|
|
22,609 |
|
Production and ad valorem taxes |
|
9,244 |
|
|
7,219 |
|
Transportation and marketing expenses |
|
13,544 |
|
|
4,759 |
|
Midstream service expenses |
|
1,170 |
|
|
1,603 |
|
Costs of purchased oil |
|
79,297 |
|
|
32,691 |
|
General and administrative . |
|
12,562 |
|
|
21,519 |
|
Depletion, depreciation and amortization |
|
61,302 |
|
|
63,098 |
|
Impairment expense |
|
26,250 |
|
|
— |
|
Other operating expenses |
|
1,106 |
|
|
1,052 |
|
Total costs and expenses |
|
226,515 |
|
|
154,550 |
|
Operating income (loss) |
|
(21,523 |
) |
|
54,397 |
|
Non-operating income
(expense): |
|
|
|
|
Gain (loss) on derivatives, net |
|
297,836 |
|
|
(48,365 |
) |
Interest expense |
|
(24,970 |
) |
|
(15,547 |
) |
Loss on extinguishment of debt |
|
(13,320 |
) |
|
— |
|
Other, net |
|
(511 |
) |
|
(72 |
) |
Total non-operating income (expense), net |
|
259,035 |
|
|
(63,984 |
) |
Income (loss) before income taxes |
|
237,512 |
|
|
(9,587 |
) |
Income tax (expense)
benefit: |
|
|
|
|
Deferred |
|
(2,417 |
) |
|
96 |
|
Total income tax (expense) benefit . |
|
(2,417 |
) |
|
96 |
|
Net income (loss) |
|
$ |
235,095 |
|
|
$ |
(9,491 |
) |
Net income (loss) per common
share: |
|
|
|
|
Basic |
|
$ |
1.01 |
|
|
$ |
(0.04 |
) |
Diluted |
|
$ |
1.01 |
|
|
$ |
(0.04 |
) |
Weighted-average common shares
outstanding: |
|
|
|
|
Basic |
|
232,351 |
|
|
230,476 |
|
Diluted |
|
233,458 |
|
|
230,476 |
|
Laredo Petroleum,
Inc.Condensed consolidated statements of cash
flows
|
|
Three months ended March 31, |
(in thousands) |
|
2020 |
|
2019 |
|
|
(unaudited) |
Cash flows from operating
activities: |
|
|
|
|
Net income (loss) |
|
$ |
235,095 |
|
|
$ |
(9,491 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
Share-settled equity-based compensation, net |
|
2,376 |
|
|
7,406 |
|
Depletion, depreciation and amortization |
|
61,302 |
|
|
63,098 |
|
Impairment expense |
|
26,250 |
|
|
— |
|
Mark-to-market on derivatives: |
|
|
|
|
(Gain) loss on derivatives, net |
|
(297,836 |
) |
|
48,365 |
|
Settlements received for matured commodity derivatives, net |
|
47,723 |
|
|
102 |
|
Premiums paid for commodity derivatives |
|
(477 |
) |
|
(4,016 |
) |
Loss on extinguishment of debt |
|
13,320 |
|
|
— |
|
Other, net |
|
9,338 |
|
|
7,680 |
|
Cash flows from operating activities before changes in operating
assets and liabilities, net |
|
97,091 |
|
|
113,144 |
|
Change in current assets and liabilities, net |
|
18,708 |
|
|
(36,750 |
) |
Change in noncurrent assets and liabilities, net |
|
(6,210 |
) |
|
1,064 |
|
Net cash provided by operating activities |
|
109,589 |
|
|
77,458 |
|
Cash flows from investing
activities: |
|
|
|
|
Acquisitions of oil and natural gas properties, net |
|
(22,876 |
) |
|
— |
|
Capital expenditures: |
|
|
|
|
Oil and natural gas properties |
|
(135,376 |
) |
|
(152,729 |
) |
Midstream service assets |
|
(761 |
) |
|
(2,262 |
) |
Other fixed assets |
|
(829 |
) |
|
(505 |
) |
Proceeds from dispositions of capital assets, net of selling
costs |
|
51 |
|
|
43 |
|
Net cash used in investing activities . |
|
(159,791 |
) |
|
(155,453 |
) |
Cash flows from financing
activities: |
|
|
|
|
Borrowings on Senior Secured Credit Facility |
|
— |
|
|
80,000 |
|
Payments on Senior Secured Credit Facility |
|
(100,000 |
) |
|
— |
|
Issuance of January 2025 Notes and January 2028 Notes |
|
1,000,000 |
|
|
— |
|
Extinguishment of debt |
|
(808,855 |
) |
|
— |
|
Payments for debt issuance costs |
|
(18,383 |
) |
|
— |
|
Other, net |
|
(640 |
) |
|
(2,612 |
) |
Net cash provided by financing activities . |
|
72,122 |
|
|
77,388 |
|
Net increase (decrease) in
cash and cash equivalents |
|
21,920 |
|
|
(607 |
) |
Cash and cash equivalents,
beginning of period |
|
40,857 |
|
|
45,151 |
|
Cash and cash equivalents, end
of period |
|
$ |
62,777 |
|
|
$ |
44,544 |
|
Laredo Petroleum,
Inc.Total Costs Incurred
The following table presents the components of our costs
incurred, excluding non-budgeted acquisition costs:
|
|
Three months ended March 31, |
(in thousands) |
|
2020 |
|
2019 |
|
|
(unaudited) |
Oil and natural gas
properties |
|
$ |
152,868 |
|
|
$ |
160,222 |
|
Midstream service
assets |
|
923 |
|
|
3,373 |
|
Other fixed assets |
|
823 |
|
|
514 |
|
Total costs incurred, excluding non-budgeted acquisition costs |
|
$ |
154,614 |
|
|
$ |
164,109 |
|
Laredo Petroleum,
Inc.Supplemental reconciliations of GAAP to
non-GAAP financial measures
Non-GAAP financial measures
The non-GAAP financial measures of Free Cash Flow, 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 financial 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. Free Cash Flow, 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.
Free Cash Flow (Unaudited)
Free Cash Flow, a non-GAAP financial measure, does not represent
funds available for future discretionary use because it excludes
funds required for future debt service, capital expenditures,
acquisitions, working capital, income taxes, franchise taxes and
other commitments and obligations. However, our management believes
Free Cash Flow is useful to management and investors in evaluating
operating trends in our business that are affected by production,
commodity prices, operating costs and other related factors. There
are significant limitations to the use of Free Cash Flow as a
measure of performance, including the lack of comparability due to
the different methods of calculating Free Cash Flow reported by
different companies.
The following table presents a reconciliation of net cash
provided by operating activities (GAAP) to cash flows from
operating activities before changes in operating assets and
liabilities, net, less costs incurred, excluding non-budgeted
acquisition costs, for the calculation of Free Cash Flow
(non-GAAP):
|
|
Three months ended March 31, |
(in thousands) |
|
2020 |
|
2019 |
|
|
(unaudited) |
Net cash provided by operating
activities |
|
$ |
109,589 |
|
|
$ |
77,458 |
|
Less: |
|
|
|
|
Change in current assets and liabilities, net |
|
18,708 |
|
|
(36,750 |
) |
Change in noncurrent assets and liabilities, net |
|
(6,210 |
) |
|
1,064 |
|
Cash flows from operating
activities before changes in operating assets and liabilities,
net |
|
97,091 |
|
|
113,144 |
|
Less costs incurred, excluding non-budgeted acquisition
costs(1): |
|
|
|
|
Oil and natural gas properties |
|
152,868 |
|
|
160,222 |
|
Midstream service assets |
|
923 |
|
|
3,373 |
|
Other fixed assets |
|
823 |
|
|
514 |
|
Total costs incurred, excluding non-budgeted acquisition costs |
|
154,614 |
|
|
164,109 |
|
Free Cash Flow
(non-GAAP) |
|
$ |
(57,523 |
) |
|
$ |
(50,965 |
) |
_____________________________________________________________________________
(1) Includes capitalized share-settled
equity-based compensation of $1.0 million and $1.9 million and
asset retirement costs of $0.4 million and $0.3 million for the
three months ended March 31, 2020 and 2019, respectively.
Adjusted Net Income (Unaudited)
Adjusted Net Income is a non-GAAP financial measure we use to
evaluate performance, prior to income taxes, mark-to-market on
derivatives, premiums paid for derivatives, impairment expense,
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 (loss)
before income taxes (GAAP) to Adjusted Net Income (non-GAAP):
|
|
Three months ended March 31, |
(in thousands, except per share data) |
|
2020 |
|
2019 |
|
|
(unaudited) |
Income (loss) before income
taxes |
|
$ |
237,512 |
|
|
$ |
(9,587 |
) |
Plus: |
|
|
|
|
Mark-to-market on derivatives: |
|
|
|
|
(Gain) loss on derivatives, net |
|
(297,836 |
) |
|
48,365 |
|
Settlements received for matured commodity derivatives, net |
|
47,723 |
|
|
102 |
|
Premiums paid for commodity derivatives |
|
(477 |
) |
|
(4,016 |
) |
Impairment expense |
|
26,250 |
|
|
— |
|
Loss on extinguishment of debt |
|
13,320 |
|
|
— |
|
Loss on disposal of assets, net |
|
602 |
|
|
939 |
|
Adjusted income before adjusted income tax expense |
|
27,094 |
|
|
35,803 |
|
Adjusted income tax expense(1) |
|
(5,961 |
) |
|
(7,877 |
) |
Adjusted Net Income |
|
$ |
21,133 |
|
|
$ |
27,926 |
|
Net income (loss) per common
share: |
|
|
|
|
Basic |
|
$ |
1.01 |
|
|
$ |
(0.04 |
) |
Diluted |
|
$ |
1.01 |
|
|
$ |
(0.04 |
) |
Adjusted Net Income per common
share: |
|
|
|
|
Basic |
|
$ |
0.09 |
|
|
$ |
0.12 |
|
Diluted |
|
$ |
0.09 |
|
|
$ |
0.12 |
|
Adjusted diluted |
|
$ |
0.09 |
|
|
$ |
0.12 |
|
Weighted-average common shares
outstanding: |
|
|
|
|
Basic |
|
232,351 |
|
|
230,476 |
|
Diluted |
|
233,458 |
|
|
230,476 |
|
Adjusted diluted |
|
233,458 |
|
|
231,531 |
|
_______________________________________________________________________________
(1) Adjusted income tax expense is
calculated by applying a statutory tax rate of 22% for each of the
periods ended March 31, 2020 and 2019.
Adjusted EBITDA (Unaudited)
Adjusted EBITDA is a non-GAAP financial measure that we define
as net income or loss plus adjustments for net share-settled
equity-based compensation, depletion, depreciation and
amortization, impairment expense, mark-to-market on derivatives,
premiums paid for commodity derivatives, accretion expense, gains
or losses on disposal of assets, interest expense, income
taxes 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 future discretionary use because it excludes funds
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 that 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 and the lack of comparability of
results of operations to different companies due to 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
(loss) (GAAP) to Adjusted EBITDA (non-GAAP):
|
|
Three months ended March 31, |
(in thousands) |
|
2020 |
|
2019 |
|
|
(unaudited) |
Net income (loss) |
|
$ |
235,095 |
|
|
$ |
(9,491 |
) |
Plus: |
|
|
|
|
Share-settled equity-based compensation, net |
|
2,376 |
|
|
7,406 |
|
Depletion, depreciation and amortization |
|
61,302 |
|
|
63,098 |
|
Impairment expense |
|
26,250 |
|
|
— |
|
Mark-to-market on derivatives: |
|
|
|
|
(Gain) loss on derivatives, net |
|
(297,836 |
) |
|
48,365 |
|
Settlements received for matured commodity derivatives, net |
|
47,723 |
|
|
102 |
|
Premiums paid for commodity derivatives |
|
(477 |
) |
|
(4,016 |
) |
Accretion expense |
|
1,106 |
|
|
1,052 |
|
Loss on disposal of assets, net |
|
602 |
|
|
939 |
|
Interest expense |
|
24,970 |
|
|
15,547 |
|
Loss on extinguishment of debt |
|
13,320 |
|
|
— |
|
Income tax expense (benefit) |
|
2,417 |
|
|
(96 |
) |
Adjusted EBITDA |
|
$ |
116,848 |
|
|
$ |
122,906 |
|
Forecasted Free Cash FlowForecasted Free Cash
Flow, a non-GAAP financial measure, is calculated as estimated cash
flows from operating activities before changes in assets and
liabilities, less estimated costs incurred, excluding non-budgeted
acquisition costs, made during the period. Management believes this
is useful to management and investors in evaluating the operating
trends in its business due to production, commodity prices,
operating costs and other related factors. We do not provide
guidance on the reconciling items between forecasted cash provided
by operating activities and forecasted Free Cash Flow due to the
uncertainty regarding timing and estimates of these items.
Therefore, we cannot reconcile forecasted cash provided by
operating activities to forecasted Free Cash Flow without
unreasonable effort.
Contacts:Ron Hagood: (918) 858-5504 -
RHagood@laredopetro.com
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