Laredo Petroleum, Inc. (NYSE: LPI) ("Laredo" or the "Company")
today announced its first-quarter 2021 financial and operating
results.
First-Quarter 2021 Highlights
- Generated $71 million of cash flows from operating activities
and $22 million of Free Cash Flow1
- Sold 723,579 shares at an average price of $38.75 for net
proceeds of $26.9 million through the Company's at-the-market
equity program ("ATM program")
- Reduced Net Debt1 by $30 million during the quarter
- Produced an average of 24,261 barrels of oil per day ("BOPD"),
an increase of 11% from fourth-quarter 2020
- Produced an average of 78,989 barrels of oil equivalent ("BOE")
per day, a decrease of 4% from fourth-quarter 2020
- Reduced drilling, completions and equipment costs for a
10,000-foot well to $525 per foot and held costs incurred during
first-quarter 2021 to $70 million
- Reduced total lease operating expenses ("LOE") by 3% versus
fourth-quarter 2020; unit LOE increased by 4% to $2.66 per BOE, but
well below expectations of $3.45 per BOE
"Our results in the first quarter are reflective
of the solid, consistent execution that underpins the Company's
strategic transformation," stated Jason Pigott, President and Chief
Executive Officer. "We maintained a disciplined approach to
personnel expenses, continued to drive well costs lower,
substantially outperformed our assumptions for lease operating
expenses and quickly and safely overcame disruptions that arose
from adverse weather in the Permian Basin. We again delivered on
our commitment to improve our balance sheet, generating Free Cash
Flow1 and opportunistically selling equity through our ATM program
to pay down debt. Our transition to Howard County is driving an
inflection point in the Company's capital efficiency and we are
continuing to optimize our land position and development plan to
facilitate further improvements."
First-Quarter 2021 Financial
Results
For the first quarter of 2021, the Company
reported a net loss attributable to common stockholders of $75.4
million, or $6.33 per diluted share, including a $122.2 million
non-cash loss on derivatives. Adjusted Net Income1 for the first
quarter of 2021 was $20.3 million, or $1.69 per adjusted diluted
share. Adjusted EBITDA1 for the first quarter of 2021 was $93.3
million.
1Non-GAAP financial measure; please see
supplemental reconciliations of GAAP to non-GAAP financial measures
at the end of this release.
Operations Summary
In the first quarter of 2021, Laredo's total
production averaged 78,989 BOE per day, including oil production of
24,261 BOPD. Winter storms in the Permian Basin during February
2021 temporarily disrupted both production activities and drilling
and completions operations, impacting total and oil production for
first-quarter 2021 by an estimated 5,700 BOE per day and 1,700
BOPD, respectively. Despite the weather impact, first-quarter 2021
oil production was positively impacted by the Company's first
package of wells in Howard County, the 15-well Gilbert/Passow
package, which was the primary driver of oil production growth of
11% from the fourth quarter of 2020.
Unit LOE for the first quarter of 2021 was $2.66
per BOE, an increase of 4% from the fourth quarter of 2020, but
below expectations of $3.45 per BOE. The difference versus
expectations was a result of reduced activity levels related to
winter storms and higher than anticipated production.
Late in first-quarter 2021, Laredo completed the
12-well Trentino/Whitmire package in Howard County, with all wells
currently cleaning up or early in their production history. This is
the Company's second well package to be completed in Howard County.
Oil production in the second quarter of 2021 is expected to be
positively impacted by production from the package, resulting in
expected 9% - 13% oil production growth versus first-quarter
2021.
The Company is currently operating two drilling
rigs and one completions crew in Howard County and expects to
complete the 13-well Davis package during the second quarter of
2021. Beginning with the Davis package, Laredo has widened
development spacing in the Wolfcamp formation to further enhance
the capital efficiency of the Company's Howard County development
program. Future development spacing is expected to utilize eight
wells per unit in the Wolfcamp formation and four wells per unit in
the Lower Spraberry formation.
Costs Incurred
During the first quarter of 2021, total costs
incurred were $70 million, comprised of $57 million in drilling and
completions activities, $3 million in land, exploration and data
related costs, $5 million in infrastructure, including Laredo
Midstream Services investments, and $5 million in other capitalized
costs.
Laredo continues to drive drilling, completions
and equipment costs per well lower through efficiency gains and
savings realized by utilizing the Company-owned sand mine in Howard
County. Costs for the Company's first two well packages in Howard
County were $525 per lateral foot, below initial estimates of $540
per lateral foot.
Environmental, Social,
Governance
In February 2021, Laredo further demonstrated the
Company's commitment to responsible and sustainable operations,
committing to significant reductions in greenhouse gas intensity,
methane emissions and the elimination of routine flaring by 2025.
Supporting these goals, Laredo's Board of Directors again
integrated targets for the reduction of flaring and reportable
spills into the Company's executive compensation program, linking
15% of the short-term incentive program payout to these
metrics.
During the first quarter of 2021, Laredo
flared/vented just 0.22% of produced natural gas, down from 1.52%
in the first-quarter of 2020 and 0.71% for full-year 2020.
Liquidity
At March 31, 2021, the Company had outstanding
borrowings of $220 million on its $725 million senior secured
credit facility, resulting in available capacity, after the
reduction for outstanding letters of credit, of $461 million.
Including cash and cash equivalents of $44 million, total liquidity
was $505 million.
At May 3, 2021, the Company had outstanding
borrowings of $230 million on its $725 million senior secured
credit facility. Available capacity, after the reduction for
outstanding letters of credit, was $451 million. Including cash and
cash equivalents of $48 million, total liquidity was $499
million.
At March 31, 2021, Laredo had executed $26.9
million of the $75 million authorized under the Company's ATM
program. Proceeds from the share sales were utilized to reduce
borrowing on the Company's senior secured credit facility.
Second-Quarter and Full-Year 2021
Guidance
The table below reflects the Company's guidance
for total and oil production for second-quarter and full-year
2021.
|
|
2Q-21E |
|
FY-21E |
Total
production (MBOE per day) |
|
83.0 - 86.0 |
|
80.0 - 85.0 |
Oil
production (MBOPD) |
|
26.5 -
27.5 |
|
27.3 -
29.3 |
The table below reflects the Company's guidance
for selected revenue and expense items for the second quarter of
2021.
|
|
2Q-21E |
Average
sales price realizations (excluding derivatives): |
|
|
Oil (% of WTI) |
|
100% |
NGL (% of WTI) |
|
27% |
Natural gas (% of Henry Hub) |
|
71% |
|
|
|
Other ($
MM): |
|
|
Net income (expense) of purchased oil |
|
($4.3) |
|
|
|
Selected
average costs & expenses: |
|
|
Lease operating expenses ($/BOE) |
|
$2.85 |
Production and ad valorem taxes (% of oil, NGL and natural gas
sales revenues) |
|
7.00% |
Transportation and marketing expenses ($/BOE) |
|
$1.55 |
General and administrative expenses (excluding LTIP, $/BOE) |
|
$1.50 |
General and administrative expenses (LTIP cash and non-cash,
$/BOE) |
|
$0.40 |
Depletion, depreciation and amortization ($/BOE) |
|
$5.75 |
Conference Call Details
On Thursday, May 6, 2021, at 7:30 a.m. CT, Laredo
will host a conference call to discuss its first-quarter 2021
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 3195169, 10 minutes prior to
the scheduled conference time. A telephonic replay will be
available two hours after the call on May 6, 2021 through Thursday,
May 13, 2021. Participants may access this replay by dialing
855.859.2056, using conference code 3195169.
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 contents
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. 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, the possibility of production
curtailment, hedging activities, the impacts of severe weather,
including the freezing of wells and pipelines in the Permian Basin
due to cold weather, possible impacts of litigation and
regulations, the impact of the Company's transactions, if any, with
its securities from time to time, the impact of new laws and
regulations, including those regarding the use of hydraulic
fracturing, the impact of new environmental, health and safety
requirements applicable to the Company's business activities, the
possibility of the elimination of federal income tax deductions for
oil and gas exploration and development and other factors,
including those and other risks described in its Annual Report on
Form 10-K for the year ended December 31, 2020 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. Any
forward-looking statement speaks only as of the date on which such
statement is made. Laredo does not intend to, and disclaims any
obligation to, correct update or revise 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," "resource play," "estimated
ultimate recovery" or "EURs," "type curve" and "standardized
measure," 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 and "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, 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,
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.
"Type curve" refers to a production profile of a well, or a
particular category of wells, for a specific play and/or area. The
"standardized measure" of discounted future new cash flows is
calculated in accordance with SEC regulations and a discount rate
of 10%. Actual results may vary considerably and should not be
considered to represent the fair market value of the Company’s
proved reserves.
This press release and any accompanying
disclosures include financial measures that are not in accordance
with generally accepted accounting principles ("GAAP"), such as
Adjusted EBITDA, Adjusted Net Income and Free Cash Flow. While
management believes that such measures are useful for investors,
they should not be used as a replacement for financial measures
that are in accordance with GAAP. For a reconciliation of such
non-GAAP financial measures to the nearest comparable measure in
accordance with GAAP, please see the supplemental financial
information at the end of this press release.
Unless otherwise specified, references to "average
sales price" refer to average sales price excluding the effects of
the Company's derivative transactions.
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, |
|
|
2021 |
|
2020 |
|
|
|
|
|
|
|
(unaudited) |
Sales
volumes: |
|
|
|
|
Oil (MBbl) |
|
2,183 |
|
|
2,655 |
|
NGL (MBbl) |
|
2,321 |
|
|
2,467 |
|
Natural gas (MMcf) |
|
15,630 |
|
|
16,512 |
|
Oil equivalents (MBOE)(1)(2) |
|
7,109 |
|
|
7,874 |
|
Average daily oil equivalent sales volumes (BOE/D)(2) |
|
78,989 |
|
|
86,532 |
|
Average daily oil sales volumes (BOPD)(2) |
|
24,261 |
|
|
29,178 |
|
Average
sales prices(2): |
|
|
|
|
Oil ($/Bbl)(3) |
|
$ |
58.48 |
|
|
$ |
45.19 |
|
NGL ($/Bbl)(3) |
|
$ |
17.96 |
|
|
$ |
4.68 |
|
Natural gas ($/Mcf)(3) |
|
$ |
2.12 |
|
|
$ |
0.26 |
|
Average sales price ($/BOE)(3) |
|
$ |
28.48 |
|
|
$ |
17.26 |
|
Oil, with commodity derivatives ($/Bbl)(4) |
|
$ |
45.03 |
|
|
$ |
56.59 |
|
NGL, with commodity derivatives ($/Bbl)(4) |
|
$ |
11.25 |
|
|
$ |
6.85 |
|
Natural gas, with commodity derivatives ($/Mcf)(4) |
|
$ |
1.66 |
|
|
$ |
0.94 |
|
Average sales price, with commodity derivatives ($/BOE)(4) |
|
$ |
21.15 |
|
|
$ |
23.21 |
|
Selected
average costs and expenses per BOE sold(2): |
|
|
|
|
Lease operating expenses |
|
$ |
2.66 |
|
|
$ |
2.80 |
|
Production and ad valorem taxes |
|
1.87 |
|
|
1.17 |
|
Transportation and marketing expenses |
|
1.71 |
|
|
1.72 |
|
Midstream service expenses |
|
0.12 |
|
|
0.15 |
|
General and administrative (excluding LTIP) |
|
1.36 |
|
|
1.33 |
|
Total selected operating expenses |
|
$ |
7.72 |
|
|
$ |
7.17 |
|
General and administrative (LTIP): |
|
|
|
|
LTIP cash |
|
$ |
0.23 |
|
|
$ |
0.02 |
|
LTIP non-cash |
|
$ |
0.26 |
|
|
$ |
0.25 |
|
Depletion, depreciation and amortization |
|
$ |
5.36 |
|
|
$ |
7.78 |
|
_________________________________________________________(1) BOE is
calculated using a conversion rate of six Mcf per one Bbl.(2) The
numbers presented are calculated based on actual amounts that are
not rounded.(3) Price reflects the average of actual sales prices
received when control passes to the purchaser/customer adjusted for
quality, certain transportation fees, geographical differentials,
marketing bonuses or deductions and other factors affecting the
price received at the delivery point.(4) Price reflects the
after-effects of the Company's commodity derivative transactions on
it's average sales prices. The Company's 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. Consolidated balance
sheets |
|
|
|
|
|
(in thousands, except share data) |
|
March 31, 2021 |
|
December 31, 2020 |
|
|
|
|
|
|
|
(unaudited) |
Assets |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
44,262 |
|
|
$ |
48,757 |
|
Accounts receivable, net |
|
67,704 |
|
|
63,976 |
|
Derivatives |
|
— |
|
|
7,893 |
|
Other current assets |
|
26,123 |
|
|
15,964 |
|
Total current assets |
|
138,089 |
|
|
136,590 |
|
Property and
equipment: |
|
|
|
|
Oil and natural gas properties, full cost method: |
|
|
|
|
Evaluated properties |
|
7,953,141 |
|
|
7,874,932 |
|
Unevaluated properties not being depleted |
|
60,260 |
|
|
70,020 |
|
Less accumulated depletion and impairment |
|
(6,852,688 |
) |
|
(6,817,949 |
) |
Oil and natural gas properties, net |
|
1,160,713 |
|
|
1,127,003 |
|
Midstream service assets, net |
|
111,083 |
|
|
112,697 |
|
Other fixed assets, net |
|
31,576 |
|
|
32,011 |
|
Property and equipment, net |
|
1,303,372 |
|
|
1,271,711 |
|
Operating
lease right-of-use assets |
|
14,955 |
|
|
17,973 |
|
Other
noncurrent assets, net |
|
18,487 |
|
|
16,336 |
|
Total assets |
|
$ |
1,474,903 |
|
|
$ |
1,442,610 |
|
Liabilities and stockholders' equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
49,065 |
|
|
$ |
38,279 |
|
Accrued capital expenditures |
|
27,924 |
|
|
28,275 |
|
Undistributed revenue and royalties |
|
32,018 |
|
|
24,728 |
|
Derivatives |
|
128,394 |
|
|
31,826 |
|
Operating lease liabilities |
|
11,263 |
|
|
11,721 |
|
Other current liabilities |
|
43,579 |
|
|
62,766 |
|
Total current liabilities |
|
292,243 |
|
|
197,595 |
|
Long-term
debt, net |
|
1,145,374 |
|
|
1,179,266 |
|
Derivatives |
|
29,821 |
|
|
12,051 |
|
Asset
retirement obligations |
|
66,280 |
|
|
64,775 |
|
Operating
lease liabilities |
|
6,459 |
|
|
8,918 |
|
Other
noncurrent liabilities |
|
3,294 |
|
|
1,448 |
|
Total liabilities |
|
1,543,471 |
|
|
1,464,053 |
|
Commitments
and contingencies |
|
|
|
|
Stockholders' equity: |
|
|
|
|
Preferred stock, $0.01 par value, 50,000,000 shares authorized and
zero issued as of March 31, 2021 and December 31, 2020 |
|
— |
|
|
— |
|
Common stock, $0.01 par value, 22,500,000 shares authorized and
12,899,660 and 12,020,164 issued and outstanding as of March 31,
2021 and December 31, 2020, respectively |
|
129 |
|
|
120 |
|
Additional paid-in capital |
|
2,426,769 |
|
|
2,398,464 |
|
Accumulated deficit |
|
(2,495,466 |
) |
|
(2,420,027 |
) |
Total stockholders' equity |
|
(68,568 |
) |
|
(21,443 |
) |
Total liabilities and stockholders' equity |
|
$ |
1,474,903 |
|
|
$ |
1,442,610 |
|
|
|
|
|
|
|
|
|
|
|
Laredo
Petroleum, Inc. Condensed consolidated statements
of operations |
|
|
|
|
|
Three months ended March 31, |
(in thousands, except per share data) |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
(unaudited) |
Revenues: |
|
|
|
|
Oil, NGL and natural gas sales |
|
$ |
202,457 |
|
|
$ |
135,885 |
|
Midstream service revenues |
|
1,296 |
|
|
2,683 |
|
Sales of purchased oil |
|
46,477 |
|
|
66,424 |
|
Total revenues |
|
250,230 |
|
|
204,992 |
|
Costs and
expenses: |
|
|
|
|
Lease operating expenses |
|
18,918 |
|
|
22,040 |
|
Production and ad valorem taxes |
|
13,283 |
|
|
9,244 |
|
Transportation and marketing expenses |
|
12,127 |
|
|
13,544 |
|
Midstream service expenses |
|
858 |
|
|
1,170 |
|
Costs of purchased oil |
|
49,916 |
|
|
79,297 |
|
General and administrative |
|
13,073 |
|
|
12,562 |
|
Depletion, depreciation and amortization |
|
38,109 |
|
|
61,302 |
|
Impairment expense |
|
— |
|
|
186,699 |
|
Other operating expenses |
|
1,143 |
|
|
1,106 |
|
Total costs and expenses |
|
147,427 |
|
|
386,964 |
|
Operating
income (loss) |
|
102,803 |
|
|
(181,972 |
) |
Non-operating income (expense): |
|
|
|
|
Gain (loss) on derivatives, net |
|
(154,365 |
) |
|
297,836 |
|
Interest expense |
|
(25,946 |
) |
|
(24,970 |
) |
Loss on extinguishment of debt |
|
— |
|
|
(13,320 |
) |
Other, net |
|
1,307 |
|
|
(511 |
) |
Total non-operating income (expense), net |
|
(179,004 |
) |
|
259,035 |
|
Income (loss) before income taxes |
|
(76,201 |
) |
|
77,063 |
|
Income tax
benefit (expense): |
|
|
|
|
Deferred |
|
762 |
|
|
(2,417 |
) |
Total income tax benefit (expense) |
|
762 |
|
|
(2,417 |
) |
Net income
(loss) |
|
$ |
(75,439 |
) |
|
$ |
74,646 |
|
Net income
(loss) per common share(1): |
|
|
|
|
Basic |
|
$ |
(6.33 |
) |
|
$ |
6.43 |
|
Diluted |
|
$ |
(6.33 |
) |
|
$ |
6.39 |
|
Weighted-average common shares outstanding(1): |
|
|
|
|
Basic |
|
11,918 |
|
|
11,618 |
|
Diluted |
|
11,918 |
|
|
11,673 |
|
__________________________________________________________________________(1) For
the three months ended March 31, 2020, net income per common share
and weighted-average common shares outstanding were retroactively
adjusted for the Company's 1-for-20 reverse stock split effective
June 1, 2020.
|
Laredo
Petroleum, Inc. Condensed consolidated statements
of cash flows |
|
|
|
|
|
Three months ended March 31, |
(in thousands) |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
(unaudited) |
Cash flows
from operating activities: |
|
|
|
|
Net income (loss) |
|
$ |
(75,439 |
) |
|
$ |
74,646 |
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
Share-settled equity-based compensation, net |
|
2,068 |
|
|
2,376 |
|
Depletion, depreciation and amortization |
|
38,109 |
|
|
61,302 |
|
Impairment expense |
|
— |
|
|
186,699 |
|
Mark-to-market on derivatives: |
|
|
|
|
(Gain) loss on derivatives, net |
|
154,365 |
|
|
(297,836 |
) |
Settlements (paid) received for matured derivatives, net |
|
(41,174 |
) |
|
47,723 |
|
Premiums received (paid) for commodity derivatives |
|
9,041 |
|
|
(477 |
) |
Loss on extinguishment of debt |
|
— |
|
|
13,320 |
|
Deferred income tax (benefit) expense |
|
(762 |
) |
|
2,417 |
|
Other, net |
|
5,477 |
|
|
6,921 |
|
Cash flows from operating activities before changes in operating
assets and liabilities, net |
|
91,685 |
|
|
97,091 |
|
Change in current assets and liabilities, net |
|
(17,259 |
) |
|
18,708 |
|
Change in noncurrent assets and liabilities, net |
|
(3,275 |
) |
|
(6,210 |
) |
Net cash provided by operating activities |
|
71,151 |
|
|
109,589 |
|
Cash flows
from investing activities: |
|
|
|
|
Acquisitions of oil and natural gas properties, net |
|
— |
|
|
(22,876 |
) |
Capital expenditures: |
|
|
|
|
Oil and natural gas properties |
|
(68,329 |
) |
|
(135,376 |
) |
Midstream service assets |
|
(329 |
) |
|
(761 |
) |
Other fixed assets |
|
(551 |
) |
|
(829 |
) |
Proceeds from dispositions of capital assets, net of selling
costs |
|
189 |
|
|
51 |
|
Net cash used in investing activities |
|
(69,020 |
) |
|
(159,791 |
) |
Cash flows
from financing activities: |
|
|
|
|
Borrowings on Senior Secured Credit Facility |
|
15,000 |
|
|
— |
|
Payments on Senior Secured Credit Facility |
|
(50,000 |
) |
|
(100,000 |
) |
Issuance of January 2025 Notes and January 2028 Notes |
|
— |
|
|
1,000,000 |
|
Extinguishment of debt |
|
— |
|
|
(808,855 |
) |
Proceeds from issuance of common stock, net of costs |
|
26,866 |
|
|
— |
|
Other, net |
|
1,508 |
|
|
(19,023 |
) |
Net cash (used in) provided by financing activities |
|
(6,626 |
) |
|
72,122 |
|
Net
(decrease) increase in cash and cash equivalents |
|
(4,495 |
) |
|
21,920 |
|
Cash and
cash equivalents, beginning of period |
|
48,757 |
|
|
40,857 |
|
Cash and
cash equivalents, end of period |
|
$ |
44,262 |
|
|
$ |
62,777 |
|
|
|
|
|
|
|
|
|
|
Laredo Petroleum, Inc.
Total Costs Incurred
The following table presents the components of the
Company's costs incurred, excluding non-budgeted acquisition costs,
for the periods presented:
|
|
Three months ended March 31, |
(in thousands) |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
(unaudited) |
Oil and natural gas properties |
|
$ |
68,449 |
|
|
$ |
152,868 |
|
Midstream
service assets |
|
876 |
|
|
923 |
|
Other fixed
assets |
|
600 |
|
|
823 |
|
Total costs incurred, excluding non-budgeted acquisition costs |
|
$ |
69,925 |
|
|
$ |
154,614 |
|
|
|
|
|
|
|
|
|
|
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 the Company,
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 is a non-GAAP financial measure
that the Company defines as net cash provided by operating
activities (GAAP) before changes in operating assets and
liabilities, net, less costs incurred, excluding non-budgeted
acquisition costs. Free Cash Flow 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, management believes
Free Cash Flow is useful to management and investors in evaluating
operating trends in its 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 Free Cash Flow
(non-GAAP) for the periods presented:
|
|
Three months ended March 31, |
(in thousands) |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
(unaudited) |
Net cash provided by operating activities |
|
$ |
71,151 |
|
|
$ |
109,589 |
|
Less: |
|
|
|
|
Change in current assets and liabilities, net |
|
(17,259 |
) |
|
18,708 |
|
Change in noncurrent assets and liabilities, net |
|
(3,275 |
) |
|
(6,210 |
) |
Cash flows
from operating activities before changes in operating assets and
liabilities, net |
|
91,685 |
|
|
97,091 |
|
Less costs incurred, excluding non-budgeted acquisition costs: |
|
|
|
|
Oil and natural gas properties(1) |
|
68,449 |
|
|
152,868 |
|
Midstream service assets(1) |
|
876 |
|
|
923 |
|
Other fixed assets |
|
600 |
|
|
823 |
|
Total costs incurred, excluding non-budgeted acquisition costs |
|
69,925 |
|
|
154,614 |
|
Free Cash
Flow (non-GAAP) |
|
$ |
21,760 |
|
|
$ |
(57,523 |
) |
_________________________________________________________(1) Includes
capitalized share-settled equity-based compensation and asset
retirement costs.
Adjusted Net Income
(Unaudited)
Adjusted Net Income is a non-GAAP financial
measure that the Company defines as income or loss before income
taxes (GAAP) plus adjustments for mark-to-market on derivatives,
premiums paid or received for commodity derivatives that matured
during the period, impairment expense, gains or losses on disposal
of assets, other non-recurring income and expenses and adjusted
income tax expense. Management believes Adjusted Net Income helps
investors in the oil and natural gas industry to measure and
compare the Company's 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) for the periods presented:
|
|
Three months ended March 31, |
(in thousands, except per share data) |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
(unaudited) |
Income (loss) before income taxes |
|
$ |
(76,201 |
) |
|
$ |
77,063 |
|
Plus: |
|
|
|
|
Mark-to-market on derivatives: |
|
|
|
|
(Gain) loss on derivatives, net |
|
154,365 |
|
|
(297,836 |
) |
Settlements (paid) received for matured derivatives, net |
|
(41,174 |
) |
|
47,723 |
|
Net premiums paid for commodity derivatives that matured during the
period(1) |
|
(11,005 |
) |
|
(477 |
) |
Impairment expense |
|
— |
|
|
186,699 |
|
Loss on extinguishment of debt |
|
— |
|
|
13,320 |
|
Loss on disposal of assets, net |
|
72 |
|
|
602 |
|
Adjusted income before adjusted income tax expense |
|
26,057 |
|
|
27,094 |
|
Adjusted income tax expense(2) |
|
(5,733 |
) |
|
(5,961 |
) |
Adjusted Net Income (non-GAAP) |
|
$ |
20,324 |
|
|
$ |
21,133 |
|
Net income
(loss) per common share(3): |
|
|
|
|
Basic |
|
$ |
(6.33 |
) |
|
$ |
6.43 |
|
Diluted |
|
$ |
(6.33 |
) |
|
$ |
6.39 |
|
Adjusted Net
Income per common share(3): |
|
|
|
|
Basic |
|
$ |
1.71 |
|
|
$ |
1.82 |
|
Diluted |
|
$ |
1.71 |
|
|
$ |
1.81 |
|
Adjusted diluted |
|
$ |
1.69 |
|
|
$ |
1.81 |
|
Weighted-average common shares outstanding(3): |
|
|
|
|
Basic |
|
11,918 |
|
|
11,618 |
|
Diluted |
|
11,918 |
|
|
11,673 |
|
Adjusted diluted |
|
12,040 |
|
|
11,673 |
|
__________________________________________________________(1)
Reflects net premiums paid previously or upon settlement that are
attributable to derivatives settled in the respective periods
presented.(2) Adjusted income tax expense is calculated by applying
a statutory tax rate of 22% for each of the periods ended
March 31, 2021 and 2020.(3) For the three months ended March
31, 2020, net income per common share, Adjusted Net Income per
common share and weighted-average common shares outstanding were
retroactively adjusted for the Company's 1-for-20 reverse stock
split effective June 1, 2020.
Adjusted EBITDA (Unaudited)
Adjusted EBITDA is a non-GAAP financial measure
that the Company defines as net income or loss (GAAP) plus
adjustments for share-settled equity-based compensation, depletion,
depreciation and amortization, impairment expense, mark-to-market
on derivatives, premiums paid or received for commodity derivatives
that matured during the period, 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,
management believes Adjusted EBITDA is useful to an investor in
evaluating the Company's 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 the Company's operations from period to period by
removing the effect of its capital structure from its operating
structure; and
- is used by management for various purposes, including as a
measure of operating performance, in presentations to the Company's
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 the Company's 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. The Company's
measurements of Adjusted EBITDA for financial reporting as compared
to compliance under its debt agreements differ.
The following table presents a reconciliation of
net income (loss) (GAAP) to Adjusted EBITDA (non-GAAP) for the
periods presented:
|
|
Three months ended March 31, |
(in thousands) |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
(unaudited) |
Net income (loss) |
|
$ |
(75,439 |
) |
|
$ |
74,646 |
|
Plus: |
|
|
|
|
Share-settled equity-based compensation, net |
|
2,068 |
|
|
2,376 |
|
Depletion, depreciation and amortization |
|
38,109 |
|
|
61,302 |
|
Impairment expense |
|
— |
|
|
186,699 |
|
Mark-to-market on derivatives: |
|
|
|
|
(Gain) loss on derivatives, net |
|
154,365 |
|
|
(297,836 |
) |
Settlements (paid) received for matured derivatives, net |
|
(41,174 |
) |
|
47,723 |
|
Net premiums paid for commodity derivatives that matured during the
period(1) |
|
(11,005 |
) |
|
(477 |
) |
Accretion expense |
|
1,143 |
|
|
1,106 |
|
Loss on disposal of assets, net |
|
72 |
|
|
602 |
|
Interest expense |
|
25,946 |
|
|
24,970 |
|
Loss on extinguishment of debt |
|
— |
|
|
13,320 |
|
Income tax (benefit) expense |
|
(762 |
) |
|
2,417 |
|
Adjusted EBITDA (non-GAAP) |
|
$ |
93,323 |
|
|
$ |
116,848 |
|
_________________________________________________________(1) Reflects
net premiums paid previously or upon settlement that are
attributable to derivatives settled in the respective periods
presented.
Net Debt
Net Debt, a non-GAAP financial measure, is
calculated as the face value of long-term debt less cash and cash
equivalents. Management believes Net Debt is useful to management
and investors in determining the Company's leverage position since
the the Company has the ability, and may decide, to use a portion
of its cash and cash equivalents to reduce debt. Net Debt as of
March 31, 2021 was $1.115 billion.
Investor Contact: Ron Hagood
918.858.5504 rhagood@laredopetro.com
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