Laredo Petroleum, Inc. (NYSE: LPI) ("Laredo" or "the Company")
today is announcing third-quarter oil and total production results
that are above prior guidance. Additionally, Laredo is providing an
update to the Company's 2019 operating plan and full-year 2019
production and free cash flow1 guidance, reflecting improving
capital efficiency, which is primarily driven by reduced cycle
times, well cost reductions and productivity improvements from
wider-spaced development.
Third-Quarter 2019 Highlights
- Exceeded both oil and total production guidance for the
quarter, producing 27.8 thousand barrels of oil per day ("MBOPD")
and 81.9 thousand barrels of oil equivalent ("MBOE") per day
- Continued to reduce well costs through efficiencies and service
cost reductions, lowering costs at the end of the quarter to $660
per lateral foot for Laredo's standard completion design
- Reduced the outstanding balance on the Company's senior secured
credit facility by $50 million with internally generated cash flow,
lowering the balance to $185 million at September 30, 2019
Since the announcement of Laredo's operating plan in May 2019,
the Company's execution of the plan has exceeded expectations and
accelerated early 2020 activity into 2019. The 52 gross completions
that were planned for full-year 2019 are now expected to be
finished by the end of October as the Company has further reduced
cycle times. Return expectations for 2019 continue to improve as
well costs have decreased, improving well-level returns by
approximately 5%, and well results confirm the Company's type curve
for wider spaced development.
Driven by these improving fundamentals, production guidance for
full-year 2019 has been raised to 28.1 MBOPD for oil and to 79.0
MBOE per day for total production, and anticipated cash flow in
2019 has increased by $65 million from expectations in May.
Reflecting the improving capital efficiency and cash flows, Laredo
now believes it will deliver $40 million of free cash flow in 2019
while maintaining its dedicated completions crew for the remainder
of 2019.
Operating the Company's dedicated completions crew for the
remainder of 2019 increases anticipated completions to 58 gross
wells in 2019. Laredo now expects to invest $490 million in 2019,
comprised of $425 million for drilling and completion activities
and $65 million for production facilities, land and other
capitalized costs.
The additional activity in 2019 is anticipated to positively
impact oil production and cash flows in 2020 and 2021. By
maintaining operational momentum through 2019, the Company now
expects to be cash flow positive in both 2020 and 2021 and grow oil
production each year from the estimated higher updated full-year
2019 oil production base.
Laredo believes that its robust 2020 oil hedge position,
covering approximately 75% of forecasted oil production at a
weighted-average floor price of $58.79 per barrel, significantly
reduces the impact of oil price declines and helps to ensure the
Company's cash flow projections.
"Our team is performing better than ever," stated Jason Pigott,
President and Chief Executive Officer. "Wider spacing has improved
our well productivity, general and administrative cost reductions
have significantly lowered our cash costs and we are bringing wells
on line quicker than forecasted. These improvements are driving
higher daily oil production than we originally anticipated and
increasing well-level and corporate returns. We are currently
operating a single completions crew with a focus on maintaining our
top-tier efficiencies. We believe that by operating our dedicated
completions crew through the end of the year, we will maintain our
efficiency gains into 2020, enabling us to grow oil production from
a higher base in the coming years and sustaining the Company's
commitment to improving corporate returns and generating free cash
flow."
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, 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. 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, the increase in
service and supply costs, tariffs on steel, pipeline transportation
constraints in the Permian Basin, hedging activities, possible
impacts of litigation and other factors, including those and other
risks described in its Annual Report on Form 10-K for the year
ended December 31, 2018, 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.
Actual quantities of reserves that may be ultimately recovered
from the Company's interests may differ substantially. 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,
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. Estimates of ultimate recovery
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 actual results may vary considerably and should not be
considered to represent the fair market value of the Company’s
proved reserves.
1 Projected Free Cash Flow
Projected free cash flow, a non-GAAP financial measure, is
calculated as estimated full-year 2019 cash flows from operating
activities before changes in assets and liabilities, less cash and
non-cash capital investments made during the period, excluding
non-budgeted acquisitions. Management believes this is useful to
investors in evaluating the operating trends in its business due to
production, commodity prices, operating costs and other related
factors.
Contacts:Ron Hagood: (918) 858-5504 -
RHagood@laredopetro.com
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