Laredo Petroleum, Inc. (NYSE: LPI) ("Laredo" or the "Company")
today announced the signing of a purchase and sale agreement to
acquire approximately 20,000 net acres in western Glasscock County
from Pioneer Natural Resources Company (NYSE: PXD) ("Pioneer") for
approximately $230 million, subject to customary closing price
adjustments. This is Laredo’s second significant acquisition in
2021, as the Company continues to execute its transformational
strategy and expand its high-margin inventory. The leasehold to be
acquired is directly adjacent to Laredo’s existing western
Glasscock leasehold, expanding its oil-weighted core development
area in the prolific Midland Basin. The transaction is expected to
close in October 2021.
Highlights:
- Increases high-margin, oil-weighted inventory by 50%, extending
development runway to approximately seven years at current activity
levels
- Expands core development area in western Glasscock County to
~22,200 net acres
- Accretive to Free Cash Flow1 and Net Asset Value1 per
share
- Company remains on track to achieve previously stated YE-22
leverage target of 1.5x Net Debt/TTM Adjusted EBITDA1
Acquisition Details:
- ~20,000 net acres (~80% operated, 98% held by production)
directly offsetting the Company’s existing western Glasscock
leasehold
- ~135 gross operated oil-weighted locations (90% WI, average
royalty of 20%) with an average lateral length of 9,700 feet
- Currently producing ~4,400 barrels of oil equivalent per day
(59% oil, 82% liquids)
- Purchase price comprised of $160 million in cash and issuance
of 959,691 shares of Laredo common equity to Pioneer
- Maintains current expectations for 2022 activity levels of two
drilling rigs and one completions crew
"Upon closing this transaction, we will have
acquired more than 55,000 net acres of highly productive,
oil-weighted inventory in Howard and western Glasscock counties in
just two years, fundamentally transforming Laredo," stated Jason
Pigott, President and Chief Executive Officer. "Seven years of
inventory across these core areas will enhance our ability to
deliver sustainable, long-term Free Cash Flow1 generation and to
rapidly deleverage. Through transactions like today’s, we continue
to demonstrate our ability to integrate premier locations into our
operations and enhance our return profile while operating in an
environmentally responsible and sustainable manner."
1Non-GAAP financial measure; please see
definitions of non-GAAP financial measures at the end of this
release.
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 contains 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, the
ability of the Company to execute its strategies, including its
ability to successfully identify and consummate strategic
acquisitions at purchase prices that are accretive to its financial
results and to successfully integrate acquired businesses, assets
and properties, 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, Current Report on
Form 8-K, filed with the Securities and Exchange Commission (“SEC”)
on May 11, 2021, and those set forth from time to time in other
filings 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. 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.
This press release and any accompanying
disclosures include financial measures that are not in accordance
with generally accepted accounting principles ("GAAP"), such as
Free Cash Flow, Net Asset Value and Adjusted EBITDA. 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 definitions of such non-GAAP
financial measures, 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.
Free Cash Flow
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 incurred capital expenditures, 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.
Net Asset Value
Net Asset Value is a non-GAAP financial measure
that the Company defines as the present value of future revenues
less future expenses, less Net Debt. Net Asset Value does not
represent the standardized measure of discounted future net cash
flows because it adjusts for Net Debt and excludes adjustments for
future income tax expense. However, management believes Net Asset
Value is useful to management and investors in evaluating the value
of the Company, which is affected by the pace of capital
expenditures and development of inventory, future commodity prices
and future prices of services utilized to develop the Company’s
inventory. There are significant limitations to the use of Net
Asset Value as a measure of value, including lack of comparability
to calculations of Net Asset Value by other companies due to
differences in assumptions utilized in the calculations.
Adjusted EBITDA
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.
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 Company has the ability, and may decide, to use a portion of
its cash and cash equivalents to reduce debt.
Net Debt to TTM Adjusted
EBITDA
Net Debt to TTM Adjusted EBITDA, a non-GAAP
financial measure, is calculated as Net Debt divided by trailing
twelve-month Adjusted EBITDA. Net Debt to TTM Adjusted EBITDA is
used by the Company's management for various purposes, including as
a measure of operating performance, in presentations to its board
of directors and as a basis for strategic planning and
forecasting.
Investor Contact: Ron Hagood
918.858.5504 rhagood@laredopetro.com
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