Current LPI Stock Info

Laredo Petroleum, Inc. (ticker: LPI) released several new reports today, including estimated annual production, year-end reserve estimates and the company’s projected 2018 CapEx.

Year-end 2017 reserves and operating results highlights

  • 17% increase in production in 2017 to a company record of 21.3 million barrels of oil equivalent (MMBOE)
  • 36% organic growth in proved developed reserves, an increase of 50 MMBOE
  • 81% increase in the value of the company’s reserves to approximately $1.8 billion

“Laredo’s 2017 development plan generated impressive results,” said Laredo Petroleum Chairman and CEO Randy A. Foutch.

“Above type curve productivity, on average, from the 62 horizontal wells completed during the year drove our 17% production growth, impressive proved developed finding and development costs and preliminary field-level returns on invested capital exceeding 30%. We were able to achieve all of this while continuing to test completion design, well spacing and new areas and landing points.”

“Initial confirmatory data from recent spacing tests has the potential to positively impact long-term corporate-level returns and value creation,” said Foutch. “Our 2018 development program is expected to capitalize upon the 2017 testing program while generating greater than 10% production growth and aligning capital expenditures with operating cash flow by the end of the year.”

“Expected operational efficiencies from increased development density in our premium Upper and Middle Wolfcamp formations anchor this concept. Larger well packages targeting these formations, well productivity in-line with our type curve, longer lateral lengths and measured increases in activity are anticipated drivers of accelerated value creation in 2018 and beyond,” said Foutch.

2018 capital budget

Laredo’s board of directors approved a $555 million capital budget for 2018, excluding acquisitions. The budget includes approximately $470 million for drilling and completions activities and approximately $85 million for production facilities, land and other capitalized costs.

Laredo Petroleum 2017 Production Hits 21.3 Million Barrels

Laredo 2018 Capital Budget, Jan. 2018

The budget is based on an average of approximately $600,000 per well in anticipated savings from the utilization of in-basin sand, performance improvements and completion design changes and assumes current service cost pricing.

The company said that it continues to increase its operational efficiencies. The budgeted 2018 development plan increases activity levels from 2017 based on completed lateral feet while utilizing, on average, fewer drilling rigs.

Laredo is currently operating three horizontal rigs and expects to increase to four horizontal rigs in the second half of 2018. In 2018, Laredo anticipates completing 60-65 net wells with an average completed lateral length of 10,400 feet.

Laredo’s current 2018 development plan primarily targets the company’s premium Upper and Middle Wolfcamp formations. The company said that knowledge gained from the accelerated 2017 testing program will be applied to new well packages, as the company designs spacing tests that co-develop multiple landing zones in the Upper and Middle Wolfcamp formations.

Laredo Petroleum 2017 Production Hits 21.3 Million Barrels

Laredo Operational Efficiencies, Jan. 2018

The 2018 development plan is expected to generate both liquids and total production growth of more than 10% compared to full-year 2017 volumes.

The company’s 2018 budget is based on benchmark pricing of $55 per barrel for oil and $3 per thousand cubic feet for natural gas. Laredo expects cash flow from operations to fund capital expenditures by the end of 2018.

Q4 2017 operational update

In the fourth quarter of 2017, the company completed 18 wells and had total capital expenditures of approximately $182 million. The completion total was less than anticipated due to increased cycle time that shifted some completions from the fourth quarter of 2017 into early 2018, Laredo said.

The increased cycle time was related to testing new landing points and drilling in a new area of Laredo’s western Glasscock acreage. Laredo said that as it accelerates development activities in the area and operations are optimized, the cycle time is expected to experience further benefits.

Total production in the fourth quarter of 2017 was a company record 61,922 BOEPD, comprised of 43% oil, 28% NGL and 29% natural gas. In addition to delays pushing well completions later into the quarter and into 2018, production was adversely impacted by two horizontal wells in the company’s western Glasscock acreage that encountered operational issues, resulting in permanently reduced production from those wells.

Laredo said that management does not expect these numbers to change, but it should be noted that the values are preliminary and unaudited.

Tax rate change

In response to recent changes in the tax code, the company will modify its statutory tax rate to 22% in its calculation of Adjusted EPS, a non-GAAP financial measure, beginning in the fourth quarter of 2017.

Previously, Laredo had a statutory tax rate of 36%.


The value of Laredo’s proved reserves increased to approximately $1.8 billion at year-end 2017, the company said, which is an 81% increase from year-end 2016. The increase in value of the company’s total proved reserves was caused by a 29% increase in proved reserve volumes and wellhead product price increases of 24% for oil and 57% for natural gas liquids, which combined represent 68% of Laredo’s total proved reserves.

For year-end 2017, the company booked 26 PUD locations, a decrease from 31 locations booked at year-end 2016. All 31 PUD locations booked at year-end 2016 were drilled and converted to proved developed locations in 2017.

Changes in total proved reserves for 2017 are summarized in the following table:

            Natural   Oil
    Oil   NGL   Gas   Equivalents(1)
    (MMBbls)   (MMBbls)   (Bcf)   (MMBOE)
Beginning of year – December 31, 2016   64     50     317     167  
Revisions of previous estimates   10     13     74     35  
Extensions, discoveries and other additions   15     10     60     35  
Sales of reserves in place                
Production   (9 )   (6 )   (36 )   (21 )
End of year – December 31, 2017(1)   79     67     415     216  
Standardized measure of discounted future net cash flows – ($ millions)   $ 1,770  

(1) Figures may not add due to rounding.


Laredo added proved developed reserves of 71 MMBOE during 2017, including increases due to positive pricing and performance revisions, the company said. Proved developed reserve additions replaced 336% of company-record production and were added at a preliminary proved developed F&D cost of $7.90 per BOE.

At year-end 2017, proved developed reserves represented 89% of the company’s total proved reserves by volume and 94% by value.

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