Tulsa-based Laredo Petroleum, Inc. announced third-quarter oil and total production results that are above prior guidance and will start work on its 2020 operation and production plans.
Working mostly in the Permian Basin, the company stated it exceeded third quarter oil and total production producing 27.8 thousand barrels of oil a day and 81.9 thousand barrels of oil equivalent a day. The firm said it continued to reduce well costs and managed to reduce costs at the end of the quarter to $660 per lateral foot for the company’s standard completion design.
Laredo managed to reduce its outstanding balance on the company’s senior secured credit facility by $50 million with internally generated cash flow.
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.
As a result, production guidance for full-year 2019 has been raised to 28.1 MBOPD for oil and 79.0 MBOE a day for total production. Laredo management now believes it will deliver $40 million of free cash flow in 2019 while keeping its dedicated completions crew for the rest of the year.
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.”