Tulsa’s Laredo Petroleum, Inc. reported a second quarter 2020 loss of $545.5 million or $46.75 per diluted share. The company also indicated it plans to resume well completions in Texas in the coming month.
The company’s adjusted net income was $28.4 million or $2.43 per adjusted diluted share while its adjusted EBITDA was $132.8 million for the quarter.
“The macro environment during the second quarter of 2020 was unprecedented in its difficulties for the energy
industry,” stated Jason Pigott, President and Chief Executive Officer. “Our success managing through this
turbulence highlights the benefits of how we run our business. We mitigate commodity price risk with a robust
hedging program, maintain operational flexibility and focus on driving additional costs out of the business.”
He pointed to the success of the company’s success from its recent $22.5 million acquisition of more holdings in Howard County, Texas where the company has nearly 8,400 net acres under lease.
“Steady completions activity in Howard
County, combined with increased commodity prices and hedges in 2021, supports an estimated $120 million in
additional cash flow in 2021 and should return our oil production to full-year 2019 levels,” he said.
But the COVID-19 pandemic hit Laredo Petroleum like every other oil and gas exploration firm. Laredo reduced operations in early 2020 but now the company plans resumption of its work in Howard County.
“A subsequent increase in commodity prices, paired
with service cost reductions, has driven expected returns on Laredo’s Howard County acreage back to levels that
support a resumption of activity. Beginning in September 2020, the Company plans to operate a completions crew
in Howard County,” stated the company in its earnings report.
Laredo now expects to complete a 15-well package in Howard County during the fourth quarter of 2020. This
additional activity is expected to improve the Company’s production beginning in the first quarter of 2021. Laredo
now anticipates capital expenditures for full-year 2020 to be $340 – $350 million and to operate within cash flow,
excluding non-budgeted acquisitions.
The Company is currently operating one drilling rig, located in Howard County. A completions crew will be
deployed to Howard County late in the third quarter of 2020 and will begin completions operations on the 15-well
package.
During the second quarter of 2020, excluding non-budgeted acquisitions, total costs incurred were $78 million,
comprised of $63 million in drilling and completions activities, $3 million in land, exploration and data related
costs, $6 million in infrastructure, including Laredo Midstream Services investments, and $6 million in other
capitalized costs. Additionally, a non-budgeted acquisition of $1 million was closed during the quarter.
For the remainder of 2020, Laredo has hedged 4.8 million barrels of oil, with 3.6 million barrels of oil swapped at a
weighted-average price of $59.50 WTI per barrel and 1.2 million barrels of oil swapped at a weighted-average
price of $63.07 Brent per barrel. For 2021, the Company has hedged approximately 70% of expected oil
production, with 7.4 million barrels of oil at a weighted-average floor price of $51.11 Brent per barrel.
At June 30, 2020, the Company had outstanding borrowings of $275 million on its $725 million senior secured
credit facility, resulting in available capacity, after the reduction for outstanding letters of credit, of $406 million.
Including cash and cash equivalents of $16 million, total liquidity was $422 million.
At August 4, 2020, the Company had outstanding borrowings of $300 million on its $725 million senior secured
credit facility, resulting in available capacity, after the reduction for outstanding letters of credit, of $381 million.
Including cash and cash equivalents of $21 million, total liquidity was $402 million.
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