Press Release
Laredo Petroleum Announces 2020 Capital Budget and Updates Three-Year Outlook
2020 Budget Highlights
- Expect to balance capital expenditures and cash flow at
$50 per barrel WTI and$2.25 per MMBtu Henry Hub pricing - Anticipating mid-single digit oil and total production growth versus full-year 2019, driven by capital- efficient development of recently acquired
Howard County leasehold - Planned 2020 capital budget of
$450 million is a 7% decrease versus 2019 capital expenditures - All development activity expected to transition to
Howard County acreage by the end of second-quarter 2020
"Our 2020 budget and production expectations reflect the significant progress we made in 2019 optimizing our established acreage position and opportunistically adding high-margin inventory," stated
2020 Capital Program
The Company's capital program for 2020 is structured to facilitate an efficient transition from Laredo's established acreage position to the recently acquired, oilier acreage in
Laredo expects to invest approximately
The Company is not anticipating significant changes in service costs and has budgeted such costs at current levels. Laredo is beginning to add more sand to its standard completions design, taking advantage of the current low cost of in-basin sand to potentially enhance well productivity. The enhanced completions design, utilizing 2,400 pounds of sand per foot, is expected to increase the cost for an Upper/Middle Wolfcamp 10,000-foot lateral to
Laredo's 2020 budget is supported by a robust hedge position. For full-year 2020, the Company has hedged 90% of expected oil production, 40% of expected natural gas production and 25% of expected NGL production. Combined, Laredo's 2020 product and basis hedges have a value of more than
2021/2022 Outlook
Laredo's transition to full-scale development in
Cline Update
In 2019, based on lower expected drilling and completions costs and long-term oil productivity uplift associated with larger completions, the Company incorporated the Cline formation into its development plans. In the first quarter of 2020, Laredo completed both planned 2020 Cline wells. Total average well cost, adjusted to a 10,000-foot lateral and for 2,400 pounds of sand per foot, was approximately
Corporate Governance
The Company's Board of Directors regularly evaluates Laredo's executive compensation plans to ensure alignment with both the Company's strategic direction and its stakeholders. For 2020, short-term incentive performance ("STIP") metrics have been modified to reflect Laredo's updated strategy, including targeting both Free Cash Flow generation and accretive acquisitions while maintaining a competitive leverage profile. New STIP metrics supporting the goals of the 2020 budget include targets for Free Cash Flow, the Company's leverage ratio and gross inventory added with a minimum of 30% drilling rate of return at a
About Laredo
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, indicates, enables, transforms, 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, long-term performance of wells, drilling and operating risks, the increase in service and supply costs, tariffs on steel, pipeline transportation constraints in the
Unless otherwise specified, references to "average sales price" refer to average sales price excluding the effects of our derivative transactions. All amounts, dollars and percentages presented in this press release are rounded and therefore approximate. Free Cash Flow (non-GAAP) is based on net cash provided by operating activities (GAAP) to cash flow from operating activities before changes in operating assets and liabilities, net, less costs incurred, excluding non-budgeted acquisition costs.
Contact:
Ron Hagood: (918) 858-5504 - RHagood@laredopetro.com
Source: Laredo Petroleum, Inc.