UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended SeptemberJune 30, 20222023
 or
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                             to                            
Commission File Number: 001-35380
vital_logo_rgb.jpg
 Laredo Petroleum,Vital Energy, Inc.
(Exact name of registrant as specified in its charter)
Delaware45-3007926
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
15 W. Sixth521 E. Second StreetSuite 9001000 
TulsaOklahoma7411974120
(Address of principal executive offices)(Zip code)
(918) 513-4570
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading symbolName of each exchange on which registered
Common stock, $0.01 par value per shareLPIVTLENew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filerAccelerated filer 
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  
Number of shares of registrant's common stock outstanding as of November 1, 2022: 16,813,540August 3, 2023: 18,596,884



LAREDO PETROLEUM,VITAL ENERGY, INC.
TABLE OF CONTENTS
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Glossary of Oil and Natural Gas Terms and Certain Other Terms
The following terms are used throughout this Quarterly Report on Form 10-Q (this "Quarterly Report"):
"Argus WTI Midland"—An index price reflecting the weighted average price of WTI at the pipeline and storage hub at Midland.
"Argus WTI Formula Basis"—The outright price at Cushing that is used as the basis for pricing all other Argus US Gulf coast physical crudes.
"Basin"—A large natural depression on the earth's surface in which sediments, generally brought by water, accumulate.
"Bbl" or "barrel"—One stock tank barrel, of 42 U.S. gallons liquid volume, used herein in reference to crude oil, condensate, natural gas liquids or water.
"Bbl/d"—Bbl per day.
"Benchmark Prices"—The unweighted arithmetic average first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period before differentials, as required by SEC guidelines.
"BOE"—One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil.
"BOE/Dd"—BOE per day.
"Brent"—A light (low density) and sweet (low sulfur) crude oil sourced from the North Sea, used as a pricing benchmark for ICE oil futures contracts.
"Btu"—British thermal unit, the quantity of heat required to raise the temperature of a one pound mass of water by one degree Fahrenheit.
"Completion"—The process of treating a drilled well followed by the installation of permanent equipment for the production of oil or natural gas, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.
"Developed acreage"—The number of acres that are allocated or assignable to productive wells or wells capable of production.
"Dry hole"—A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.
"Exchange Act" — The—The Securities Exchange Act of 1934, as amended.
"Formation"—A layer of rock which has distinct characteristics that differ from nearby rock.
"Fracturing" or "Frac"—The propagation of fractures in a rock layer by a pressurized fluid. This technique is used to release petroleum and natural gas for extraction.
"GAAP"—Generally accepted accounting principles in the United States.
"GCM"—Garden City Minerals, LLC.
"Gross acres" or "gross wells" —The total acres or wells, as the case may be, in which a working interest is owned.
"Henry Hub"—A natural gas pipeline delivery point in south Louisiana that serves as the benchmark natural gas price underlying NYMEX natural gas futures contracts.
"Horizon" — A—A term used to denote a surface in or of rock, or a distinctive layer of rock that might be represented by a reflection in seismic data.
"Horizontal drilling" — A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval.
"ICE"—The Intercontinental Exchange.
"Initial Production"The measurement of production from an oil or gas well when first brought on stream. Often stated in terms of production during the first thirty days.
"Liquids"—Describes oil, condensate and natural gas liquids.
"LMS"—Laredo Midstream Services, LLC.
"MBbl"—One thousand barrels of crude oil, condensate or natural gas liquids.
"MBOE"—One thousand BOE.
"MMBOE"—One million BOE.
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"Mcf"—One thousand cubic feet of natural gas.
"MMBtu"—One million Btu.
"MMcf"—One million cubic feet of natural gas.
"Natural gas liquids" or "NGL"—Components of natural gas that are separated from the gas state in the form of liquids, which include propane, butanes and ethane, among others.
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"Net acres"—The percentage of gross acres an owner has out of a particular number of acres, or a specified tract. An owner who has 50% interest in 100 acres owns 50 net acres.
"NYMEX"—The New York Mercantile Exchange.
"OPEC"—The Organization of the Petroleum Exporting Countries.
"Productive well"—A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of the production exceed production expenses and taxes.
"Proved reserves"—The estimated quantities of oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions.
"Realized Prices"—Prices which reflect adjustments to the Benchmark Prices for quality, transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting the price received at the delivery point without giving effect to our commodity derivative transactions.
"Reservoir"—A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is separate from other reservoirs.
"Royalty interest" — An interest that gives an owner the right to receive a portion of the resources or revenues without having to carry any development costs, which may be subject to expiration.
"SEC" — The U.S. Securities and Exchange Commission.
"Securities Act" — The Securities Act of 1933, as amended.
"Senior Secured Credit Facility" — The Fifth Amended and Restated Credit Agreement among Laredo Petroleum,Vital Energy, Inc., as borrower, Wells Fargo Bank, N.A., as administrative agent, LaredoVital Midstream Services, LLC, and Garden City Minerals, LLC, as guarantors,guarantor, and the banks signatory thereto.
"Spacing"—The distance between wells producing from the same reservoir.
"Standardized measure"—Discounted future net cash flows estimated by applying Realized Prices to the estimated future production of year-end proved reserves. Future cash inflows are reduced by estimated future production and development costs based on period end costs to determine pre-tax cash inflows. Future income taxes, if applicable, are computed by applying the statutory tax rate to the excess of pre-tax cash inflows over our tax basis in the oil and natural gas properties. Future net cash inflows after income taxes are discounted using a 10% annual discount rate.
"Undeveloped acreageWAHA"—Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.
"Wellhead natural gas"—Waha West Texas Natural gas produced at or near the well.Gas Index price as quoted in Platt's Inside FERC.
"Working interest" or "WI"—The right granted to the lessee of a property to explore for and to produce and own crude oil, natural gas liquids, natural gas or other minerals. The working interest owners bear the exploration, development and operating costs on either a cash, penalty or carried basis.
"WTI"—West Texas Intermediate grade crude oil. A light (low density) and sweet (low sulfur) crude oil, used as a pricing benchmark for NYMEX oil futures contracts.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Various statements contained in or incorporated by reference into this Quarterly Report are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements include statements, projections and estimates concerning our operations, performance, business strategy, oil, NGLs and natural gas reserves, drilling program capital expenditures, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. Forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "potential," "could," "may," "will," "foresee," "plan," "goal," "should," "intend," "pursue," "target," "continue," "suggest" or the negative thereof or other variations thereof or other words that convey the uncertainty of future events or outcomes. Forward-looking statements are not guarantees of performance. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. Among the factors that significantly impact our business and could impact our business in the future are:
moderating but continuing inflationary pressures and associated changes in monetary policy that may cause costs to rise;
changes in domestic and global production, supply and demand for oil, NGL and natural gas and actions by the possibilityOrganization of the Petroleum Exporting Countries members and other oil exporting nations ("OPEC+");
the volatility of oil, NGL and natural gas prices, including our area of operation in the Permian Basin;
reduced demand due to shifting market perception towards the oil and gas industry;
our ability to optimize spacing, drilling and completions techniques in order to maximize our rate of return, cash flows from operations and shareholder value;
the ongoing instability and uncertainty in the U.S. and international energy, financial and consumer markets that could adversely affect the liquidity available to us and our customers and the demand for commodities, including oil, NGL and natural gas;
changes in domestic and global production, supply and demand for oil, NGL and natural gas, including actions by OPEC members and other oil exporting nations ("OPEC+");
the volatility of oil, NGL and natural gas prices, including in our area of operationcompetition in the Permian Basin;
the potential impact of suspending drilling programsoil and completions activities or shutting in a portion of our wells, as well as costs to later restart, and co‐development considerations such as horizontal spacing, vertical spacing and parent‐child interactions on production of oil, NGL and natural gas from our wells;
United States ("U.S.") and international economic conditions and legal, tax, political and administrative developments, including the effects of energy, trade and environmental policies and existing and future laws and government regulations;
war and political instability in Ukraine and Russian efforts to destabilize the government of Ukraine and the global hydrocarbon market;
changes in general economic, business or industry conditions, including increases in interest rates, the tightening of the labor market, supply chain disruptions, elevated inflation rates and the possibility of a recession;
the effects, duration, government response or other implications of the coronavirus ("COVID-19") pandemic, or the threat and occurrence of other epidemic or pandemic diseases;
our ability to comply with federal, state and local regulatory requirements;
restrictions on the use of water, including limits on the use of produced water and a moratorium on new produced water well permits recently imposed by the Railroad Commission of Texas, in an effort to control induced seismicity in the Permian Basin;industry;
our ability to execute our strategies, including our ability to successfully identify and consummate strategic acquisitions at purchase prices that are accretive to our financial results and to successfully integrate acquired businesses, assets and properties; our ability to realize the anticipated benefits of acquired businesses, assets and properties;
competition in the oil and natural gas industry;acquisitions, including effectively managing our expanded acreage;
our ability to discover, estimate, develop and replace oil, NGL and natural gas reserves and inventory;
drillinginsufficient transportation capacity in the Permian Basin and operating risks impactingchallenges associated with such constraint, and the availability and costs of sufficient gathering, processing, storage and export capacity;
a decrease in production levels which may impair our ability to produce existing wells and/ormeet our contractual obligations and ability to retain our leases;
risks associated with the uncertainty of potential drilling locations and plans to drill and complete new wells over an extended period of time, including risks related to hydraulic fracturing activities and inclement or extreme weather;in the future;
the long-term performanceinability of wells that were completed using different technologies;significant customers to meet their obligations;
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revisions to our reserve estimates as a result of changes in commodity prices, decline curves and other uncertainties;
impactsthe availability and costs of impairment write-downs ondrilling and production equipment, supplies, labor and oil and natural gas processing and other services;
the effects, duration and other implications of, including government response to widespread epidemic or pandemic diseases;
ongoing war and political instability in Ukraine and Russian efforts to destabilize the government of Ukraine and the global hydrocarbon market;
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loss of senior management or other key personnel;
risks related to the geographic concentration of our financial statements;assets;
capital requirements for our operations and projects;
our ability to hedge commercial risk, including commodity price volatility, and regulations that affect our ability to hedge such risks;
our ability to continue to maintain the borrowing capacity under our Senior Secured Credit Facility (as defined herein) or access other means of obtaining capital and liquidity, especially during periods of sustained low commodity prices;
our ability to comply with restrictionscovenants and other terms and conditions contained in our debt agreements, including our Senior Secured Credit Facility and the indentures governing our senior unsecured notes, as well as debt that could be incurred in the future;
our ability to generate sufficient cash to service our indebtedness, fund our capital requirements for our operations and projects and generate future profits;
drilling and operating risks, including risks related to hydraulic fracturing activities and those related to inclement or extreme weather, impacting our ability to hedge our future production,produce existing wells and/or drill and regulations that affect our abilitycomplete new wells over an extended period of time;
physical and transition risks relating to hedge our future production;climate change;
the availabilityimpact of legislation or regulatory initiatives intended to address induced seismicity, including restrictions on the use of water, produced water and costs of drilling and production equipment, supplies, labor and oil and natural gas processing and other services;produced water wells, on our ability to conduct our operations;
United States ("U.S.") and international economic conditions and legal, tax, political and administrative developments, including the availabilityeffects of energy, trade and costs of sufficient gathering, processing, storageenvironmental policies and export capacity in the Permian Basinexisting and refining capacity in the U.S. Gulf Coast;future laws and government regulations;
our ability to comply with federal, state and local regulatory requirements;
the impact of repurchases, if any, of securities from time to time;
the effectiveness of our internal control over financial reporting and our ability to remediate a material weakness in our internal control over financial reporting;
our ability to maintain the health and safety of, as well as recruit and retain, qualified personnel necessary to operate our business;
risks related to the geographic concentration of our assets; and
our ability to secure or generate sufficient electricity to produce our wells without limitations.limitations; and
our belief that the outcome of any legal proceedings will not materially affect our financial results and operations.
These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth under "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations", "Part II, Item 1A. Risk Factors" and elsewhere in this Quarterly Report, under "Part II, Item 1A. Risk Factors" in our first-quarter 2022 Quarterly Report, and under "Part I, Item 1A. Risk Factors" and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 (the "2021"2022 Annual Report") and those set forth from time to time in our other filings with the SEC. These documents are available through our website or through the SEC's Electronic Data Gathering and Analysis Retrieval system at http:https://www.sec.gov. In light of such risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report, or if earlier, as of the date they were made. We do not intend to, and disclaim any obligation to, update or revise any forward-looking statements unless required by securities law.
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Part I

Item 1.    Consolidated Financial Statements (Unaudited)

Laredo Petroleum,Vital Energy, Inc.
Consolidated balance sheets
(in thousands, except share data)
(Unaudited)
September 30, 2022December 31, 2021June 30, 2023December 31, 2022
AssetsAssets  Assets  
Current assets:Current assets:  Current assets:  
Cash and cash equivalentsCash and cash equivalents$49,941 $56,798 Cash and cash equivalents$71,696 $44,435 
Accounts receivable, netAccounts receivable, net162,876 151,807 Accounts receivable, net143,672 163,369 
DerivativesDerivatives18,990 4,346 Derivatives11,942 24,670 
Other current assetsOther current assets16,254 22,906 Other current assets15,619 13,317 
Total current assetsTotal current assets248,061 235,857 Total current assets242,929 245,791 
Property and equipment:Property and equipment: Property and equipment: 
Oil and natural gas properties, full cost method:Oil and natural gas properties, full cost method: Oil and natural gas properties, full cost method: 
Evaluated propertiesEvaluated properties9,465,399 8,968,668 Evaluated properties10,349,348 9,554,706 
Unevaluated properties not being depletedUnevaluated properties not being depleted115,994 170,033 Unevaluated properties not being depleted198,805 46,430 
Less: accumulated depletion and impairmentLess: accumulated depletion and impairment(7,236,621)(7,019,670)Less: accumulated depletion and impairment(7,500,936)(7,318,399)
Oil and natural gas properties, netOil and natural gas properties, net2,344,772 2,119,031 Oil and natural gas properties, net3,047,217 2,282,737 
Midstream service assets, net90,990 96,528 
Other fixed assets, net40,150 34,590 
Midstream and other fixed assets, netMidstream and other fixed assets, net128,792 127,803 
Property and equipment, netProperty and equipment, net2,475,912 2,250,149 Property and equipment, net3,176,009 2,410,540 
DerivativesDerivatives29,156 32,963 Derivatives24,314 24,363 
Operating lease right-of-use assetsOperating lease right-of-use assets127,958 23,047 
Deferred income taxesDeferred income taxes222,217 — 
Other noncurrent assets, netOther noncurrent assets, net52,796 32,855 Other noncurrent assets, net22,002 22,373 
Total assetsTotal assets$2,805,925 $2,551,824 Total assets$3,815,429 $2,726,114 
Liabilities and stockholders' equityLiabilities and stockholders' equity Liabilities and stockholders' equity 
Current liabilities:Current liabilities: Current liabilities: 
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities$86,211 $71,386 Accounts payable and accrued liabilities$84,803 $102,516 
Accrued capital expendituresAccrued capital expenditures55,729 50,585 Accrued capital expenditures66,488 48,378 
Undistributed revenue and royaltiesUndistributed revenue and royalties249,295 117,920 Undistributed revenue and royalties166,663 160,023 
DerivativesDerivatives58,763 179,809 Derivatives2,338 5,960 
Operating lease liabilitiesOperating lease liabilities48,961 15,449 
Other current liabilitiesOther current liabilities77,275 107,213 Other current liabilities64,492 82,950 
Total current liabilitiesTotal current liabilities527,273 526,913 Total current liabilities433,745 415,276 
Long-term debt, netLong-term debt, net1,181,584 1,425,858 Long-term debt, net1,619,599 1,113,023 
DerivativesDerivatives766 — Derivatives3,025 — 
Asset retirement obligationsAsset retirement obligations70,063 69,057 Asset retirement obligations74,428 70,366 
Operating lease liabilitiesOperating lease liabilities75,844 9,435 
Other noncurrent liabilitiesOther noncurrent liabilities25,569 16,216 Other noncurrent liabilities5,215 7,268 
Total liabilitiesTotal liabilities1,805,255 2,038,044 Total liabilities2,211,856 1,615,368 
Commitments and contingenciesCommitments and contingenciesCommitments and contingencies
Stockholders' equity:Stockholders' equity:Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized and zero issued as of September 30, 2022 and December 31, 2021, respectively— — 
Common stock, $0.01 par value, 40,000,000 and 22,500,000 shares authorized, and 16,914,836 and 17,074,516 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively169 171 
Preferred stock, $0.01 par value, 50,000,000 shares authorized and zero issued as of June 30, 2023 and December 31, 2022Preferred stock, $0.01 par value, 50,000,000 shares authorized and zero issued as of June 30, 2023 and December 31, 2022— — 
Common stock, $0.01 par value, 40,000,000 shares authorized, and 18,593,867 and 16,762,127 issued and outstanding as of June 30, 2023 and December 31, 2022, respectivelyCommon stock, $0.01 par value, 40,000,000 shares authorized, and 18,593,867 and 16,762,127 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively186 168 
Additional paid-in capitalAdditional paid-in capital2,762,232 2,788,628 Additional paid-in capital2,838,143 2,754,085 
Accumulated deficitAccumulated deficit(1,761,731)(2,275,019)Accumulated deficit(1,234,756)(1,643,507)
Total stockholders' equityTotal stockholders' equity1,000,670 513,780 Total stockholders' equity1,603,573 1,110,746 
Total liabilities and stockholders' equityTotal liabilities and stockholders' equity$2,805,925 $2,551,824 Total liabilities and stockholders' equity$3,815,429 $2,726,114 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Laredo Petroleum,Vital Energy, Inc.
Consolidated statements of operations
(in thousands, except per share data)
(Unaudited)
Three months ended September 30,Nine months ended September 30, Three months ended June 30,Six months ended June 30,
2022202120222021 2023202220232022
Revenues:Revenues:Revenues:
Oil salesOil sales$311,740 $229,329 $1,069,542 $514,752 Oil sales$299,085 $410,359 $565,816 $757,802 
NGL salesNGL sales59,377 47,949 197,037 133,121 NGL sales25,887 72,505 58,893 137,660 
Natural gas salesNatural gas sales73,831 33,998 179,026 98,186 Natural gas sales8,952 66,606 27,026 105,195 
Midstream service revenues795 1,739 5,030 4,292 
Sales of purchased oilSales of purchased oil18,371 66,235 106,030 173,500 Sales of purchased oil338 8,795 14,189 87,659 
Other operating revenuesOther operating revenues800 1,891 1,645 4,235 
Total revenuesTotal revenues464,114 379,250 1,556,665 923,851 Total revenues335,062 560,156 667,569 1,092,551 
Costs and expenses:Costs and expenses:Costs and expenses:
Lease operating expensesLease operating expenses44,246 29,837 127,136 68,526 Lease operating expenses57,718 42,014 107,899 82,890 
Production and ad valorem taxesProduction and ad valorem taxes29,024 17,937 89,512 45,957 Production and ad valorem taxes21,607 33,001 42,138 60,488 
Transportation and marketing expensesTransportation and marketing expenses13,285 11,660 39,022 34,477 Transportation and marketing expenses10,681 10,994 21,596 25,737 
Midstream service expenses769 1,014 3,916 2,572 
Costs of purchased oilCosts of purchased oil18,772 68,805 108,516 183,458 Costs of purchased oil588 6,780 14,755 89,744 
General and administrativeGeneral and administrative11,857 15,008 50,800 49,182 General and administrative18,482 16,999 44,412 38,943 
Organizational restructuring expenses10,420 — 10,420 9,800 
Depletion, depreciation and amortizationDepletion, depreciation and amortization74,928 62,678 226,555 140,763 Depletion, depreciation and amortization103,340 78,135 190,119 151,627 
Impairment expense— — — 1,613 
Other operating expense, net1,772 1,798 2,947 4,099 
Other operating expenses, netOther operating expenses, net1,351 3,999 2,835 4,137 
Total costs and expensesTotal costs and expenses205,073 208,737 658,824 540,447 Total costs and expenses213,767 191,922 423,754 453,566 
Gain on disposal of assets, netGain on disposal of assets, net4,282 95,201 4,952 93,454 Gain on disposal of assets, net154 930 391 670 
Operating incomeOperating income263,323 265,714 902,793 476,858 Operating income121,449 369,164 244,206 639,655 
Non-operating income (expense):Non-operating income (expense):Non-operating income (expense):
Gain (loss) on derivatives, netGain (loss) on derivatives, net100,748 (96,240)(290,995)(467,547)Gain (loss) on derivatives, net(18,044)(65,927)2,446 (391,743)
Interest expenseInterest expense(30,967)(30,406)(96,251)(82,222)Interest expense(31,529)(32,807)(60,083)(65,284)
Gain (loss) extinguishment of debt, net553 — (245)— 
Loss on extinguishment of debt, netLoss on extinguishment of debt, net— (798)— (798)
Other income, netOther income, net98 441 433 2,236 Other income, net1,104 1,958 150 
Total non-operating income (expense), net70,432 (126,205)(387,058)(547,533)
Income (loss) before income taxes333,755 139,509 515,735 (70,675)
Total non-operating expense, netTotal non-operating expense, net(48,469)(99,526)(55,679)(457,675)
Income before income taxesIncome before income taxes72,980 269,638 188,527 181,980 
Income tax benefit (expense):Income tax benefit (expense):Income tax benefit (expense):
CurrentCurrent960 (1,300)(4,771)(1,300)Current(503)(4,513)(1,834)(5,731)
DeferredDeferred2,808 (1,377)2,324 707 Deferred222,334 (2,579)222,058 (484)
Total income tax benefit (expense)Total income tax benefit (expense)3,768 (2,677)(2,447)(593)Total income tax benefit (expense)221,831 (7,092)220,224 (6,215)
Net income (loss)$337,523 $136,832 $513,288 $(71,268)
Net income (loss) per common share:
Net incomeNet income$294,811 $262,546 $408,751 $175,765 
Net income per common share:Net income per common share:
BasicBasic$20.27 $8.68 $30.64 $(5.29)Basic$16.35 $15.60 $23.71 $10.46 
DilutedDiluted$20.08 $8.56 $30.26 $(5.29)Diluted$16.30 $15.41 $23.60 $10.31 
Weighted-average common shares outstanding:Weighted-average common shares outstanding:Weighted-average common shares outstanding:
BasicBasic16,650 15,756 16,750 13,464 Basic18,031 16,834 17,236 16,800 
DilutedDiluted16,809 15,993 16,963 13,464 Diluted18,085 17,039 17,319 17,040 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Laredo Petroleum,Vital Energy, Inc.
Consolidated statements of stockholders' equity
(in thousands)
(Unaudited)
Common stockAdditional
paid-in capital
Treasury stock
(at cost)
Accumulated deficit Common stockAdditional
paid-in capital
Treasury stock
(at cost)
Accumulated deficit 
SharesAmountSharesAmountTotal SharesAmountSharesAmountTotal
Balance, June 30, 202217,212 $172 $2,778,538 — $— $(2,099,254)$679,456 
Balance, December 31, 2022Balance, December 31, 202216,762 $168 $2,754,085 — $— $(1,643,507)$1,110,746 
Restricted stock awardsRestricted stock awards— — — — — — Restricted stock awards315 (3)— — — — 
Restricted stock forfeituresRestricted stock forfeitures(50)(1)— — — — Restricted stock forfeitures(3)— — — — — — 
Share repurchases— — — 245 (17,515)— (17,515)
Stock exchanged for tax withholdingStock exchanged for tax withholding— — — 11 (853)— (853)Stock exchanged for tax withholding— — — 49 (2,459)— (2,459)
Retirement of treasury stockRetirement of treasury stock(256)(2)(18,366)(256)18,368 — — Retirement of treasury stock(49)(1)(2,458)(49)2,459 — — 
Share-settled equity-based compensationShare-settled equity-based compensation— — 2,059 — — — 2,059 Share-settled equity-based compensation— — 3,141 — — — 3,141 
Net incomeNet income— — — — — 337,523 337,523 Net income— — — — — 113,940 113,940 
Balance, September 30, 202216,915 $169 $2,762,232 — $— $(1,761,731)$1,000,670 
Common stockAdditional
paid-in capital
Treasury stock
(at cost)
Accumulated deficit
SharesAmountSharesAmountTotal
Balance, June 30, 202113,573 $136 $2,473,709 — $— $(2,628,127)$(154,282)
Balance, March 31, 2023Balance, March 31, 202317,025 170 2,754,765 — — (1,529,567)1,225,368 
Restricted stock awardsRestricted stock awards39 — — — — — — Restricted stock awards— — — — — — 
Restricted stock forfeituresRestricted stock forfeitures(1)— — — — — — Restricted stock forfeitures(9)— — — — — — 
Stock exchanged for tax withholdingStock exchanged for tax withholding— — — (848)— (848)Stock exchanged for tax withholding— — — (385)— (385)
Retirement of treasury stockRetirement of treasury stock(9)— (848)(9)848 — — Retirement of treasury stock(7)— (385)(7)385 — — 
Exercise of stock options— 173 — — — 173 
Share-settled equity-based compensationShare-settled equity-based compensation— — 2,220 — — — 2,220 Share-settled equity-based compensation— — 3,711 — — — 3,711 
Equity issued for acquisitions of oil and natural gas properties2,507 25 239,942 — — — 239,967 
Equity issued for acquisition of oil and natural gas propertiesEquity issued for acquisition of oil and natural gas properties1,579 16 80,052 — — — 80,068 
Net incomeNet income— — — — — 136,832 136,832 Net income— — — — — 294,811 294,811 
Balance, September 30, 202116,111 $161 $2,715,196 — $— $(2,491,295)$224,062 
Balance, June 30, 2023Balance, June 30, 202318,594 $186 $2,838,143 — $— $(1,234,756)$1,603,573 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

Table of Contents
Laredo Petroleum,Vital Energy, Inc.
Consolidated statements of stockholders' equity
(in thousands)
(Unaudited)
Common stockAdditional
paid-in capital
Treasury stock
(at cost)
Accumulated deficit  Common stockAdditional
paid-in capital
Treasury stock
(at cost)
Accumulated deficit 
SharesAmountSharesAmountTotal SharesAmountSharesAmountTotal
Balance, December 31, 2021Balance, December 31, 202117,075 $171 $2,788,628 — $— $(2,275,019)$513,780 Balance, December 31, 202117,075 $171 $2,788,628 — $— $(2,275,019)$513,780 
Restricted stock awardsRestricted stock awards246 (2)— — — — Restricted stock awards232 (2)— — — — 
Restricted stock forfeituresRestricted stock forfeitures(57)(1)— — — — Restricted stock forfeitures(4)— — — — — — 
Share repurchases— — — 330 (26,586)— (26,586)
Stock exchanged for tax withholdingStock exchanged for tax withholding— — — 94 (7,442)— (7,442)Stock exchanged for tax withholding— — — 76 (5,847)— (5,847)
Retirement of treasury stockRetirement of treasury stock(424)(4)(34,024)(424)34,028 — — Retirement of treasury stock(76)(1)(5,846)(76)5,847 — — 
Share-settled equity-based compensationShare-settled equity-based compensation— — 7,630 — — — 7,630 Share-settled equity-based compensation— — 2,636 — — — 2,636 
Performance share conversionPerformance share conversion75 (1)— — — — Performance share conversion75 (1)— — — — 
Net income— — — — — 513,288 513,288 
Balance, September 30, 202216,915 $169 $2,762,232 — $— $(1,761,731)$1,000,670 
Net lossNet loss— — — — — (86,781)(86,781)
Balance, March 31, 2022Balance, March 31, 202217,302 173 2,785,415 — — (2,361,800)423,788 
Restricted stock awardsRestricted stock awards— — — — — — 
Restricted stock forfeituresRestricted stock forfeitures(3)— — — — — — 
Share repurchasesShare repurchases— — — 85 (9,071)— (9,071)
Stock exchanged for tax withholdingStock exchanged for tax withholding— — — (742)— (742)
Retirement of treasury stockRetirement of treasury stock(92)(1)(9,812)(92)9,813 — — 
Share-settled equity-based compensationShare-settled equity-based compensation— — 2,935 — — — 2,935 
Common stockAdditional
paid-in capital
Treasury stock
(at cost)
Accumulated deficit
SharesAmountSharesAmountTotal
Balance, December 31, 202012,020 $120 $2,398,464 — $— $(2,420,027)$(21,443)
Restricted stock awards233 (2)— — — — 
Restricted stock forfeitures(42)— — — — — — 
Stock exchanged for tax withholding— — — 53 (2,589)— (2,589)
Retirement of treasury stock(53)— (2,589)(53)2,589 — — 
Exercise of stock options— 173 — — — 173 
Share-settled equity-based compensation— — 6,730 — — — 6,730 
Issuance of common stock, net of costs1,438 14 72,478 — — — 72,492 
Equity issued for acquisitions of oil and natural gas properties2,507 25 239,942 — — — 239,967 
Performance share conversion— — — — — — 
Net loss— — — — — (71,268)(71,268)
Balance, September 30, 202116,111 $161 $2,715,196 — $— $(2,491,295)$224,062 
Net incomeNet income— — — — — 262,546 262,546 
Balance, June 30, 2022Balance, June 30, 202217,212 $172 $2,778,538 — $— $(2,099,254)$679,456 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
4

Table of Contents
Laredo Petroleum,Vital Energy, Inc.
Consolidated statements of cash flows
(in thousands)
(Unaudited)
Nine months ended September 30,Six months ended June 30,
2022202120232022
Cash flows from operating activities:Cash flows from operating activities:  Cash flows from operating activities:  
Net income (loss)$513,288 $(71,268)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net incomeNet income$408,751 $175,765 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Share-settled equity-based compensation, netShare-settled equity-based compensation, net6,295 5,609 Share-settled equity-based compensation, net5,465 4,657 
Depletion, depreciation and amortizationDepletion, depreciation and amortization226,555 140,763 Depletion, depreciation and amortization190,119 151,627 
Impairment expense— 1,613 
Gain on disposal of assets, netGain on disposal of assets, net(4,952)(93,454)Gain on disposal of assets, net(391)(670)
Mark-to-market on derivatives:Mark-to-market on derivatives:Mark-to-market on derivatives:
Loss on derivatives, net290,995 467,547 
Settlements paid for matured derivatives, net(423,668)(191,507)
Premiums received for commodity derivatives— 9,041 
Amortization of debt issuance costs4,809 3,608 
(Gain) loss on derivatives, net(Gain) loss on derivatives, net(2,446)391,743 
Settlements received (paid) for matured derivatives, netSettlements received (paid) for matured derivatives, net8,440 (297,824)
Amortization of operating lease right-of-use assets16,523 9,907 
Loss on extinguishment of debt, netLoss on extinguishment of debt, net245 — Loss on extinguishment of debt, net— 798 
Deferred income tax benefit(2,324)(707)
Deferred income tax (benefit) expenseDeferred income tax (benefit) expense(222,058)484 
Other, netOther, net4,600 3,359 Other, net5,147 15,964 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accounts receivable, netAccounts receivable, net(11,069)(58,681)Accounts receivable, net17,360 (53,960)
Other current assetsOther current assets7,574 (3,026)Other current assets(8,230)6,844 
Other noncurrent assets, netOther noncurrent assets, net1,450 (30,285)Other noncurrent assets, net1,590 (34,057)
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities15,084 21,342 Accounts payable and accrued liabilities(17,435)(8,634)
Undistributed revenue and royaltiesUndistributed revenue and royalties131,356 56,268 Undistributed revenue and royalties1,847 139,460 
Other current liabilitiesOther current liabilities(41,362)11,203 Other current liabilities(18,647)32,819 
Other noncurrent liabilitiesOther noncurrent liabilities(14,697)5,780 Other noncurrent liabilities(4,499)13,991 
Net cash provided by operating activitiesNet cash provided by operating activities720,702 287,112 Net cash provided by operating activities365,013 539,007 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Acquisitions of oil and natural gas properties, netAcquisitions of oil and natural gas properties, net(5,581)(627,044)Acquisitions of oil and natural gas properties, net(526,985)(7,887)
Capital expenditures:Capital expenditures:Capital expenditures:
Oil and natural gas propertiesOil and natural gas properties(432,124)(278,847)Oil and natural gas properties(309,223)(282,750)
Midstream service assets(1,163)(2,375)
Other fixed assets(9,101)(3,226)
Midstream and other fixed assetsMidstream and other fixed assets(6,899)(4,952)
Proceeds from dispositions of capital assets, net of selling costsProceeds from dispositions of capital assets, net of selling costs2,939 393,742 Proceeds from dispositions of capital assets, net of selling costs2,252 2,049 
Settlements received for contingent considerationSettlements received for contingent consideration1,555 — Settlements received for contingent consideration2,035 — 
Net cash used in investing activitiesNet cash used in investing activities(443,475)(517,750)Net cash used in investing activities(838,820)(293,540)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Borrowings on Senior Secured Credit FacilityBorrowings on Senior Secured Credit Facility335,000 425,000 Borrowings on Senior Secured Credit Facility595,000 135,000 
Payments on Senior Secured Credit FacilityPayments on Senior Secured Credit Facility(400,000)(650,000)Payments on Senior Secured Credit Facility(90,000)(240,000)
Extinguishment of debtExtinguishment of debt(182,319)— Extinguishment of debt— (32,334)
Issuance of July 2029 Notes— 400,000 
Proceeds from issuance of common stock, net of offering costs— 72,492 
Share repurchasesShare repurchases(26,586)— Share repurchases— (9,071)
Stock exchanged for tax withholdingStock exchanged for tax withholding(7,442)(2,589)Stock exchanged for tax withholding(2,844)(6,589)
Proceeds from exercise of stock options— 173 
Payments for debt issuance costsPayments for debt issuance costs(1,725)(14,597)Payments for debt issuance costs— (1,725)
Other, netOther, net(1,012)2,798 Other, net(1,088)— 
Net cash (used in) provided by financing activities(284,084)233,277 
Net (decrease) increase in cash and cash equivalents(6,857)2,639 
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities501,068 (154,719)
Net increase in cash and cash equivalentsNet increase in cash and cash equivalents27,261 90,748 
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period56,798 48,757 Cash and cash equivalents, beginning of period44,435 56,798 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$49,941 $51,396 Cash and cash equivalents, end of period$71,696 $147,546 
 The accompanying notes are an integral part of these unaudited consolidated financial statements.
5

Laredo Petroleum,Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 1—Organization and basis of presentation
Organization
Laredo Petroleum,Vital Energy, Inc. ("Laredo"Vital" or the "Company"), together with its wholly-owned subsidiaries, is an independent energy company focused on the acquisition, exploration and development of oil and natural gas properties in the Permian Basin of West Texas. The Company has identified one operating segment: exploration and production. In these notes, the "Company" refers to Laredo, LMSVital and GCMits subsidiaries collectively, unless the context indicates otherwise. All amounts, dollars and percentages presented in these unaudited consolidated financial statements and the related notes are rounded and, therefore, approximate.
Basis of presentation
The unaudited consolidated financial statements were derived from the historical accounting records of the Company and reflect the historical financial position, results of operations and cash flows for the periods described herein. The unaudited consolidated financial statements have been prepared in accordance with GAAP. All material intercompany transactions and account balances have been eliminated in the consolidation of accounts.
The unaudited consolidated financial statements have not been audited by the Company's independent registered public accounting firm, except that the consolidated balance sheet as of December 31, 20212022 is derived from the Company's audited consolidated financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all necessary adjustments to present fairly the Company's financial position as of SeptemberJune 30, 2022,2023, results of operations for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 and cash flows for the ninesix months ended SeptemberJune 30, 20222023 and 2021.2022. All adjustments are of a recurring nature unless otherwise disclosed herein.
Certain disclosures have been condensed or omitted from the unaudited consolidated financial statements. Accordingly, the unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 20212022 Annual Report.
Reclassifications
Certain previously reported 2022 and 2021prior period amounts have been reclassified to conform to the current period financial statement presentation. There was no impact on previously reported total assets, total liabilities, net income (loss) or stockholders' equity for the periods presented.
Significant accounting policies
There have been no material changes in the Company's significant accounting policies during the ninesix months ended SeptemberJune 30, 2022.2023. See Note 2 in the 20212022 Annual Report for discussion of significant accounting policies.
Use of estimates
The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as ofat the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates are reasonable, actual results could differ.
See Note 2 in the 20212022 Annual Report for further information regarding the use of estimates and assumptions.
Note 2—New accounting standards
The Company considered the applicability and impact of all accounting standard updates ("ASU") issued by the Financial Accounting Standards Board to the Accounting Standards Codification ("ASC") and has determined there are no ASUs that are not yet adopted and meaningful to disclose as of SeptemberJune 30, 2022.2023. Additionally, the Company did not adopt any new ASUs during the ninesix months ended SeptemberJune 30, 2022.2023.
6

Laredo Petroleum,Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 3—Acquisitions and divestitures
20212023 Acquisitions and divestiture
PioneerForge Acquisition
On September 17, 2021,May 11, 2023, the Company entered into a purchase and sale agreement (the "Pioneer PSA"with Northern Oil and Gas, Inc. ("NOG") with Pioneer Natural Resources USA, Inc ("PXD"), DE Midland III,and Forge Energy II Delaware, LLC ("DEM"Forge"), Parsley Minerals, LLC ("PM") and Parsley Energy, L.P. ("PE" and collectively with PXD, DEM, and PM, the "Seller") pursuant to which the Company and NOG agreed to purchase (the "Pioneer Acquisition"), effective as of July 1, 2021, certainForge's oil and natural gas properties located in the MidlandDelaware Basin, including approximately 20,00034,000 net acres in Pecos, Reeves and approximately 135 gross (121 net) operated locations, located in western Glasscock County, Texas, as well asWard Counties, and related assets and contracts, for an aggregate purchase price of $540.0 million of cash, subject to customary closing price adjustments. The Company agreed to purchase an undivided interest in 70% of the acquired assets and operate the assets and NOG agreed to purchase the remaining 30% of the assets (the "Pioneer Assets""Forge Acquisition").
On October 18, 2021June 30, 2023 ("PioneerForge Closing Date"), the Company closed the PioneerForge Acquisition for an aggregate purchase price of $210.1$397.2 million, comprised of (i) $135.3$391.6 million in cash, inclusive of customary closing price adjustments, subject to post-closing adjustments, and (ii) 959,691 shares of the Company's common stock, par value $0.01 per share (the "common stock"), based upon the share price as of the Pioneer Closing Date and (iii) $3.9$5.7 million in transaction related expenses, inclusive of post-closing adjustments.expenses.
The Company determined that the PioneerForge Acquisition was an asset acquisition, as substantially all of the gross assets acquired are concentrated in a group of similar identifiable assets. Accordingly, the consideration paid was allocated to the individual assets acquired and liabilities assumed based on their relative fair values and all transaction costs associated were capitalized.
The following table presents components of the purchase price, inclusive of customary closing adjustments:
(in thousands, except for share and share price data)thousands)As of October 18, 2021June 30, 2023
Shares of Company common stock959,691
Company common stock price at the Pioneer Closing Date$73.90 
Value of Company common stock consideration$70,921 
Cash consideration$135,323391,586 
Transaction costs3,8615,656 
Total purchase price$210,105397,242 
The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed, based on their relative fair values, on the PioneerForge Closing Date:
(in thousands)As of October 18, 2021June 30, 2023
Evaluated properties$143,021249,831 
Unevaluated properties74,468153,110 
Revenue suspense liabilities assumed(7,384)(4,323)
Asset retirement obligation liabilities assumed(1,376)
Allocated purchase price$210,105397,242 
The Company funded the cash portion of the aggregate purchase price and related transaction costs with respect to the PioneerForge Acquisition with cash on hand and borrowings under its Senior Secured Credit Facility.
During the year ended December 31, 2021, in connection with the Pioneer Acquisition, the Company acquired additional interests in the Pioneer Assets through additional sellers that exercised their "tag-along" sales rights, for total cash consideration of $2.9 million, excluding customary purchase price adjustments. These acquisitions were accounted for as asset acquisitions.
Sabalo/ShadDriftwood Acquisition
On May 7, 2021,February 14, 2023, the Company entered into two separatea purchase and sale agreements, one (the "Sabalo PSA")agreement with SabaloDriftwood Energy LLC and its subsidiary, Sabalo Operating, LLC (collectively, "Sabalo"("Driftwood"), andpursuant to which the otherCompany agreed to purchase (the "Shad PSA" and together with the Sabalo PSA, the "Sabalo/Shad PSAs""Driftwood Acquisition") with Shad Permian, LLC ("Shad"), to acquire certain Midland BasinDriftwood's oil and natural gas
7

Laredo Petroleum, Inc.
Condensed notes to properties in the consolidated financial statements
(Unaudited)
properties,Midland Basin, including approximately 21,00011,200 net acres and approximately 120 gross (109 net) operated locations and approximately 150 gross (18 net) non-operated locations, located in HowardUpton and BordenReagan Counties Texas, (collectively, the "Sabalo/Shad Acquisition"and related assets and contracts, inclusive of derivatives (the "Driftwood Assets"). Sabalo and Shad are unaffiliated, but owned interests in the same assets.
On July 1, 2021April 3, 2023 ("Sabalo/ShadDriftwood Closing Date"), the Company closed the Sabalo/ShadDriftwood Acquisition effective April 1, 2021, for an aggregate purchase price of $863.1$201.3 million, comprised of (i) $606.1$117.3 million inof cash, inclusive of customary closing price adjustments, subject to post-closing adjustments, (ii) 2,506,9641,578,948 shares of the Company's common stock, par value $0.01 per share, based upon the share price as of the Sabalo/ShadDriftwood Closing Date and (iii) $17.0$3.9 million in transaction related expenses, inclusive of post-closing adjustments.expenses.
The Sabalo/Shad Acquisition was accounted for as a single transaction because the Sabalo PSA and Shad PSA were entered into at the same time and in contemplation of one another to form a single transaction designed to achieve an overall economic effect. The Company determined that the Sabalo/ShadDriftwood Acquisition was an asset acquisition, as substantially all of the gross assets acquired are concentrated in a group of similar identifiable assets. Accordingly, the consideration paid was allocated to the individual assets acquired and liabilities assumed based on their relative fair values and all transaction costs associated were capitalized.
7

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
The following table presents components of the purchase price, inclusive of customary closing adjustments:
(in thousands, except for share and share price data)As of July 1, 2021April 3, 2023
Shares of Company common stock2,506,9641,578,948 
Company common stock price at the Sabalo/ShadDriftwood Closing Date$95.7250.71 
Value of the Company common stock consideration$239,96780,068 
Cash consideration$606,126117,332 
Transaction costs17,0203,857 
Total purchase price$863,113201,257 
The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed, based on their relative fair values, on the Sabalo/ShadDriftwood Closing Date:
(in thousands)As of July 1, 2021April 3, 2023
Evaluated properties$503,005147,622 
Unevaluated properties362,97759,088 
Revenue suspense liabilities assumed(4,269)(470)
InventoryDerivative liabilities assumed1,400 (4,151)
Asset retirement obligation liabilities assumed(832)
Allocated purchase price$863,113201,257 
The Company funded the cash portion of the aggregate purchase price and related transaction costs with respect to the Sabalo/ShadDriftwood Acquisition with proceeds from cash on hand and borrowings under its Senior Secured Credit Facility andFacility.
During the Working Interest Sale described below.three months ended June 30, 2022, in connection with the Driftwood Acquisition, the Company acquired additional interests in the Driftwood Assets through additional sellers that exercised their "tag-along" sales rights, for total cash consideration of $8.6 million, excluding customary purchase price adjustments. These acquisitions were accounted for as asset acquisitions.
Working Interest Sale2022 Divestiture
On May 7, 2021,August 16, 2022, the Company entered into a purchase and sale agreement (the "Sixth Street PSA") with Piper Investments Holdings, LLC, an affiliate of Sixth Street Partners, LLC ("Sixth Street"),NOG, pursuant to which the Company agreed to sell 37.5% ofto NOG the Company's working interestinterests in certain producing wellboresspecified non-operated oil and the relatedgas properties primarily located within Glasscock and Reagan Counties, Texas, subject to certain excluded assets and title diligence procedures (the "Working"NOG Working Interest Sale").
On July 1, 2021 (the "Sixth Street Closing Date"),October 3, 2022, the Company closed the NOG Working Interest Sale for cash proceedsan aggregate sales price of $405.0 million. In addition to such proceeds, the Sixth Street PSA also provided the Company with the right to receive up to a maximum$106.1 million, inclusive of $93.7 million in additional cash consideration if certain cash flow targets related to divested oil and natural gas property operations are met ("Sixth Street Contingent Consideration"). The Sixth Street Contingent Consideration is made up of quarterly payments through June 2027 totaling up to $38.7 million and a potential balloon payment of $55.0 million in June 2027. On the Sixth Street Closing Date, the fair value of the Sixth Street Contingent Consideration was determined to be $33.8 million. The Sixth Street Contingent Consideration is accounted for as a contingent consideration derivative, with allpost-closing adjustments.
8

Laredo Petroleum,Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
gains and losses as a result of changes in the fair value of the contingent consideration derivative recognized in earnings in the period in which the changes occur. See Notes 8 and 9 for further discussion of the Sixth Street Contingent Consideration.
Subsequent to the Sixth Street Closing Date, the Company continues to own and operate its remaining working interest in the properties sold to Sixth Street; however, the results of operations and cash flows related to the 37.5% working interests sold were eliminated from the Company's financial statements. This divestiture did not represent a strategic shift and will not have a major effect on the Company's future operations or financial results.
Pursuant to the rules governing full cost accounting, the Company recorded a gain on the Working Interest Sale of $94.3 million, net of transaction expenses of $11.6 million, on the Company's consolidated statements of operations, inclusive of post-closing adjustments, as this divestment represented more than 25% of the Company's June 30, 2021 proved reserves. For the purposes of calculating the gain, total capitalized costs were allocated between reserves sold and reserves retained as of the Sixth Street Closing Date.
Note 4—Debt
Long-term debt, net
The following table presents the Company's long-term debt and debt issuance costs, net included in "Long-term debt, net" on the unaudited consolidated balance sheets as of the dates presented:
September 30, 2022December 31, 2021 June 30, 2023December 31, 2022
(in thousands)(in thousands)Long-term debtDebt issuance costs, netLong-term debt, netLong-term debtDebt issuance costs, netLong-term debt, net(in thousands)Long-term debtDebt issuance costs, netLong-term debt, netLong-term debtDebt issuance costs, netLong-term debt, net
January 2025 NotesJanuary 2025 Notes$529,464 $(4,355)$525,109 $577,913 $(6,345)$571,568 January 2025 Notes$455,628 $(2,407)$453,221 $455,628 $(3,297)$452,331 
January 2028 NotesJanuary 2028 Notes326,756 (3,978)322,778 361,044 (5,024)356,020 January 2028 Notes300,309 (3,123)297,186 300,309 (3,478)296,831 
July 2029 NotesJuly 2029 Notes298,214 (4,517)293,697 400,000 (6,730)393,270 July 2029 Notes298,214 (4,022)294,192 298,214 (4,353)293,861 
Senior Secured Credit Facility(1)
Senior Secured Credit Facility(1)
40,000 — 40,000 105,000 — 105,000 
Senior Secured Credit Facility(1)
575,000 — 575,000 70,000 — 70,000 
TotalTotal$1,194,434 $(12,850)$1,181,584 $1,443,957 $(18,099)$1,425,858 Total$1,629,151 $(9,552)$1,619,599 $1,124,151 $(11,128)$1,113,023 

(1)Debt issuance costs, net related to the Senior Secured Credit Facility of $7.8$5.8 million and $8.1$7.3 million as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively, are included in "Other noncurrent assets, net" on the unaudited consolidated balance sheets.
Senior unsecured notes repurchases
The following table presents the Company's repurchases of its senior unsecured notes and the related gain or loss on extinguishment of debt during the periods presented:
(in thousands)Three months ended September 30, 2022Nine months ended September 30, 2022
January 2025 Notes$48,449 $48,449 
January 2028 Notes28,038 34,288 
January 2029 Notes76,010 101,786 
Total principal amount repurchased$152,497 $184,523 
 
Write off of debt issuance costs$(1,958)$(2,449)
Difference between consideration paid and net carrying amounts2,511 2,204 
Gain (loss) on extinguishment of debt, net$553 $(245)
See Note 15 for the Company's additional repurchases of its senior unsecured notes subsequent to September 30, 2022.
Three months ended June 30,Six months ended June 30,
(in thousands)2023202220232022
January 2025 Notes$— $— $— $— 
January 2028 Notes— 6,250 — 6,250 
January 2029 Notes— 25,776 — 25,776 
Total principal amount repurchased$— $32,026 $— $32,026 
 Less:
Consideration paid$— $32,334 $— $32,334 
Write off of debt issuance costs— 490 — 490 
Loss on extinguishment of debt, net(1)
$— $(798)$— $(798)
______________________________________________________________________________

(1)
9

Laredo Petroleum, Inc.
Condensed notes toAmounts are included in "Loss on extinguishment of debt, net" on the consolidated financial statements of operations.
(Unaudited)
Senior Secured Credit Facility
On August 30, 2022, the Company entered into the Ninth Amendment to the Senior Secured Credit Facility (the "Ninth Amendment"). The Ninth Amendment, among other things, added additional capacity to making repurchases of the Company's common stock and clarified the conditions to making redemptions of the Company's debt.
As of SeptemberJune 30, 2022,2023, the Senior Secured Credit Facility, which matures on July 16, 2025 (subject to a springing maturity date of July 29, 2024 if any of the January 2025 Notes are outstanding on such date), had a maximum credit amount of $2.0 billion, a borrowing base and an aggregate elected commitment of $1.25$1.3 billion and $1.0 billion, respectively, with a $40.0$575.0 million balance outstanding, and was subject to an interest rate of 5.379%7.978%. The Senior Secured Credit Facility contains both financial and non-financial covenants, all of which the Company was in compliance with for all periods presented. Additionally, the Senior Secured Credit Facility provides for the issuance of letters of credit, limited to the lesser of total capacity andor $80.0 million. As of June 30, 2023 and December 31, 2021,2022, the Company had a $44.1 million letterno letters of credit outstanding under the Senior Secured Credit Facility. No letters of credit were outstanding under the Senior Secured Credit Facility as of September 30, 2022. For additional information see Note 7 in the 20212022 Annual Report. See Note 1514 for discussion of (i) additional borrowings and repayments on and (ii) an increase in the borrowing base of the Senior Secured Credit Facility subsequent to SeptemberJune 30, 2022.2023.
9

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 5—Stockholders' equity
Shares issued for acquisition of oil and natural gas properties
On April 3, 2023, in connection with the Driftwood Acquisition, the Company issued 1,578,948 shares of its common stock as part of the purchase price. See Note 3 for additional information on the Driftwood Acquisition.
Authorized shares increase
On May 26, 2022, upon recommendation of the Company's board of directors, stockholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of its common stock from 22,500,000 shares to 40,000,000 shares.
Share repurchase program
On May 31, 2022, the Company's board of directors authorized a $200.0 million share repurchase program. The repurchase program commenced in May 2022 and expires in May 2024. Share repurchases under the program may be made through a variety of methods, which may include open market purchases, including under plans complying with Rule 10b5-1 of the Exchange Act, and privately negotiated transactions. The timing and actual number of share repurchases will depend upon several factors, including market conditions, business conditions, the trading price of the Company's common stock and the nature of other investment opportunities available to the Company.
The following table presentsCompany's board of directors may modify, increase, suspend or terminate the Company's open market repurchases ofshare repurchase program at any time at its common stock duringdiscretion. During the periods presented:
(in thousands, except for share and share price data)Three months ended September 30, 2022Nine months ended September 30, 2022
Shares of Company common stock repurchased244,687329,848
Average share price(1)
$71.58 $80.60 
Total$17,515 $26,586 
______________________________________________________________________________
(1)Average share price includes any commissions paid to repurchase stock.
All shares were retired upon repurchase. See Note 15 for the Company's additional repurchases of its common stock subsequent to Septembersix months ended June 30, 2022.
ATM Program
On February 23, 2021,2022, the Company entered into an equity distribution agreement (the "Equity Distribution Agreement") with Wells Fargo Securities, LLC acting as sales agent and/or principal (the "Sales Agent"), pursuant to which the Company may offer and sell, from time to time through the Sales Agent,repurchased 85,161 shares of its common stock having an aggregate gross saleson the open market at a weighted-average price of up to $75.0$106.50 per common share for a total of $9.1 million through an "at-the-market" equityunder this program (the "ATM Program").
Duringand, upon repurchase, the nineshares were retired. No shares were repurchased during the six months ended SeptemberJune 30, 2021, the Company sold 1,438,105 shares2023. As of its common stock pursuant to the ATM ProgramJune 30, 2023, approximately $162.7 million remained available for net proceeds of approximately $72.5 million, after underwriting commissions and other related expenses,
10

Laredo Petroleum, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
thus completing the ATM Program. Proceeds fromfuture repurchases under the share sales were utilized to reduce borrowings on the Senior Secured Credit Facility.repurchase program.
Note 6—Equity Incentive Plan
The Laredo Petroleum,Vital Energy, Inc. Omnibus Equity Incentive Plan (the "Equity Incentive Plan") provides for the granting of incentive awards in the form of restricted stock awards, stock option awards, performance share awards, performance unit awards, phantom unit awards and other awards. On May 20, 2021, the Company's stockholders approved an amendment to theThe Equity Incentive Plan to, among other things, increaseallows for the maximum numberissuance of shares of the Company's common stock issuable under the Equity Incentive Plan from 1,492,500up to 2,432,500 shares.
See Note 9 in the 20212022 Annual Report for additional discussion of the Company's equity-based compensation awards.
10

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
The following table presents activity for equity-based compensation awards for the ninesix months ended SeptemberJune 30, 2022:2023:
Equity AwardsLiability AwardsEquity AwardsLiability Awards
(in thousands)(in thousands)Restricted Stock AwardsStock Option Awards
Performance Share Awards(1)(2)
Performance Unit Awards
Phantom Unit Awards(3)
(in thousands)Restricted Stock AwardsStock Option AwardsPerformance Share Awards
Performance Unit Awards(1)(2)
Phantom Unit Awards(3)
Outstanding as of December 31, 2021350 72 209 33 
Outstanding as of December 31, 2022Outstanding as of December 31, 2022362 48 150 18 
GrantedGranted246 — 62 — — Granted321 — — 75 — 
ForfeitedForfeited(57)— (16)(59)— Forfeited(12)— — — — 
VestedVested(180)— (70)— (15)Vested(158)— — (67)(16)
Expired or canceledExpired or canceled— (2)— — — Expired or canceled— (1)— — — 
Outstanding as of September 30, 2022359 48 150 18 
Outstanding as of June 30, 2023Outstanding as of June 30, 2023513 48 158 
_____________________________________________________________________________
(1)The performance shareunit awards granted on February 28, 2019March 5, 2020 had a performance period of January 1, 20192020 to December 31, 20212022 and, as their market and performance criteria were satisfied, resulted in a 107% payout.151% payout, or 101,368 units. As such, the granted awards vested and were converted into 75,107 shares ofpaid out in cash on March 3, 2023 at $57.06 based on the Company's commonclosing stock duringprice on the nine months ended September 30, 2022 based on this 107% payout.vesting date.
(2)On February 22, 2022,15, 2023, the Company granted performance shareunit awards with a performance period of January 1, 20222023 through December 31, 2024.2025. The market criteria consists of: (i) annual relative total shareholder return comparing the Company's shareholder return to the shareholder return of the exploration and production companies listed in the RussellRussel 2000 Index and (ii) annual absolute total shareholder return. The performance criteria for these awards consists of: (i) earnings before interest, taxes, depreciation, amortization and exploration expense and three-year total debt reduction, (ii) growth in inventory and (iii) emissions reduction targets.reductions. Any sharesunits earned are expected to be paid in equitycash during the first quarter following the completion of the requisite service period, based on the achievement of market and performance criteria, and the payout can range from 0% to 225%.
(3)On March 1, 20222023 and March 5, 2022, the vested3, 2023, granted phantom unit awards vested and were settled and paid out in cash at a fair value of $76.60$52.56 and $83.00$57.06, respectively, based on the Company's closing stock price on the respective vesting dates.date.
As of SeptemberJune 30, 2022,2023, total unrecognized cost related to equity-based compensation awards was $23.2$30.2 million, of which $5.3$4.8 million was attributable to liability awards which will be settled in cash rather than shares. Such cost will be recognized on a straight-line basis over an expected weighted-average period of 1.992.14 years.
Equity-based compensation
The following table reflects equity-based compensation expense for the periods presented:
Three months ended June 30,Six months ended June 30,
(in thousands)2023202220232022
Equity awards:
Restricted stock awards$3,322 $2,435 $6,039 $4,610 
Performance share awards389 500 813 961 
Total share-settled equity-based compensation, gross3,711 2,935 6,852 5,571 
Less amounts capitalized(818)(331)(1,387)(914)
Total share-settled equity-based compensation, net2,893 2,604 5,465 4,657 
Liability awards:
Performance unit awards1,093 340 1,590 5,906 
Phantom unit awards18 270 235 879 
Total cash-settled equity-based compensation, gross1,111 610 1,825 6,785 
Less amounts capitalized— (155)(50)(202)
Total cash-settled equity-based compensation, net1,111 455 1,775 6,583 
Total equity-based compensation, net$4,004 $3,059 $7,240 $11,240 
11

Laredo Petroleum,Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Equity-based compensation
The following table reflects equity-based compensation expense for the periods presented:
Three months ended September 30,Nine months ended September 30,
(in thousands)2022202120222021
Equity awards:
Restricted stock awards$1,818 $1,810 $6,428 $5,630 
Performance share awards241 410 1,202 1,093 
Stock option awards— — — 
Total share-settled equity-based compensation, gross$2,059 $2,220 $7,630 $6,730 
Less amounts capitalized(421)(409)(1,335)(1,121)
Total share-settled equity-based compensation, net$1,638 $1,811 $6,295 $5,609 
Liability awards:
Performance unit awards$(4,311)$1,380 $1,595 $8,552 
Phantom unit awards199 269 1,078 1,202 
Total cash-settled equity-based compensation, gross$(4,112)$1,649 $2,673 $9,754 
Less amounts capitalized(45)(60)(247)(353)
Total cash-settled equity-based compensation, net$(4,157)$1,589 $2,426 $9,401 
Total equity-based compensation, net$(2,519)$3,400 $8,721 $15,010 
Note 7—Net income (loss) per common share
Basic and diluted net income (loss) per common share are computed by dividing net income (loss) by the weighted-average common shares outstanding for the period. Diluted net income (loss) per common share reflects the potential dilution of non-vested restricted stock awards, outstanding stock option awards and non-vested performance shareequity-based compensation awards. See Note 9 in the 20212022 Annual Report for additional discussion of these awards. For the nine months ended September 30, 2021, all of these awards were anti-dilutive due to the Company's net loss and, therefore, were excluded from the calculation of diluted net loss per common share.
The following table reflects the calculations of basic and diluted (i) weighted-average common shares outstanding and (ii) net income (loss) per common share for the periods presented:
Three months ended September 30,Nine months ended September 30,
(in thousands, except for per share data)2022202120222021
Net income (loss) (numerator)$337,523 $136,832 $513,288 $(71,268)
Weighted-average common shares outstanding (denominator):
Basic16,650 15,756 16,750 13,464 
Dilutive non-vested restricted stock awards159 187 197 — 
Dilutive non-vested performance share awards(1)
— 50 16 — 
Diluted16,809 15,993 16,963 13,464 
Net income (loss) per common share:
Basic$20.27 $8.68 $30.64 $(5.29)
Diluted$20.08 $8.56 $30.26 $(5.29)
_____________________________________________________________________________
Three months ended June 30,Six months ended June 30,
(in thousands, except for per share data)2023202220232022
Net income$294,811 $262,546 $408,751 $175,765 
Weighted-average common shares outstanding:
Basic18,031 16,834 17,236 16,800 
Dilutive non-vested restricted stock awards54 205 83 216 
Dilutive non-vested performance share awards(1)
— — — 24 
Diluted18,085 17,039 17,319 17,040 
Net income per common share:
Basic$16.35 $15.60 $23.71 $10.46 
Diluted$16.30 $15.41 $23.60 $10.31 

(1)The dilutive effect of the non-vested performance shares for the three and ninesix months ended SeptemberJune 30, 2022 was calculated assuming theeach respective performance period ended on SeptemberJune 30, 2022.
12

Laredo Petroleum, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 8—Derivatives
The Company has two types of derivative instruments as of SeptemberJune 30, 2022:2023: (i) commodity derivatives and (ii) a contingent consideration derivative. In previous periods, the Company also engaged in an interest rate swap derivative, which concluded during the quarterly period ended June 30,second quarter of 2022. See (i) Note 2 in the 2021 Annual Report for discussion of the Company's significant accounting policies for derivatives and presentation and (ii) Note 9 for discussion of fair value measurement of derivatives on a recurring basis.basis and Note 14 for discussion of derivatives subsequent events. The Company's derivatives were not designated as hedges for accounting purposes, and the Company does not enter into such instruments for speculative trading purposes. Accordingly, the changes in derivative fair valuevalues are recognized in "Gain"Gain (loss) on derivatives, net"net" under "Non-operating income (expense)" on the unaudited consolidated statements of operations.
The following table summarizes components of the Company's gain (loss) on derivatives, net by type of derivative instrument for the periods presented:
Three months ended September 30,Nine months ended September 30,Three months ended June 30,Six months ended June 30,
(in thousands)(in thousands)2022202120222021(in thousands)2023202220232022
CommodityCommodity$110,356 $(101,394)$(285,715)$(472,296)Commodity$(16,190)$(66,347)$1,392 $(396,071)
Contingent considerationContingent consideration(1,854)419 1,054 4,314 
Interest rateInterest rate— (17)14 (43)Interest rate— — 14 
Contingent consideration(9,608)5,171 (5,294)4,792 
Gain (loss) on derivatives, netGain (loss) on derivatives, net$100,748 $(96,240)$(290,995)$(467,547)Gain (loss) on derivatives, net$(18,044)$(65,927)$2,446 $(391,743)
Commodity
Due to the inherent volatility in oil, NGL and natural gas prices and the sometimes wide pricing differentials between where the Company produces and where the Company sells such commodities, the Company engages in commodity derivative transactions, such as puts, swaps, collars and basis swaps, to hedge price risk associated with a portion of the Company's anticipated sales volumes. By removing a portion of the price volatility associated with future sales volumes, the Company expects to mitigate, but not eliminate, the potential effects of variability in cash flows from operations. See Note 1011 in the 20212022 Annual Report for discussion of transaction types and settlement indexes. During the ninesix months ended SeptemberJune 30, 2022,2023, the Company’s derivatives were settled based on reported prices on commodity exchanges, with (i) oil derivatives settled based on WTI NYMEX, Argus WTI Midland and Brent ICE pricing, (ii) NGL derivatives settled based on Mont Belvieu OPISArgus WTI Formula Basis pricing and (iii) natural gas derivatives settled based on Henry Hub NYMEX and Waha Inside FERC pricing.

1312

Laredo Petroleum,Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
The following table summarizes open commodity derivative positions as of SeptemberJune 30, 2022,2023, for commodity derivatives that were entered into through SeptemberJune 30, 2022,2023, for the settlement periods presented:
 Remaining Year 2022Year 2023
Oil: 
WTI NYMEX - Swaps:
Volume (Bbl)92,000 — 
Weighted-average price ($/Bbl)$64.40 $— 
WTI NYMEX - Collars:
Volume (Bbl)1,407,600 4,362,000 
Weighted-average floor price ($/Bbl)$72.65 $67.93 
Weighted-average ceiling price ($/Bbl)$86.54 $82.89 
Brent ICE - Swaps:
Volume (Bbl)1,039,600 — 
Weighted-average price ($/Bbl)$48.34 $— 
Brent ICE - Collars: 
Volume (Bbl)391,000 — 
Weighted-average floor price ($/Bbl)$56.65 $— 
Weighted-average ceiling price ($/Bbl)$65.44 $— 
NGL:
Purity Ethane - Swaps:
Volume (Bbl)386,400 — 
Weighted-average price ($/Bbl)$11.42 $— 
Non-TET Propane - Swaps:
Volume (Bbl)294,400 — 
Weighted-average price ($/Bbl)$35.91 $— 
Non-TET Normal Butane - Swaps:
Volume (Bbl)92,000 — 
Weighted-average price ($/Bbl)$41.58 $— 
Non-TET Isobutane - Swaps:
Volume (Bbl)27,600 — 
Weighted-average price ($/Bbl)$42.00 $— 
Non-TET Natural Gasoline - Swaps:
Volume (Bbl)92,000 — 
Weighted-average price ($/Bbl)$60.65 $— 
Natural gas:
Henry Hub NYMEX - Swaps: 
Volume (MMBtu)920,000 — 
Weighted-average price ($/MMBtu)$2.73 $— 
Henry Hub NYMEX - Collars: 
Volume (MMBtu)7,360,000 25,550,000 
Weighted-average floor price ($/MMBtu)$3.09 $4.14 
Weighted-average ceiling price ($/MMBtu)$3.84 $8.43 
Waha Inside FERC to Henry Hub NYMEX - Basis Swaps: 
Volume (MMBtu)7,314,000 25,550,000 
Weighted-average differential ($/MMBtu)$(0.36)$(1.65)
14

Laredo Petroleum, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
 Remaining Year 2023Year 2024
Oil: 
WTI NYMEX - Swaps:
Volume (Bbl)2,024,000 3,260,950 
Weighted-average price ($/Bbl)$72.83 $69.56 
WTI NYMEX - Collars:
Volume (Bbl)1,793,400 — 
Weighted-average floor price ($/Bbl)$69.58 $— 
Weighted-average ceiling price ($/Bbl)$87.01 $— 
WTI NYMEX - Three-way Collars:
Volume (Bbl)191,500 217,350 
Weighted-average sold put price ($/Bbl)$45.54 $50.00 
Weighted-average floor price ($/Bbl)$57.68 $66.51 
Weighted-average ceiling price ($/Bbl)$74.37 $87.09 
Argus WTI Midland to Argus WTI Formula Basis - Basis Swaps:
Volume (Bbl)328,900 293,300 
Weighted-average differential ($/Bbl)$0.18 $0.11 
Natural gas:
Henry Hub NYMEX - Swaps: 
Volume (MMBtu)78,100 22,415,700 
Weighted-average price ($/MMBtu)$2.46 $3.47 
Henry Hub NYMEX - Collars: 
Volume (MMBtu)13,685,407 776,292 
Weighted-average floor price ($/MMBtu)$4.11 $3.40 
Weighted-average ceiling price ($/MMBtu)$8.33 $6.11 
Henry Hub NYMEX - Three-way Collars:
Volume (MMBtu)69,000 — 
Weighted-average sold put price ($/MMBtu)$2.00 $— 
Weighted-average floor price ($/MMBtu)$2.50 $— 
Weighted-average ceiling price ($/MMBtu)$3.01 $— 
Waha Inside FERC to Henry Hub NYMEX - Basis Swaps: 
Volume (MMBtu)21,192,507 23,191,992 
Weighted-average differential ($/MMBtu)$(1.53)$(0.75)
Contingent consideration
On May 7, 2021, the Company entered into a purchase and sale agreement (the "Sixth Street PSA"), to sell 37.5% of the Company's working interest in certain producing wellbores and the related properties primarily located within Glasscock and Reagan Counties, Texas. The Sixth Street PSA provides for potential contingent payments to be paid to the Company if certain cash flow targets are met related to divested oil and natural gas property operations.operations (the "Sixth Street Contingent Consideration"). The Sixth Street Contingent Consideration provides the Company with the right to receive up to a maximum of $93.7 million in additional cash consideration, comprised of potential quarterly payments through June 2027 totaling up to $38.7 million and a potential balloon payment of $55.0 million in June 2027. As of SeptemberJune 30, 2022,2023, the maximum remaining additional cash consideration of the contingent consideration was $90.1$85.4 million. The fair value of the Sixth Street Contingent Consideration was $35.9$26.2 million as of June 30, 2023 and $26.6 million as of December 31, 2021 and $28.7 million as of September 30, 2022. See Note 3 for further discussion
13

Vital Energy, Inc.
Condensed notes to the Working Interest Sale associated with the Sixth Street Contingent Consideration.consolidated financial statements
At each quarterly reporting period, the Company remeasures contingent consideration with the change in fair value recognized in "Gain (loss) on derivatives, net" under "Non-operating income (expense)" on the unaudited consolidated statements of operations.(Unaudited)
Note 9—Fair value measurements
See the beginning of Note 1112 in the 20212022 Annual Report for information about the fair value hierarchy levels.
Fair value measurement on a recurring basis
See Note 8 for further discussion of the Company's derivatives, and see Note 2 in the 2021 Annual Report for the Company's significant accounting policies for derivatives.

15

Laredo Petroleum, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Balance sheet presentation
The following tables present the Company's derivatives by (i) balance sheet classification, (ii) derivative type and (iii) fair value hierarchy level, and provide a total, on a gross basis and a net basis reflected in "Derivatives" on the unaudited consolidated balance sheets as of the dates presented:
September 30, 2022June 30, 2023
(in thousands)(in thousands)Level 1Level 2Level 3Total gross fair valueAmounts offsetNet fair value presented on the unaudited consolidated balance sheets(in thousands)Level 1Level 2Level 3Total gross fair valueAmounts offsetNet fair value presented on the consolidated balance sheets
Assets:Assets:Assets:
Current:Current:Current:
CommodityCommodity$— $49,566 $— $49,566 $(34,716)$14,850 Commodity$— $32,558 $— $32,558 $(22,541)$10,017 
Contingent considerationContingent consideration— — 4,140 4,140 — 4,140 Contingent consideration— — 1,925 1,925 — 1,925 
Noncurrent:Noncurrent:Noncurrent:
CommodityCommodity— 5,204 — 5,204 (598)4,606 Commodity— 416 — 416 (416)— 
Contingent considerationContingent consideration— — 24,550 24,550 — 24,550 Contingent consideration— — 24,314 24,314 — 24,314 
Liabilities:Liabilities:Liabilities:
Current:Current:Current:
CommodityCommodity— (93,479)— (93,479)34,716 (58,763)Commodity— (24,879)— (24,879)22,541 (2,338)
Noncurrent:Noncurrent:Noncurrent:
CommodityCommodity— (1,364)— (1,364)598 (766)Commodity— (3,441)— (3,441)416 (3,025)
Net derivative liability positions$— $(40,073)$28,690 $(11,383)$— $(11,383)
Net derivative asset positionsNet derivative asset positions$— $4,654 $26,239 $30,893 $— $30,893 
December 31, 2021December 31, 2022
(in thousands)(in thousands)Level 1Level 2Level 3Total gross fair valueAmounts offsetNet fair value presented on the
consolidated balance sheets
(in thousands)Level 1Level 2Level 3Total gross fair valueAmounts offsetNet fair value presented on the consolidated balance sheets
Assets:Assets:Assets:
Current:Current:Current:
CommodityCommodity$— $21,671 $— $21,671 $(21,671)$— Commodity$— $35,586 $— $35,586 $(13,193)$22,393 
Contingent considerationContingent consideration— — 4,346 4,346 — 4,346 Contingent consideration— — 2,277 2,277 — 2,277 
Noncurrent:Noncurrent:Noncurrent:
Commodity— 1,448 — 1,448 — 1,448 
Contingent considerationContingent consideration— — 31,515 31,515 — 31,515 Contingent consideration— — 24,363 24,363 — 24,363 
Liabilities:Liabilities:Liabilities:
Current:Current:Current:
CommodityCommodity— (201,428)— (201,428)21,671 (179,757)Commodity— (19,153)— (19,153)13,193 (5,960)
Interest rate— (52)— (52)— (52)
Noncurrent:
Commodity— — — — — — 
Net derivative liability positions$— $(178,361)$35,861 $(142,500)$— $(142,500)
Net derivative asset positionsNet derivative asset positions$— $16,433 $26,640 $43,073 $— $43,073 
See Note 1112 in the 20212022 Annual Report for discussion of the significant Level 2 inputs used in the fair value mark-to-market analysis of commodity, interest rate and contingent consideration derivatives. The Company reviewed the third-party specialist's valuations of commodity, interest rate and contingent consideration derivatives, including the related inputs, and analyzed changes in fair values between reporting dates.
14

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
The Sixth Street Contingent Consideration associated with the Working Interest Sale was categorized as Level 3 of the fair value hierarchy, as the Company utilized its own cash flow projections along with a risk-adjusted discount rate generated by a third-party valuation specialist to determine the valuation. The Company reviewed the third-party specialist's valuation,
16

Laredo Petroleum, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
including the related inputs, and analyzed changes in fair values between the Sixth Street Closing Datedivestiture closing date and the reporting dates. The fair value of the Sixth Street Contingent Consideration was recorded as part of the basis in the oil and natural gas properties divested and as a contingent consideration asset. At each quarterly reporting period, prior to the end of the contingency period, the Company will remeasure the Sixth Street Contingent Considerationremeasures contingent consideration with the changeschange in fair valuevalues recognized in "Gain (loss) on derivatives, net" under "Non-operating income (expense)" on the earnings for such quarter. See Note 3 for further discussionconsolidated statement of the Working Interest Sale associated with the Sixth Street Contingent Consideration.operations.
The following table summarizes the changes in contingent consideration derivatives classified as Level 3 measurements for the periods presented:
Three months ended September 30,Nine months ended September 30,
(in thousands)2022202120222021
Balance of Level 3 at beginning of period$38,620 $— $35,861 $— 
Sixth Street Contingent Consideration valuation as of Sixth Street Closing Date— 33,832 — 33,832 
Change in Sixth Street Contingent Consideration fair value(9,608)5,182 (5,294)5,182 
Settlements realized(1)
(322)— (1,877)— 
Balance of Level 3 at end of period$28,690 $39,014 $28,690 $39,014 
_____________________________________________________________________________
Three months ended June 30,Six months ended June 30,
(in thousands)2023202220232022
Balance of Level 3 at beginning of period$28,093 $39,756 $26,640 $35,861 
Change in Sixth Street Contingent Consideration fair value(1,854)419 1,054 4,314 
Settlements realized(1)
— (1,555)(1,455)(1,555)
Balance of Level 3 at end of period$26,239 $38,620 $26,239 $38,620 

(1)For the ninesix months ended SeptemberJune 30, 2023 and 2022, $1.6 million of realizedthe settlements has been received and isare included in "Settlements received for contingent consideration" in cash flows from investing activities on the unaudited consolidated statements of cash flows, and $0.3 million is a receivable at period end.flows.
Items not accounted for at fair value
The carrying amounts reported on the unaudited consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, accrued capital expenditures, undistributed revenue and royalties and other accrued assets and liabilities approximate their fair values.
The Company has not elected to account for its debt instruments at fair value. The following table presents the carrying amounts and fair values of the Company's debt as of the dates presented:
September 30, 2022December 31, 2021 June 30, 2023December 31, 2022
(in thousands)(in thousands)Carrying
amount
Fair
value(1)
Carrying
amount
Fair
value(1)
(in thousands)Carrying
amount
Fair
value(1)
Carrying
amount
Fair
value(1)
January 2025 NotesJanuary 2025 Notes$529,464 $525,059 $577,913 $589,471 January 2025 Notes$455,628 $452,211 $455,628 $449,122 
January 2028 NotesJanuary 2028 Notes326,756 313,686 361,044 378,578 January 2028 Notes300,309 294,378 300,309 292,846 
July 2029 NotesJuly 2029 Notes298,214 274,771 400,000 390,000 July 2029 Notes298,214 246,027 298,214 268,416 
Senior Secured Credit FacilitySenior Secured Credit Facility40,000 39,959 105,000 105,040 Senior Secured Credit Facility575,000 575,348 70,000 69,945 
TotalTotal$1,194,434 $1,153,475 $1,443,957 $1,463,089 Total$1,629,151 $1,567,964 $1,124,151 $1,080,329 

(1)The fair values of the outstanding notes were determined using the Level 2 fair value hierarchy quoted market prices for each respective instrument as of SeptemberJune 30, 20222023 and December 31, 2021.2022. The fair values of the outstanding debt under the Senior Secured Credit Facility was estimated utilizing the Level 2 fair value hierarchy pricing model for similar instruments as of SeptemberJune 30, 20222023 and December 31, 2021.2022.
Note 10—Commitments and contingencies
From time to time, the Company is subject to various legal proceedings arising in the ordinary course of business, including those that arise from interpretation of federal, state and local laws and regulations affecting the oil and natural gas industry, personal injury claims, title disputes, royalty disputes, contract claims, contamination claims relating to oil and natural gas exploration and development and environmental claims, including claims involving assets previously sold to third parties and no longer part of the Company's current operations. The Company may not have insurance coverage for some of these proceedings and failure to comply with applicable laws and regulations can result in substantial penalties. While many of these matters involve inherent uncertainty, as of the date hereof, the Company believes that any such legal proceedings, if
1715

Laredo Petroleum,Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
these matters involve inherent uncertainty, as of the date hereof, the Company believes that any such legal proceedings, if ultimately decided adversely, will not have a material adverse effect on the Company's business, financial position, results of operations or liquidity. See Note 15 in the 2021 Annual Report for further discussion of litigation and environmental and federal, state and local regulations.
The Company has committed to deliver, for sale or transportation, fixed volumes of product under certain contractual arrangements that specify the delivery of a fixed and determinable quantity. If not fulfilled, the Company is subject to firm transportation payments on excess pipeline capacity and other contractual penalties. These commitments are normal and customary for the Company's business. In certain instances, the Company has used spot market purchases to meet its commitments in certain locations or due to favorable pricing. A portion of the Company's commitments are related to transportation commitments with a certain pipeline pertaining to the gathering of the Company's production from established acreage that extends into 2024. The Company was unable to satisfy a portion of this particular commitment with produced or purchased oil, therefore, the Company expensed firm transportation payments on excess capacity of $7.7$2.4 million and $2.8$3.5 million during the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, which are recorded in "Transportation and marketing expenses" on the unaudited consolidated statements of operations. The Company'sCompany had an estimated aggregate liability of firm transportation payments on excess capacity is $8.6of $11.7 million and $11.5 million as of SeptemberJune 30, 2023 and December 31, 2022, respectively, and is included in "Accounts payable and accrued liabilities" on the unaudited consolidated balance sheet.sheets. As of SeptemberJune 30, 2022,2023, future firm sale and transportation commitments of $171.5$138.5 million are expected to be satisfied and, as such, are not recorded as a liability on the unaudited consolidated balance sheet.
Note 11—Supplemental cash flow and non-cash information
The following table presents supplemental cash flow and non-cash information for the periods presented:
Nine months ended September 30,Six months ended June 30,
(in thousands)(in thousands)20222021(in thousands)20232022
Supplemental cash flow information:Supplemental cash flow information:Supplemental cash flow information:
Cash paid for interest, net of $3,265 and $3,081 of capitalized interest, respectively$130,082 $95,684 
Cash paid for interest, net of $1,116 and $2,606 of capitalized interest, respectivelyCash paid for interest, net of $1,116 and $2,606 of capitalized interest, respectively$55,987 $67,995 
Supplemental non-cash operating information:Supplemental non-cash operating information:Supplemental non-cash operating information:
Right-of-use assets obtained in exchange for operating lease liabilities(1)
Right-of-use assets obtained in exchange for operating lease liabilities(1)
$34,532 $7,532 
Right-of-use assets obtained in exchange for operating lease liabilities(1)
$124,868 $33,985 
Supplemental non-cash investing information:Supplemental non-cash investing information:Supplemental non-cash investing information:
Fair value of contingent consideration asset on transaction date(2)
$— $33,832 
Change in accrued capital expendituresChange in accrued capital expenditures$5,144 $25,380 Change in accrued capital expenditures$18,110 $14,173 
Equity issued for acquisition of oil and natural gas properties(2)
Equity issued for acquisition of oil and natural gas properties(2)
$80,068 $— 
Liabilities assumed in acquisitions of oil and natural gas properties(2)
Liabilities assumed in acquisitions of oil and natural gas properties(2)
$11,152 $— 
_____________________________________________________________________________
(1)See NoteNotes 5 and 18 in the 20212022 Annual Report for additional discussion of the Company's leases.
(2)See Note 3 for additional discussion of the Company's 2021 Working Interest Sale which included contingent consideration. See Note 9 for discussion of the quarterly remeasurement of this contingent consideration.regarding acquisitions.
Note 12—Income taxes
As of June 30, 2023, the Company’s deferred tax assets were primarily the result of U.S. net operating loss carryforwards. A valuation allowance of $298.2 million was recorded against the gross deferred tax asset balance as of December 31, 2022, on the basis of management’s assessment that its deferred tax assets did not meet the standard for recognition. As of each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2023, the Company determined that there is sufficient positive evidence to conclude that it is more likely than not its federal deferred tax assets are realizable. Therefore, the Company reduced its valuation allowance accordingly and recorded a discrete quarterly benefit of $222.2 million during the three months ended June 30, 2023. The balance of the valuation allowance reversal is reflected as part of the Company's estimated annualized effective tax rate with respect to current year projected earnings. The Company believes that it is subjectmore-likely-than-not that its Oklahoma deferred tax assets are not realizable and continues to federal and state income taxes and the Texas franchise tax. maintain a full valuation allowance recorded against these deferred tax assets.
As of SeptemberJune 30, 2022,2023, the Company had federal net operating loss ("NOL") carryforwards totaling $1.6$1.2 billion, $1.2 billion$727.4 million of which will begin to expire in 20312034 and $366.8$425.9 million of which will not expire but may be limited in future periods, and state of Oklahoma net operating loss carryforwards totaling $34.4 million that will begin to expire in 2032. If the Company were to experience an "ownership change" as determined under Section 382 of the Internal Revenue Code, the Company's ability to offset taxable income arising after the ownership change with net operating losses arising prior to the ownership change would be limited. As of September 30, 2022, no such ownership change has occurred.
As of September 30, 2022, the Company believes it is more likely than not that a portion of the net operating loss carryforwards are not fully realizable. The Company continues to consider new evidence, both positive and negative, in determining whether, based on the weight of that evidence, a valuation allowance is needed. Such consideration includes projected future cash flows from its oil, NGL and natural gas reserves (including the timing of those cash flows), the reversal of deferred tax liabilities recorded as of September 30, 2022 and the Company's ability to capitalize intangible drilling costs, rather than expensing these costs and future projections of taxable income. A significant item of objective negative evidence
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Laredo Petroleum,Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
considered wasoffset taxable income arising after the cumulative historical three-year pre-tax loss andownership change with net deferred tax asset position. Such objective evidence limits the ability to consider other subjective evidence such as the Company’s potential for future growth.
As of September 30, 2022, a total valuation allowance of $325.7 million has been recorded to offset the Company's federal and Oklahoma net deferred tax assets, resulting in a $1.5 million Texas net deferred asset, which is included in "Other noncurrent assets, net" on the unaudited consolidated balance sheets.
Since September 30, 2015, the Company has recorded a full valuation allowance against its federal and Oklahoma net deferred tax position. As such, the Company's effective tax rate is 1%, dueoperating losses arising prior to the Texas franchise tax. The Company's effective tax rate is affected by changes in valuation allowances, recurring permanent differences and discrete items that may occur in any given year, but are not consistent from year to year. For the three and nine months ended September 30, 2022 and 2021, the Company’s items of discrete income tax expense or benefit were not material.
On August 16, 2022, the U.S. Inflation Reduction Act of 2022 (the "IRA") was signed into U.S. law. The IRA includes various tax provisions, including a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, expanded tax credits for clean energy incentives and a 15% corporate alternative minimum tax that applies to certain corporations with adjusted financial statement income in excess of $1.0 billion. The Company is evaluating the IRA and its requirements, as well as the potential impact of the IRA to its business.ownership change could be significantly limited.
Note 13—Related parties
Halliburton
The Chairman of the Company's board of directors is on the board of directors of Halliburton Company ("Halliburton"). Halliburton provides drilling and completions services to the Company. The Company has entered into a lease agreement with Halliburton, which became effective during the first quarter of 2023 and extends through 2025, to provide an electric fracture stimulation crew and the related services. Under the agreement, the Company had a lease liability of $73.2 million as of June 30, 2023 which is included in both current and noncurrent "Operating lease liabilities" on the consolidated balance sheets. Services provided under the lease agreement do not differ substantially from historical services provided by Halliburton, which were previously not subject to a long-term agreement. Payments to Halliburton are included in capital expenditures for oil and natural gas properties in cash flows from investing activities on the consolidated statements of cash flows.
The following table presents the capital expenditures for oil and natural gas properties paid to Halliburton included in the unaudited consolidated statements of cash flows for the periods presented:
 Nine months ended September 30,
(in thousands)20222021
Capital expenditures for oil and natural gas properties$78,749 $42,074 
Note 14—Organizational restructurings
On August 24, 2022, the Company announced the departure of the Company's Senior Vice President and Chief Operating Officer. In connection with the departure, the Company incurred one-time charges for certain payments and benefits of $10.4 million during the three months ended September 30, 2022. These charges were recorded as "Organizational restructuring expenses" on the unaudited consolidated statements of operations. All equity-based compensation awards held by the Company's Senior Vice President and Chief Operating Officer were forfeited and the corresponding equity-based compensation totaling $4.9 million previously recorded was reversed in "General and administrative" on the unaudited consolidated statements of operations during the three months ended September 30, 2022.
On June 29, 2021 (the "Effective Date"), the Company committed to a company-wide reorganization effort (the "Reorganization Plan") that included a workforce reduction of 14 individuals, or approximately 5% of the workforce. The reduction in workforce was communicated to employees on the Effective Date and implemented immediately, subject to certain administrative procedures. The Company put the Reorganization Plan in place in order to better position the Company for the future. In connection with the Reorganization Plan, the Company incurred an aggregate of $9.8 million of one-time charges during the nine months ended September 30, 2021 comprising of compensation, tax, professional, outplacement and insurance related expenses. All equity-based compensation awards held by the affected employees were forfeited and the corresponding equity-based compensation totaling $1.1 million previously recorded was reversed in "General and administrative" on the unaudited consolidated statements of operations during the nine months ended September 30, 2021.
 Six months ended June 30,
(in thousands)20232022
Capital expenditures for oil and natural gas properties$69,911 $56,620 
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Laredo Petroleum,Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 15—14—Subsequent events
NOG Working Interest Sale
On August 16, 2022, the Company entered into a purchase and sale agreement with Northern Oil and Gas, Inc. ("NOG"), pursuant to which the Company agreed to sell to NOG the Company’s working interests in certain specified non-operated oil and gas properties for an aggregate purchase price of $110.0 million, subject to certain customary adjustments (the "NOG Working Interest Sale"). The NOG Working Interest Sale closed on October 3, 2022, with an effective date of August 1, 2022.
Senior Secured Credit Facility
On October 7, 2022,July 12, 2023, the Company borrowed an additional $35.0 million, and on July 24, 2023, the Company repaid $40.0$15.0 million on the Senior Secured Credit Facility. As a result, there was nothe outstanding balance under the Senior Secured Credit Facility was $595.0 million as of November 2, 2022.August 4, 2023. See Note 4 for additional discussion of the Senior Secured Credit Facility.
On November 1, 2022, the Company entered into the Tenth Amendment (the "Tenth Amendment") to the Senior Secured Credit Facility. The Tenth Amendment, among other things, (i) increases the borrowing base from $1.25 billion to $1.3 billion, (ii) permits additional senior note buybacks and other restricted payments, subject to certain conditions; and (iii) makes technical changes to permit the Company to potentially incur term loans, subject to terms to be agreed with lenders making such term loans, in addition to revolving loans, in each case, subject to the terms of the Tenth Amendment and the Senior Secured Credit Facility.
Senior unsecured notes repurchases
Subsequent to September 30, 2022, the Company repurchased $50.9 million and $9.9 million in aggregate principal amount of the January 2025 Notes and January 2028 Notes, respectively, through November 2, 2022. See Note 4 for additional discussion of the Company's senior unsecured notes repurchases.
Share repurchase program
Subsequent to September 30, 2022, the Company repurchased 112,049 shares of its common stock on the open market at a weighted-average price of $66.68 per common share for a total of $7.5 million under the share repurchase program through November 2, 2022. See Note 5 for additional discussion of the Company's share repurchases under this program.
Commodity derivatives
The following table summarizes the Company's open oil and natural gas derivative positions as of SeptemberJune 30, 2022,2023, updated for the derivative transactions entered into from SeptemberJune 30, 20222023 through November 2, 2022,August 4, 2023, for the settlement periods presented:
Remaining Year 2022Year 2023 Remaining Year 2023Year 2024
Oil:Oil:  Oil:  
WTI NYMEX - Swaps:WTI NYMEX - Swaps:WTI NYMEX - Swaps:
Volume (Bbl)Volume (Bbl)92,000 — Volume (Bbl)3,860,000 5,638,950 
Weighted-average price ($/Bbl)Weighted-average price ($/Bbl)$64.40 $— Weighted-average price ($/Bbl)$73.51 $71.49 
WTI NYMEX - Collars:WTI NYMEX - Collars:WTI NYMEX - Collars:
Volume (Bbl)Volume (Bbl)1,407,600 4,727,000 Volume (Bbl)1,793,400 — 
Weighted-average floor price ($/Bbl)Weighted-average floor price ($/Bbl)$72.65 $68.09 Weighted-average floor price ($/Bbl)$69.58 $— 
Weighted-average ceiling price ($/Bbl)Weighted-average ceiling price ($/Bbl)$86.54 $83.81 Weighted-average ceiling price ($/Bbl)$87.01 $— 
WTI NYMEX - Three-way Collars:WTI NYMEX - Three-way Collars:
Volume (Bbl)Volume (Bbl)191,500 217,350 
Weighted-average sold put price ($/Bbl)Weighted-average sold put price ($/Bbl)$45.54 $50.00 
Weighted-average floor price ($/Bbl)Weighted-average floor price ($/Bbl)$57.68 $66.51 
Weighted-average ceiling price ($/Bbl)Weighted-average ceiling price ($/Bbl)$74.37 $87.09 
Argus WTI Midland to Argus WTI Formula Basis - Basis Swaps:Argus WTI Midland to Argus WTI Formula Basis - Basis Swaps:
Volume (Bbl)Volume (Bbl)328,900 293,300 
Weighted-average differential ($/Bbl)Weighted-average differential ($/Bbl)$0.18 $0.11 
Natural gas:Natural gas:
Henry Hub NYMEX - Swaps:Henry Hub NYMEX - Swaps:
Volume (MMBtu)Volume (MMBtu)78,100 26,075,700 
Weighted-average price ($/MMBtu)Weighted-average price ($/MMBtu)$2.46 $3.47 
Henry Hub NYMEX - Collars:Henry Hub NYMEX - Collars:
Volume (MMBtu)Volume (MMBtu)13,685,407 776,292 
Weighted-average floor price ($/MMBtu)Weighted-average floor price ($/MMBtu)$4.11 $3.40 
Weighted-average ceiling price ($/MMBtu)Weighted-average ceiling price ($/MMBtu)$8.33 $6.11 
Henry Hub NYMEX - Three-way Collars:Henry Hub NYMEX - Three-way Collars:
Volume (MMBtu)Volume (MMBtu)69,000 — 
Weighted-average sold put price ($/MMBtu)Weighted-average sold put price ($/MMBtu)$2.00 $— 
Weighted-average floor price ($/MMBtu)Weighted-average floor price ($/MMBtu)$2.50 $— 
Weighted-average ceiling price ($/MMBtu)Weighted-average ceiling price ($/MMBtu)$3.01 $— 
Waha Inside FERC to Henry Hub NYMEX - Basis Swaps:Waha Inside FERC to Henry Hub NYMEX - Basis Swaps:
Volume (MMBtu)Volume (MMBtu)21,192,507 26,851,992 
Weighted-average differential ($/MMBtu)Weighted-average differential ($/MMBtu)$(1.53)$(0.74)
See Note 8 for additional discussion regarding the Company's derivatives. There has been no other derivative activity subsequent to SeptemberJune 30, 2022.2023.
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Table of Content
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations is for the three and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, and should be read in conjunction with our unaudited consolidated financial statements and condensed notes thereto included elsewhere in this Quarterly Report as well as our audited consolidated financial statements and notes thereto included in our 20212022 Annual Report. The following discussion contains "forward-looking statements" that reflect our future plans, estimates, beliefs and expected performance. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see "Cautionary Statement Regarding Forward-Looking Statements" and "Part II, Item 1A. Risk Factors." Except for purposes of the unaudited consolidated financial statements and condensed notes thereto included elsewhere in this Quarterly Report, references in this Quarterly Report to "Laredo,"Vital," "we," "us," "our" or similar terms refer to Laredo, LMSVital and GCMits subsidiaries, collectively, unless the context otherwise indicates or requires. 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 Quarterly Report are rounded and therefore approximate.
Executive overview
We are an independent energy company focused on the acquisition, exploration and development of oil and natural gas properties in the Permian Basin of West Texas. The oil and liquids-rich Permian Basin is characterized by multiple target horizons, extensive production histories, long-lived reserves, high drilling success rates and high initial production rates. We have grown primarily through our drilling program, coupled with select strategic acquisitions. As of SeptemberJune 30, 2022,2023, we had assembled 165,359197,985 net acres in the Permian Basin.
We are currentlyproduced a Company-record 44,360 Bbl/d of oil during the second quarter of 2023. We also closed on two previously announced accretive acquisitions in the Midland and Delaware basins, adding approximately 35,000 net acres and 130 gross high-value, oil-weighted locations to our asset base.
As of June 30, 2023, we were operating twothree drilling rigs and one completions crew. We utilized a second completions crew which weduring a portion of third-quarter 2023, and again expect to maintain forutilize a second completions crew in late fourth-quarter 2023 to optimize completion activities in the remainder of 2022.Midland and Delaware basins. Our planned capital expenditures for fourth-quarter 2022full-year 2023 are expected to be approximately $135.0between $665.0 million to $145.0and $695.0 million. However, we will continue to monitor commodity prices and service costs and adjust activity levels in order to proactively manage our cash flows and preserve liquidity. Below is a summary and comparative analysis of our financial and operating performance for the periods presented:
Three months ended September 30,2022 compared to 2021Three months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change (#)Change (%)(in thousands)20232022Change (#)Change (%)
Oil sales volumes (MBbl)Oil sales volumes (MBbl)3,219 3,250 (31)(1)%Oil sales volumes (MBbl)4,037 3,690 347 %
Oil equivalents sales volumes (MBOE)7,324 7,057 267 %
Oil equivalent sales volumes (MBOE)Oil equivalent sales volumes (MBOE)8,193 7,920 273 %
Oil, NGL and natural gas sales(1)
Oil, NGL and natural gas sales(1)
$444,948 $311,276 $133,672 43 %
Oil, NGL and natural gas sales(1)
$333,924 $549,470 $(215,546)(39)%
Net income(2)Net income(2)$337,523 $136,832 $200,691 147 %Net income(2)$294,811 $262,546 $32,265 12 %
Net cash provided by operating activitiesNet cash provided by operating activities$182,615 $97,674 $84,941 87 %Net cash provided by operating activities$248,888 $368,125 $(119,237)(32)%
Free Cash Flow (a non-GAAP financial measure)(2)
$51,361 $(19,895)$71,256 358 %
Adjusted EBITDA (a non-GAAP financial measure)(2)
$222,790 $133,441 $89,349 67 %
_____________________________________________________________________________
(1)Our oil, NGL and natural gas sales increaseddecreased primarily as a result of a 38% increase41% decrease in average sales price per BOE.
(2)See pages 37-39Our net income for discussion and calculationsthe three months ended June 30, 2023 includes a non-cash deferred income tax benefit of these non-GAAP financial measures.$222.2 million in connection with the release of our valuation allowance.

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Nine months ended September 30,2022 compared to 2021Six months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change (#)Change (%)(in thousands)20232022Change (#)Change (%)
Oil sales volumes (MBbl)Oil sales volumes (MBbl)10,536 7,840 2,696 34 %Oil sales volumes (MBbl)7,504 7,317 187 %
Oil equivalents sales volumes (MBOE)22,905 21,985 920 %
Oil equivalent sales volumes (MBOE)Oil equivalent sales volumes (MBOE)15,430 15,581 (151)(1)%
Oil, NGL and natural gas sales(1)
Oil, NGL and natural gas sales(1)
$1,445,605 $746,059 $699,546 94 %
Oil, NGL and natural gas sales(1)
$651,735 $1,000,657 $(348,922)(35)%
Net income (loss)$513,288 $(71,268)$584,556 820 %
Net income(2)
Net income(2)
$408,751 $175,765 $232,986 133 %
Net cash provided by operating activitiesNet cash provided by operating activities$720,702 $287,112 $433,590 151 %Net cash provided by operating activities$365,013 $539,007 $(173,994)(32)%
Free Cash Flow (a non-GAAP financial measure)(2)
$183,404 $(27,585)$210,989 765 %
Adjusted EBITDA (a non-GAAP financial measure)(2)
$722,377 $323,755 $398,622 123 %
_____________________________________________________________________________
(1)Our oil, NGL and natural gas sales increaseddecreased primarily as a result of a 86% increase34% decrease in average sales price per BOE and a 34% increase in oil sales volumes.BOE.
(2)See pages 37-39Our net income for discussion and calculationsthe six months ended June 30, 2023 includes a non-cash deferred income tax benefit of these non-GAAP financial measures.
Recent developments
Volatility in commodity prices
Commodity prices remained strong during the third quarter of 2022, sustaining levels reached at the end of the first quarter as increased commodity demand has continued to outpace relative supply. While recessionary concerns have placed some downward pressure on commodity prices, causing oil and gas prices to retreat from their earlier highs in 2022, worldwide commodity demand continues to exceed pre-COVID-19 pandemic levels. Although supply has increased, it has been constrained and pricing has been affected, in part, by the impact of the Russian-Ukrainian military conflict on global commodity and financial markets, and the resulting effect of sanctions by the European Union, United Kingdom and U.S. on imports of oil and gas from Russia, as well as a recent announcement by OPEC+ of oil production cuts of two$222.2 million barrels per day beginning in November of 2022. However, because any of the above factors could suddenly change or reverse, global commodity and financial markets remain subject to heightened levels of uncertainty and volatility, and future disruptions and industry-specific impacts could result.
Rising inflation and interest rates
Reversing a trend experienced in 2020 in connection with the impactrelease of COVID-19our valuation allowance.
Recent developments
Inflation and historically low crude oil prices, drillinginterest rates considerations
Drilling and completions costs and costs of oilfield services, equipment and materials began to rise in 2021 and have continuedare moderating but continue to persist at elevated levels in 2022the second quarter of 2023 in conjunction with the significant increase in commodity prices, labor tightening, lingering supply chain disruptions caused by the COVID-19 pandemic and the resulting limited availability of certain materials and products manufactured using such materials and heightened levels of inflation. In addition to the effect of such inflationary pressures on our operating and capital costs, risinghigher interest rates as a result of the Federal Reserve’s tightening monetary policy have the potential to increaseincreased our borrowing costs on debt under our Senior Secured Credit Facility.Facility and may limit our ability to access debt capital markets. Additional increases in interest rates have the potential to increase our costs of borrowing even more. We remain committed to our ongoing efforts to increase the efficiency of our operations and improve costs, which may, in part, offset cost increases from inflation and reduce our borrowing needs.
See Note 1514 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for discussion of recent developments that have occurred subsequent to SeptemberJune 30, 2022.2023.
Pricing and reserves
Commodity prices have historically been volatile. While general economic concerns continue to place some downward pressure on commodity prices, worldwide commodity demand continues to rise. Although supply has increased, it has been constrained and pricing has been affected, in part, by the impact of the world political and economic environment. Any of the above factors could change or reverse, and global commodity and financial markets remain subject to heightened levels of uncertainty and volatility.
Our results of operations are heavily influenced by oil, NGL and natural gas prices. Historically, commodity prices have experienced significant fluctuations; however, the volatility in prices has substantially increased in recent years. We maintain an active multi-year commodity derivatives strategy to minimize commodity price volatility and support cash flows needed for operations. We have entered into a number of commodity derivative contracts that have enabled us to offset a portion of the changes in our cash flow caused by fluctuations in price and basis differentials for our sales of oil, NGL and natural gas, as discussed in "Item 3.7A. Quantitative and Qualitative Disclosures About Market Risk." See Notes 8, 9 and 914 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for additional discussion of our commodity derivatives. Notwithstanding our derivatives strategy, another collapse in commodity prices may affect the economic viability of, and our ability to fund, our drilling projects, as well as the economic recovery of oil, NGL and natural gas reserves. See "Critical accounting estimates" in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of
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Operations" of the 20212022 Annual Report for further discussion of our oil, NGL and natural gas reserve quantities and standardized measure of discounted future net cash flows.
Our reserves are reported in three streams: oil, NGL and natural gas. The Realized Prices, which are utilized to value our proved reserves and calculated using the average first-day-of-the-month prices for each month within the 12-month period prior to the end of the reporting period, adjusted for factors affecting price received at the delivery point, as of SeptemberJune 30, 20222023 were $92.54$84.88 for oil, $32.38$19.88 for NGL and $4.34$2.49 for natural gas. The unamortized cost of evaluated oil and natural gas properties being depleted did not exceed the full cost ceiling as of SeptemberJune 30, 20222023 and SeptemberJune 30, 2021.2022. As such, no full cost ceiling impairments were recorded during the ninesix months ending SeptemberJune 30, 20222023 and SeptemberJune 30, 2021. Additionally,2022. Oil prices have declined from mid-2022 levels; however, even with this decline if oil prices remain at current levels, we do not anticipate recording any full
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cost ceiling impairments for the foreseeable future. See Notes 2 and 6 in our 20212022 Annual Report for discussion of the full cost method of accounting and our Realized Prices.
Results of operations
Revenues
Sources of our revenue
Our revenues are primarily derived from the sale of produced oil, NGL and natural gas and the sale of purchased oil, and providing midstream services to third parties, all within the continental U.S. and do not include the effects of derivatives. See Note 2 in our 20212022 Annual Report for additional information regarding our revenue recognition policies.
The following tables present our sources of revenue as a percentage of total revenues for the periods presented and the corresponding changes for such periods:
Three months ended September 30,2022 compared to 2021Three months ended June 30,2023 compared to 2022
20222021Change (#)Change (%)20232022Change (#)Change (%)
Oil salesOil sales67 %60 %12 %Oil sales89 %73 %16 %22 %
NGL salesNGL sales13 %13 %— — %NGL sales%13 %(5)%(38)%
Natural gas salesNatural gas sales16 %10 %60 %Natural gas sales%12 %(9)%(75)%
Midstream service revenues— %— %— — %
Sales of purchased oilSales of purchased oil%17 %(13)(76)%Sales of purchased oil— %%(2)%(100)%
Other operating revenuesOther operating revenues— %— %— %— %
TotalTotal100 %100 %Total100 %100 %
Nine months ended September 30,2022 compared to 2021
20222021Change (#)Change (%)
Oil sales69 %56 %13 23 %
NGL sales13 %14 %(1)(7)%
Natural gas sales11 %11 %— — %
Midstream service revenues— %— %— — %
Sales of purchased oil%19 %(12)(63)%
Total100 %100 %

Six months ended June 30,2023 compared to 2022
20232022Change (#)Change (%)
Oil sales85 %69 %16 %23 %
NGL sales%13 %(4)%(31)%
Natural gas sales%10 %(6)%(60)%
Sales of purchased oil%%(6)%(75)%
Other operating revenues— %— %— %— %
Total100 %100 %

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Oil, NGL and natural gas sales volumes, revenues and prices
The following tables present information regarding our oil, NGL and natural gas sales volumes, sales revenues and average sales prices for the periods presented and the corresponding changes for such periods:
Three months ended September 30,2022 compared to 2021 Three months ended June 30,2023 compared to 2022
20222021Change (#)Change (%)20232022Change (#)Change (%)
Sales volumes:Sales volumes:  Sales volumes:  
Oil (MBbl)Oil (MBbl)3,219 3,250 (31)(1)%Oil (MBbl)4,037 3,690 347 %
NGL (MBbl)NGL (MBbl)2,034 1,830 204 11 %NGL (MBbl)2,050 2,100 (50)(2)%
Natural gas (MMcf)Natural gas (MMcf)12,430 11,860 570 %Natural gas (MMcf)12,638 12,774 (136)(1)%
Oil equivalents (MBOE)(1)(2)
7,324 7,057 267 %
Average daily oil equivalent sales volumes (BOE/D)(2)
79,613 76,703 2,910 %
Average daily oil sales volumes (Bbl/D)(2)
34,994 35,329 (335)(1)%
Oil equivalent (MBOE)(1)(2)
Oil equivalent (MBOE)(1)(2)
8,193 7,920 273 %
Average daily oil equivalent sales volumes (BOE/d)(2)
Average daily oil equivalent sales volumes (BOE/d)(2)
90,030 87,032 2,998 %
Average daily oil sales volumes (Bbl/d)(2)
Average daily oil sales volumes (Bbl/d)(2)
44,360 40,553 3,807 %
Sales revenues (in thousands):Sales revenues (in thousands):  Sales revenues (in thousands):  
OilOil$311,740 $229,329 $82,411 36 %Oil$299,085 $410,359 $(111,274)(27)%
NGLNGL59,377 47,949 11,428 24 %NGL25,887 72,505 (46,618)(64)%
Natural gasNatural gas73,831 33,998 39,833 117 %Natural gas8,952 66,606 (57,654)(87)%
Total oil, NGL and natural gas sales revenuesTotal oil, NGL and natural gas sales revenues$444,948 $311,276 $133,672 43 %Total oil, NGL and natural gas sales revenues$333,924 $549,470 $(215,546)(39)%
Average sales prices(2):
Average sales prices(2):
  
Average sales prices(2):
  
Oil ($/Bbl)(3)
Oil ($/Bbl)(3)
$96.83 $70.56 $26.27 37 %
Oil ($/Bbl)(3)
$74.09 $111.20 $(37.11)(33)%
NGL ($/Bbl)(3)
NGL ($/Bbl)(3)
$29.20 $26.20 $3.00 11 %
NGL ($/Bbl)(3)
$12.63 $34.52 $(21.89)(63)%
Natural gas ($/Mcf)(3)
Natural gas ($/Mcf)(3)
$5.94 $2.87 $3.07 107 %
Natural gas ($/Mcf)(3)
$0.71 $5.21 $(4.50)(86)%
Average sales price ($/BOE)(3)
Average sales price ($/BOE)(3)
$60.75 $44.11 $16.64 38 %
Average sales price ($/BOE)(3)
$40.76 $69.38 $(28.62)(41)%
Oil, with commodity derivatives ($/Bbl)(4)
Oil, with commodity derivatives ($/Bbl)(4)
$71.09 $53.94 $17.15 32 %
Oil, with commodity derivatives ($/Bbl)(4)
$74.43 $74.72 $(0.29)— %
NGL, with commodity derivatives ($/Bbl)(4)
NGL, with commodity derivatives ($/Bbl)(4)
$24.47 $9.31 $15.16 163 %
NGL, with commodity derivatives ($/Bbl)(4)
$12.63 $27.24 $(14.61)(54)%
Natural gas, with commodity derivatives ($/Mcf)(4)
Natural gas, with commodity derivatives ($/Mcf)(4)
$3.35 $1.45 $1.90 131 %
Natural gas, with commodity derivatives ($/Mcf)(4)
$1.45 $3.33 $(1.88)(56)%
Average sales price, with commodity derivatives ($/BOE)(4)
Average sales price, with commodity derivatives ($/BOE)(4)
$43.74 $29.70 $14.04 47 %
Average sales price, with commodity derivatives ($/BOE)(4)
$42.07 $47.41 $(5.34)(11)%

(1)BOE is calculated using a conversion rate of six Mcf per one Bbl.
(2)The numbers presented in the three months ended SeptemberJune 30, 20222023 and 20212022 columns are based on actual amounts and aremay not calculatedrecalculate using the rounded numbers presented in the table above or the table below.
(3)Price reflects the average of actual sales prices received when control passes to the purchaser/customer adjusted for quality, certain transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting the price received at the delivery point.
(4)Price reflects the after-effects of our commodity derivative transactions on our average sales prices. Our calculation of such after-effects includes settlements of matured commodity derivatives during the respective periods and an adjustment to reflect premiums incurred previously or upon settlement that are attributable to commodity derivatives that settled during the respective periods.
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Nine months ended September 30,2022 compared to 2021 Six months ended June 30,2023 compared to 2022
20222021Change (#)Change (%)20232022Change (#)Change (%)
Sales volumes:Sales volumes:  Sales volumes:  
Oil (MBbl)Oil (MBbl)10,536 7,840 2,696 34 %Oil (MBbl)7,504 7,317 187 %
NGL (MBbl)NGL (MBbl)6,128 6,702 (574)(9)%NGL (MBbl)3,899 4,094 (195)(5)%
Natural gas (MMcf)Natural gas (MMcf)37,447 44,659 (7,212)(16)%Natural gas (MMcf)24,167 25,017 (850)(3)%
Oil equivalents (MBOE)(1)(2)
22,905 21,985 920 %
Average daily oil equivalent sales volumes (BOE/D)(2)
83,901 80,530 3,371 %
Average daily oil sales volumes (Bbl/D)(2)
38,594 28,717 9,877 34 %
Oil equivalent (MBOE)(1)(2)
Oil equivalent (MBOE)(1)(2)
15,430 15,581 (151)(1)%
Average daily oil equivalent sales volumes (BOE/d)(2)
Average daily oil equivalent sales volumes (BOE/d)(2)
85,250 86,080 (830)(1)%
Average daily oil sales volumes (Bbl/d)(2)
Average daily oil sales volumes (Bbl/d)(2)
41,457 40,424 1,033 %
Sales revenues (in thousands):Sales revenues (in thousands):  Sales revenues (in thousands):  
OilOil$1,069,542 $514,752 $554,790 108 %Oil$565,816 $757,802 $(191,986)(25)%
NGLNGL197,037 133,121 63,916 48 %NGL58,893 137,660 (78,767)(57)%
Natural gasNatural gas179,026 98,186 80,840 82 %Natural gas27,026 105,195 (78,169)(74)%
Total oil, NGL and natural gas sales revenuesTotal oil, NGL and natural gas sales revenues$1,445,605 $746,059 $699,546 94 %Total oil, NGL and natural gas sales revenues$651,735 $1,000,657 $(348,922)(35)%
Average sales prices(2):
Average sales prices(2):
  
Average sales prices(2):
  
Oil ($/Bbl)(3)
Oil ($/Bbl)(3)
$101.51 $65.66 $35.85 55 %
Oil ($/Bbl)(3)
$75.41 $103.57 $(28.16)(27)%
NGL ($/Bbl)(3)
NGL ($/Bbl)(3)
$32.16 $19.86 $12.30 62 %
NGL ($/Bbl)(3)
$15.11 $33.62 $(18.51)(55)%
Natural gas ($/Mcf)(3)
Natural gas ($/Mcf)(3)
$4.78 $2.20 $2.58 117 %
Natural gas ($/Mcf)(3)
$1.12 $4.20 $(3.08)(73)%
Average sales price ($/BOE)(3)
Average sales price ($/BOE)(3)
$63.11 $33.94 $29.17 86 %
Average sales price ($/BOE)(3)
$42.24 $64.22 $(21.98)(34)%
Oil, with commodity derivatives ($/Bbl)(4)
Oil, with commodity derivatives ($/Bbl)(4)
$71.03 $49.33 $21.70 44 %
Oil, with commodity derivatives ($/Bbl)(4)
$75.53 $71.01 $4.52 %
NGL, with commodity derivatives ($/Bbl)(4)
NGL, with commodity derivatives ($/Bbl)(4)
$25.93 $10.40 $15.53 149 %
NGL, with commodity derivatives ($/Bbl)(4)
$15.11 $26.65 $(11.54)(43)%
Natural gas, with commodity derivatives ($/Mcf)(4)
Natural gas, with commodity derivatives ($/Mcf)(4)
$3.05 $1.53 $1.52 99 %
Natural gas, with commodity derivatives ($/Mcf)(4)
$1.45 $2.90 $(1.45)(50)%
Average sales price, with commodity derivatives ($/BOE)(4)
Average sales price, with commodity derivatives ($/BOE)(4)
$44.60 $23.86 $20.74 87 %
Average sales price, with commodity derivatives ($/BOE)(4)
$42.82 $45.01 $(2.19)(5)%

(1)BOE is calculated using a conversion rate of six Mcf per one Bbl.
(2)The numbers presented in the ninesix months ended SeptemberJune 30, 20222023 and 20212022 columns are based on actual amounts and aremay not calculatedrecalculate using the rounded numbers presented in the table above or the table below.
(3)Price reflects the average of actual sales prices received when control passes to the purchaser/customer adjusted for quality, certain transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting the price received at the delivery point.
(4)Price reflects the after-effects of our commodity derivative transactions on our average sales prices. Our calculation of such after-effects includes settlements of matured commodity derivatives during the respective periods and an adjustment to reflect premiums incurred previously or upon settlement that are attributable to commodity derivatives that settled during the respective periods.
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The following tables present net settlements paid for matured commodity derivatives and net premiums paid previously or upon settlement attributable to commodity derivatives that matured during the periods utilized in our calculation of the average sales prices, with commodity derivatives, for the periods presented and the corresponding changes for such periods:     
Three months ended September 30,2022 compared to 2021Three months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change ($)Change (%)(in thousands)20232022Change ($)Change (%)
Net settlements paid for matured commodity derivatives:
OilOil$(82,862)$(43,838)$(39,024)(89)%Oil$(1,355)$(134,631)$133,276 99 %
NGLNGL(9,618)(30,905)21,287 69 %NGL— (15,294)15,294 100 %
Natural gasNatural gas(32,131)(16,747)(15,384)(92)%Natural gas(9,428)(24,090)14,662 61 %
TotalTotal$(124,611)$(91,490)$(33,121)(36)%Total$(10,783)$(174,015)$163,232 94 %
Net premiums paid previously or upon settlement attributable to commodity derivatives that matured during the respective period:
Oil$— $(10,182)$10,182 100 %
Six months ended June 30,2023 compared to 2022
(in thousands)20232022Change ($)Change (%)
Oil$(941)$(238,244)$237,303 100 %
NGL— (28,533)28,533 100 %
Natural gas(8,079)(32,564)24,485 75 %
Total$(9,020)$(299,341)$290,321 97 %
Nine months ended September 30,2022 compared to 2021
(in thousands)20222021Change ($)Change (%)
Net settlements paid for matured commodity derivatives:
Oil$(321,106)$(96,675)$(224,431)(232)%
NGL(38,152)(63,434)25,282 40 %
Natural gas(64,694)(30,046)(34,648)(115)%
Total$(423,952)$(190,155)$(233,797)(123)%
Net premiums paid previously or upon settlement attributable to commodity derivatives that matured during the respective period:
Oil$— $(31,370)$31,370 100 %
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Changes in average sales prices and sales volumes caused the following changes to our oil, NGL and natural gas revenues between the three and ninesix months ended SeptemberJune 30, 20222023 and 2021:2022:
(in thousands)(in thousands)OilNGLNatural gasTotal (in thousands)OilNGLNatural gasTotal 
Third-quarter 2021 Revenues$229,329 $47,949 $33,998 

$311,276 
Second-quarter 2022 RevenuesSecond-quarter 2022 Revenues$410,359 $72,505 $66,606 

$549,470 
Effect of changes in average sales pricesEffect of changes in average sales prices84,586 6,095 38,199 128,880 Effect of changes in average sales prices(149,795)(44,860)(56,945)(251,600)
Effect of changes in sales volumesEffect of changes in sales volumes(2,175)5,333 1,634 4,792 Effect of changes in sales volumes38,521 (1,758)(709)36,054 
Third-quarter 2022 Revenues$311,740 $59,377 $73,831 $444,948 
Second-quarter 2023 RevenuesSecond-quarter 2023 Revenues$299,085 $25,887 $8,952 $333,924 
Change ($)Change ($)$82,411 $11,428 $39,833 $133,672 Change ($)$(111,274)$(46,618)$(57,654)$(215,546)
Change (%)Change (%)36 %24 %117 %43 %Change (%)(27)%(64)%(87)%(39)%
(in thousands)(in thousands)OilNGLNatural gasTotal (in thousands)OilNGLNatural gasTotal 
Third-quarter year-to-date 2021 Revenues$514,752 $133,121 $98,186 

$746,059 
First-half 2022 RevenuesFirst-half 2022 Revenues$757,802 $137,660 $105,195 

$1,000,657 
Effect of changes in average sales pricesEffect of changes in average sales prices377,743 75,324 96,696 549,763 Effect of changes in average sales prices(211,339)(72,195)(74,593)(358,127)
Effect of changes in sales volumesEffect of changes in sales volumes177,047 (11,408)(15,856)149,783 Effect of changes in sales volumes19,353 (6,572)(3,576)9,205 
Third-quarter year-to-date 2022 Revenues$1,069,542 $197,037 $179,026 $1,445,605 
First-half 2023 RevenuesFirst-half 2023 Revenues$565,816 $58,893 $27,026 $651,735 
Change ($)Change ($)$554,790 $63,916 $80,840 $699,546 Change ($)$(191,986)$(78,767)$(78,169)$(348,922)
Change (%)Change (%)108 %48 %82 %94 %Change (%)(25)%(57)%(74)%(35)%
The increase in our third-quarter 2022following tables present sales of purchased oil revenues as compared tofor the same period in 2021 is primarily due to an increase in oil price. The increase in our third-quarter year-to-date 2022 oil revenues as compared to the same period in 2021 is primarily due to (i) an increase in oil price and (ii) the Sabalo/Shad Acquisition and Pioneer Acquisition, both of which occurred during the second half of 2021,periods presented and the related increase in our oil sales volumes.corresponding changes for such periods:
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Three months ended June 30,2023 compared to 2022
(in thousands) 20232022Change ($)Change (%)
Sales of purchased oil$338 $8,795 $(8,457)(96)%
The increase in our third-quarter 2022 NGL and natural gas revenues as compared to the same period in 2021 is primarily due to increases in NGL and natural gas prices. The increase in our third-quarter year-to-date 2022 NGL and natural gas revenues as compared to the same period in 2021 is primarily due to increases in NGL and natural gas prices, partially offset by the Working Interest Sale, which occurred during the second half of 2021, and the related decrease in our NGL and natural gas sales volumes.
 
 
Six months ended June 30,2023 compared to 2022
(in thousands) 20232022Change ($)Change (%)
Sales of purchased oil$14,189 $87,659 $(73,470)(84)%
Sales of purchased oil. Sales of purchased oil are a function of the volumes and prices of purchased oil sold to customers and are offset by the volumes and costs of purchased oil. During the three and nine months ended September 30, 2022, we wereWe are a firm shipper on the Gray Oak pipeline and we utilizedutilize purchased oil to fulfill portions of our commitments. In previous periods, we also utilized purchased oil to fulfill portions of our Bridgetex pipeline commitment, which ended during the first quarter of 2022. The continuance of this practice in the future is based upon, among other factors, our pipeline capacity as a firm shipper and the quantity of our lease production which may contribute to our pipeline commitments. Sales of purchased oil decreased during the three and ninesix months ended SeptemberJune 30, 20222023 compared to the same periods in 20212022 primarily due to (i) a larger portion of our pipeline commitments being fulfilled by our lease production and (ii) a decrease in the volumes of purchased oil as our Bridgetex pipeline commitment ended during the first quarter of 2022, partially offset by an increase in sales prices.
The following tables present sales of purchased oil for the periods presented and the corresponding changes for such periods:
 
 
Three months ended September 30,2022 compared to 2021
(in thousands) 20222021Change ($)Change (%)
Sales of purchased oil$18,371 $66,235 $(47,864)(72)%
 
 
Nine months ended September 30,2022 compared to 2021
(in thousands) 20222021Change ($)Change (%)
Sales of purchased oil$106,030 $173,500 $(67,470)(39)%

price.
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Costs and expenses
The following tables present information regarding costs and expenses and selected average costs and expenses per BOE sold for the periods presented and the corresponding changes for such periods:
Three months ended September 30,2022 compared to 2021 Three months ended June 30,2023 compared to 2022
(in thousands except for per BOE sold data)(in thousands except for per BOE sold data)20222021Change ($)Change (%)(in thousands except for per BOE sold data)20232022Change ($)Change (%)
Costs and expenses:Costs and expenses:  Costs and expenses:  
Lease operating expensesLease operating expenses$44,246 $29,837 $14,409 48 %Lease operating expenses$57,718 $42,014 $15,704 37 %
Production and ad valorem taxesProduction and ad valorem taxes29,024 17,937 11,087 62 %Production and ad valorem taxes21,607 33,001 (11,394)(35)%
Transportation and marketing expensesTransportation and marketing expenses13,285 11,660 1,625 14 %Transportation and marketing expenses10,681 10,994 (313)(3)%
Midstream service expenses769 1,014 (245)(24)%
Costs of purchased oilCosts of purchased oil18,772 68,805 (50,033)(73)%Costs of purchased oil588 6,780 (6,192)(91)%
General and administrative (excluding LTIP)14,831 11,332 3,499 31 %
General and administrative (excluding LTIP and transaction expenses)General and administrative (excluding LTIP and transaction expenses)15,427 13,505 1,922 14 %
General and administrative (LTIP):General and administrative (LTIP):General and administrative (LTIP):
LTIP cashLTIP cash(3,782)2,065 (5,847)(283)%LTIP cash1,323 889 434 49 %
LTIP non-cashLTIP non-cash808 1,611 (803)(50)%LTIP non-cash2,593 2,605 (12)— %
Organizational restructuring expenses10,420 — 10,420 100 %
General and administrative (transaction expenses)General and administrative (transaction expenses)(861)— (861)(100)%
Depletion, depreciation and amortizationDepletion, depreciation and amortization74,928 62,678 12,250 20 %Depletion, depreciation and amortization103,340 78,135 25,205 32 %
Other operating expense, net1,772 1,798 (26)(1)%
Other operating expenses, netOther operating expenses, net1,351 3,999 (2,648)(66)%
Total costs and expensesTotal costs and expenses$205,073 $208,737 $(3,664)(2)%Total costs and expenses$213,767 $191,922 $21,845 11 %
Gain on disposal of assets, netGain on disposal of assets, net4,282 95,201 (90,919)(96)%Gain on disposal of assets, net$154 $930 $(776)(83)%
Selected average costs and expenses per BOE sold(1):
Selected average costs and expenses per BOE sold(1):
Selected average costs and expenses per BOE sold(1):
Lease operating expensesLease operating expenses$6.04 $4.23 $1.81 43 %Lease operating expenses$7.05 $5.30 $1.75 33 %
Production and ad valorem taxesProduction and ad valorem taxes3.96 2.54 1.42 56 %Production and ad valorem taxes2.64 4.17 (1.53)(37)%
Transportation and marketing expensesTransportation and marketing expenses1.81 1.65 0.16 10 %Transportation and marketing expenses1.30 1.39 (0.09)(6)%
General and administrative (excluding LTIP)2.02 1.61 0.41 25 %
General and administrative (excluding LTIP and transaction expenses)General and administrative (excluding LTIP and transaction expenses)1.88 1.71 0.17 10 %
Total selected operating expensesTotal selected operating expenses$13.83 $10.03 $3.80 38 %Total selected operating expenses$12.87 $12.57 $0.30 %
General and administrative (LTIP):General and administrative (LTIP):General and administrative (LTIP):
LTIP cashLTIP cash$(0.52)$0.29 $(0.81)(279)%LTIP cash$0.16 $0.11 $0.05 45 %
LTIP non-cashLTIP non-cash$0.11 $0.23 $(0.12)(52)%LTIP non-cash$0.32 $0.33 $(0.01)(3)%
General and administrative (transaction expenses)General and administrative (transaction expenses)$(0.11)$— $(0.11)(100)%
Depletion, depreciation and amortizationDepletion, depreciation and amortization$10.23 $8.88 $1.35 15 %Depletion, depreciation and amortization$12.61 $9.87 $2.74 28 %

(1)Selected average costs and expenses per BOE sold are based on actual amounts and aremay not calculatedrecalculate using the rounded numbers presented in the table above.

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 Nine months ended September 30,2022 compared to 2021
(in thousands except for per BOE sold data)20222021Change ($)Change (%)
Costs and expenses:  
Lease operating expenses$127,136 $68,526 $58,610 86 %
Production and ad valorem taxes89,512 45,957 43,555 95 %
Transportation and marketing expenses39,022 34,477 4,545 13 %
Midstream service expenses3,916 2,572 1,344 52 %
Costs of purchased oil108,516 183,458 (74,942)(41)%
General and administrative (excluding LTIP)41,729 33,479 8,250 25 %
General and administrative (LTIP):
LTIP cash3,606 10,905 (7,299)(67)%
LTIP non-cash5,465 4,798 667 14 %
Organizational restructuring expenses10,420 9,800 620 %
Depletion, depreciation and amortization226,555 140,763 85,792 61 %
Impairment expense— 1,613 (1,613)(100)%
Other operating expense, net2,947 4,099 (1,152)(28)%
Total costs and expenses$658,824 $540,447 $118,377 22 %
Gain on disposal of assets, net4,952 93,454 (88,502)(95)%
Selected average costs and expenses per BOE sold(1):
Lease operating expenses$5.55 $3.12 $2.43 78 %
Production and ad valorem taxes3.91 2.09 1.82 87 %
Transportation and marketing expenses1.70 1.57 0.13 %
General and administrative (excluding LTIP)1.82 1.52 0.30 20 %
Total selected operating expenses$12.98 $8.30 $4.68 56 %
General and administrative (LTIP):
LTIP cash$0.16 $0.50 $(0.34)(68)%
LTIP non-cash$0.24 $0.22 $0.02 %
Depletion, depreciation and amortization$9.89 $6.40 $3.49 55 %
_____________________________________________________________________________
 Six months ended June 30,2023 compared to 2022
(in thousands except for per BOE sold data)20232022Change ($)Change (%)
Costs and expenses:  
Lease operating expenses$107,899 $82,890 $25,009 30 %
Production and ad valorem taxes42,138 60,488 (18,350)(30)%
Transportation and marketing expenses21,596 25,737 (4,141)(16)%
Costs of purchased oil14,755 89,744 (74,989)(84)%
General and administrative (excluding LTIP and transaction expenses)37,301 26,898 10,403 39 %
General and administrative (LTIP):
LTIP cash2,246 7,388 (5,142)(70)%
LTIP non-cash4,865 4,657 208 %
General and administrative (transaction expenses)— — — — %
Depletion, depreciation and amortization190,119 151,627 38,492 25 %
Other operating expenses, net2,835 4,137 (1,302)(31)%
Total costs and expenses$423,754 $453,566 $(29,812)(7)%
Gain on disposal of assets, net$391 $670 $(279)(42)%
Selected average costs and expenses per BOE sold(1):
Lease operating expenses$6.99 $5.32 $1.67 31 %
Production and ad valorem taxes2.73 3.88 (1.15)(30)%
Transportation and marketing expenses1.40 1.65 (0.25)(15)%
General and administrative (excluding LTIP and transaction expenses)2.42 1.73 0.69 40 %
Total selected operating expenses$13.54 $12.58 $0.96 %
General and administrative (LTIP):
LTIP cash$0.15 $0.47 $(0.32)(68)%
LTIP non-cash$0.32 $0.30 $0.02 %
General and administrative (transaction expenses)$— $— $— — %
Depletion, depreciation and amortization$12.32 $9.73 $2.59 27 %

(1)Selected average costs and expenses per BOE sold are based on actual amounts and aremay not calculatedrecalculate using the rounded numbers presented in the table above.

Lease operating expenses ("LOE"). LOE, which includes workover expenses, increased for the three and ninesix months ended SeptemberJune 30, 2022,2023, compared to the same periods in 2021.2022. LOE are daily expenses incurred to bring oil, NGL and natural gas out of the ground and to market, together with the daily expenses incurred to maintain our producing properties. Such costs also include maintenance, repairs and non-routine workover expenses related to our oil and natural gas properties. LOE increased during 2022the first half of 2023 due to (i) a higher percentage of our production shifting to high-value Howard County wells and other recently acquired wells, where, among other things, we have higher water production, resulting in increased water handling and lifting costs and (ii) inflationary pressures and costs associated with integrating our assets from the Sabalo/Shad Acquisition and Pioneer Acquisition, primarily driven by costs related to artificial lift and flowback management.pressures. We continue to focus on economic efficiencies associated with the usage and procurement of products and services related to LOE.TotalLOE. LOE is expected to remain relatively flatincrease slightly for the remainder of the year, with unit LOE increasing as total volumes are expected to decline.2023.
Production and ad valorem taxes. Production and ad valorem taxes increaseddecreased for the three and ninesix months ended SeptemberJune 30, 2022,2023, compared to the same periods in 2021,2022, due to increaseddecreased oil, NGL and natural gas sales revenues. Production taxes are based on and fluctuate in proportion to our oil, NGL and natural gas sales revenues, and are established by federal, state or local taxing authorities. We take advantage of all credits and exemptions in our various taxing jurisdictions. Ad valorem taxes are based on and fluctuate in proportion to the taxable value assessed by the various counties where our oil and natural gas properties are located.

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Transportation and marketing expenses. Transportation and marketing expenses increaseddecreased for the three and ninesix months ended SeptemberJune 30, 2022,2023, compared to the same periods in 2021.2022. These are expenses incurred for the delivery of produced oil to
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customers in the U.S. Gulf Coast market via the Gray Oak pipeline and, in previous periods, the Bridgetex pipeline. We ship the majority of our produced oil to the U.S. Gulf Coast, which we believe provides a long-term pricing advantage versus the Midland market. Additionally, firm transportation payments on excess pipeline capacity associated with transportation agreements are included in transportation and marketing expenses. See Note 10 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for additional discussion of our transportation commitments.
Costs of purchased oil. During the three and ninesix months ended SeptemberJune 30, 2022,2023, we were a firm shipper on the Gray Oak pipeline and we utilized purchased oil to fulfill portions of our commitments. In previous periods, we also utilized purchased oil to fulfill portions of our Bridgetex pipeline commitment, which ended during the first quarter of 2022. In the event our long-haul transportation capacity on the Gray Oak pipeline is expected to exceed our net production, consistent with our historic practice, we expect to continue to purchase third-party oil at the trading hubs to satisfy the deficit in our associated long-haul transportation commitments. Costs of purchased oil decreased for the three and ninesix months ended SeptemberJune 30, 2022,2023, compared to the same periods in 20212022 primarily due to (i) a larger portion of our pipeline commitments being fulfilled by our lease production and (iii) a decrease in the volumes of purchased oil on pipelines as our Bridgetex pipeline commitment ended during the first quarter of 2022, partially offset by an increase in sales prices.price.
General and administrative ("G&A"). G&A, excluding employee compensation expenses from our long-term incentive plan ("LTIP"), and transaction expenses associated with the Driftwood Acquisition, increased for the three and ninesix months ended SeptemberJune 30, 2023, compared to the same periods in 2022. Such increases are primarily due to (i) bonuses paid to our workforce in first-quarter 2023 for full-year 2022 performance, which were higher than expected, (ii) bonuses accrued for our workforce related to first-half 2023 performance, (iii) expenses in connection with retention bonuses paid to our workforce and (iv) inflationary pressures on workforce compensation.
LTIP cash expense increased for the three months ended June 30, 2023, compared to the same period in 2021, mainly2022 due to (i) increasesnew cash-settled performance unit awards granted in workforce and professional expenses2023 and (ii) inflationary pressures.
fluctuations in the fair value of our cash-settled LTIP awards during the first half of 2022, as a result of the performance of our stock. LTIP cash expense decreased for the three and ninesix months ended SeptemberJune 30, 2022,2023, compared to the same periodsperiod in 2021. These decreases are primarily2022 due to (i) forfeitures of cash-settled performance unit awards in connection with the departure of our former Senior Vice President and Chief Operating Officer during the third quarter of 2022 and (ii) a decreasefluctuations in the fair values of our cash-settled LTIP awards during the third quarterfirst half of 2022, mainly due to2023, as a result of the performance of our stock, during the period.and partially offset by new cash-settled performance unit awards granted in 2023.
LTIP non-cash expense decreasedincreased slightly for the threesix months ended SeptemberJune 30, 2022,2023, compared to the same period in 2021, mainly due to forfeitures of share-settled LTIP awards in connection with the departure of our former Senior Vice President2022, and Chief Operating Officer during the third quarter of 2022. LTIP non-cash expense increasedwas consistent for the ninethree months ended SeptemberJune 30, 2023 and 2022 compared to the same periodas there have not been significant changes in 2021, mainly due to new share-settled LTIP awards granted to our employees during the second half of 2021 and the first half of 2022, and partially offset by forfeitures of share-settled LTIP awards in connection with the departure of our former Senior Vice President and Chief Operating Officer during the third quarter of 2022.equity award compensation program. See Note 6 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for information regarding our equity-based compensation.
Organizational restructuring expenses. Organizational restructuringTransaction expenses increased for the three and nine months ended September 30, 2022, compared to the same periods in 2021. Such expenses wererepresent incurred for (i) the departure our former Senior Vice President and Chief Operating Officercosts during the thirdfirst quarter of 2022 and (ii) a workforce reduction2023 associated with the Driftwood Acquisition, which closed on April 3, 2023. As the transaction was determined to be an asset acquisition, these costs were capitalized as part of the acquisition purchase price during the second quarter of 2021. See Note 14 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for information regarding our organizational restructurings.
Gain on disposal of assets, net. Gain on disposal of assets, net, decreased for the three and nine months ended September 30, 2022, compared to the same periods in 2021, primarily due to the gain recorded in third-quarter 2021 in connection with the Working Interest Sale. See Note 3to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for additional discussion regarding the gain on the Working Interest Sale. From time to time, we dispose of inventory, midstream service assets and other fixed assets. The associated gain or loss recorded during the period fluctuates depending on the volume of the assets disposed, their associated net book value and, in the case of a disposal by sale, the sale price.

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2023.
Depletion, depreciation and amortization ("DD&A").amortization. The following tables present depletion expense per BOE sold for the periods presented and the corresponding changes for such periods:
Three months ended September 30,2022 compared to 2021Three months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change ($)Change (%)(in thousands)20232022Change ($)Change (%)
Depletion expense per BOE soldDepletion expense per BOE sold$9.79 $8.40 $1.39 17 %Depletion expense per BOE sold$12.13 $9.47 $2.66 28 %
Nine months ended September 30,2022 compared to 2021Six months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change ($)Change (%)(in thousands)20232022Change ($)Change (%)
Depletion expense per BOE soldDepletion expense per BOE sold$9.46 $5.94 $3.52 59 %Depletion expense per BOE sold$11.83 $9.30 $2.53 27 %
Depletion expense per BOE increased for the three and ninesix months ended SeptemberJune 30, 2022,2023, compared to the same periods in 2021,2022, primarily due to (i) an increase in the book valuefuture development costs of our oil and natural gas properties, as a resultwhich includes the effects of the Sabalo/Shad Acquisition and Pioneer Acquisition and the associated development costs and (ii) inflationary pressures. See Note 6 to our consolidated financial statements included in our 20212022 Annual Report and "—Pricing and reserves" for additional information regarding the full cost method of accounting.
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Other operating expense, net. These costs include accretion expense due to the passageTable of time on our asset retirement obligations. See Note 2 in our 2021 Annual Report for additional information regarding our asset retirement obligations.Content
Non-operating income (expense)
The following tables presenttable presents the components of non-operating income (expense), net for the periods presented and the corresponding changes for such periods:
Three months ended September 30,2022 compared to 2021 Three months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change ($)Change (%)(in thousands)20232022Change ($)Change (%)
Gain (loss) on derivatives, net$100,748 $(96,240)$196,988 205 %
Loss on derivatives, netLoss on derivatives, net$(18,044)$(65,927)$47,883 73 %
Interest expenseInterest expense(30,967)(30,406)(561)(2)%Interest expense(31,529)(32,807)1,278 %
Gain extinguishment of debt, net553 — 553 100 %
Loss extinguishment of debt, netLoss extinguishment of debt, net— (798)798 100 %
Other income, netOther income, net98 441 (343)(78)%Other income, net1,104 1,098 18,300 %
Total non-operating expense, netTotal non-operating expense, net$70,432 $(126,205)$196,637 156 %Total non-operating expense, net$(48,469)$(99,526)$51,057 51 %
Nine months ended September 30,2022 compared to 2021 Six months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change ($)Change (%)(in thousands)20232022Change ($)Change (%)
Loss on derivatives, net$(290,995)$(467,547)$176,552 38 %
Gain (loss) on derivatives, netGain (loss) on derivatives, net$2,446 $(391,743)$394,189 101 %
Interest expenseInterest expense(96,251)(82,222)(14,029)(17)%Interest expense(60,083)(65,284)5,201 %
Loss extinguishment of debt, net(245)— (245)(100)%
Loss on extinguishment of debt, netLoss on extinguishment of debt, net— (798)798 100 %
Other income, netOther income, net433 2,236 (1,803)(81)%Other income, net1,958 150 1,808 1,205 %
Total non-operating expense, netTotal non-operating expense, net$(387,058)$(547,533)$160,475 29 %Total non-operating expense, net$(55,679)$(457,675)$401,996 88 %
Gain (loss) on derivatives, net. The following tables presenttable presents the changes in the components of gain (loss) on derivatives, net for the periods presented and the corresponding changes for such periods:
Three months ended September 30,2022 compared to 2021Three months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change ($)Change (%)(in thousands)20232022Change ($)Change (%)
Non-cash gain (loss) on derivatives, netNon-cash gain (loss) on derivatives, net$225,037 $(3,514)$228,551 6,504 %Non-cash gain (loss) on derivatives, net$(28,827)$106,527 $(135,354)(127)%
Settlements paid for matured derivatives, net(124,289)(92,726)(31,563)(34)%
Gain (loss) on derivatives, net$100,748 $(96,240)$196,988 205 %
Settlements received (paid) for matured derivatives, netSettlements received (paid) for matured derivatives, net10,783 (174,009)184,792 106 %
Settlements received for contingent considerationSettlements received for contingent consideration— 1,555 (1,555)(100)%
Loss on derivatives, netLoss on derivatives, net$(18,044)$(65,927)$47,883 73 %
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Nine months ended September 30,2022 compared to 2021
(in thousands)20222021Change ($)Change (%)
Non-cash gain (loss) on derivatives, net$131,118 $(285,081)$416,199 146 %
Settlements paid for matured derivatives, net(423,668)(191,507)(232,161)(121)%
Settlements received for contingent consideration1,555 — 1,555 100 %
Premiums received for commodity derivatives— 9,041 (9,041)(100)%
Loss on derivatives, net$(290,995)$(467,547)$176,552 38 %
Six months ended June 30,2023 compared to 2022
(in thousands)20232022Change ($)Change (%)
Non-cash loss on derivatives, net$(8,029)$(93,919)$85,890 91 %
Settlements received (paid) for matured derivatives, net9,020(299,379)308,399 103 %
Settlements received for contingent consideration1,4551,555 (100)(6)%
Gain (loss) on derivatives, net$2,446 $(391,743)$394,189 101 %
Non-cash gain (loss) on derivatives, net is the result of (i) new and matured contracts, including contingent consideration derivatives for the period subsequent to the initial valuation date and through the end of the contingency period, and the changing relationship between our outstanding contract prices and the future market prices in the forward curves, which we use to calculate the fair value of our derivatives and (ii) matured interest rate swaps and the changing relationship between the contract interest rate and the LIBOR interest rate forward curve. In general, if outstanding commodity contracts are held constant, we experience gains during periods of decreasing market prices and losses during periods of increasing market prices. Settlements paid or received for matured derivatives are for our (i) commodity derivative contracts, which are based on the settlement prices compared to the prices specified in the derivative contracts, (ii) interest rate derivative and (iii) contingent consideration derivatives.
See Notes 8, 9 and 914 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report and "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for additional information regarding our derivatives.
Interest expense. During the third quarter of 2021, we completed the offering of the July 2029 Notes, with interest payable semi-annually commencing January 31, 2022 with interest from closing to that date. The increaseInterest expense decreased during the ninethree and six months ended SeptemberJune 30, 2023. This decrease is due to a reduction in the principal amounts of our senior unsecured notes as a result of repurchases made during 2022, reflects a full year-to-date of interest expense incurred for the July 2029 Notes.which was partially offset by increased borrowings under our Senior Secured Credit Facility related to acquisitions. See Note 4 to our unaudited
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consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding our long-term debt.
Income tax benefit (expense)
The following tables present income tax benefit (expense) for the periods presented and the corresponding changes for such periods:
Three months ended September 30,2022 compared to 2021Three months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change ($)Change (%)(in thousands)20232022Change ($)Change (%)
CurrentCurrent$960 $(1,300)$2,260 174 %Current$(503)$(4,513)$4,010 89 %
DeferredDeferred$2,808 $(1,377)$4,185 304 %Deferred$222,334 $(2,579)$224,913 8,721 %
Nine months ended September 30,2022 compared to 2021Six months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change ($)Change (%)(in thousands)20232022Change ($)Change (%)
CurrentCurrent$(4,771)$(1,300)$(3,471)(267)%Current$(1,834)$(5,731)$3,897 68 %
DeferredDeferred$2,324 $707 $1,617 229 %Deferred$222,058 $(484)$222,542 45,980 %
We are subject to federal and state income taxes and the Texas franchise tax. TheIncluded in the income tax benefit (expense) for the three and ninesix months ended SeptemberJune 30, 20222023, is attributed$222.2 million attributable to Texas franchisethe release of the federal valuation allowance.
As of June 30, 2023, management considered evidence, both positive and negative, and determined it is more likely than not that a portion of our federal deferred tax due to a fullassets are realizable which resulted in the release of the federal valuation allowance recorded againstand preservation of the Oklahoma valuation allowance. We will continue to monitor and consider new evidence, both positive and negative, in determining whether, based on the weight of that evidence, a valuation allowance is needed.
We have significant federal and Oklahoma deferred tax assets.
state net operating loss carry-forwards. If we were to experience an "ownership change"“ownership change” as determined under Section 382 of the Internal Revenue Code, our ability to offset taxable income arising after the ownership change with net operating losses arising prior to the ownership change wouldmay be limited. AsBased on information available as of SeptemberJune 30, 2022,2023, no such ownership change has occurred.
With the rise in oil prices and the addition of oily, high-margin inventory, we have seen positive indications that we will use our NOLs. We utilized $244.8 million of our NOLs on our 2021 tax return and expect to utilize a comparable amount on our 2022 tax return. However, as of September 30, 2022, we believe it is more likely than not that a portion of the NOL loss carryforwards are not fully realizable. We continue to consider new evidence, both positive and negative, in determining whether, based on the weight of that evidence, a valuation allowance is needed. Such consideration includes projected future cash flows from our oil, NGL and natural gas reserves (including the timing of those cash flows), the reversal of deferred tax
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liabilities recorded as of September 30, 2022, and our ability to capitalize intangible drilling costs, rather than expensing these costs and future projections of Oklahoma sourced income. A significant item of objective negative evidence considered was the cumulative historical three-year pre-tax loss and a net deferred tax asset position at September 30, 2022.
We currently believe it is reasonably possible we could achieve a three-year cumulative level of profitability within the next 12 months, which would enhance our ability to conclude that it is more likely than not that the deferred tax assets would be realized and support a release of the valuation allowance. However, the exact timing and amount of the release is unknown at this time. As long as we continue to conclude that the valuation allowance recorded against our net deferred tax assets is necessary, we will not have significant deferred income tax expense or benefit. The valuation allowance does not preclude us from utilizing the tax attributes if we recognize taxable income.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into U.S. law. The IRA includes various tax provisions, including a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, expanded tax credits for clean energy incentives and a 15% corporate alternative minimum tax that applies to certain corporations with adjusted financial statement income in excess of $1.0 billion. The Company is evaluating the IRA and its requirements, as well as the potential impact of the IRA to its business. For additional discussion of our income taxes, see Note 12 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
Liquidity and capital resources
Historically, our primary sources of liquidity have been cash flows from operations, proceeds from equity offerings, proceeds from senior unsecured note offerings, borrowings under our Senior Secured Credit Facility and proceeds from asset dispositions. Our primary operational uses of capital have been for the acquisition, exploration and development of oil and natural gas properties and infrastructure development. During the third quarter of 2022, we have utilized our cash flows to fund the repurchase of portions of our senior unsecured notes and our share repurchase program. For additional discussion of the repurchase of our senior unsecured notes and our share repurchase program, see Notes 4 and 5, respectively, to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
We continually seek to maintain a financial profile that provides operational flexibility and monitor the markets to consider which financing alternatives, including debt and equity capital resources, joint ventures and asset sales, are available to meet our future planned capital expenditures, a significant portion of which we are able to adjust and manage. We also continually evaluate opportunities with respect to our capital structure, including issuances of new securities, as well as transactions involving our outstanding senior notes, which could take the form of open market or private repurchases, exchange or tender offers, or other similar transactions, and our common stock, which could take the form of open market or private repurchases. We may make changes to our capital structure from time to time, with the goal of maintaining financial flexibility, preserving or improving liquidity and/or achieving cost efficiency. Such financing alternatives, or combination of alternatives, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. We continuously look for other opportunities to maximize shareholder value. For further discussion of our financing activities related to debt instruments, see Notes 4 and 14 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
Due to the inherent volatility in the prices of oil, NGL and natural gas and the sometimes wide pricing differentials between where we produce and where we sell such commodities, we engage in commodity derivative transactions to hedge price risk associated with a portion of our anticipated sales volumes. Due to the inherent volatility in interest rates, we will, from time to time, we have in the past entered into and we may in the future enter into interest rate derivative swaps to hedge interest rate risk associated with our debt under the Senior Secured Credit Facility. By removing a portion of the price volatility associated with future sales volumes, we expect to mitigate, but not eliminate, the potential effects of variability in cash flows from operations. As of June 30, 2023, the Company has not entered into any interest rate derivative swaps, and therefore our
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outstanding debt balance under our Senior Secured Credit Facility is subject to interest rate fluctuations. See "Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk" below. See NoteNotes 9 and 14 to our consolidated financial statements included elsewhere in this Quarterly Report for discussion of our open commodity positions.
As of SeptemberJune 30, 2022,2023, we had cash and cash equivalents of $49.9$71.7 million and available capacity under the Senior Secured Credit Facility of $960.0$425.0 million, resulting in total liquidity of $1.0 billion.$496.7 million. As of November 2, 2022,August 4, 2023, we had cash and cash equivalents of $53.9$73.0 million and full available capacity under the Senior Secured Credit Facility of $1.0 billion,$405.0 million, resulting in total liquidity of $1.1 billion.$478.0 million. We believe that our operating cash flows and the aforementioned liquidity sources provide us with sufficient liquidity and financial resources to manage our cash needs and contractual obligations, to implement our currently planned capital expenditure budget and, at our discretion, to fund any share repurchases, pay down, repurchase or refinance
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debt or adjust our planned capital expenditure budget.
Cash requirements for known contractual and other obligations
The following table presents significant cash requirements for known contractual and other obligations as of SeptemberJune 30, 2022:2023:
(in thousands)(in thousands)
Short-term(1)
Long-termTotal(in thousands)Short-termLong-termTotal
Senior unsecured notes(2)(1)
Senior unsecured notes(2)(1)
$106,495 $1,517,430 $1,623,925 
Senior unsecured notes(2)(1)
$96,803 $1,346,174 $1,442,977 
Senior Secured Credit Facility(3)
Senior Secured Credit Facility(3)
— 40,000 40,000 
Senior Secured Credit Facility(3)
— 575,000 575,000 
Asset retirement obligations(4)
Asset retirement obligations(4)
3,183 70,063 73,246 
Asset retirement obligations(4)
2,666 74,428 77,094 
Firm transportation commitments(5)
Firm transportation commitments(5)
17,217 60,282 77,499 
Firm transportation commitments(5)
17,604 48,289 65,893 
Performance unit award cash payouts(6)
6,644 7,926 14,570 
Lease commitments(7)
18,906 14,762 33,668 
Operating lease commitments(2)
Operating lease commitments(2)
57,246 87,191 144,437 
TotalTotal$152,445 $1,710,463 $1,862,908 Total$174,319 $2,131,082 $2,305,401 
___________________________________________________________________________________________________________________________________________________________
(1)Amounts presented include both principal and interest obligations.
(2)Amounts presented include both minimum lease payments and imputed interest.
We expect to satisfy our short-term contractual and other obligations with cash flows from operations.
(2)Amounts presented include both our principal and interest obligations. The July 2029 Notes consist of $298.2 million in principal and interest payments totaling $23.1 million each year with interest payments due semi-annually on January 31 and July 31 of each year until July 31, 2029. The January 2025 Notes and January 2028 Notes consist of $529.5 million and $326.8 million in principal, respectively, and interest payments totaling $50.3 million and $33.1 million each year, respectively, with interest payments due semi-annually on January 15 and July 15 of each year until January 15, 2025 and January 15, 2028, respectively.
(3)The $40.0 million principal on our Senior Secured Credit facility is due on July 16, 2025. Amounts presented do not include future loan advances, repayments, commitment fees or other fees on our Senior Secured Credit Facility as we cannot determine with accuracy the timing of such items. Additionally, amounts presented do not include interest expense as it is a floating rate instrument and we cannot determine with accuracy the future interest rates to be charged. See Notes 4, 10 and 1514 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report and Notes 2, 5 and 18 in our 2022 Annual Report for additionalfurther discussion of our Senior Secured Credit Facility.
(4)Asset retirement obligations represent future costs associated with the retirement of tangible long-lived assets. See Note 2 in our 2021 Annual Report for additional information regarding our asset retirementknown contractual and other obligations.
(5)Amounts represent commitments to deliver, for sale or transportation, fixed volumes of product under certain contractual arrangements that specify the delivery of a fixed and determinable quantity. See Note 10 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for additional discussion of our firm transportation commitments.
(6)Amounts represent the estimated cash payouts as of September 30, 2022 for our performance unit awards granted on March 5, 2020 and March 9, 2021, utilizing our September 30, 2022 closing stock price. See Note 9 to our consolidated financial statements included in our 2021 Annual Report for additional discussion of our performance unit awards.
(7)Lease commitment amounts represent our minimum lease payments for our operating lease liabilities. We have committed to drilling rig contracts with third parties to facilitate our drilling plans. Amounts presented include the gross amount we are committed to pay for the drilling rig contract. However, we will record our proportionate share based on our working interest in our consolidated financial statements as incurred. Management does not currently anticipate the early termination of these contracts in 2022. See Note 5 to our consolidated financial statements included in our 2021 Annual Report for additional discussion of our leases and Note 10 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for additional discussion of our drilling rig contracts.

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Cash flows
The following table presents our cash flows for the periods presented and the corresponding changes for such periods:
Nine months ended September 30,2022 compared to 2021 Six months ended June 30,2023 compared to 2022
(in thousands)(in thousands)20222021Change ($)Change (%)(in thousands)20232022Change ($)Change (%)
Net cash provided by operating activitiesNet cash provided by operating activities$720,702 $287,112 $433,590 151 %Net cash provided by operating activities$365,013 $539,007 $(173,994)(32)%
Net cash used in investing activitiesNet cash used in investing activities(443,475)(517,750)74,275 14 %Net cash used in investing activities(838,820)(293,540)(545,280)(186)%
Net cash (used in) provided by financing activities(284,084)233,277 (517,361)(222)%
Net (decrease) increase in cash and cash equivalents$(6,857)$2,639 $(9,496)(360)%
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities501,068 (154,719)655,787 424 %
Net increase in cash and cash equivalentsNet increase in cash and cash equivalents$27,261 $90,748 $(63,487)(70)%
Cash flows from operating activities
Net cash provided by operating activities increaseddecreased during the ninesix months ended SeptemberJune 30, 2022,2023, compared to the same period in 2021.2022. Notable cash changes include (i) an increasea decrease in total oil, NGL and natural gas sales revenues of $699.5$348.9 million, (ii) a decreasean increase of $241.2$306.3 million due to changes in net settlements for matured derivatives, net of premiums, mainly due to increasesdecreases in commodity prices and (iii) an increasea decrease of $85.7$124.5 million due to net changes in operating assets and liabilities. Other significant changes include an increase in lease operating expense and production and ad valorem taxes. The increasedecrease in total oil, NGL and natural gas sales revenues was due to a 86% increase34% decrease in average sales price per BOE as well as a 34% increase in oil volumes sold.BOE. For additional information, see "—Results of operations."
Our operating cash flows are sensitive to a number of variables, the most significant of which are the volatility of oil, NGL and natural gas prices, mitigated to the extent of our commodity derivatives' exposure, and sales volume levels. Regional and worldwide economic activity, weather, infrastructure, transportation capacity to reach markets, costs of operations, legislation and regulations, including potential government production curtailments, and other variable factors significantly impact the prices of these commodities. For additional information on risks related to our business, see "Part I. Item 3.
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Quantitative and Qualitative Disclosures About Market Risk" and "Part II. Item 1A. Risk Factors" included elsewhere in this Quarterly Report and "Part I. Item 1A. Risk Factors" in our 20212022 Annual Report.
Cash flows from investing activities
Net cash used in investing activities decreasedincreased for the ninesix months ended SeptemberJune 30, 2022,2023, compared to the same period in 2021,2022, mainly due to (i) a decreasean increase in acquisitions of oil and natural gas properties offset by a decrease in proceeds fromfor the sale of capital assetsDriftwood Acquisition and Forge Acquisition and (ii) inflationary pressures and an increase in non-operated capital expenditures, related towhich includes the effects of inflationary pressures. For further discussion of our acquisitions and divestiture of oil and natural gas properties.properties, see Note 3 to our consolidated financial statements included elsewhere in this Quarterly Report.
The following table presents incurred capital expenditures, on an accrual basis, in the acquisition, exploration and development of oil and natural gas properties, with asset retirement obligations included in evaluated property acquisition costs and development costs, for the periods presented:
Three months ended September 30,Nine months ended September 30, Three months ended June 30,Six months ended June 30,
(in thousands)(in thousands)2022202120222021(in thousands)2023202220232022
Property acquisition costs:Property acquisition costs:   Property acquisition costs:   
EvaluatedEvaluated$3,515  $745,240 $8,295 $745,240 Evaluated$405,986  $— $405,986 $4,780 
UnevaluatedUnevaluated179 127,505 3,470 127,505 Unevaluated212,220 17 212,220 3,291 
Exploration costsExploration costs4,343 8,143 18,700 27,413 Exploration costs10,960 7,604 15,780 14,357 
Development costsDevelopment costs130,961 127,031 420,468 279,032 Development costs133,390 127,892 312,684 289,507 
Total oil and natural gas properties incurred capital expenditures(1)
Total oil and natural gas properties incurred capital expenditures(1)
$138,998 $1,007,919 $450,933 $1,179,190 
Total oil and natural gas properties incurred capital expenditures(1)
$762,556 $135,513 $946,670 $311,935 

(1)Total oil and natural gas properties incurred capital expenditures includes certain employee-related costs.

The following tables present the components of our incurred capital expenditures, excluding non-budgeted acquisition costs, for the periods presented and the corresponding changes for such periods:
 Three months ended June 30,2023 compared to 2022
(in thousands)20232022Change ($)Change (%)
Oil and natural gas properties(1)
$144,350 $135,496 $8,854 %
Midstream and other fixed assets(1)
4,239 2,467 1,772 72 %
Total incurred capital expenditures, excluding non-budgeted acquisition costs$148,589 $137,963 $10,626 %

(1)Includes capitalized share-settled equity-based compensation and asset retirement costs.
 Six months ended June 30,2023 compared to 2022
(in thousands)20232022Change ($)Change (%)
Oil and natural gas properties(1)
$328,464 $303,864 $24,600 %
Midstream and other fixed assets(1)
7,769 4,998 2,771 55 %
Total incurred capital expenditures, excluding non-budgeted acquisition costs$336,233 $308,862 $27,371 %

(1)Includes capitalized share-settled equity-based compensation and asset retirement costs.
The amount, timing and allocation of capital expenditures are largely discretionary and within management's control. If oil, NGL and natural gas prices are below our acceptable levels, or costs are above our acceptable levels, we may choose to defer a portion of our capital expenditures until later periods to achieve the desired balance between sources and uses of liquidity
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and prioritize capital projects that we believe have the highest expected returns and potential to generate near-term cash flow. Subject to financing alternatives, we may also increase our capital expenditures significantly to take advantage of opportunities we consider to be attractive. We continually monitor and may adjust our projected capital expenditures in response to world developments, as well as success or lack of success in drilling activities, changes in prices, availability of financing and joint venture opportunities, drilling and acquisition costs, industry conditions, the timing of regulatory
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approvals, the availability of rigs and supplies, changes in service costs, contractual obligations, internally generated cash flow and other factors both within and outside our control.
Cash flows from financing activities
For the ninesix months ended SeptemberJune 30, 2022, $284.12023, $501.1 million of net cash was used inprovided by financing activities compared to $233.3$154.7 million of net cash that was provided byused in financing activities for the same period in 2021. In 2022, we began executing our strategy to return cash to shareholders through redemption of our senior secured notes and repurchasing our equity, which consisted of extinguishment of debt on our senior unsecured notes of $182.3 million and share repurchases of $26.6 million during the nine months ended September 30, 2022. Other notable 2022Notable 2023 activity includedincludes (i) borrowings on our Senior Secured Credit Facility of $335.0$595.0 million primarily to fund to our recent acquisitions, (ii) payments on our Senior Secured Credit Facility of $400.0$90.0 million and (iii) stock exchanged for tax withholding of $7.4$2.8 million. For further discussion of our financing activities related to debt instruments, and share repurchases, see Notes 4 and 5, respectively,14 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
Sources of Liquidity
Senior Secured Credit Facility
As of SeptemberJune 30, 2022,2023, the Senior Secured Credit Facility, which matures on July 16, 2025, had a maximum credit amount of $2.0 billion, a borrowing base of $1.3 billion and an aggregate elected commitment of $1.25 billion and $1.0 billion, respectively, with a $40.0$575.0 million balance outstanding, and was subject to an interest rate of 5.379%7.978%. The Senior Secured Credit Facility contains both financial and non-financial covenants, all of which we were in compliance with for all periods presented. Additionally, the Senior Secured Credit Facility provides for the issuance of letters of credit, limited to the lesser of total capacity or $80.0 million. As of June 30, 2023 and December 31, 2021,2022, we had a $44.1 million letterno letters of credit outstanding under the Senior Secured Credit Facility. There were no outstanding letters of credit as of September 30, 2022. The Senior Secured Credit Facility is fully and unconditionally guaranteed by LMS and GCM.
On August 30, 2022, we entered into the Ninth Amendment to the Senior Secured Credit Facility. The Ninth Amendment, among other things, added additional capacity to making repurchases of the Company's common stock and clarified the conditions to making redemptions of the Company's debt.
On November 1, 2022, we entered into the Tenth Amendment to our Senior Secured Credit Facility. The Tenth Amendment, among other things, (i) increases the borrowing base from $1.25 billion to $1.3 billion, (ii) permits additional senior note buybacks and other restricted payments, subject to certain conditions; and (iii) makes technical changes to permit us to potentially incur term loans, subject to terms to be agreed with lenders making such term loans, in addition to revolving loans, in each case, subject to the terms of the Tenth Amendment and the Senior Secured Credit Facility.
See Notes 4 and 1514 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further discussion of our Senior Secured Credit Facility.
January 2025 Notes, January 2028 Notes and July 2029 Notes
The following table presents principal amounts and applicable interest rates for our outstanding January 2025 Notes, January 2028 Notes and July 2029 Notes as of SeptemberJune 30, 2022:2023:
(in millions, except for interest rates)PrincipalInterest rate
January 2025 Notes$529.5 9.500 %
January 2028 Notes326.8 10.125 %
July 2029 Notes298.2 7.750 %
Total senior unsecured notes$1,154.5 
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During the nine months ended September 30, 2022, we repurchased a total of $184.5 million in aggregate principal amount of our senior unsecured notes. See Note 4 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further discussion of these repurchases.
(in millions, except for interest rates)PrincipalInterest rate
January 2025 Notes$455.6 9.500 %
January 2028 Notes300.3 10.125 %
July 2029 Notes298.2 7.750 %
Total senior unsecured notes$1,054.1 
Supplemental Guarantor information
As of SeptemberJune 30, 2022, $1.22023, approximately $1.1 billion of our senior unsecured notes remained outstanding. Our wholly owned subsidiaries, LMS and GCM (each, a "Guarantor," and together, the "Guarantors"wholly-owned subsidiary, Vital Midstream Services, LLC (the "Guarantor"), jointly and severally, and fully and unconditionally, guarantees the January 2025 Notes, January 2028 Notes and July 2029 Notes.
The guarantees are senior unsecured obligations of eachthe Guarantor and rank equally in right of payment with other existing and future senior indebtedness of such Guarantor, and senior in right of payment to all existing and future subordinated indebtedness of such Guarantor. The guarantees of the senior unsecured notes by the GuarantorsGuarantor are subject to certain Releases. The obligations of eachthe Guarantor under its note guarantee are limited as necessary to prevent such note guarantee from constituting a fraudulent conveyance under applicable law. Further, the rights of holders of the senior unsecured notes against the GuarantorsGuarantor may be limited under the U.S. Bankruptcy Code or state fraudulent transfer or conveyance law. LaredoVital is not restricted from making investments in the GuarantorsGuarantor and the Guarantors areGuarantor is not restricted from making intercompany distributions to Laredo or each other.Vital.
The assets, liabilities and results of operations of the combined issuer and Guarantorsthe Guarantor are not materially different than the corresponding amounts presented in our unaudited consolidated financial statements included elsewhere in this Quarterly Report. Accordingly, we have omitted the summarized financial information of the issuer and the GuarantorsGuarantor that would otherwise be required.
Non-GAAP financial measures
The non-GAAP financial measures of Free Cash Flow and Adjusted EBITDA, as defined by us, may not be comparable to similarly titled measures used by other companies. Furthermore, these non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP measures of liquidity or financial performance, but rather should be considered in conjunction with GAAP measures, such as net income or loss, operating income or loss or cash flows from operating activities.
Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that we define 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. Management believes Free Cash Flow is useful to management and investors in evaluating operating trends in our 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.

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The following table presents a reconciliation of net cash provided by operating activities (GAAP) to Free Cash Flow (non-GAAP) for the periods presented:
Three months ended September 30,Nine months ended September 30,
(in thousands)2022202120222021
Net cash provided by operating activities$182,615 $97,674 $720,702 $287,112 
Less:
Change in current assets and liabilities, net(1,812)(3,142)101,583 27,106 
Change in noncurrent assets and liabilities, net(7,034)(16,715)(13,247)(24,505)
Cash flows from operating activities before changes in operating assets and liabilities, net191,461 117,531 632,366 284,511 
Less incurred capital expenditures, excluding non-budgeted acquisition costs:
Oil and natural gas properties(1)
135,304 135,174 439,168 306,445 
Midstream service assets(1)
506 567 1,232 2,422 
Other fixed assets4,290 1,685 8,562 3,229 
Total incurred capital expenditures, excluding non-budgeted acquisition costs140,100 137,426 448,962 312,096 
Free Cash Flow (non-GAAP)$51,361 $(19,895)$183,404 $(27,585)

(1)Includes capitalized share-settled equity-based compensation and asset retirement costs.

Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net income or loss (GAAP) plus adjustments for share-settled equity-based compensation, depletion, depreciation and amortization, impairment expense, gains or losses on disposal of assets, mark-to-market on derivatives, premiums paid or received for commodity derivatives that matured during the period, accretion expense, 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, our management believes Adjusted EBITDA is useful to an investor in evaluating our 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 our operations from period to period by removing the effect of our capital structure from our operating structure; and
is used by our management for various purposes, including as a measure of operating performance, in presentations to our 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 our 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. Our measurements of Adjusted EBITDA for financial reporting as compared to compliance under our debt agreements differ.

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The following table presents a reconciliation of net income (loss) (GAAP) to Adjusted EBITDA (non-GAAP) for the periods presented:
 Three months ended September 30,Nine months ended September 30,
(in thousands)2022202120222021
Net income (loss)$337,523 $136,832 $513,288 $(71,268)
Plus:
Share-settled equity-based compensation, net1,638 1,811 6,295 5,609 
Depletion, depreciation and amortization74,928 62,678 226,555 140,763 
Impairment expense— — — 1,613 
Organizational restructuring expenses10,420 — 10,420 9,800 
Gain on disposal of assets, net(4,282)(95,201)(4,952)(93,454)
Mark-to-market on derivatives:
(Gain) loss on derivatives, net(100,748)96,240 290,995467,547 
Settlements paid for matured derivatives, net(124,289)(92,726)(423,668)(191,507)
Settlements received for contingent consideration— — 1,555 — 
Net premiums paid for commodity derivatives that matured during the period(1)
— (10,182)— (31,370)
Accretion expense954 906 2,946 3,207 
Interest expense30,967 30,406 96,251 82,222 
(Gain) loss on extinguishment of debt, net(553)— 245 — 
Income tax (benefit) expense(3,768)2,677 2,447 593 
Adjusted EBITDA (non-GAAP)$222,790 $133,441 $722,377 $323,755 
_____________________________________________________________________________
(1)Reflects net premiums paid previously or upon settlement that are attributable to derivatives settled in the respective periods presented.
Critical accounting estimates
The discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our unaudited consolidated financial statements.
ThereOther than the critical accounting estimates set forth below, there have been no material changes in our critical accounting estimates during the ninesix months ended SeptemberJune 30, 2022.2023. See our critical accounting estimates in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 20212022 Annual Report.
Income taxes
As part of the process of preparing the consolidated financial statements, we are required to estimate the federal and state income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items such as derivative instruments, depletion, depreciation and amortization, and certain accrued assets and liabilities for tax and financial accounting purposes. These differences and our net operating loss carry-forwards result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. We must then assess, using all available negative and positive evidence, the likelihood that the deferred tax assets will be recovered from future taxable income. If we believe that recovery is not likely, we must establish a valuation allowance. Generally, to the extent we establish a valuation allowance or increase or decrease this allowance in a period, we must include an expense or reduction of expense within the tax provision in the consolidated statement of operations.
Under accounting guidance for income taxes, an enterprise must use judgment in considering the relative impact of negative and positive evidence. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. The more negative evidence that exists (i) the more positive evidence is necessary and (ii) the more difficult it is to support a conclusion that a valuation allowance is not needed for all or a portion of the deferred tax asset. Among the more significant types of evidence that we consider are:
our earnings history exclusive of the loss that created the future deductible amount coupled with evidence indicating that the loss is an aberration rather than a continuing condition;
the ability to recover our net operating loss carry-forward deferred tax assets in future years;
the existence of significant proved oil, NGL and natural gas reserves;
our ability to use tax planning strategies, such as electing to capitalize intangible drilling costs as opposed to expensing such costs;
current price protection utilizing commodity hedges;
future revenue and operating cost projections that indicate we will produce more than enough taxable income to realize the deferred tax asset based on existing sales prices and cost structures; and
current market prices for oil, NGL and natural gas.
During the second quarter of 2023, in evaluating whether it was more-likely-than-not that our deferred tax asset was recoverable from future net income, we considered all positive and negative evidence available and determined it was more likely than not that the federal net deferred tax assets were realizable and a valuation allowance was no longer warranted. We believe that is more-likely-than-not that our Oklahoma deferred tax assets are not realizable and continue to maintain a full valuation allowance recorded against these deferred tax assets. We will continue to assess the need for a valuation allowance against deferred tax assets considering all available evidence obtained in future reporting periods. See Note 12 to our consolidated financial statements included elsewhere in this Quarterly Report for additional discussion of our income taxes.
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Item 3.    Quantitative and Qualitative Disclosures About Market Risk
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risk. The term "market risk," in our case, refers to the risk of loss arising from adverse changes in oil, NGL and natural gas prices and in interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of how we view and manage our ongoing market risk exposures. All of our market risk-sensitive derivative instruments were entered into for hedging purposes, rather than for speculative trading.
Commodity price exposure
Due to the inherent volatility in oil, NGL and natural gas prices and the sometimes wide pricing differentials between where we produce and where we sell such commodities, we engage in commodity derivative transactions, such as puts, swaps, collars and basis swaps, to hedge price risk associated with a portion of our anticipated sales volumes. By removing a portion of the price volatility associated with future sales volumes, we expect to mitigate, but not eliminate, the potential effects of variability in cash flows from operations.
The fair valuevalues of our open commodity positions are largely determined by the relevant forward commodity price curves of the indexes associated with our open derivative positions. The following table provides a sensitivity analysis of the projected incremental effect on income or loss before income taxes of a hypothetical 10% change in the relevant forward commodity price curves of the indexes associated with our open commodity positions as of SeptemberJune 30, 2022:2023:
(in thousands) As of SeptemberJune 30, 20222023
Commodity derivative liabilityasset position$(40,073)4,654 
Impact of a 10% increase in forward commodity prices$(44,477)(54,735)
Impact of a 10% decrease in forward commodity prices$60,77149,165 
See Notes 8, 9 and 914 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further discussion of our commodity derivatives. For additional discussion of our quantitative and qualitative disclosures about market risk, see "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our 20212022 Annual Report.
Interest rate risk
Our Senior Secured Credit Facility bears interest at a floating rate and our senior unsecured notes bear interest at fixed rates. The interest rate on our Senior Secured Credit Facility as of SeptemberJune 30, 20222023 was 5.379%7.978%. See Note 4 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further discussion of our debt. The interest rate on borrowings may be based on an alternate base rate or term secured overnight financing rate ("Term SOFR"), at our option. Interest on alternate base rate loans is equal to the sum of (a) the highest of (i) the "prime rate" (as publicallypublicly announced by Wells Fargo Bank, N.A.) in effect on such day, (ii) the federal funds effective rate in effect on such day plus 0.5% and (iii) the Adjusted Term SOFR (as defined in our Senior Secured Credit Facility) for a one-month tenor in effect on such day plus 1% and (b) the applicable margin. Interest on Term SOFR loans is equal to the sum of (a)(i) the Term SOFR (as defined in our Senior Secured Credit Facility) rate for such period plus (ii) the Term SOFR Adjustment (as defined in our Senior Secured Credit Facility) of 0.1% (in the case of clause (a), subject to a floor of 0%) plus (b) the applicable margin. The applicable margin varies from 1.5% to 2.5% on alternate base rate borrowings and from 2.5% to 3.5% on Term SOFR borrowings, in each case, depending on our utilization ratio. At SeptemberJune 30, 2022,2023, the applicable margin on our borrowings were 1.5%was 1.75% for alternate base rate borrowings and 2.5%2.75% for Term SOFR borrowings.

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Item 4.    Controls and Procedures
Evaluation of disclosure controls and procedures
As of the end of the period covered by this report, an evaluation of the effectiveness of the design and operation of Laredo'sVital's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), was performed under the supervision and with the participation of Laredo'sVital's management, including our principal executive officer and principal financial officer. Based on that evaluation, these officers concluded that Laredo'sVital's disclosure controls and procedures were effective as of SeptemberJune 30, 2022.2023. Our disclosure controls and other procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to Laredo'sVital's management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of changes in internal control over financial reporting
There were no changes in our internal controls over financial reporting (as defined in Rule 13(a)-15(f) of the Exchange Act) during the quarter ended SeptemberJune 30, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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Part II
Item 1.    Legal Proceedings
From time to time, we are subject to various legal proceedings arising in the ordinary course of business, including proceedings for which we may not have insurance coverage. While many of these matters involve inherent uncertainty as of the date hereof, we do not currently believe that any such legal proceedings will have a material adverse effect on our business, financial position, results of operations or liquidity.
Item 1A.    Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risks discussed in our first-quarter 2022 Quarterly Report, our 2021 Annual Report and those set forth from time to time in our other filings with the SEC. Other than the risk factor set forth below, thereThere have been no material changes in our risk factors from those described in our 20212022 Annual Report and our first-quarter 2022 Quarterly Report. The risks described in such reportsreport are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results.
Continuing or worsening inflationary pressures and associated changes in monetary policy have resulted in and may result in additional increases to our drilling and completions costs and costs of oilfield services, equipment, and materials, which in turn have caused and may continue to cause our capital expenditures and operating costs to rise.
The U.S. inflation rate has been steadily increasing since 2021 and into 2022. These inflationary pressures have resulted in and may result in additional increases to our drilling and completions costs and costs of oilfield services, equipment, and materials, which in turn have caused and may continue to cause our capital expenditures and operating costs to rise. Sustained levels of high inflation have likewise caused the Federal Reserve and other central banks to increase interest rates, which could have the effects of raising the cost of capital and depressing economic growth, either of which — or the combination thereof — could hurt the financial and operating results of our business.
Item 2.    PurchasesUnregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Issuer Repurchases of Equity Securities
The following table summarizes purchases of common stock by LaredoVital for the periods presented:
Period
Total number of shares purchased(1)
Weighted-average price paid per share(2)
Total number of shares purchased as
part of publicly announced plans(3)
Maximum value that may yet be purchased under the program as of the respective period-end date(3)
July 1, 2022 - July 31, 2022102,244 $70.53 94,031 $184,283,901 
August 1, 2022 - August 31, 2022105,772 $72.18 105,772 $176,648,973 
September 1, 2022 - September 30, 202248,867 $72.07 44,884 $173,413,515 
Total256,883 244,687 
Period
Total number of shares purchased(1)
Weighted-average price paid per share
Total number of shares purchased as
part of publicly announced plans
Maximum value that may yet be purchased under the program as of the respective period-end date(2)
April 1, 2023 - April 30, 2023— $— — $162,710,185 
May 1, 2023 - May 31, 202337 $46.16 — $162,710,185 
June 1, 2023 - June 30, 20238,514 $45.15 — $162,710,185 
Total8,551 — 
______________________________________________________________________________
(1)IncludesRepresents shares that were withheld by us to satisfy tax withholding obligations that arose upon the lapse of restrictions on equity-based compensation awards.
(2)Average share price includes any commissions paid to repurchase stock.
(3)On May 31, 2022, our board of directors authorized a $200 million share repurchase program commencing on the date of such announcement and continuing through and including May 27, 2024. Share repurchases under the program may be made through a variety of methods, which may include open market purchases, including under plansarrangements complying with Rule 10b5-1 of the Exchange Act, and privately negotiated transactions. During the three months ended SeptemberJune 30, 2022, we repurchased 244,6872023, no shares under this program at a cost of $17.5 million.were repurchased.
Item 3.    Defaults Upon Senior Securities
None.
Item 4.    Mine Safety Disclosures
The operation of our Howard County, Texas sand mine is subject to regulation by the Federal Mine Safety and Health Administration (the "MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"). The MSHA may inspect our Howard County mine and may issue citations and orders when it believes a violation has occurred under the Mine Act.
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While we contract the mining operations of the Howard County mine to an independent contractor, we may be considered an "operator" for purpose of the Mine Act and may be issued notices or citations if MSHA believes that we are responsible for violations.
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Quarterly Report.
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Item 5.    Other Information
Not applicable.Rule 10b5-1 Trading Arrangement Changes
Certain of our officers and directors have trading arrangements for the sale or purchase of Vital Energy, Inc. common stock intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act. The following table summarizes changes to such arrangements during the three months ended June 30, 2023:
Name and title of
director or officer
Type of changeDate of adoptionDate of terminationDuration of trading arrangementPotential aggregate number of securities to be purchased (sold) pursuant to the trading arrangement
Mark Denny
Senior Vice President-General Counsel & Secretary
AdoptionMay 22, 2023N/AOctober 6, 2023(5,496)
Mark Denny
Senior Vice President-General Counsel & Secretary
TerminationFebruary 24, 2023May 22, 2023December 29, 2023(10,037)
Jason Pigott
President and Chief Executive Officer
TerminationFebruary 24, 2023May 23, 2023July 31, 2023(10,000)
Other than as described above, none of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarterly period ended June 30, 2023.
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Item 6.    Exhibits
Incorporated by reference (File No. 001-35380, unless otherwise indicated)Incorporated by reference (File No. 001-35380, unless otherwise indicated)
ExhibitExhibit DescriptionFormExhibitFiling DateExhibit DescriptionFormExhibitFiling Date
8-K2.15/17/2023
 8-K3.112/22/2011 8-K3.112/22/2011
8-K3.16/1/20208-K3.16/1/2020
8-K3.15/26/20228-K3.15/26/2022
8-K3.11/6/20148-K3.11/9/2023
8-K3.13/4/20218-K3.11/6/2014
8-K3.21/9/2023
 8-A12B/A4.11/7/2014 8-A12B/A4.11/7/2014
10-Q10.48/04/2022
8-K10.18/30/2022
8-K10.111/3/2022
10-Q22.15/7/202010-K22.12/22/2023
  
  
  
101101 The following financial information from Laredo’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows and (v) Condensed Notes to the Consolidated Financial Statements.101 The following financial information from Vital’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows and (v) Condensed Notes to the Consolidated Financial Statements.
104104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*    Filed herewith.
**    Furnished herewith.
#    Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission on request.
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 
 LAREDO PETROLEUM,VITAL ENERGY, INC.
   
Date: November 3, 2022August 8, 2023By:/s/ Jason Pigott
  Jason Pigott
  President and Chief Executive Officer
  (principal executive officer)
   
Date: November 3, 2022August 8, 2023By:/s/ Bryan J. Lemmerman
  Bryan J. Lemmerman
  Senior Vice President and Chief Financial Officer
  (principal financial officer)
Date: November 3, 2022August 8, 2023By:/s/ Jessica R. Wren
Jessica R. Wren
Senior Director of Financial Accounting and SEC Reporting
(principal accounting officer)

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