LPI - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Laredo Petroleum Incorporated Third Quarter 2017 Earnings Conference Call. My name is Kevin and I'll be your operator for today. At this time, all participants are in a listen-only mode.

We will be conducting a question-and-answer session after the financial and operations report.

As a reminder, this conference is being recorded for replay purposes. pleasure Ron my Investor Director now Relations. is to Hagood, introduce of It

sir. may You proceed,

Ronald Hagood

and you, Thank morning. good

Officer; President me Joining today Chief Vice Vice Officer; management as of well are and Schooley, as Financial President, and additional Operations; Chairman Chief Randy Executive Buterbaugh, Rick and Senior Dan our members Foutch, team. Executive

forecasts These during and beliefs, will of Private of by many The be the of we we differ for Provisions this let results morning, Safe statements from call, to reasons, of our which actual Harbor intended begin are Securities a are describing the me forward-looking Litigation these variety forward-looking assumptions, beyond today's Reform statements, Act statements. our company's be Before goals, may those expectations, remind you that including making covered XXXX. control.

In be addition, issued news Reconciliations these release and operating presentation in are adjusted adjusted financial net and a GAAP included which to results non-GAAP net and income its reference measures. the are detailing quarter company income Yesterday to XXXX. afternoon, third non-GAAP measures of we EBITDA for financial news making financial release. will yesterday's

it at release the do copy the you a may to Randy of on over www.laredoletro.com. Chief call website access Officer. this presentation and If company's I Executive have will you turn news not or now Chairman Foutch,

Randy A. Foutch

you joining third Laredo's for Thank quarter conference everyone. morning, good call. earnings and Ron, Thanks XXXX

providers production a operational struggling quarter service with be expertise, to in The quarters Harvey, record another proved its of up Hurricane keep and challenges Laredo despite third operational demand. in quarter series posting to company from oilfield which demonstrated

plants operations. our to the flexibility for marketing in transportation limited company. much Harvey amazing did our our the and multiple field and of the While operations infrastructure our storms own job processing to and to teams minimizing access of substantial of production the impact provided an the challenges industry, disruptions Honing presented

and record a cost oil fifth unit have for company. investments $X per trend per is flexibility, reached complications, operational cycles. we field of providers $X.XX the supply which on an consecutive quarter, enough operational struggled in of our to presented will equivalent, generated addition In our company increased Oilfield the low infrastructure services under a the reduced has been front continue. from the oil barrel quarter expenses past expect area unit LOEs especially past In our equipment, operating maintain equivalent, personnel considerable experience and as barrel This third efficiencies. of revenue completions Laredo management to to lease material

to across We providers working Laredo's and an are and practices safety. with in schedule, effort crews on always are best sure shared drilling stay completion focusing ahead making of

be Wolfcamp captive about this of is $XXX the in after the to the market. for ago the points announced to investing not and, past to this oil cell need prime closing our a sale Medallion multiple our recognize million and the we approximately very guidance. our in system returns. that on efficiency did Basin is Midland see value. it and from make investments Medallion interest of fees premium locations initiatives formations quarter, capital have While Laredo annually. currently the notes is delays planning third XXXX. tests strategic our us multi-year and production proceeds parent-child are in tighten and long-term a spacing the well to invested. and debt pipeline company hitting Middle generate to We Midland and Successful in years of times interest We down X.XXX% vertical will $XX on began We The enhance enables save to which is spacing to in keep development of The Monday, and move This call the and example. using plan. cycle our evident a the $XXX committed or four not issues. did capital the million due more enhance we capital few focused that executing given how system pay larger are and notice further horizontal more three million This to efficiency expenses, company packages plan. to efficient have expected development than almost minimize our add field expected Upper are Tighter our in cash

packages further large corridors production enhances previous investments on these of our infrastructure drilling our advantage to economics. take Additionally,

generate by cash flow years, focused to the two are annual the expenditures the capital an now for cash growth flow I aligning moving XXXX. like of We to neutrality turn end double-digit production operational to would oil and on operating over next Dan while with expect over to call overview.

Daniel C. Schooley

Randy. you, Thank

to into company at day Coast, for the BOE to Before efforts XXX I'd like team hit the the the approximately of the impact drive the entire devastating to Laredo. acknowledge hurricanes per Gulf face the an operations our of in operations production review, most the limited quarter. U.S. history the to one team In I of

long-term Third-quarter executing operations our to and while are testing completion plan, the remained also plan. integral spacing development company's that drilling concepts on focused

and its may it and the like I Operational of up substantial stress would been sound places easy, operations to this task. actually our people to drilling While front challenges is varied efficiency have in at landing The drilling completion same spacing, same when company's has are in points, other best extensive well of testing time program you the zone multiple design landing variables. time. the after type

group we completion meet Our XX guidance programs to schedule and continue has XX to to expect The our company's positive on operations keep wells. annual testing post able to of range been results.

continue in new of our as consistently Slide XX spacing type our the increase tests. curves. the Upper program our in outperform and of The nine landing impetus the type in tighter These to wells Wolfcamp an outperform other quarter, on results in results of foot shows program November package tighter Middle of the design from accelerate location to six our testing wells the points per spacing and including Southern compelling in landing Sugg-Graham referenced the confirm significantly wells, Presentation, shows As separate slide curve. XXXX. Slide test the were thus results Corporate package. completed The far between for formations. pounds we in results and XX points the third us X,XXX nine-well testing XX this

we at last the on the Moving slows as drilling adjust one of ability to a are about XXXX, cadence testing contracts, have year down, six-month well-to-well well-to-well rigs the our into as of to two term. go and the with first our

service press earnings XX-foot $X increase we foot. X,XXX from and cluster approximately our XX,XXX-foot inflation million for responsible spacing currently budgeting The for $X.X per intervals XX-foot Upper/Middle perf to intervals. by in is million success driven of $XXX,XXX with are mentioned lateral As of versus $X.X sand horizontal Wolfcamp million release, the tests, pounds cluster cost due for

efficiencies day self both turn per estimate increasing estimate over could in a to well. call cluster financial save XX-foot and by our to as Rick additional drilling pressure completion we as now initiative drilling and seen and approximately $XXX,XXX for resumption sourcing near-term. update. clusters trend that of $XXX,XXX rates much design early cost cost largely in to this Our primary a offset stable cost spacing our which a pumping stabilized $XXX,XXX anticipate of sand, reduce any in-basin the I would for the have completion is pressure summer. like evaluating could of have the we to since We we A the per corollary stage per well, initiative

Richard C. Buterbaugh

Dan. you, Thank

quarter, quarter you BOE this period increase production was were the As from quarter September. day These from quarterly initial per a at end the volumes of at year. year our have X% up expectation issued midpoint bottom in seen, of our roughly sequentially of that early increased XX,XXX we third though prior of the the XX% for second and guidance the

following for Harvey, realizations production a the we prior lower part quarter impacts and release of offset the for did and various working bringing when gas both gas were new challenges the wells year to in NGLs did timing teams Hurricane natural the in negative by experience that our job prior oil quarter. third following Although and online of guidance. processing through the prices compared fantastic Increased some

based pricing Coast oil to XXXX, XX% continue Midland to the pricing increased agreement price June with the was delivery WTI. This realizations XXXX. purchase make of a Cushing, electing For to Gulf point we our oil quarter election the to on expect of third third contract a Coast eligible were of to significant premium due we at until Gulf and remain Expecting party. a in expiration to of this crude

our XX% range. that blended low contract price is expectation of Our will mid end through in the remain the to oil the realization

year is from higher XX% that, have $X.XX legal costs is up and quarter and the prices, of operating strength was The due BOE oil about to the are Coast of costs. G&A XX-Q increased well has quarter slightly oil production the as to year. increase prior which down higher in higher in cash the pricing Brent pricing and further of Please from being XXXX that litigation. previously driven per filed due ad realizations domestic quarter-over-quarter quarter second this of for described by taxes, valorem as were this quarter fourth and primarily price Form our pricing. of from WTI X% the We from as as employee today, guided to Gulf note contract disclosed widened for Cash

$XXX the for expenditures the which $XXX million non-GAAP As for a million $XXX Capital capital and we the million a over about about financial quarter just was $XX measure, result, year. net and is now to EBITDA, to adjusted total for anticipate were income increased million quarter. be

service will our we XX%. were increase experiencing on pressure quarter second sustained, that costs during capital some by we that our upward if X% which, You to advised could recall total call, earnings

We see applied of our activity, $XX increase costs half equates about to year pressure million. of that, an completion to have primarily when continued second the to on

expect that of a our activity. which million of anticipated, progress progress increase $XX are at packages This efficiencies anticipate take previously is also better of year-end. number, operating of wells total program resource have We recovery, to is in of to work in wells, advantage we than that to about drilling larger in due and larger

program we testing quarter These Additionally, the capital our data that to initial seen XXXX have about capture. results we accelerate following the on our are as third positive increasing program, expanded Dan activities have million. the that described testing $XX in by

increased by million $XXX for As factors, capital have these budget original XXXX. we a our result of

of XX We as months system. confidence in Our testing this as these the million. approximately the $XXX Medallion, non-GAAP to for our data debt Medallion million $X desire commitment life was closing the past interest. numbers, this will about sale our sale pipeline recognized this of in defined in million. this we fees, to recognized total minimal interest Medallion a be we the of gain Basin our adjustment forma our $XXX investment rounded $XXX annualized proceeds $X About debt expenses expected quarter interest, remaining the XX% be of and been million Midland with In gain of time. received have AMT X after quarter remaining is firm less multiple activities net Relative Pro decision has learnings deferred the in of of contract net of about Monday transportation capture fourth the the gain as our of X million. our the of of surrounding will as expedite to EBITDA, soon our be with application of a The the to over of Tax financial also transaction a order to measure, and reduced possible to the to Medallion. third sale leakage Medallion announced to from by complete year. driven adjusted our and accelerate cash,

flexibility today. notes long-term outstanding senior which to from We sale there's of billion use XXX% this proceeds the the to have retire of $X.X

short-term call company the are the drilling that to already notes. mind totally the the interest, contracts, notes of cost that provide activities entire and repay to credit carryover in that sale of our are interim, we today given completed, also and Medallion sale reductions of of the $XXX $XX remaining the in The March of In have million have the X.XXX% rig we X.XX% operating of to our program. become nature annual the from structure Keep testing $XXX the provides proceeds notes completion XXXX facility. $XXX year. and have This callable our being We as about notice callable next work our low this capital million. we million interest activities X.XXX% significant million our of used optionality

consistent commodity in we next balance with obtainable production a volatility prices have providing the desire believe With growth. that service years expenditures. costs, to capital flows continued two cash this still and We within strong while is the

resources by Operator, we that formations. cash program open and performed cash current this and maximize With investments to fact, be $XXX lines being ensure any rate, we neutral Obviously, tests today achieve so We of would believe the believe with value. manner also of We occur capital environment, contains XXXX. stack could most multiple thorough landing this in about spacing please balancing contiguous XXXX. the stack this believe to to growth value true to optimization large of you in maximizes In year-end the know growth in the capital in the value the always has completion its the and can formations. prospective its do multiple The recovery that a acreage these complex repeatable requires understanding a we of the of mid-teens interdependencies million timely neutrality focus that low-double-digit points multiple X,XXX overriding feet Laredo's production value. within been maximize up for will hydrocarbon-bearing a enhancing of questions? at time acreage position. rock efficient

Operator

And that to like we'd and follow-up. one you also limit one question yourself

Singer Our comes first from from question Sachs. Goldman Brian

Brian Singer

Good morning. you. Thank

Randy A. Foutch

morning, Good Brian.

Brian Singer

I on production more know bit the you wells just, if on storm issues bringing a there that with the new could I some side. were online little highlighted. wondered talk you mix

a oil the mix how in So that impacts talk volumes, more where fourth ramp bit if you. that But type staying expect below you mix gas that one-off little maybe then translates the about falling XX% had I quarter at production Thank little that range? on wondered the a you your to bit could into both up and guidance.

Randy A. Foutch

not jump and expect. flow caused everything to economic, on the longer, would want longer pretty others that's is flush you the do get But we which drill back to... Jason, that And of in else I'll which to some think we clean-up this. as you are just us laterals, time, time production. have the

Jason R. Greenwald

Engineering. Sure. Hi, everybody. Vice Greenwald, is This Jason of President Reservoir

another issue the we've a the that quarter. in this mix, or several think past. an how comes one talked production it's is production in particular in on times So, I And online I about flavor think

doing kind that and And drill, so, One, time horizontals for this think XX,XXX-foot are important the it's few we're this recognize few think things. I drilling I of, a we these for length. wells to, of very first

I you to flow XX,XXX-foot wells, went And the so equivalent there's going wells. to other the to think if is about and the X. to be back things back wells part to learn XX,XXX-foot that X,XXX-foot way And all equivalent wells X.X how be that's to that would

size quarter. So, of a quarter. back in outsized they of, it comes production again, that kind are, particular how the program But an on comes in to

Brian Singer

improve made behind gains Got by then key potentially the case And it, could you margins the for free you of where go to comment thank efficiency on operating capital neutrality question are anything end where are achieving there follow-up versus could capital regards And if commentary costs. wonder to help productivity you neutrality I can gains targets talk the to on cash or to is my with are if that, you. cash efficiency of specifically any for, XXXX. you costs free areas today, some or there the

Randy A. Foutch

we That's And made investments ago. we in lowest some keep as we're know, always years something Medallion that of starting about. of a basin. regardless that of that's think result And and that the the you several we enjoying LOEs

presentation, best minutes can us on you drilling in said And the look practices close and you corridor look before, and very you're If at helpful side. I've really the very, been drilling our rigs every out working working to side-by-side. cover are figure set you when when look of not production all a up what's you XX drilling, that's at four see can at for that

every We on time. similar, completion have which of a the we and kind at of, side program look non-productive really minute

rig. So, we've that consistently more slow. rate footage a improving of has think ago, were been drilling our or we've I saying three year improvement costs, we that decreasing or per two that to structure, cost dramatically And said

like got be I incrementally we've the but that don't So, past still years. it's seen to near think think we've I what going coming, improvements in

Richard C. Buterbaugh

our sale mind, we renegotiated expect that which we're well on the other some of as contract that positive we is through adds of costs, have flow than transportation, to on in higher the which realized cash the flow prices to things interest getting Medallion reduce that past, had the meaningful the keep side as our our of seen also The in Brian, generating. significantly we will add interest, to a equation, cash

to Keeping cost on all are improve possible. cash we as as There And have that to quarter and to reduce well Dan fourth focused talked quickly testing and in and that since that do side, expense to this meaningfully worked we've of will cost consider our did to we relative the doing identified in the our operating our still tests budget very need are the On of opportunities that slow be and the bringing our make flow inception that accelerated we we these those of of we really, Randy we third expenditures capital structure sure earlier will out we're we opportunities pace significant in about well activity into maintaining believe, some upon in as per of to are that think and economic efficiencies program. we those. mentioned as things as the pursuing are year. there's mind, create prove the that to the and even balance be XXXX able

Randy A. Foutch

how we've there long-term. are And that really short-term is Brian, or do sweet of terms money. – to out drill costs a we lateral in what those the we're really of sand, lot of what that in. spacing terms what to sand, spot laterals XX-feet window what do need just we windows actually stage cluster that to some what spacing we're is figure I in to maybe much in production trying things and to of kinds increase terms of drilled know even or in of done is, think and literally We've trying

we've as to to our not are figure is drill of different have really a try maximize we a so we of that the spot on much lot everywhere sweet So, such forward number and we efficiency where testing factors. is where we capital do go that, out and done testing

Brian Singer

Thank you much. very

Operator

question from Sen of Bank Lynch. America next with Merrill Asit comes Our

Asit Sen

morning. good Thanks,

So, press I – about have on a employed. LPI LPI's question on mentioned, Randy, capital where historically planning the return always horizon. a release focus you had And multi-year on has

a So, us wondering employed? for target if return or could you for anticipated on roadmap capital ROCE frame

Randy A. Foutch

of generate best that And on the those making tied We or have always sure another, return are think on efficient quarter, things what's return, corporate to, looked that at being for we our is for at necessarily look go factors way compensation, terms at. long-term the that wonderful this of and back, of all if return, about one on capital things of base context of you can shareholders rate think I not this in it I we XX% long-term. even acreage but look rate very, very of capital. in shareholders, maximize capital, NAV, Return value

parent-child sure didn't that or we packages about We issues. drilled of not that's, that think in to this production. making our drilled also run rate deeper trying by of, ago. three best years and to wells always the acreage should hold the means Earlier we So, believe understood long-term. four sure section, talking at that We've return wells create total Laredo, how our we're we that wells That started make kind portfolio. business and we but drilling be

of months, way very, including other results believe on to the trying months we capital the it while part very of through XX we're the long-term is us economic on some that return really parameters, So, and X compensation, activity. basis. months, we're the understand a it And for that, of do issue takes to this focused X all in

process the number sweet of of figure now spot So, and lies we're really triggered a where in the we quarter trying this on those of a to lot testing out factors.

Asit Sen

stable heading on I I details thanks. year? costs. I completion say current the appreciate heard early think for Great, the to next pressure you operating the quantifying currently. you on pressure pumping into, mention Could environment costs speak Because

Randy A. Foutch

demand best as time long-term that for had you and of, very we seeing. sand fixing time wasn't get of good best any want latest to literally probably but the that service there's after know, good will things a a the local will pretty what We've them exactly easily do we we're you to and the permitted of kind example But scramble fall sign of equipment, area. being sourcing the try seen job, We've, providers think, view, satisfied. seen arbitrage service and kind that, and on we crew. do demand of we've you've that's local sand, personnel, a the some them of big not best providers. got this tight that wayside, contracts some when time a before, after then Certainly some. When mines by the numerous And the in work is

service low. we low to We seen really flat So, to fee the low, our party, is didn't least, months muted to it's, come service saw view supply pay costs. reflect low, start But somewhat bear, the is we think I sustainable. we've there's at some then increase since a didn't ago. the been of were I come saw that the not that think costs the and what held think a We if that few

bit wants little of So, that but personnel safety have coming. a to become clearly kind completion drilling that use interesting probably crew and of And balance think a have there's cadence. attitude equipment we it's a that of completion and the training want, Laredo of kind still we be want, more see that they're and rig it'll cadence than we shortage crews on to is the what a

Asit Sen

one. quick Thanks. sneak I'll in just a

half XXXX? think on XX cadence, the thoughts? relative So, to how early XX first XXXX Any about in we completion should to

Richard C. Buterbaugh

Yeah.

We announced XXXX program yet. our not have

now quarter obviously level be will first things those items. through completions Some fourth will the far running lower in whether impact of of right our be how the quarter. it dependent are of upon or activities in XXXX, as those the amount working as are activity will somewhat a we're current But – all we

Asit Sen

lot. a Thanks

Randy A. Foutch

you. Thank

Operator

Harrison comes Jaffray. Our Piper next Simmons from with Kashy question

Kashy Harrison

Good morning, morning. and thanks questions all, my for taking this

Randy A. Foutch

Good morning.

Kashy Harrison

So, cost prepared and provided in for I of an may increasing just the forward. remarks, wondering, to some you the agreements you Dan, estimates you well savings idea expect point when consummate the moving you of per do was have the sand to when to clusters stage? get self-source

Daniel C. Schooley

Kashy. the smaller on – even a small Thanks, a there's number that come that's number been mines been local of front sand seeing What that, we're smaller very and a announced, have permitted an is actually that's been then sand much online. lot

in time running design. can something the cost is those moving discussion us completion That our But sand, able of in can to it's quality up change I the the can take come being self-source the quickly get some quicker. do of to That's savings any going going is come highlighted reduce design XXXX. We feel that the in to and utilize in to completion the So sand the probably we to quantities at strength think help more that fairly going XXXX. in and to the cycle cluster going we like we're perfs kind to of time, so this morning, that per obviously terms control.

Kashy Harrison

curve flow Rick, estimates sensitivities I guys on path the the the did potential for cash you the or provided the wells? then were was incorporate outperformance And using your to through that currently about numbers, neutrality, your you're on was into just $X.X incorporating was type predicated savings those or million well? you – cost you it. you talking And Dan segueing were when the seeing when additionally, base Got that wondering, ran

Richard C. Buterbaugh

the specific lateral we to and that wells in based in are that. length, be wells run, going where we around upon XXXX, other those it's account adjusted going acreage to are take as are that far As XXXX the the program anticipate but block, what they wells drilling into

account best So at of our it what into time. program be this the would takes estimate

reductions timing it our realizations how far and cost really some those the Dan the would more as about cost has price we I that of feel structure, as XXXX the well with be talked program, in interest that that As does earlier. talked and comfortable the savings benefit about incorporated assume the as into

Kashy Harrison

Got it. just, could rule sneak break the the and XQ? clean up about longer tick of, we more laterals seeing just one the over I or we time, start XX% back start if with we're these questions. mix for to in in should to expect to up two And to oil Once should kind stick what

Richard C. Buterbaugh

XX%. in As oil going package and a the higher. range talked one If in that previously about continue XX% even of expect that on move the best is But, we've kind see in to past, quarter we're wells mix, it volatility to in basis. would that of, the to comes to be long-term there the early range could midpoint of significant of a on that is expectation

continues grow, lower on Basin. and proved to production, product from for If you wells impact ordinary on. mix Laredo meaningful and difficult our reserves But any that look going to be in the more what it's that's a as that bit be would to the our base But a you and on of have obviously the of not out that. base producers coming than new expect it's look to more at at the developed we

Kashy Harrison

good have and the for Got rest day. it. time the of Thanks a

Richard C. Buterbaugh

you. Thank

Operator

Whitfield Our next question Stifel comes Derrick Financial. with from

Derrick Whitfield

and good you morning. Thank

Randy A. Foutch

Good morning, Derrick.

Derrick Whitfield

to are peak to Randy as XX,XXX a less of follow-up X,XXX production to spud to more with times intensive Brian's first transition the your from laterals expected question, designs evolve on laterals could XX,XXX intensive with in designs? completion you to how to comment completion light XX,XXX-foot

Randy A. Foutch

obviously, we've so to that laterals But on Dan on in answer give for and side, laterals. not the as gone get there better tight specifically. far that a seen What I'll the further just more the time, is on side, completion out to takes as zone a drill more out. on more staying as much a is stages but penalty there's we've drilling very

adds within of well to in controlling the directional you're rate just cases XX-feet the If drilling the per that some to of also in trying and time, penetration drill lateral. of terms foot

get time And has could so, that efficiencies cost testing on and completion days. reasons building make some we production base on comment we XX-month wanted in the I cycle But efficiency time? us we've Dan, on think and why to that the history, that cycle where this that's, and the the want we done economics that are. done on kind is certainly we drilling X, was of, where is X, to lose more one you testing start of quarter that sure made up do than

Daniel C. Schooley

XX,XXX-foot obviously because on. us at, curve aren't there in look going to and third-parties a are and data any to terms even of steep understand Well, learning even others share with for what's laterals

going perform like XX,XXX-foot take is curves some it's to on length. to time what to well the going are production understand and to a look peak us to wells going how So, those in build type up that

So, wells on of just going we've and time to it's bit just production. little take a those put

coming are we things good So, hope.

Richard C. Buterbaugh

being or that are is packages. much thing the they're in other even our bigger of keep part laterals, mind XX,XXX-foot of wells, The whether all to XX,XXX-foot

of is cycle – going an and basis. cause production on the is operation growth overall rig in value wells resource. issues well parent-child going to is to cause the it's lumpier maximizing to standpoint the quarter-to-quarter we're recovery which much and package of drilling ensure cadence efficient So, overall lengthen, a these But more a packages, time minimizing we to creation from current going that believe the at

Daniel C. Schooley

Right.

production to about continue first that it's going out. From time. move spud of All extend talking Rick to that cycle to is

Derrick Whitfield

sense. XXXX regarding done have XX, to guys is base follow-up my that work slide has evolved the the the then from frac how evolution What's second you quite testing? Understand, that front would remarkable. makes half sense And be effective on on completion the length design your

Randy A. Foutch

we in know wellbore to let to around spacing consistently should but that will the is we're we've can maybe impact James, then and I trying in what little sense that wells. each we others we bit, a help back a using be out XD drilling what come – do consistently sure we impacted consistently know what such make and really

If you kind design. base the of, that see we look design at can you linear the had,

effectively, impacting right we amount consistently it if that are the target. to talk If how you a so inventory that very define that sense we that's to been kind zone continue forth we much look a do to a much and have in we more chevroned the of the on allows and was XD And when so helpful. us of drilling can about and greater far of circular

this, we're is not the run key low. the maximize each for that it haven't something And recovery really the we we what rock James, do well away impacting of factor of you by the have do some has and recovery all efficiently or add to the that? well in more frac want from areas, been to trying acreage to not. block and some, is know to that about factor talked Now a pretty all in this

James R. Courtier

our so understand we to I add The of we and data is laboratory, continue field to use is entire and think what's a all build what I on very expensive would try with our going predictive models. try set. data

So, about. completion landing nature concerns components that's it both spacing sequentially test the idea/concept wells. and go concepts and the multiple points, that and of doing with the once those as between the then we throughout and what Dan those Randy relative interact have year two an we And how been we've have concerns talked

return the towards getting all a geared And rock. unit so of of is of work out area that best

Derrick Whitfield

Okay, taking it. for Thanks questions. got my

Randy A. Foutch

Thank you.

Operator

with comes question from Blaise Angelico next Capital Iberia Partners. Your

Blaise Matthew Angelico

everyone. good Hey morning,

You in the question hoping better the I maybe understand you I could guess, me laterals but is, technical of, it. of a This longest help kind some was Basin. are drilling guys

guys laterals, have can you Do Thanks drill for relative any I'll longer you as to lateral? So, that maybe a shorter on flow wells lift in longer a having one? effectiveness as these guys the you challenges and these with the that see of to you talk back artificial relative queue. about any expected comments of hop shorter

Randy A. Foutch

company team, drill concerned that up the do Karen's were our and wanted Dan mechanically we start about teams, The we've several we've before. satisfied we we completion. could years. can which to. that XX,XXX-foot our we're yesterday is is, what blocked that going into and we It's if to somewhat announced a they set we And going actually it? was, or been and that kind was way – the saying this We with drilling up, of, their see concerns think interesting We drill we to have major actually longer complete to there had ability that for laterals satisfied were acreage day –

that the without make a to to we, wanted could, such to well. entering got we to where opportunity of, to that, part of extent the fluids sways better and – flow vertically the and of have wellbore we drill we the that So, lot vertical lateral dips a kind was variance increases the sure

our we the lift, lift, gas the get vertical another and the is that artificial gas well. enter or on lift version of mostly fluids part All days, it's of one that where early of

degree any, doesn't some impact lift. artificial the kind So, length effectiveness part of the of, to really of the horizontal

fluid vertical just be well, the You has issue fluid to criteria the the doesn't be once artificial to to of lift, big expose so lift. vertical, a get for But the seem different at we more to design all. your the gas part the

Blaise Matthew Angelico

it. Appreciate you. Thank Got you.

Randy A. Foutch

you. Thank

Operator

Barclays. Our next question with from comes Jeff Robertson

Jeffrey Robertson

Good Thanks. morning.

Randy A. Foutch

Morning, Jeff.

Jeffrey Robertson

XX,XXX-foot all talk improve concept talk I'm to drilling bit laterals. the trying of little a curious you a more can just Randy, about capital efficiency, and if you lot about

only on if But laterals? XX,XXX-foot of you efficiency, you could say compare laterals Wolfcamp. and you development a think for the how Upper locations drill land-ready to, in I the XXX would that have Middle capital say, XX,XXX-foot acreage

Randy A. Foutch

XX,XXX-foot that – the literally And on amount drill it were effective a to set a can exposing drill. of how We at the amount laterals XX,XXX, of location the that by drill longer was. rock or feet. up we that that surprised that a with of increase you're are, and XX,XXX X,XXX extra advantage doesn't take double XX% from The to you much

in of, you're capital then terms to bringing water look at So, efficiency you that frac. location the for

away you've the utilizing water reducing the got the but on – so build reducing water move. better terms number that the the we're all liquids. and have rig water reducing times that the everywhere. of And in takeaway of number water within that frac other set taking of laterals. to and the we We're making better to up surface; we're You're that recycling, on to plays corridors, XX,XXX-foot locations and actually doing crews. needs the our about And has surface we're reducing well we also We're of sure haven't talked

a really is less at on you're what development basis you just So, need looking infrastructure.

You with fluid. wells less vertical drill and more wells vertical facilities the all of surface and go effectively that more handling you're

Jeffrey Robertson

but is efficiency cost? return, lot improved therefore amount reservoir, wells same capital – to only I develop not spread the of it of be costs also facilities lot and got a drilling So, of obviously, correct? fewer the substantially, guess, help a that also your pretty you've will

Randy A. Foutch

laterals. both our think, of facility handling you've have it. pretty certainly if Yes, got longer or XX,XXX-foot just case, a after we've you're with significant four In wells And into ways, our and XX,XXX-foot frac corridors, to future surface set a water that to this in it do in you got mean, miles one-off And handling, to to have further the it drilled. We way production. up I got also some in us got apart at or water zones significant water is people's well, we've flush to way It and the that beneficial. example, ability some sight of and most completed to an drill degree, some area. that, I lot lot the will – drilling allows immediate the significant some point it. limits, to zones five as you've out less the as XX,XXX-foot about also the is not just uses zone everything can of area a frac we on hand that, those that And a we ability we acreage development – lose just think it of multiple be to I we've that produce degree it

with effectively surface we're way and the other zones and to gives area corridors the set XX,XXX-foot, more So those the the us infrastructure that within up corridors. drill

Jeffrey Robertson

completion for million the the Wolfcamp on all highlight But Upper/Middle like outperformance Okay. X,XXX intensity? about increased cost talk difference it X,XXX My seems side you proppant just second the you $X.X XX,XXX-foot of use you pounds in foot. Can the per the for about is talk and a wells that pounds question with are the that fracture sand. side

Randy A. Foutch

the that after make time that time yielded early I after the day, Jeff, to seen, first on, first months, type enough that time far three extra a that but months, Yeah. that things first curve I'll point the let time, it, want cost. above to, it week, Dan address on the is but keep rate, failed we've two production four paid production the that or the better out over

one of And so actually X,XXX more pounds than of we've was that – tested sand.

X the could, geared stuff the optimize that contain the we of So, mind get significantly months, gains what's issue. example, and let that to just over our we And really not figure sand time place of of that's show less amount to in sand part do, that one we've XX, – what page and it's that oil production and on I before and better we for to was if add the months one is more we may try and the done XX recovery, to sand. out think sand a want And really get inventory quarter keep to wells I with do. spacing better need things this of exactly have was go do fracs we and you testing us X think production XX months, that in

what's after the Dan, long-winded, that answer? So

Daniel C. Schooley

introduction. Great

Randy A. Foutch

Yeah.

Daniel C. Schooley

of design obviously pounds on at in it XxXX. tested you the the think those all nine and Yeah, at were I were fairly choose. completion We wells the they but spacing quarter, that X,XXX design spacing, depends third significant in

doesn't at look around the the it pound page what frac, – can a you So, cluster you XX. in us this what is In the use understand on left doing we've XX, then planar the frac when and Upper pounds wellbore least, to across is see the long that NAV get of that that, you shoots tighten you with and think, like X,XXX to that X,XXX models Middle. sand been at you on in these when and you it have driving contain we're to And containing what maximize see so asset. up allows trying bigger better spacing. And the page actually wellbore and sand, closer to we the the smaller to connectivity that spacing

Jeffrey Robertson

you. Thank

Operator

with Our KeyBanc. next from question Stevens Chris comes

Chris S. Stevens

firm flow continue I kind extra that At cash a to going was extra guys. would you morning that flow point rig? where add the oil prices here, to minimize if about good is just or there this curious to deficit, Hey cash you point, up of, use just, XXXX. are

Randy A. Foutch

is I and that the not I talking and of I we've ability to at wish will in the efficiency think, But both predict drill ability specifically about tell XXXX prices. gains to you we're had that, we've complete. better tended terms the to what oil made I ability look to

something pretty say to we happening. accelerate would that difficult without think I more it's with rigs dramatic

very getting think I we're efficient.

about think the where set to well drilling on talk cadence And we completions. rigs. to way multiple comes five, In you contracts with your could think we're the six pads, pad you up need – are completion. four, number of whatever drill drop are, fact, I on question no wells The real really long-term before we I the

extra I of production any lot we flexibility Rick? think a cash still So, have growth. for, have would use what on we good and

Richard C. Buterbaugh

those cash earlier, of fine-tune need we've the of the through to very the going trying complete obviously But test tests. going lot done flow possible encouraging. as focus those truly let and initial We're year. to correct this we to economics additional done, to months tests. production mentioned as cadence. is results We X, you're a about significant our of understand that, get indicate the X, that really sense. talked neutral as to But always Yes, as of quickly a we've data we're XX testing are We've remainder makes the history

really help dictate the results cadence. we're getting the on we proper So, there to will that the focus data,

Chris S. Stevens

of a towards spacing like about sticking And following well maybe little on bit it previous pounds trending X,XXX more you're, lower per with a drilling sounds understood. up with guess of, of And just Okay, I question, foot. bore loading guess tighter kind stagger-stack I proppant the per most X,XXX the tighter these with going at stack, upcoming spacing Is that this pound of point spacing stagger do some pads to that is the the wellbore forward? on you're and more going with – of foot pilots. something

Randy A. Foutch

we – increasing presentation, having ought less are long-term Middle about a this you look inventory around for for X,XXX think think XX sand, on NAV our or the any view not goes around we zone because the if back if seeing that And we're control as zones the of company. not initial of and to huge wellbore than less impact. that to And tested and them, towards lead X,XXX we the sand has can in the view to and best adding but you packages. the the acreage again what's X,XXX, maybe have that page inventory higher increasing Upper that impact – we add also drill to I the the significantly more things sand But us our our probably I results that in can at makes positive. you

need many that it's we history two add in the the to chevroned think landing keep of before Middle, terms high (XX:XX) significant points. in acreage I those. already So, if thing the value points of higher, think, can get see information And probably tested we more are is production mind on sure mode we've points. make an those we Upper and we've call more the X,XXX of want significantly four But on we're just your question, between XX NAV the been very And that, increased still to to value than what's in to that but we to landing we basis want configurations landing separate zones. really in we I to you that

our so, that's, goal of, is. And kind what

Chris S. Stevens

you. thank Okay, Understood, it. got

Richard C. Buterbaugh

some drilled get that difficult is, landing other points. The in to once and mind acreage thing very to this come on back it's keep is other of those

within it interdependencies you onset. value potential going the substantial to best lose be your from right drill as about possible, understand are Otherwise existing as those from that can, So, want could you and much created you as zones to acreage.

Operator

And like any our I I'm back this host. not showing the turn questions to would at to further over time. call

Randy A. Foutch

interest quarter us Laredo. operations We update. Thanks appreciate for your joining for and our financial morning. good third in a Have

Operator

this Ladies does today's presentation. and conclude gentlemen,

You a may have wonderful day. now disconnect and

Vital Energy (VTLE) 2 Nov 172017 Q3 Earnings call transcript