LPI - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to Laredo Petroleum, Incorporated's Third Quarter 2018 Earnings Conference Call. My name is Emani, and I will 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 Mr. my now is to introduce It Ron President-Investor Relations. Hagood, Vice

sir. You proceed, may

Ronald L. Hagood

you, good Thank morning. and

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

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

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

call. to by refer this We will page during presentation today's

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

Randy A. Foutch

third XXXX Thanks, Ron. thank call. Good earnings conference joining and for quarter morning you Laredo's

throughout the morning. earnings provided third XXXX to that last presentation we'll we mentioned, refer this night a Ron As call quarter

for improving anticipated also to the quarter, see XX keeping expecting wells EBITDA to EBITDA growth the total on program. total driving number our completion slide slightly our from shares and net the XXXX We're while XX%, of operational carried $XXX even X.X repurchase efficiencies quarter, under into adjusted than can third our times the expected quarter. we grew As stay repurchase production previous X% production in capital of higher raising X, stock Laredo's ratio you as program. at to growth We to around debt approximately still continue million to history

guided slide to the our with to raised as for X% budget controlling were guidance unit to had our On XXXX costs, guidance category, by growth align this coupled third total below announcement. focus as quarter every for slide on mentioned costs our basis cash a original with we X, XXXX previously, for capital we production flow operations cash I X, CapEx Turning our on helped from and XX%. approximately have

Although oil our minutes we believe production to year lowering some few Dan are oil the for discuss a production. approximately of X.X% the will growth X.X%. our In drivers about impacting guidance

cash from growth XXXX closure in production expect Looking in operate into flow below than for small from XXXX, growth year full we XXXX. XXXX. full an to to year CapEx would result flow of in operations and will XXXX. oil Aligning similar cash result A oil that to production operations outspend

quarters three our come as of we've quarter third from We million costs mid-November. down our the budget. on of XXXX, incurred capital in X, are first to capital rig quarter slide approximately shown incurred the we fourth costs utilized dropping in As through $XXX anticipate completion

staying expected XXXX Although non-budgeted acquisitions. increase capital estimates, around year year $XXX excluding to from are program XXXX our full previous for anticipate million completions our full we

make Turning development plan. would to to evaluating slide about like X, comments we're how I our some

horizontal the density high rates. spacing, to XX decline and production completion our landing adds of high XX on Middle of been four we on focused have with and for value thesis an formations we've packages that length design our the point proposition wells impact, of of complex process parent the the DSU our and the data intensive long-term Wolfcamp productivity developing vertical Middle For acreage. been Upper the the selection, oil and Upper which We year-and-a-half, density per This formations. and production confirm determining believe lateral Wolfcamp past development has to to child result overall interaction

two have density been that half packages have three another We just high that first of completed through XXXX. completed will be additional and the

at on are moving into reduced capital begun and improving crew have flow rig accomplish a goal, mentioned operations. I anticipate To a efficiency. return from expenditures As rate of balancing on moment and with our completion we then cadence and focused to ago, XXXX, therefore shifting focus cash development we running this capital slightly our

by slide, the production second around would illustrated results the the on to well this Lower the As expected brought half packages. development discuss results. packages quarter on lower of hand call this of impacting driven in XXXX, I be of to now further will density end to to second density XXXX. Dan like are be off

Daniel C. Schooley

other which year an in influencing first seeing oil rate expected of decline than does X we be not have trend rate but that our the trend development a oil on future improve slide extensive beginning the in thinking production base present more room influences our additional density at oil gas packages, have are length, This we think two rates results on Slide what and were one comment higher at density would approximately oil has have X,XXX wells we results is that the lower these to in we more development. interactions, rate Still parent-child rate as Low influence development curve. running outspend. development productivity to morning. relates of return observing it good capital efficiency this high accomplished efficiency four density on focuses so higher capital future minimize we of volumes. the lateral density return the capital implications in we at total, high defined focused development. are the company. it design, capital shows In has return formations, have density change inventory. A and impact much development, all significantly production Obviously, as locations steeper completion the development, density high and near-term Randy, landing production including we holds, forecast that concept company's can Multiple results still to density X, locations productivity packages you, If point data. expected range now horizontal, for or vertical efficiency of and but than the at factors of take significantly Thank of across more selection, are our return well's of wide to year our these moving it grow and and higher that density history the spacing.

we'll factors these planning We on well have in and extensive forward. going development be relative learnings these performance applying data budgeting to and

diminish. is production. capital development more exceeding is resulting future total then the trend expectations and peak rates year primary the our oil at to on compared to by is Moving type we Operating lateral slide the Total completed Karen difference the than year annual to development is relative and of slides curves the Vice of the recently of slide on pronounced oil anticipated programs oil maintaining and its trend. named wells production and and higher implication spacing. production oil XXXX, oil cut whom for lower packages program X and evidence XX. as charts recent we density well production performance in on the time should adjusted over generally show since growth total for believe converse expected, and see for to will growth future to These X even Senior which within first in expectations impact to production Lower productivity driver to This formation President oil tends development, Oil and and drilling I and steeper XX. and both expectations. that performance density now efficiency hand both believe individual versus basis. lower performance between Chandler We begins in Chief Officer. wider positively an relative production for call length decline We

T. Karen Chandler

Dan. you, Thank

During quarter, efficiency of as continued of team. our result improvements operations to the we work outstanding third see a

Driven completing operations, now crew a XX XX% in rig we gains or budget increase wells. is Our This original originally without increasing efficiency completion wells. XXXX count. net XX.X complete net was drilling completions approximately and built to budgeted expect both on by the

well are integrating This time completions drilling slide time Turning are efficiencies. to XXXX. efficiency of result across XX, in non-productive to complex, to greatly slide vertical in all Internally, better drilling our the planning improvements engage to from improvements improvement. the These sections drill best teams our horizontal and data the The days either in in horizontal are and design completions implementation we stability and hole reduced our and related losses optimized see from improvements mud practices drive our to of to casing improvements depths show and crews. production XX, processes. culmination continuous of drilling you geomechanics average to in our the well since normalized the ongoing our the the or the fully time the accept rig which These basic to includes while laterals. most utilize a rig even has foot intermediate our non-productive we've XX,XXX substantial beginning bore. the setting On modeling drill a we represents well release, areas, both performance that more initiatives optimization completion reduction subsurface of contractors identify of accomplished finding

in bit through We improvement have achieved designs. BHA also of optimization our up-performance significant drill and

providers both efficiency our operations We performance. consolidating with and safety who continue service on towards to can work deliver improved

expected compared As feet slide per XXXX. culminated lateral shown in an gross these rig have XXXX improvements increase XX% as completed XX, in on to in

enable is this cycle the for gain the remainder as since dropping completion to improvements with month, and XXXX activity drilling in horizontal as of us early impressive continued XXXX. and expected accomplish much rigs three budgeted as to one anticipate which single operating crew in four operating are we times completion has And by operational Just XXXX program. year. enabled with driven to we approximately eight were of Reduced rigs completion the completions the with efficiencies our crew the a XXX%

had infrastructure, basis. We XX, maintained and same operations, show of constantly beginning XXXX, drivers, utilize unit cost LOE we quarterly compression. operating slide continuous improvement gas quarter are optimize field costs. have benefits down below We and of third our we to on infrastructure. operations maintained the our in unit the ongoing looking further low a since of continue analysis field on our LOE we drilling is $X hand primarily this systems control investments we of Boe now Like Since believe to our unit will our XXXX. our completion aspects to prior for and financial the capitalize extensive existing provide Rick the have and activities call One ways water as to On drivers on the LOEs of other to the implemented focus focus for main drive areas integrated per will and in I cost overview. of

Richard C. Buterbaugh

good flows to of grew expenditures EBITDA, a $XXX.X production is with quarter non-GAAP in X% from we Thank you, financial total quarter Karen, cash the presentation, that a and In reconciled control operating and we this costs. to the third the financial morning. company's adjusted improve and as previous by million. capital appendix measure continues of grow XXXX, cash The performance balanced to

the adjusted over see adjusted in price growth approximately faster than per You XX, grown debt share of basis net the substantially slide XXXX, despite headwinds. per by period recent beginning EBITDA in oil we net the of EBITDA on Since debt the on can share have XX%, same increase basis. adjusted adjusted the a

control our metric's and reflected sheet on Our our this continued cost improvement. focus strengthening throughout of in balance goal operations, are

is by debt during the As notes tranche based net just XX, of each XXXX with $XXX reaffirmed call debt of at $X.X $X.X borrowing however, premiums third base company's the This on due quarter slide billion for this our on approximately years, includes at or shown The remaining times XXXX. least XX, of annualized and amount today bank first million three September which declining $XXX recently adjusted reserve are of quarter callable EBITDA. commitment credit of million on company's facility. was our elected group. our The is X.X senior net facility the debt billion not was

$X.XX inception investment. share of a $XXX In of liquidity have million this its more half significant the per the as maintaining slide to options which Since illustrated shares hedges during than by future million the per share approximately program flexibility repurchases billion price $X On approximately As than third share, an weighted company anticipated same basis $X.XX over we program. the repurchase result, vein, total cash quarter, timeframe. program, executed slide authorized our average of XX, predicting price the of the less our for have of flows. utilized show and that XX average provides for share around this The $XX year. investment to under on at XX, we company's million we approximately key product repurchase commodity each is

and are the this believe we In performance acreage physical X.X multiple of For horizontal testing XXXX, completion we planning. including development financial significant We landing hedged, which commodity lateral basis to of primarily links. transportation our have firm across commodity volatile design, deliveries XX, puts shown environment. flows to million concluded on points, assist have general our protect we of vertical add in of presentation in a and consistently the the future pages and physical to opportunities underpin and approximately barrels review parent/child while derivatives retaining protection, using XX. derivatives of downside and cash variety addition oil appendix relationships a upside summary, and in in these including Details all spacing,

analyzed, Although, an growth asset while of balances to highest believe data Operator, long-term be goal with wider stakeholders. please the recognizing the any operating flow open production our which cash will of best for spacing to lines for continue are value we moving our questions. we

Operator

Thank you.

Whitfield Derrick Stifel. from comes question first Our with

now line Your open. is

Derrick Whitfield

all. Good morning

Randy A. Foutch

Derrick. morning, Good

Unknown Speaker

Good morning.

Derrick Whitfield

X XX, vintage curve a type page is to spacing? representative be will or there for Perhaps most that X year Dan. well Referencing of Randy

Randy A. Foutch

You are XX. on page

acreage. lot spacing testing to and lengths about learned lateral we I done of we wanted that vertical acreage. our think We've a we know and the our as that messaging design. convey is variety lot completion a We've – a and about

program what then some I so to don't Dan mixed would representative. know got let I degree. is think that, is I'll within and has each a you of I testing years And one tell respond these one that it

Daniel C. Schooley

few Randy around I was spacing. I infill what by what just said, was drilling exactly wells. not parent/childs think, think driven having to – virgin That weren't very you yeah, wider rock. Randy, that's outperformance onto also in parent/child. consider and XXXX We worry drilling performance about had other adding driven by right. We XXXX. weren't We

that infill spacing We're things lot We're going wider to reflect forward. also to to to does to it face has have around we're have areas that. XXXX So drill a have going going going other but to drill of that challenges wells that in wells. existing have

anticipate So though out to wider going as we don't we're good spacing. the a performance as XXXX even

Derrick Whitfield

for price the on my That but four your variables page Middle to and variables, And your the lower sense. makes and feedback well location Wolfcamp? hear assume as follow-up what of I I'd two per that. referencing end of X, drive eight range Upper to then love section and the higher are

Randy A. Foutch

Yeah.

let drilled; Dan – of lateral I'll of again and things, part we're length of use; part talking been this to several about. what going Dan is what's let that is But landing exactly part is is there's that already what think follow-up. we're I that Randy, I'll

think variety I range have drilling give that how it's factors us wells many on spacing of a we that (XX:XX). per

Daniel C. Schooley

three drilling also And in in follow-on zones had, Wolfcamp a alone Derrick, Middle just previous years, we four had is the we one landing actually as to to of drivers total the co-development. Upper Wolfcamp. and were four We in Yeah. that, the –

more wider what co-development to to away spacing. at going and we're from zone is single migrate looking So now

drilling low on on what's of that's X. slide So count primarily driving rate density the return the

Derrick Whitfield

Thanks, helpful. guys. very That's

Randy A. Foutch

Thank you.

Operator

you. Thank

Energy. from Our comes Kashy next with Harrison Simmons question

now open. is line Your

Kashy Harrison

taking for thanks and questions. morning, my Good

wondering, X,XXX So, commentary first and me. one on of many the was Wolfcamp for The are Upper inventory, just I just how the a these locations in Wolfcamp? Middle

Daniel C. Schooley

is Dan almost so XX%. better this them, little about thanks, Kashy, XXX bit a XX%, It's than Schooley. of

Kashy Harrison

on seeking the Got I a some it. was clarification second just And quick one me. for XXXX guidance. then

decline like the is XXXX is be wanted the flat just to to at year-on-year case, clarification held $XXX oil it And the is or budget production on oil get So going sounds that? that million? case CapEx some that

Richard C. Buterbaugh

Yeah. Kashy. is This Rick.

XXXX in expect of that come with budget not would approval have our January, have We a to sometime XXXX. early yet, out final

So, operating driver the XXXX standpoint that forming as our we're a operate cash program, flows. is primary that cash formatting or within from to

So to and completing that be is will our we'll drive to requirements. cadence also various far operate the for meeting amount at, opportunities activity, investment that of but right as look what at the drilling as

know you that our lot of on flexibility acreage. development the a position how by production, As we primarily acreage that of is go held we have about and

balance a it's of at spend. would we So, level what

Now that to anticipating the spending did XXXX keep million that we're and outspend. $XXX for an in mind committing create

million above expecting. should be a XXXX think I what going be to So, program using $XXX you in is

Kashy Harrison

for Got right. me. it. That All Thank was you. it

Randy A. Foutch

Thank you.

Operator

And Asit of our Merrill America from Lynch. Sen you. Thank next question comes with Bank

line Your open. is now

Asit Sen

understand are you spacing this, the thoughts per morning, Good it resource early Thanks. and in per or thoughts? any I early wider but Any cost could as to provide relates guys. tests, tighter section? section on the days these

Daniel C. Schooley

the this have a how Yeah, hasn't is matter changed, of rock obviously and Dan I different same It's that don't oil get (XX:XX). in still obviously that of much amount we has place. Schooley. we the the think can Asit, spacing of – resource the changed we densities out think at

Wolfcamp. jump But about thick. way if Let this here were me and points go Upper need which in rock, landing of help. feet X,XXX at this that in Middle more rock X XX, is in discrete we we're too some this and talking I think, have then tested a Jason technical the different We've the

a different, different, but differently a our of not within DSU, across as landing they points complete they they drill produce acreage these position just whole. all So – have

now, think the lateral I right completion discussion, seeing said higher said we're seeing these I zone, a like what do leave density and is data drivers in Randy So that we're length is that design, parent/child, primary development Jason, in landing my spacing. anything out. in I

Jason R. Greenwald

Jason Yeah, President-Reservoir hi. Engineering. Vice This is Greenwald,

and of our add a about place. This amount in only I and oil is would When focused is it's efficiency also higher we're the capital slightly is place those the recovery world-class changed. the it's return think, understanding rate – basin. development, NPV the But thing that huge lower hasn't density return emphasis and the then at of those a they of I scheme. think And still talking of to density but comes development a end in rate of wells – that by to of higher shift wells. with shift also place. We lower a on resource recovery

Asit Sen

Okay. thoughts on I'll Any talked lower I tests, take it some doing early on completion that, work were early any designs. offline. fluids you cluster of some thoughts know and again, about concentration you

T. Karen Chandler

continuing This to designs. Taylor, Yeah. so completion multiple is test to going Karen we're

I work the completion optimize think to we our that we're across spacing. as design different going

impacted development an an from think completions actually going look I I design continue will lower and standpoint So us that to the down opportunity optimize operations give meaning density will times. be our think improving cost, to to to cycle the driving

efficiency with program. improve think in hand-in-hand I the go capital us we continuing this make those as transition really So help to our

mentioned lot a of continue and things So like have we're to optimize that and/or program. with just testing spacing our different we'll we

Asit Sen

Thank you much. very

Operator

. you Thank

Sameer from Our Holt. with comes Tudor, Panjwani Pickering, next question

now is open. line Your

Sameer Panjwani

morning. Good guys. Hey,

Randy A. Foutch

morning. Good

Sameer Panjwani

paying our efficiency, buybacks equity PDP of the credit you TPH is, accelerating your value undeveloped with growth? about context and is capital giving at view locations. the pursuing you think how only With and of that not and market you do is for any production it where inflection for coming In trading sort that

Randy A. Foutch

just different We ways Randy. reinvesting of of is capital including This consider that. lots

understand terms on We've production decisions we have I expend careful make actually held we like. for in Our flexibility most the lot we about have a looks forward yeah, the we part, those acreage put Sameer. And what of going well, how think capital. but dollars, so investment our by is math where of decisions we'll pretty to in that been

Sameer Panjwani

budgeting the least how the on a production? wells you're helpful. and production flattish that's you're thinking but XXXX Okay, in at XX activity an approximation of and from I of understand is a And about first quarter still process, QX standpoint, oil then both XXXX, good about half

Richard C. Buterbaugh

Yeah.

well rather As our the planning We basis line lengthy. on with you're time aware, quarterly completion from I cash a bring do drilling and is to our activities mean to expect flows. cycle in fairly

cash ups that our see the focus, flow downs amount stated entire And the yet and of determined. earlier, of The timing completions primary will is would to You be we some as it. that within still and was with I year. for live

investment where believe activities of see with work. – of value to sure but capital we being about we what It may the that cash directed of a running. flow seeing have process we efficiently staying in being have rewarded to balance drilling about, discounted that We reduced the still we little we're a talked our operating to reducing that not decision the crews the and as You're of activities it's make Randy the cash is the also, those completion being the equity bit more as you or in at amount we're just If is and as direction. value, want of is within going to that put more talked possible that the commitments.

as are types but a things of more now. little come mentioned, that being will those we out, So looked XXXX, I definitive early with are in at the plan

Sameer Panjwani

Okay. you. Appreciate color. the Thank

Operator

you. Thank

Our next question comes from Richard Securities. Capital Tullis One with

now line Your open. is

Richard Merlin Tullis

if this apologize on Hey, touched you I thanks. morning. Good Randy, already.

planned curve million the be forward, density X.XX with X.X retaining will with So the barrel type going million development the lower you barrel B-factor?

Randy A. Foutch

and that, terms production factor. really increase. in quarterly a been production base at the will ultimately think, we've continue look gas that's of pretty about the what I but not that yet that oil We've we've and I over reserves to XXXX to time. that's often indicated a mentioned ratio we're what on stress is in to like out what for think does for while, there clearly, kind understand seen that density drilling We've we've and talked the look of reserves that higher past trying We impacted expressed

Richard Merlin Tullis

from Okay. cost on higher the million release. the And expectations cost then just lastly, earnings well moving the lower forward? to in density referenced going $X.X density Any impact

T. Karen Chandler

again, is this So Karen. Yeah.

now an foot for $X.X about million lateral. average the right we So XX,XXX talk

an move stage and for So forward to the continue really question, really at some. length, that completion as been us suit spacing are times, back opportunity increased trying there's things the that and design, optimize prior spacing think to understand more to we the I working fully focus wider on cycle things push particularly to way. on really wider we've that Those and will continue to to

So, there. And other pressures is I in things. with we'll think there opportunity some price just balance that other and

opportunity there's there. yes, So some

Richard Merlin Tullis

Thanks bunch. Okay. a

Operator

Thank you.

with question next from Dan Capital McSpirit Our comes BMO Markets.

line now open. Your is

Daniel Eugene McSpirit

you good folks, morning. Thank

Randy A. Foutch

Good morning Dan.

Unknown Speaker

morning. Good

Daniel Eugene McSpirit

What months the what's an out, how expected decline the over on to XX to PDPs get is capital and estimate a in better is rate change oil sense of today of your time. asking effort the operation intensity

Randy A. Foutch

and still ourselves very on to we're trying work answer that's that something going aggressively think I forward.

should So be start that address in the XXXX. talking some at point that we we may as about something future

Daniel Eugene McSpirit

good. Very day. you. great Have Thank a

Randy A. Foutch

Thank you.

Unknown Speaker

Thanks.

Operator

turn I today's Thank over for now closing like Q&A This concludes to you. Ron to remarks. call back would Hagood session. the

Ronald L. Hagood

quarter have morning. Well, for a us and joining our appreciate update. for interest in We your I'd thanks third Laredo say great

Operator

the conference. does program. participating and in Ladies This conclude for you gentlemen, today's thank

great You disconnect. may a Everyone all day. have

Vital Energy (VTLE) 6 Nov 182018 Q3 Earnings call transcript