LPI - Earnings call transcript Q1 2020

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Operator

Good day, ladies and gentlemen, and welcome to the Laredo Petroleum, Incorporation's First Quarter 2020 Earnings Conference Call. My name is Tawanda and I will be your operator for today. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

It is now my pleasure to introduce Mr. Investor President, Vice Hagood, Relations. Ron proceed. Sir, you may

Ron Hagood

Thank you good morning. and

Beyer, and Jason officer; and Joining members and of Michael as are team. as President Financial Chief Vice Chief Officer; Chief Officer; our President me today additional Vice Pigott, Executive well President Senior Karen Operations management Senior Chandler,

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

be financial operating making news in included to a news presentation reference measures measures. release the issued non-GAAP first yesterday's financial GAAP Reconciliations Company and addition, and In results its we'll for to quarter are XXXX. release. afternoon, Yesterday financial detailing

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

or not If release this news at it you Company's may copy access of do have on www.laredopetro.com. a the you presentation, website

turn Executive to and over the Officer. now Jason President Pigott, will I call Chief

Jason Pigott

I and joining for on Good thank these morning safe and you trying your healthy during our hope call and us are today. you families times.

circumstances improve As you challenging read facing. every are nearly in to of yesterday, press aspect business release continues in the we our Laredo our despite issued

In X. value our November which we for we XXXX, put on Slide forward outline strategy stakeholder increasing

quarter position. still a established Results current actionable value success we was price it strategy in XXXX is environment, acreage optimizing our environment. in our formulated the commodity the different demonstrate of this Although the first very in believe

of We quarter. $X.XX foot reduced quarter D&C quarter in in reduced to BOE per costs quarter. this of $XXX XXXX We the in first $XXX first from this to XXXX foot per $X.XX per a from the LOE BOE

core our well. curve continue our wells outperform to acreage Our footprint type on wider-spaced as

continuing our in acres to at in bolster to significantly to a County we continue transactions this adding footprint compared expand X,XXX our position prior Additionally, area. the cost Howard year, so far reduced

tough position using capital this which efficiency operating make up we accretive there financial improve advantages our our scale and will be operational to our In acquisitions opportunities margins. environment, enhance believe capital to

the it While environment was is what capabilities first we most quarter. and the current risk quarter, the very operational for drove that from our different management results of during our saw

financial in we commodity cash the our Turning our environment to strong notes and demonstrated open sales narrow Slide as versus issuance we $X production un-hedged executed this our you for increase X, management expectations very And in resulted and surpassed a average a XX% see window was importantly, price. controllable cost. settlements very in derivative billion

of with from we and responded COVID-XX spread mitigate instruction actions dropped OPEC+, demand prices commodity the the quickly became decisively. to combined apparent efforts of As virus rapidly. And

County generation On acquired level. original activity a for the flow Slide expenditures rapid $XXX the and cash X, in million, guidance recently capital capital nine completion free in we of our of reduction XXXX of at higher locations commodity million. final $XXX to anticipated we as illustrate XXXX substantial months cut our reduced This the our drives when our Howard stabilize should expenditures delays prices future into

to activity margin from in established XX position can with Cline both at Turning oil of in operated years of our areas improvement we benefit areas. Slide XXX These oil locations acreage prices. acquisitions current that with levels XXXX higher and to since in adding X, three executed these position, have natural inventory locations plus paired our November locations established Laredo compared gas productivity high

County of prices. leverage the acreage demonstrate we X, to oil Slide our On Howard higher

Howard vendor dramatically million almost a County pricing, cost returns recently This oil received XX% and cost at the efficiency levels well value doubles higher have estimate and at decrease At XXXX per reduction year-end seen from impacts $X.X expected at cost current we dramatically. well. well Additionally, we price.

end We year rig DUCs, continue of us and with XXXX the expect efficient Howard operating completions development. in to and XX to to further County exit the through positioning one activity quickly drilling resume capital drive

deeper year, we development more drove we Cline our as traditional well Wolfcamp than position. acreage Last to refocus the position. was on on established lower, established acreage client expensive cost on began our formation the At our formation,

Cline higher its the competitive the returns As the productivity initial well Wolfcamp. with made cost decline, of

first Cline completed the two the years. two we quarter, In approximately wells, first in

$X.X could per drill exceptionally, the At we cost for well. Cline expectations. below current delivering X% well service per million costs, $X.X wells Our performed well, operations we for group believe million

these Slide X, be County. we start Cline with Howard those the that costs, competitive at to returns show well On in

We we demonstrate where improvement the Cline-type this Permian. in approaching our declines those gas the in total using We acreage continue in from as resulting material prices gas curve to in to observe benefits associated Howard rise. see established our County gas volume oil position. drop as returns are prices There

now over in-depth to would to the I turn financial for update. more like a Michael call

Michael Beyer

Thank million what in of In financial window XXXX, and of had maturing In strategically we of the actions you, our a have on Jason. XXXX notes January, to positive a the taken became position. significant that $XXX Company's opportunity XXXX. targeted refinance we first have impact months four small

new million. with last redetermination, in finalized in during XX Slide structure. our of facility reserve RBL repaid we a borrowing maturities our and resulted show and April $XXX base we Thursday, million $XXX XXXX, issued the capital our We pushing $X based billion spring of base XXXX Throughout credit banks facility. to worked on borrowing current On and our X, out which notes, our

reduction compares our over governing previous borrowing favorably the base $XXX position remain remains of main to decline million. liquidity of our comfortable and X:X more Moreover, in X.XXx. covenants current $XXX requirement XX% And debt-to-EBITDA May million more being those our our yesterday, of than the at severe from unchanged, financial revolver that X, our approximate as ratio of Our period. prices same oil ratio

to RBL use ratio Company we are the for I and the ratios would items, to RBL comment portion for the other undrawn base calculation current financial the reporting regarding like an how our facility a is financial different. credit assets the brief removed managing value govern ratios borrowing covenant the the give that Among addition liabilities. mark-to-market both derivatives and of current and of as assets current for gives from current and

in from the is current our reported adjusted the premiums definition covenant paid derivative RBL Page our also contract with Similar defer EBITDA and premiums. main reflected hedge of of found recognizing presentation execution of to of MD&A, today's XX we internal the in of differences on the the In and differs the one of period calculations at external ratio, contract. until debt-to-EBITDA underlying our prices settlement treatment

cost Looking our file we we full potential that future XX-Q current have MD&A calculation forward, our commodity for Form the when in prices. updated quarter, with see first will impairment you

commodity impacts disclosure. that costs driving this are a lower quarter first As disclosure seeing we now reminder, not as pricing the such lower currently is prices. in the designed capital lower only included Other costs isolate are of impacted to surface

the for Brent we per comprised XXXX, approximately resulting free added total day cash a of refinancing bought our expected commodity on an and of In position in Utilizing flow hedge per XXXX increased million $XX. $XX swaps. puts average floor force XX,XXX day of our price of barrels at a Brent weighted at RBL approximately of X,XXX hedges, position We puts we of per per significantly day addition barrels XXXX. for additional derivative the X,XXX redetermination, barrels day barrels X,XXX to debt and

keep of at $XX average Execution flows XXXX significant XXXX, this potential while barrel. program of flat oil that daily production in flow exit a rate secures WTI fourth with price of $XX supporting the program a cash cash to free could quarter in generating capital per XXXX

now the call will I for of to Karen a pass discussion operations.

Karen Chandler

Michael. you, Thank

our of production Since than spacing we of modified over developing strategy XX As completed of Nine a Jason single in done of drive These wells. optimizing packages at have our spacing wider-spaced the in existing strategy pads. the component of and current targets work Throughout currently optimal we've wells to acreage. learnings packages late Company's Company's single we've with our these in call, impacts. rather wider-spaced key XX history, larger lot our history. development is development a XXXX, mentioned development parent-child open around days or the packages

Wolfcamp Slide Middle curve XX, X consecutive Upper exceeding On show oil XX%, we drive helping our oil that these and type packages guidance. have X the of exceeded Company by quarters

our per operational top per drilled feet per Another crew. On significant day our completed optimization rig part shows chart story feet is of per XX, the Slide superior performance. day and the

performance As X-year the you trend can see a delivered operations completions. the for team has chart, positive both drilling and from

near remain Glasscock even Howard of for record transitioning newly first Company last drilling In to the completions our set performance areas our rigs and performance fact, another with quarter in all-time Western in the and acquired quarter, set our all our Counties. high yet

reduced we costs foot XXXX, million a per well per completion. over to In well foot $X per pound for X,XXX $XXX by

of all XXXX, difficult additional providers we look the Basin. have XXXX, As reduction for foot and shown of of this COVID-XX to reduced service our opportunities. the price cost had work Midland destruction $XXX on of time have In to Slide and of X% the we by our quarter on related actions lowest with demand XX, to in continued well quarter and among bottom first OPEC+, second to further the volatility in average chart in cost the per cost

year-end current At a from or of our per vendor our pricing, deliver able received approximately foot wells to at below total to cost. reduction Company $XXX expects be or XX% well XXXX the

maintains a Just our competitive operating cost as in advantage also Laredo importantly, structure.

basin since XX% are what XX, Slide among operating the we LOE to savings Turning we from achieved in we unit reduced cost by unit our driver we our the is lowest XXXX, the peers. have believe our infrastructure. show have key water company-owned and A that

XX.X drive XXXX, of This system Slide XX In and per we used completions. well our produced XX water than extent and unit million savings BOE well. recycled barrels of than almost LOE recycled of by the than more we've in built. more water $XXX,XXX the cost million of barrels helped $X.XX our reduce system shows more our per

consideration price environment, commodity or current shutting driven due is the by operators. a production operating resulting costs economics in all for either to prices storage from issues In loan

XXX older normal we've wells. the a process we've to vertical of part process. wells shut of XXXX, economics Laredo, in established of evaluation all as our For this Since assist ongoing

in evaluate continue We uneconomic price wells want have price wells vertical to through in process. of expect this But evaluation to response uneconomically an environment, harder produce to the oil to ongoing continued rather that have we we will now at do that need to continue that to not I look but decline. this inventory our process stress we

how summarize shut-in part market we and and structures revolves around performance. we of our our transport the delivery The maximize oil. point we second evaluation Slide On sales how of XX,

firm we delivery Gray us in the then receive logistics with have points which firm inter-basin place Oak. We transportation for Bridgetex have to inter-basin and Gulf transportation Coast, Brent-based Upon Medallion our gets and to with providers contracts or pricing. large international WTI-Houston on delivery

and all encouraging will in that to have Our been this in constraints. due party we had counterparties currently volumes conversations believe shut with process to we third not

important On highlight another of historical infrastructure. Slide we our advantage XX, investment in

and gathering oil environmental operation of safer make miles gas releases. XXX and reduce our infrastructure Our

Permian you we less best performers the peer among than can weighted Basin the average. half As of the and see, flare are in

to the comments. back over Jason now few pass call for a closing I'll

Jason Pigott

aspect our high cost on and all perform improving working to maintained the were These During for we achievements made our our continued providers new structure quarter, of adapted employees service the set while keeping Laredo improve and situations as workforce upon the standards team all ourselves, focus to across safe. we our business.

cash strive differential us create rather refinancing structure our our protecting as keeping timing stakeholders. value our debt we Our reactive appropriately in the to a to prior our than be hedges, for cost places flows position commitments and low, with of proactive to

Operator, open for line we will questions. now the

Operator

with [Operator Instructions] Derrick Our line Stifel. the first from comes of question Whitfield

Derrick Whitfield

and Howard would few guidance strip assume for fair County completing price that of maintenance actionable Jason, drilling of from with an approximately scenario outlook XXXX is it now, scenario? to at Perhaps a the would plan formal XXXX a will XX quarters understanding that be $XX provide require a or you prices that wells of higher

Jason Pigott

activity moment what outlaid a think year would that Again, levels. cash some flows maintenance again, we've I the ago. those for just hedges plan be as on to put again we've those a highlighted in, placed No, protect we've next call and we've,

So stay, positive free to we prices low again, $XX as to with should be as $XX. able flow cash

Derrick Whitfield

flow regarding I the And privately the notes to with in statement free pay the in negotiated of to my press follow-up, open potential release transaction. of wanted your down the the cash or use comments end near address through market senior

I could discounts debt any create if understand to that potential this your pursue to pursue value within notes you will material capital limit how there inclined this trading could and and to or the par, aggressively ability to with the be this Given action. are covenants conditions structure wanted your

Jason Pigott

not a Yes, do But it it's to I'll it's There's and covenant over I'll at company. on in us look us, there of something as to to Michael liquidity on would for those, the it we're Michael ability return we value just a talk and about that over at it, the a turn to side of To something ultimately it. the out lot it's add turn hard. but that, looking it covenant. good that

Michael Beyer

a our standpoint, think I Yes, couple of governors. from maybe

always free we're to positive. going manage flow one is minimum I cash to at being a think

a restricted currently $XXX payment is maximum in then think and I that at that So threshold a cash. is RBL is million there set of governor. basket, our And

Operator

comes Our with question the line next of Energy. from Kashy Simmons Harrison

Kashy Harrison

My first for one Jason.

to may have a be the You've position good clear capability. time and so been aggregate about pretty oilier if to any $XX it an do like you seems WTI as wanting

share And think opportunities financing consolidation opportunities your wondering so was how just of if and I impairing just you in seeing on you're about could the what you terms sheet. balance without thoughts set

Jason Pigott

again, Howard of Again, big been it plan. we're, able our For again. a us, is add pillar acreage to in County we've

this acres. far added X,XXX So we've year

not can acreage, think The I pursue kind for there's lows well, time at get you'll the of multiple this. we we've time of it out time, there ways lows, that period all again, longest but all So, seen.

again in at can get opportunity we rates. So is both, those land organically purchase to if low

to in again think our balance debt being corporation done when lowest as our I the favor again $X.XX, our sheet, of our push for those future, type larger the to all the all hedges and about cash out our LOE to into things work flows, in protect protect that talk a basin. maturities deals, we've put we at things

structure G&A also corporately very cash low. Our is

up But exactly low period So a that of we, really a say it's we've like to time. the this successful in of set to we ourselves environment is price low looks where see what hard long be had cost environment. structure because such in for

Kashy Harrison

tracking within question Jason if are edge deflation when if that foot. a for on to sounds $XX be had share think you And there environment on get It some like back a work you hit to more about? then maybe Or might cost deflation? you you work leading that that you limit service talked thoughts costs Karen. Can well to around $XXX think $XX the be

Karen Chandler

environment moved some are service impacts always current X obviously a topic this discussion. significant and the with COVID-XX over just really Yes, costs of seen as we've last months we've I And impacts. kind think other of into

using So for cost. current we're forecast service us, the

well providers based on our foot per $XXX current at the at service what for received is our we performance now with pricing. are, current those right So current could drill

is or that's to what So up we down potential on. based wanted for our movement potentially, but forecast there

Operator

Our of from next Singer. Brian comes line question the

Brian Singer

Just of a couple questions.

oil the First, price. rigs? plays that the points then gas price also to for you would the you be about talk consider initial But in can bringing consider role at bringing decision as the points back would probably you back DUCs well? how to price thought and could which And talk on a also

Jason Pigott

DUC new on shows This got we and the different Slide X, there is to economics. sensitivities kind Again, We've Jason Slide that just out again. prices. a show X of

down of County. to great again we've see and need drive work we team that can Karen her Howard positive done, price oil at with have get to the returns able been rate the you So

than So, do but again, there's well some DUC, cost. have show you all-in turning cost. on a lower It mean I be we here, could show we

into getting as low You're $XX. of rate good returns as

we it's is kind core to oil, a that we're company. a oilier, NGL. a they it That's rolled Cline. gas are more of driver. And gas, position something as for again becomes have like that then us it's, the oily Again, This prices, our the but as the and third strategy, primary our got out again for get But high interesting gas they still wells rate. about looking is, we're we've where also

in rise, gas So we see get prices to range stronger as we with have that $XXX wells Howard you Cline just those can wells in as our as do $XXX and County. economics

us. options lot is So a of for there

think the one in you few potentially companies gas, names. to Permian of If have that about those exposure we're

efficient pivot our been our to structure. oilier more the with growth, to has While capital strategy we're

could gas like to in oil strength exposure comes that the shut-ins be Permian and gas as as just and down associated also occur. position Our the a with things

Brian Singer

business follow-up flow higher optionality debt. question in And then flexibility with capital to the and to And some see cash about of and you earlier of of versus the in between buying the the capital versus on cost balance is, reinvesting choices debt my on think sheet your versus how you buying acquisition you the in wondered environment, the about talked how back kind building back this priorities? response market cash the free your

Jason Pigott

your and discount growing can in things. has purchased today debt to my as we working that multiple trying which doing at we then get try debt-to-EBITDA January. do in by to to EBITDA oil those issued strategy if changes. out or a assets. they think really you is Again, But company, went oilier best all when were our with to Again, we he especially got the do get some out, down, can trade But I'll events, when that Michael want daily was we're down it Yes. as rolled the as debt-to-EBITDA our we and down comments. we all methods, price those bonds a chime just change things getting something on the we through

a at be mean, really about, able free are -- lower to environment. we growth able debt-to-EBITDA also it's solid -- we're good sorry, and the were the positive experiencing saw create to asset. flow trying continue to things. are do again, all to now cash County balance but trying prior those shutdowns, rates that, we that's time, grow I build to price So Again, higher something this but we the Howard as on -- over we we of out lot think organically inventory of to

all conversation. we're to it's manage and of those again, trying So, things a daily

As debt et prices change, again, of cetera. cost changes,

Michael Beyer

add won't too I Yes, much.

I think to add the to kind hedge and needs be our strategic to position cash buybacks evaluate borrowings restart some free really revolver -- our using really earlier that allows only of that from reducing January thing is completions plan. would current on those made. I each that's to that us of best for make the of from And decision flow to bond XXXX than under

options lot out just there's to through point there where, to a we're trying make. there So really we a a it's decisions get little where a of as to some really navigate and of stability bit makes to choppy out a easier time those all little those

trying pricing make not or that. something to like on are We call a

things on daily and do basis. with I those So a time evaluated of our to it each hedges obviously get think

Jason Pigott

$XXX good to just us the as team the the million. to of act option some Again, that the I'll RBL, liquidity getting that. work by into add well our value with again, under under on gives

Operator

the comes Noel Parks. from of Our next line question

Noel Parks

sequentially touched went come Just if it a at I of this least earlier, did you a that. -- I like just bit. on couple But check sorry I costs to if it don't up transportation wanted things. up. looked was And know in on

Benjamin Klein

of to what today. future. when guiding of under full the this should Gray is doing early for, expect quarter, But to a of what for going service. we're kind little of were had Oak movement We, coming into was we of be what the service service you -- going we movements the quarter, pipeline call their there. in there shipping commissioning the early Couple the Yes, for is bit of in so, out just Ben Yes, reflective this Klein. period

Noel Parks

infrastructure, are done where you projects maybe consider onto in and are there wondering instead for lower that any might are of speaking price able thinking I calendar be attractive little And to things shut-ins the of period this at get was next might I infrastructure that you sooner a wondering, there industry particularly moving you activity, year? a of was

Benjamin Klein

Not right now.

quarters spend in is I of we're over been our build-outs heavy the of done benefit think development have the A really early our lot on in and that of things really a years. lot program behind we've stressed that one us. is last these the of capturing the of couple

of infrastructure build-outs minimal last in-field have Our expect we this to quite couple been that don't years and change.

doing we're leveraging up by what up into third third different entering more already parties. really of a And already there a are It's anticipating parties has built mature place. little in with in Howard, is landscape bit been that a that out us area

area. plan in-field there deploy to in So capital as that not our that is leverage and really much

Noel Parks

just not So now? up capacity, competition capacity or overall over capacity as the industry much there just the

Benjamin Klein

not for able find a oil, Certainly the to any and water. issues having being gas, home

Noel Parks

And last one. then just the

receptive. window ago Looking offering lifetime into sort what debt of that that back do the seems markets were on January, Laredo where to managed at a

of you how with want looking about thought at So and have to the under get some just, I your just belt sense things transpired debt that markets. since, all what

to more plug think really throughout like can, possibility something at you of have just in mentioned the be away You something the it's on And if Or buying own. timing kind that's your volatility? anticipating year. of, you more you you of of opportunistic you can wondered I

Benjamin Klein

earlier. I It's cash have be what talked about another that just think Yes, just today. little we to it's of kind use of we going a

a we watching do to something be It's think mean, we in purchases, some lot of back. pretty open go 'XX. down opportunistic So, do the need we I Obviously, those market. are and going have invest market just of a revolver. we're uses bring and and ahead be If today. pay to options But to I want going not rig kind it's to

to we've the necessary a, the lock have We which in to run a operations to want to pretty starts that just in decent do. started hedge build efficient position really 'XX, we cash flows

I the can of we're all I to we structure keys, can. that's that best going D&C, try work it return of always business is to buckets one from we our that think are there. X And LOE. the to flow, basically across of the the you Utilizing cost our cash see put make out decision generate to think all And to those best

And when to you're But complete take bonds it you looking earlier. want where flow think where have additional, are, prices weigh County the use be at and attractive kind just little we where, if that specifically, oil wells Howard can some cash of you an today, I do trading the a they're return. to also

of it of just and see and those work that think it's see decisions I some through the over we'll the couple team that over Jason work couple through stability just next something kind next hopefully months. how as evolves So this and of months the we

Operator

Our next line One. the from question comes Capital Tullis with of Richard

Richard Tullis

for $XX, or well significant Just regarding trying general environment, retained and of higher optimistic the down service driving I cost be gauge say cost the the success terms, guess could in internally generated split even in is I'm versus cost, there. for Karen, to or savings a both oil what that continued $XX Probably Jason LOE? efficiencies lower level between

Karen Chandler

Yes.

significant XXXX savings XXXX. really now quarter for cost had of first and through really in of obviously general, all we've So,

and we which were really significant and were seeing that that worked is which performance cost particularly seeing half we we through the So talking of reduction. XXXX, trend kind completions most XXXX, on, as that's impressive cost service performance about we were impacts of where through were we kind roughly reduction, that seeing, versus in cost forward. And given half of improvement is the about continued, on

that commodity the the related. we into lot $XXX, a an our about price all is we've to moving cost about which through there, $XXX foot service this from of And service down first cost quarter related environment. forward then Since cost delivery expected our year, moved we've with as per is talked forecast current went

what really market. the a on XXXX in But this of year seeing So performance more moving through lot is we're just going with side and on impacts performance, service too. the cost then everything LOE

Richard Tullis

looks What's from then Has It of And it just at some still pretty acreage any the like because bumped lastly Howard is able that? with lower prices. up County typical cost it acquire you're associated very me. to or the standard? attractive royalty

Jason Pigott

that's pretty the Say changing bit. little for right standard world again now. But a is

So about. we'll going again excited going come forward, cost happens that we'll see forward. That's something down the we're But see has materially. what

Operator

I showing the I'm call to remarks. no you. closing Ron in Thank further questions queue. for would like Hagood over turn to the back

Ron Hagood

great morning. joining you appreciate call us a have day. our this We for our concludes call This and

Operator

gentlemen, and you today's concludes Ladies this Thank conference. for your participation.

disconnect. now may You Everyone, have a day. wonderful

Vital Energy (VTLE) 8 May 202020 Q1 Earnings call transcript