Laredo Petroleum, Inc. (NYSE: LPI) operates as an independent energy company in the United States. It operates through two segments, Exploration and Production; and Midstream and Marketing. The company engages in the acquisition, exploration, and development of oil and natural gas properties; and the transportation of oil and natural gas primarily in the Permian Basin in West Texas, as well as rig fuel, natural gas lift, and water delivery and takeaway services.
Approximately 85% of the Company’s gross operated volumes are gathered directly on pipe by Laredo Midstream Services, LLC (“LMS”)-owned crude oil gathering system or on Medallion-owned gathering, substantially eliminating the need for trucking the Company’s crude production. The small portion of crude that is trucked is delivered into either Laredo or Medallion-owned truck stations, shortening the average trip from tank battery to delivery to approximately 20 miles.
In the second quarter of 2018, Laredo contracted firm transportation to the Gulf Coast on the Gray Oak crude oil pipeline, which is expected to begin transporting crude oil in the fourth quarter of 2019. The agreement allows the Company to transport 25,000 gross barrels of oil per day (“BOPD”) in the first year of operation and 35,000 gross BOPD in the remaining six years of the contract. Laredo currently transports 10,000 gross BOPD to the Gulf Coast on the Bridgetex crude oil pipeline and, when combined with the Gray Oak volumes, a substantial portion of the Company’s gross production will be priced in the Gulf Coast when the Gray Oak pipeline begins service.
Operations
Laredo’s Permian activities are centered on the east side of the basin approximately 35 miles east of Midland, Texas in primarily Glasscock and Reagan Counties. Today, Laredo has over 140,000 gross acres (with a majority of it being contiguous) and of which 85% is HBP.
The principal focus of Laredo’s horizontal drilling activities is an oil play (that also includes a liquids-rich natural gas component) that involves both the Wolfcamp (Upper, Middle, and Lower) and the Cline formations. Secondary targets include the Spraberry, Canyon, Strawn and ABW intervals. In total, over 12 viable landing points have been identified throughout the stratigraphic section (~ 4,500 ft. thick) as being prospective for development.
About
Laredo Petroleum, Inc. operates as an independent energy company in the United States. It operates through two segments, Exploration and Production; and Midstream and Marketing. The company engages in the acquisition, exploration, and development of oil and natural gas properties; and the transportation of oil and natural gas primarily in the Permian Basin in West Texas, as well as rig fuel, natural gas lift, and water delivery and takeaway services. As of December 31, 2017, it had assembled 124,843 net acres in the Permian Basin; and had total proved reserves of 215,883 thousand barrels of oil equivalent. The company was formerly known as Laredo Petroleum Holdings, Inc. and changed its name to Laredo Petroleum, Inc. in December 2013. Laredo Petroleum, Inc. was founded in 2006 and is headquartered in Tulsa, Oklahoma.
Analysts
17 Wall Street analysts have issued ratings and price targets for Laredo Petroleum in the last 12 months. Their average twelve-month price target is $12.1667, suggesting that the stock has a possible upside of 56.59%. The high price target for LPI is $15.00 and the low-price target for LPI is $9.50. There are currently 2 sell ratings, 11 hold ratings and 4 buy ratings for the stock, resulting in a consensus rating of “Hold.”
Date Brokerage Rating Price Target
8/21/2018 Williams Capital Hold $10.00
8/5/2018 Piper Jaffray Companies Buy $14.00
8/2/2018 Bank of America Underperform $12.00 ➝ $11.00
Source: marketbeat.com
Guidance
The Company is increasing its anticipated full-year 2018 total production growth guidance to greater than 15% and reiterating previously issued oil production growth guidance of greater than 10% as compared to 2017. The table below reflects the Company’s guidance for the third quarter of 2018.
Total production (MBOE/d) 71.0
Oil production (MBO/d) 29.1
Price Realizations (pre-hedge):
Crude oil (% of WTI) 86%
Natural gas liquids (% of WTI) 33%
Natural gas (% of Henry Hub) 47%
Operating Costs & Expenses:
Lease operating exp ($/BOE) $3.65
Midstream expenses ($/BOE) $0.15
Transport and marketing ($/BOE) $0.80
Production and ad valorem taxes 6.25%
General and administrative expenses:
Cash ($/BOE) $2.60
Stock-based comp ($/BOE) $1.55
Depletion, dep and amort ($/BOE) $8.30
Financial review
Laredo reported second-quarter net income of $33.5 million.
The company said it had net income of 14 cents per share. Earnings, adjusted for non-recurring costs, came to 25 cents per share.
The company posted revenue of $351 million in the period.
Q2 expenses were $256 million.
The company reported $36.6 million in cask at the end of the quarter.
Stock influences and risk factors
Strong oil and natural gas prices may act as a continuing catalyst for the company shares.
Oil, NGL and natural gas prices are volatile. The continuing and extended volatility in oil, NGL and natural gas prices has affected, and may adversely affect, the business.
To the extent they are unable to obtain future hedges at attractive prices or derivative activities are not effective, cash flows and their financial condition may be adversely impacted.
Federal and state legislation and regulatory initiatives relating to hydraulic fracturing and water disposal wells could prohibit projects or result in materially increased costs and additional operating restrictions or delays because of the significance of hydraulic fracturing and water disposal wells in their business.
Stock chart
On Friday, September 7, 2018, LPI shares were at $7.77 on traded volume of 2.7 million shares. The current RSI (14) is 33.95
At $7.77 per share, LPI is trading below its 50 DMA and its 200 DMA of $8.89 and $9.36 respectively.
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