Laredo Petroleum, Inc. announced its second-quarter 2022 financial and operating results. Supplemental slides have been posted to the Company's website and can be found at www.laredopetro.com. A conference call and webcast to discuss the results is planned for 7:30 a.m. CT, Thursday, August 4, 2022. Complete details can be found within this release.
Highlights
• Reported net income of $262.5 million and cash flows from operating activities of $368.1 million, generating Adjusted EBITDA1 of $278.4 million and Free Cash Flow1 of $110.5 million
• Produced 40,553 barrels of oil per day ("BOPD") and 87,032 barrels of oil equivalent per day ("BOEPD"), increases of 53% and 1%, respectively, compared to second-quarter 2021
• Incurred capital expenditures of $138 million, excluding non-budgeted acquisitions and leasehold expenditures
• Increased total liquidity to $1.148 billion from $646 million in first-quarter 2022
• Reduced Net Debt1/Consolidated EBITDAX1 ratio to 1.4x from 1.9x in first-quarter 2022
• Repurchased 184,173 shares for $16.1 million and $91.4 million face value of term-debt at 98% of par value, year to date, of which 85,161 shares and $32.0 million face value of term-debt repurchases were executed during the second quarter
"Our strong financial results in the second quarter are a direct result of our multi-year strategic transformation," stated Jason Pigott, President and Chief Executive Officer. "We delivered record Adjusted EBITDA and Free Cash Flow, introduced a plan to return capital to shareholders through a $200 million equity repurchase program and repurchased more than $40 million of equity and debt. At $100 oil for the remainder of 2022 and $90 oil for 2023, we expect to deliver approximately $840 million of Free Cash Flow for full-year 2022 and 2023 combined and to continue repurchasing our equity and debt."
Second-Quarter 2022 Financial and Operations Summary
Financial Results. For the second quarter of 2022, the Company reported net income attributable to common stockholders of $262.5 million, or $15.41 per diluted share. Adjusted Net Income1 for the second quarter of 2022 was $127.8 million, or $7.50 per adjusted diluted share. Adjusted EBITDA for the second quarter of 2022 was $278.4 million.
1Non-GAAP financial measure; please see supplemental reconciliations of GAAP to non-GAAP financial measures at the end of this release.
Production. In the second quarter of 2022, the Company's total and oil production averaged 87,032 BOEPD and 40,553 BOPD, respectively. Total and oil production for the second quarter were reduced by 937 BOEPD and 672 BOPD, respectively, for working interest adjustments to wells that reached payout prior to second-quarter 2022 for non-leased mineral owners.
Operating Expenses. Lease operating expenses ("LOE") in second-quarter 2022 were $5.30 per BOE. Total LOE is expected to remain relatively flat for the remainder of the year, with unit LOE increasing slightly as total volumes are expected to decline.
Capital Investments. During the second quarter of 2022, Laredo completed 11 wells and turned-in-line ("TIL") seven wells. Total incurred capital expenditures were $138 million, excluding non-budgeted acquisitions and leasehold expenditures. Total investments included $112 million in drilling and completions activities, including $12 million of non-operated capital, $6 million in land, exploration and data related costs, $13 million in infrastructure, including Laredo Midstream Services investments, and $7 million in other capitalized costs.
Equity and Debt Repurchases. During the second quarter of 2022, Laredo purchased 85,161 shares for $9.1 million at an average price of $106.50 per share. The Company purchased $32.0 million face value of term debt at 101% of par value.
Liquidity. At June 30, 2022, the Company had no outstanding borrowings on its $1.0 billion senior secured credit facility. Including cash and cash equivalents of $148 million, total liquidity was $1.148 billion.
2022 Outlook
Late in the second quarter of 2022, Laredo TIL'd the six-well Leech package, developed in the Company's most southeastern unit of its Howard County leasehold. The package has been producing for approximately 60 days, with the expected increase in oil production slower than expected. Production guidance for the remainder of 2022 has been adjusted to reflect the current range of outcomes for the Leech wells. No additional completions are planned in the area until 2024 and the Company will adjust development strategies based on the longer-term performance of the package. Full-year 2022 total and oil production was revised from a range of 82.0 - 86.0 MBOEPD and 39.5 - 42.5 MBOPD, respectively, to 82.0 - 83.5 MBOEPD and 38.0 - 39.0 MBOPD, respectively. Free Cash Flow for full-year 2022 is projected to be approximately $280 million at $100 WTI for the remainder of the year versus previous projections of $350 million.
The Company is currently operating two drilling rigs and one completions crew and expects to complete 11 wells and TIL 13 wells during the third quarter of 2022 and to complete 13 - 15 wells and TIL 12 - 17 wells during the fourth quarter of 2022. Laredo expects incurred capital expenditures for full-year 2022 to be in-line with its previously updated capital budget of $550 million.
2023 Preliminary Outlook
Laredo anticipates operated activity levels in 2023 will be comparable to 2022 with an annual average of approximately two drilling rigs and 1.4 completions crews. Total capital expenditures, based on current service costs and anticipated activity levels, are expected to be approximately $585 million.
At this time, the Company expects that its planned investments in 2023 will result in low single-digit oil growth. At $90 WTI for full-year 2023, Free Cash Flow is expected to be approximately $560 million.
