Laredo Petroleum gets bigger near Midland, Texas
TULSA — Laredo Petroleum keeps growing in the Permian Basin.
On Monday, the company announced it has closed on a $65 million deal to acquire an additional 4,475 contiguous acres in Glasscock County, Texas.
Officials described the deal as a “bolt-on” acquisition they expect will both improve the company’s capital efficiency and enhance its free cash flow generation. The company did not disclose the seller or sellers of the land.
Officials said they paid for the property using part of Laredo’s $1 billion senior secured credit facility, resulting in outstanding borrowings of $245 million on Dec. 6.
"We are excited to announce another acquisition that delivers on our strategy of shifting our development to oilier, more capital-efficient acreage," Jason Pigott, Laredo’s CEO, stated as part of the announcement.
"This acquisition expands our Glasscock County position further to the west into an area of higher oil productivity than our established acreage position.”
Pigott noted the acreage will be integrated into its drilling plans to meet its held-by-production obligations in 2020 and 2021.
He said the company expects to undertake full development of the acquisition the following year, “extending our runway of higher-value locations to three years."
The company said the acreage acquired this month has an average total daily production of about 1,400 barrels of oil equivalent, with about 55% of that being crude.
The company estimates it will ultimately drill about 45 wells with 1,320-foot spacing in the area that will target the Lower Spraberry, Upper Wolfcamp and Middle Wolfcamp formations.
It noted the targeted locations are within an area of high oil productivity, with relevant offset wells indicating first year oil production 37% higher than expectations for legacy Laredo Wolfcamp drilling.
"This acquisition enhances our ability to generate combined high-single digit oil growth and free cash flow through 2022," Pigott said.
"We remain committed to maintaining a competitive leverage ratio and expect to utilize our free cash flow to pay down our revolver as we pursue a disciplined, accretive acquisition strategy."
Laredo, headquartered in Tulsa, is operating in the Permian Basin, located in west Texas and southeastern New Mexico.
The basin, it notes, is characterized by an extensive production history, mature infrastructure, long reserve life and a potential to recover hydrocarbons from multiple formations.
The company’s activities are focused on the basin’s east side, east of Midland, Texas, primarily Glasscock and Reagan Counties.
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, plus other secondary formations.
Laredo has more than 140,000 acres, a majority of it being contiguous, and of which 85% is held by production, officials said.