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Laredo Petroleum posts net loss of about $545 million for second quarter

A Laredo Petroleum production pad. [THE OKLAHOMAN ARCHIVES]
A Laredo Petroleum production pad. [THE OKLAHOMAN ARCHIVES]

Laredo Petroleum took a non-cash impairment of about $406.5 million during the second quarter of 2020 on the way to posting a net loss of more than a half billion dollars for the period.

In a report issued after markets closed Wednesday, Laredo reported it had posted a net loss of about $545 million, or $46.75 per share, on total revenues of about $110.6 million.

During the second quarter of 2019, the company had posted a net income of about $173.4 million, or $14.99 per share, on total revenues of $216.6 million.

"The macro environment during the second quarter of 2020 was unprecedented in its difficulties for the energy industry," Jason Pigott, Laredo’s CEO, stated as part of the earnings report. "Our success managing through this turbulence highlights the benefits of how we run our business. We mitigate commodity price risk with a robust hedging program, maintain operational flexibility and focus on driving additional costs out of the business."

On hedging, the company received $86.9 million from settlements of matured commodity derivatives during the second quarter of 2020, resulting in an average hedged sales price of $21.09 per barrel of oil equivalent.

The company said its average unhedged sale price per barrel of oil equivalent during the second quarter was $10.99. Officials said about 70% of its expected 2021 oil production is hedged.

Laredo produced an average of 31,241 barrels of oil per day during the second quarter, up 3% compared to the second quarter of 2019.

It produced an average of 94,117 barrels of oil equivalent per day during the quarter, up 14%, year over year.

As for costs, the company reported it had driven its second quarter lease operating expenses 24% lower year over year, to $2.40 per barrel of oil equivalent.

Its second quarter per barrel general and administrative expenses were down 16% year over year, to $1.24.

The company said improving markets will give it an opportunity to resume somewhat normal operations as the year continues, adding a completion crew in its Howard County operational area in the Permian Basin beginning in September.

Officials stated Laredo expects to complete a 15-well package in Howard County during the fourth quarter this year, expending between $340 million and $350 million in capital for the entire year.

At current service costs and commodity prices, it plans to use two drilling rigs and a single completion crew at the start of 2021.

Officials stated they hope to keep that level constant there to help drive operational and capital efficiencies, drilling and completing between 50 and 55 wells at a cost of between $325 million and $350 million that year.

The company predicts that it will grow its average daily oil production for 2021 to between 27,000 and 29,000 barrels.

"As we expect to maintain a stable drilling and completions cadence in 2021, we remain focused on operating within cash flow and securing those cash flows with a consistent hedging program,” Pigott stated. “Steady completions activity in Howard County, combined with increased commodity prices and hedges in 2021, supports an estimated $120 million in additional cash flow in 2021 and should return our oil production to full-year 2019 levels.”

Amended first-quarter results

The company also announced Wednesday it had updated filings with the U.S. Securities Exchange Commission related to its first quarter 2020 results.

Officials said amended filings Laredo made this month corrected a $160 million understatement of an impairment expense it took for the period.

That understatement, officials said, resulted in an overstatement of the company’s net income for the period by the same amount.

Officials stated Laredo had outstanding borrowings of $300 million on its $725 million senior secured credit facility on Aug. 4, resulting in an available capacity after accounting for outstanding letters of credit of $381 million. Including cash and cash equivalents of $21 million, total liquidity was $402 million, officials stated.

Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›

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