Laredo Petroleum, Inc. (NYSE: LPI) ("Laredo" or the "Company") announced its first-quarter 2021 financial and operating results.
First-Quarter 2021 Financial Results
For the first quarter of 2021, the Company reported a net loss attributable to common stockholders of $75.4 million, or $6.33 per diluted share, including a $122.2 million non-cash loss on derivatives. Adjusted Net Income for the first quarter of 2021 was $20.3 million, or $1.69 per adjusted diluted share. < Adjusted Net Income compares to my forecast of $20.8 million, $1.67 per share.
Adjusted EBITDA for the first quarter of 2021 was $93.3 million.
Generated $71 million of cash flows from operating activities and $22 million of Free Cash Flow < Compares to my Q1 forecast of $69.9 million operating cash flow.
Sold 723,579 shares at an average price of $38.75 for net proceeds of $26.9 million through the Company's at-the-market equity program ("ATM program") < Partly to blame for this morning's pullback in the share price combined with small reduction in the oil price.
Reduced Net Debt by $30 million during the quarter
Produced an average of 24,261 barrels of oil per day ("BOPD"), an increase of 11% from fourth-quarter 2020 < Compares to my forecast of 22,000 BOPD.
Produced an average of 78,989 barrels of oil equivalent ("BOE") per day, a decrease of 4% from fourth-quarter 2020 < Compares to my forecast of 73,000 Boepd.
Reduced drilling, completions and equipment costs for a 10,000-foot well to $525 per foot and held costs incurred during first-quarter 2021 to $70 million
Reduced total lease operating expenses ("LOE") by 3% versus fourth-quarter 2020; unit LOE increased by 4% to $2.66 per BOE, but well below expectations of $3.45 per BOE < Very good as I was expecting LOE to actually increase a bit in Q1.
"Our results in the first quarter are reflective of the solid, consistent execution that underpins the Company's strategic transformation," stated Jason Pigott, President and Chief Executive Officer. "We maintained a disciplined approach to personnel expenses, continued to drive well costs lower, substantially outperformed our assumptions for lease operating expenses and quickly and safely overcame disruptions that arose from adverse weather in the Permian Basin. We again delivered on our commitment to improve our balance sheet, generating Free Cash Flow and opportunistically selling equity through our ATM program to pay down debt. Our transition to Howard County is driving an inflection point in the Company's capital efficiency and we are continuing to optimize our land position and development plan to facilitate further improvements."
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My initial take: Production beat is very good news and their Q2 production guidance is 6,000 Boepd above my model, which is EVEN BETTER NEWS. Selling equity ATM to pay down debt doesn't concern me and it lowers interest expense going forward. Actually, LPI's low share count and low trading volume is a negative, so increasing the share count is good. More unhedged oil in Q2 will give revenues a nice boost. I will update my forecast model today.
Laredo Petroleum (LPI) Q1 Results - May 6
Laredo Petroleum (LPI) Q1 Results - May 6
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Laredo Petroleum (LPI) Q1 Results - May 6
I have updated my forecast/valuation model for LPI based on Q1 results and their fresh detailed guidance. All I can say is "Buy The Dip".
LPI is down big today because the whole group is down, oil prices dipped below $65 and investors don't like the ATM selling of more shares, which IMO is not that big of a deal. They want to reduce debt and that is good for equity holders.
My valuation increases by $2 to $54, but will go a lot higher if they continue to beat their production forecast estimates. They did not increase the high end of their full-year forecast (85,000 Boepd) and it sounds like they may top that in Q2 as a lot more wells are coming online this quarter.
During April, three very sharp analyst had the following price targets. Keep in mind that on the dates below oil, gas and NGL prices were much lower.
4/23/2021 $46.00 < Raymond James
4/21/2021 $39.00 < Piper Sandler
4/12/2021 $68.00 < Stifel
Laredo has ~70% of their remaining oil hedged with Swaps at Brent $51.29/bbl.
Despite these "Bad Hedges" their Q1 Adjusted Cash Flow From Operations was over $7/share and they are on-track to generate $33 operating CFPS this year. I think my valuation is extremely conservative.
BTW TipRanks show average estimates of operating cash flow to be $31.07 in 2021 and $38.35 in 2022. < I am using TipRanks now because their estimates are based on more current analysts reports than what First Call (Reuters) is using.
LPI is down big today because the whole group is down, oil prices dipped below $65 and investors don't like the ATM selling of more shares, which IMO is not that big of a deal. They want to reduce debt and that is good for equity holders.
My valuation increases by $2 to $54, but will go a lot higher if they continue to beat their production forecast estimates. They did not increase the high end of their full-year forecast (85,000 Boepd) and it sounds like they may top that in Q2 as a lot more wells are coming online this quarter.
During April, three very sharp analyst had the following price targets. Keep in mind that on the dates below oil, gas and NGL prices were much lower.
4/23/2021 $46.00 < Raymond James
4/21/2021 $39.00 < Piper Sandler
4/12/2021 $68.00 < Stifel
Laredo has ~70% of their remaining oil hedged with Swaps at Brent $51.29/bbl.
Despite these "Bad Hedges" their Q1 Adjusted Cash Flow From Operations was over $7/share and they are on-track to generate $33 operating CFPS this year. I think my valuation is extremely conservative.
BTW TipRanks show average estimates of operating cash flow to be $31.07 in 2021 and $38.35 in 2022. < I am using TipRanks now because their estimates are based on more current analysts reports than what First Call (Reuters) is using.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group