Laredo Petroleum (LPI) Update - March 10

[dan_s]

I finished my review of the updated profile for Laredo Petroleum and I have updated my forecast/valuation model for higher oil & gas prices.

My valuation of LPI increases by $2 to $133/share.
The relatively small increase is because Laredo has a lot of their 2022 production hedged; 84% of Q1 2022 oil is hedged at a weighted average price of $57.57/bbl.
The percentage hedged declines each quarter, but ~61% of their oil is still hedged at a weighted average of $53.88/bbl in Q4 2022. 2023 is much better with only ~18% of their oil hedged with collars that have $77.96/bbl ceilings.
Even with cash settlements on their hedges included, Laredo should generate $850 to $900 million of operating cash flow this year, which compares to their D&C budget of $520 million.

This is a HIGH BETA stock because it only has 17.5 million shares outstanding; quite low for a company of this size. If you are an ACTIVE TRADER, this one is for you.

Here is what really jumps out: Operating cash flow was $26.42/share in 2021 and my operating CFPS forecast is $48.92/share in 2022 (compares to TipRanks operating CFPS forecast of $44.14). If all goes as planned with Laredo reaching their leverage ratio goals, a valuation multiple a year from now should be 5X CFPS. $250 is not out of range in 12-18 months if oil stays over $90/bbl.