Laredo Petroleum (LPI) Update - Sept 21
Posted: Tue Sep 21, 2021 1:48 pm
LPI is a HIGH BETA stock because it has a very small share count; less than 17 million shares outstanding. What this means is that a change in my forecast model assumptions (and the Wall Street Gang's "Paradigm") have a significant impact on my valuation of this stock.
LPI is trading at $71.15 at the of the time of this post. It is up over 260% YTD.
> My increases in the natural gas and NGL price assumptions for 2H 2021 and 2022 increased my valuation by $10 to $90 per share.
> LPI closed two "transformative" transactions on July 1, 2021.
> If their Q3 results and their updated guidance confirm my forecast model assumptions, my valuation might go as high as $130 per share.
> Since I believe I am using some very conservative assumptions to value this stock, they would have to miss my Q3 forecast by a wide margin for my valuation to go down. My Q2 EPS and operating cash flow per share forecasts are below the current First Call estimates of $3.79 EPS and $7.65 CFPS. < Keep in mind that Laredo does have some "Bad Hedges" to work off that may cause "Reported EPS" to be negative. ALWAYS focus on "Adjusted Net Income" and 10X more important, Operating Cash Flow.
Although the "Transformative Transactions" will cause LPI's production volumes on a BOE basis to decline from Q2 to Q3, the production mix to a lot more oil should increase their revenues by more than $50 million from Q2 to Q3.
To give you an idea of the upside, First Call's current operating cash flow per share forecast for 2022 is $41.78. If production and commodity prices hold up, Laredo's year-end reserve report and their balance sheet should justify a price target of at least 4X operating CFPS.
TipRanks: "In the last 3 months, 6 ranked analysts set 12-month price targets for LPI. The average price target among the analysts is $82.83." The PT range is $49 to $105. I have never seen a price target range this wide.
LPI is trading at $71.15 at the of the time of this post. It is up over 260% YTD.
> My increases in the natural gas and NGL price assumptions for 2H 2021 and 2022 increased my valuation by $10 to $90 per share.
> LPI closed two "transformative" transactions on July 1, 2021.
> If their Q3 results and their updated guidance confirm my forecast model assumptions, my valuation might go as high as $130 per share.
> Since I believe I am using some very conservative assumptions to value this stock, they would have to miss my Q3 forecast by a wide margin for my valuation to go down. My Q2 EPS and operating cash flow per share forecasts are below the current First Call estimates of $3.79 EPS and $7.65 CFPS. < Keep in mind that Laredo does have some "Bad Hedges" to work off that may cause "Reported EPS" to be negative. ALWAYS focus on "Adjusted Net Income" and 10X more important, Operating Cash Flow.
Although the "Transformative Transactions" will cause LPI's production volumes on a BOE basis to decline from Q2 to Q3, the production mix to a lot more oil should increase their revenues by more than $50 million from Q2 to Q3.
To give you an idea of the upside, First Call's current operating cash flow per share forecast for 2022 is $41.78. If production and commodity prices hold up, Laredo's year-end reserve report and their balance sheet should justify a price target of at least 4X operating CFPS.
TipRanks: "In the last 3 months, 6 ranked analysts set 12-month price targets for LPI. The average price target among the analysts is $82.83." The PT range is $49 to $105. I have never seen a price target range this wide.