Laredo Petroleum (LPI) Q4 Results - Feb 23

[dan_s]

TULSA, OK, Feb. 22, 2022 (GLOBE NEWSWIRE) -- Laredo Petroleum, Inc. (NYSE: LPI) ("Laredo" or the "Company") today announced its fourth-quarter and full-year 2021 financial and operating results. Under a separate press release, the Company today also issued its 2022 outlook. A conference call and webcast to discuss the Company's financial and operating results and its 2022 outlook is planned for 7:30 a.m. CT, Wednesday, February, 23, 2022. Complete details can be found within this release.

For the fourth quarter of 2021, the Company reported net income attributable to common stockholders of $216.3 million, or $12.84 per diluted share. Adjusted Net Income1 for the fourth quarter of 2021 was $57.2 million, or $3.39 per adjusted diluted share. <Compares to my Q4 forecast of $70.6 million net income.
Adjusted EBITDA1 for the fourth quarter of 2021 was $182.2 million.

For full-year 2021, the Company reported net income attributable to common stockholders of $145.0 million, or $10.03 per diluted share. Adjusted Net Income1 for full-year 2021 was $128.9 million, or $8.91 per adjusted diluted share. Adjusted EBITDA1 for full-year 2021 was $505.9 million.

1Non-GAAP financial measure; please see supplemental reconciliations of GAAP to non-GAAP financial measures at the end of this release.

2021 Highlights

Grew development inventory through acquisition of ~41,000 net acres in Howard and western Glasscock counties, adding ~250 high-margin, oil-weighted locations

Added an additional ~125 oil-weighted locations in the Middle Spraberry formation in Howard County and the Wolfcamp D formation in western Glasscock County following recent appraisal success

Increased average daily oil production by 19% versus full-year 2020

Increased total proved reserves by 15% in 2021, including a 78% increase in proved oil reserves. Oil now comprises 38% of total proved reserves versus 24% at year-end 2020

Accelerated transition to oil-weighted assets through sale of ~94 million BOE of lower-margin gas-weighted reserves, primarily in Glasscock and Reagan counties

Increased liquidity through the sale of 1.4 million shares of common stock for net proceeds of $72.5 million through the Company's at-the-market equity program and issuance of $400 million of senior notes maturing in 2029

Reduced Net Debt/Adjusted EBITDA ratio (fourth quarter annualized)1 to 1.9x at fourth-quarter 2021 from 2.4x at fourth-quarter 2020

Issued two comprehensive ESG and Climate Risk Reports with data through year-end 2020, establishing goals for reducing greenhouse gas and methane emissions, as well as the elimination of routine flaring by 2025

Fourth-Quarter 2021 Highlights

Closed acquisition of ~20,000 net acres in western Glasscock County for ~$203 million, net of customary closing price adjustments

Generated Adjusted EBITDA of $182.2 million and Free Cash Flow of $24.8 million

Produced 41,080 barrels of oil per day ("BOPD") and 85,240 barrels of oil equivalent per day ("BOEPD"), an increase of 87% and 3%, respectively, versus fourth-quarter 2020, exceeding guidance ranges for both metrics < Beat my Q4 forecast of 40,000 BOPD and 82,000 Boepd.

Increased oil cut as a percentage of total production to 48% in fourth-quarter 2021 versus 27% in fourth-quarter 2020

Incurred capital expenditures of $142 million, excluding non-budgeted acquisitions and leasehold expenditures, completing 18 wells with 26 turn-in lines ("TIL") during the quarter

"We posted exceptional results in 2021 and enter 2022 with strong momentum and a clearly defined strategy to add value for shareholders," stated Jason Pigott, President and Chief Executive Officer. "Our team identified and closed two acquisitions that significantly expanded our oil-weighted leasehold in Howard and western Glasscock counties and extended our runway of high-margin drilling locations. We strengthened our balance sheet, purposefully funding portions of the acquisitions with equity and proceeds from the divestiture of lower-margin gas-weighted reserves. Our capital today is being allocated to our highest return opportunities in Howard and western Glasscock counties. We also furthered our commitment to sustainable development, setting meaningful emissions reduction goals and allocating necessary capital to ensure their attainment."

"Our outlook for 2022 is strong and our disciplined development plan will build upon our successes from 2021," continued Mr. Pigott. "We are focused on capital efficient development, generation of Free Cash Flow and leverage reduction. We expect to achieve our initial leverage target of 1.5x Net Debt/Adjusted EBITDA1 in the third quarter of 2022 and to be below 1.0x by the second half of 2023. As we further strengthen our capital structure, we expect to be in a position to return cash to shareholders in early 2023." < If LPI can achieve these goals, the share price should double from where it is today.

[dan_s]

LPI was trading at ~$75 at the time of this post. I am increasing my current valuation by $19 to $131/share.

My valuation is just 3X annualized operating cash flow for 2021 to 2023.
> The Company has a bit too much leverage, but they at current oil prices they are generating more than enough operating cash flow to service the debt.
> FCF in 2022 should be ~$300 million
> Production growth should be ~5% YOY
> Steady production and proven reserves growth with higher percentage of oil should draw some analysts' upgrades
> Raymond James price target was $85 before they increased their oil price forecast

LPI has a very wide trading range since it has a small float.

My updated forecast model will be posted to the EPG website this afternoon.