2013-02-25 12:41:33 -
TULSA, OK - February 25, 2013 - Laredo Petroleum Holdings, Inc. (NYSE: LPI)
("Laredo" or "the Company"), today announced preliminary operating
results for
year-end 2012, in which the Company:
* Increased annual production approximately 31% from 2011, to a record 11.3
million barrels of oil equivalent (MMBOE);
* Increased oil percentage of total production to approximately 42% from 39%
in the prior year;
* Increased proved reserves to a record 188.6 MMBOE, up approximately 21% from
the prior year-end;
* Increased oil percentage of proved reserves to approximately 52% from 36% at
year-end 2011; and
* Replaced approximately 385% of production, with approximately 93% of this
replacement from the drill bit.
"Throughout 2012, Laredo successfully executed its development and delineation
program to grow production, reserves and identified resource potential through a
deliberate and disciplined approach to recognize the full value of the entire
resource potential that we believe exists within our Permian acreage position,"
said Randy A. Foutch, Laredo Chairman and Chief Executive Officer. "We have once
again grown our reserves more than 20% and meaningfully enhanced the quality of
our reserves by increasing the oil and proved developed components to 52% and
43%, respectively. Yet, we believe the current reserves only represent a
fraction of the resource potential that has been de-risked to date within our
Permian-Garden City acreage. Our recent successes from the initial Middle and
Lower Wolfcamp horizontal wells, coupled with ongoing strong results from the
Upper Wolfcamp and Cline horizontal wells, have continued to de-risk the
significant resource potential that we believe exists from all four zones across
our entire 145,000 net acres in the Permian-Garden City area."
Laredo's total proved reserves, presented on a two-stream basis, were 188.6
MMBOE at year-end 2012, an approximate 21% increase from the year-end 2011
amount. Reserves consisted of 98.1 million barrels of oil and 542.9 billion
cubic feet of liquids-rich natural gas. At December 31, 2012, approximately 43%
of the Company's proved reserves were proved developed compared to approximately
40% at year-end 2011. Geographically, approximately 85% of year-end 2012
reserves were located in the Permian Basin, approximately 11% in the Anadarko
Granite Wash and approximately 4% in other areas. A summary of 2012 reserve
changes is as follows:
Natural Oil
Oil Gas Equivalents
--------- ---------- ------------
MMBbls Bcf MMBOE
Beginning of year - December 31, 2011 56.3 601.1 156.5
Revisions of previous estimates (12.4 ) (260.7 ) (55.8 )
Extensions, discoveries and other additions 57.4 232.4 96.1
Purchases of reserves in place 1.6 9.2 3.1
Sales of reserves in place - - -
Production (4.8 ) (39.1 ) (11.3 )
--------- ---------- ------------
End of year - December 31, 2012 98.1 542.9 188.6
--------- ---------- ------------
Standardized measure - ($ millions) $ 1,877.5
------------
Pre-tax PV-10((1)) - ($ millions) $ 2,348.5
------------
Laredo focused much of its 2012 activities on delineation of its Permian-Garden
City acreage and the related opportunities for horizontal development of the
four identified zones in the Wolfcamp and Cline shales on this acreage. As a
result, added horizontal locations in the Upper Wolfcamp and Cline zones,
coupled with deep vertical well locations in the Permian Basin were the primary
drivers for the 96.1 MMBOE of reserve additions from extensions and discoveries.
Revisions of previous estimates were primarily associated with the removal of
410 shallow vertical wells in the Permian Basin, that were replaced with deep
vertical and horizontal wells, and the removal of 202 vertical wells in the
Anadarko Basin due to lower natural gas pricing.
Laredo's estimated net proved reserves were prepared by Ryder Scott Company,
L.P. as of December 31, 2012 and are based on reference oil and natural gas
prices. In accordance with applicable rules of the Securities and Exchange
Commission ("SEC"), the reference oil and natural gas prices are derived from
the average trailing 12-month index prices (calculated at the unweighted
arithmetic average of the first-day-of-the-month price for each month within the
applicable 12-month period), held constant throughout the life of the
properties. Reference prices used, before differentials were applied, were
$91.21 per barrel of oil and $2.63 per MMBtu of natural gas.
For 2012, preliminary finding and development (F&D) cost was $22.08/BOE, and
preliminary finding development and acquisition (FD&A) cost was $20.97/BOE,
presented on a two-stream basis. The F&D and FD&A costs will be finalized upon
filing the Company's annual report on Form 10-K. For a description of F&D and
FD&A costs, please see the discussion below under the heading "Finding and
Development Cost."
"During 2012, Laredo achieved our objective of confirming and better defining
the vast resource potential from the multiple productive zones in the Permian-
Garden City asset," added Foutch. "Looking forward to 2013, the Company is well
positioned to continue our disciplined approach to further define the captured
resource potential and begin the optimization of its development, which we
believe will further enhance our unit F&D and operating costs. These efforts are
designed to efficiently exploit and accelerate the value recognition from this
core asset."
Separately, the Company has retained Wells Fargo Securities, LLC to assist in
the possible divestment of various assets outside of the Permian Basin.
Laredo Petroleum Holdings, Inc. is an independent energy company with
headquarters in Tulsa, Oklahoma. Laredo's business strategy is focused on the
exploration, development and acquisition of oil and natural gas properties
primarily in the Permian and Mid-Continent regions of the United States.
Additional information about Laredo may be found on its website at
www.laredopetro.com.
Forward-Looking Statements
This press release contains forward-looking statements as defined under Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of
historical facts, that address activities that Laredo assumes, plans, expects,
believes, intends, projects, estimates or anticipates (and other similar
expressions) will, should or may occur in the future are forward-looking
statements. The forward-looking statements are based on management's current
belief, based on currently available information, as to the outcome and timing
of future events. The actual impact of derivative instruments described above
may be different, and could differ materially, from these estimates due to the
completion of our financial closing procedures, final adjustments and other
developments that may arise between now and the time the financial results for
our fourth-quarter 2012 are finalized.
General risks relating to Laredo include, but are not limited to the risks
described in its Annual Report on Form 10-K for the year ended December
31, 2011, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012
and September 30, 2012, and those set forth from time to time in other filings
with the SEC, including its Rule 424(b) prospectus filed October 12, 2012. These
documents are available through Laredo's website at www.laredopetro.com under
the tab "Investor Relations" or through the SEC's Electronic Data Gathering and
Analysis Retrieval System ("EDGAR") at www.sec.gov. Any of these factors could
cause Laredo's actual results and plans to differ materially from those in the
forward-looking statements. Therefore, Laredo can give no assurance that its
future results will be as estimated. Laredo does not intend to, and disclaims
any obligation to, update or revise any forward-looking statement.
The SEC generally permits oil and gas companies, in filings made with the SEC,
to disclose proved reserves, which are reserve estimates that geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions and certain probable and possible reserves that meet the SEC's
definitions for such terms. In this communication, the Company may use the term
"resource potential" which the SEC guidelines restrict from being included in
filings with the SEC without strict compliance with SEC definitions. "Resource
potential" refers to the Company's internal estimates of unbooked hydrocarbon
quantities that may be potentially added to proved reserves, largely from a
specified resource play. A resource play is a term used by the Company to
describe an accumulation of hydrocarbons known to exist over a large areal
expanse and/or thick vertical section, which, when compared to a conventional
play, typically has a lower geological and/or commercial development risk.
Unbooked resource potential does not constitute reserves within the meaning of
the Society of Petroleum Engineer's Petroleum Resource Management System or SEC
rules and does not include any proved reserves. Actual quantities that may be
ultimately recovered from the Company's interests will differ substantially.
Factors affecting ultimate recovery include the scope of the Company's ongoing
drilling program, which will be directly affected by the availability of
capital, drilling and production costs, availability of drilling services and
equipment, drilling results, lease expirations, transportation constraints,
regulatory approvals and other factors; and actual drilling results, including
geological and mechanical factors affecting recovery rates. Estimates of
unproved reserves may change significantly as development of the Company's core
assets provides additional data. In addition, our production forecasts and
expectations for future periods are dependent upon many assumptions, including
estimates of production decline rates from existing wells and the undertaking
and outcome of future drilling activity, which may be affected by significant
commodity price declines or drilling cost increases.
Finding and Development Cost
Finding and development cost, or F&D cost, is calculated by dividing (x)
development, exploitation, and exploration capital expenditures for the period,
plus unevaluated capital expenditures as of the beginning of the period, less
unevaluated capital expenditures as of the end of the period, by (y) reserve
additions for the period, excluding acquired reserves. Finding, development and
acquisition cost, or FD&A cost, is calculated by dividing (x) development,
exploitation, exploration and acquisition capital expenditures for the period,
plus unevaluated capital expenditures as of the beginning of the period, less
unevaluated capital expenditures as of the end of the period, by (y) reserve
additions for the period, including acquired reserves. The methods we use to
calculate our F&D and FD&A costs may differ significantly from methods used by
other companies to compute similar measures. As a result, our F&D and FD&A costs
may not be comparable to similar measures provided by other companies. We
believe that providing measures of F&D and FD&A costs are useful in evaluating
the costs, on a per barrel of oil equivalent basis, to add proved reserves.
However, these measures are provided in addition to, and not as an alternative
for, and should be read in conjunction with, the information contained in our
financial statements prepared in accordance with generally accepted accounting
principles. Due to various factors, including timing differences in the addition
of proved reserves and the related costs to develop those reserves, F&D and FD&A
costs do not necessarily reflect precisely the costs associated with particular
reserves. As a result of various factors that could materially affect the timing
and amounts of future increases in reserves and the timing and amounts of future
costs, we cannot assure you that our future F&D or FD&A costs will not differ
materially from those presented.
Laredo Petroleum Holdings, Inc.
2012 F&D and FD&A Costs
Unaudited
F&D FD&A
----------- ----------
($ in millions, except per unit amounts)
Exploration, development & exploitation capital $ 925.0 $ 925.0
Acquisitions (if applicable) - 20.6
Asset retirement obligation additions 7.4 7.4
Adjustments:
Unevaluated costs as of December 31, 2011 117.2 117.2
Unevaluated costs as of December 31, 2012 (159.9 ) (159.9 )
----------- ----------
Adjusted capital expenditures related to reserve
additions $ 889.7 $ 910.3
----------- ----------
(MMBOE)
Reserve extensions, discoveries and revisions 40.3 40.3
Acquisitions (if applicable) - 3.1
----------- ----------
Total reserve additions 40.3 43.4
----------- ----------
Cost per BOE $ 22.08 $ 20.97
----------- ----------
((1)) PV-10: A Non-GAAP Financial Measure
PV-10 is derived from the standardized measure of discounted future net cash
flows, which is the most directly comparable GAAP financial measure. PV-10 is a
computation of the standardized measure of discounted future net cash flows on a
pre-tax basis. PV-10 is equal to the standardized measure of discounted future
net cash flows at the applicable date, before deducting future income taxes,
discounted at 10 percent. We believe that the presentation of the PV-10 is
relevant and useful to investors because it presents the discounted future net
cash flows attributable to our estimated proved reserves prior to taking into
account future corporate income taxes, and it is a useful measure for evaluating
the relative monetary significance of our oil and natural gas assets. Further,
investors may utilize the measure as a basis for comparison of the relative size
and value of our reserves to other companies. We use this measure when assessing
the potential return on investment related to our oil and natural gas assets.
However, PV-10 is not a substitute for the standardized measure of discounted
future net cash flows. Our PV-10 measure and the standardized measure of
discounted future net cash flows do not purport to present the fair value of our
oil and natural gas reserves.
The following table provides a reconciliation of PV-10 to the standardized
measure of discounted future net cash flows at December 31, 2012:
Laredo Petroleum Holdings, Inc.
Reconciliation of PV-10 Non-GAAP Financial Measure
Unaudited
December
31,
2012
------------
In Millions
Pre-tax PV-10 $ 2,348.5
Present value of future income taxes discounted at 10% (471.0 )
------------
Standardized measure of discounted future net cash flows $ 1,877.5
------------
# # #
Contacts:
Rick Buterbaugh: (918) 858-5151 -
RButerbaugh@laredopetro.com
Branden Kennedy: (918) 858-5015 -
BKennedy@laredopetro.com
13-2
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originality of the information contained therein.
Source: Laredo Petroleum, Inc via Thomson Reuters ONE
[HUG#1680656]
