Laredo Q4 Results – EPS Beaten, Production Stable, Debt Down

Laredo Petroleum (NYSE: LPI) released fourth quarter results after the close, posting strong earnings, guiding the street to stable production and allocating cash flow on the balance sheet:

• Earnings – the company posted fourth quarter adjusted earnings of $3.39, compared to Bloomberg consensus estimates of $3.26, and generated approximately $25m in free cash flow (~2% of market cap ).
• Production – management guided the street to 84kboe/d of production in 2022 (midpoint), compared to Q4 2021 volumes of 85kboe/d.
• Capital – the company expects $520 million in capital spending in 2022, compared to $444 million in 2021, with the 18% increase almost entirely due to service cost inflation.
• Allocation – given the company’s past debt challenges, management is allocating free cash flow to debt reduction in 2022.

Laredo guided the market to free cash flow of over $300 million at $80 WTI (~26% of current market cap), suggesting that the company has a lot of potential after the balance sheet fix. By sticking to capital discipline, as its peers have done, there’s a good chance the company will be rewarded by Wall Street, despite an inability to return money to shareholders just yet.