Permian Operator Laredo Petroleum Purchases Howard County Acreage

Laredo Petroleum Inc. continued the build-out of its position in Howard County in West Texas through a bolt-on acquisition of 2,758 net acres.

The Permian Basin operator said in an Oct. 22 release it acquired the acreage, located adjacent to the company’s existing Howard County acreage, for $11.3 million. The acquisition increases Laredo Howard County position within the Permian’s Midland-sub-basin to 11,299 net acres.

“We have now closed on our third bolt-on acquisition in Howard County since our initial investment late last year, adding additional high-margin drilling locations at prices not seen since the introduction of horizontal drilling in the Midland Basin,” Jason Pigott, Laredo president and CEO, said in a statement.

In late 2019, Laredo began acquiring acreage in Howard County as it worked to answer calls by investors to transform itself into a returns focused company by pivoting toward oil.

Laredo’s latest Howard County acquisition included 210 boe/d of production (80% oil) plus increased the lateral length, as well as working interest, of 12 existing locations to 10,000 ft from 7,500 ft. The company also said the bolt-on added 12 new 10,000-ft locations at conservative, 12 wells per unit development assumptions, with the potential for 25 additional locations as drilling units are formed.

The bolt-on acquisition was funded entirely with borrowings from the company’s senior secured credit facility, the borrowing base of which was reaffirmed at $725 million on Oct. 22.

After paying for the Howard County bolt-on acquisition, Laredo reduced net debt during the third quarter by $54 million, Pigott said, leaving the company with no term-debt maturities until 2025. With the reaffirmation of its borrowing base and hedges in 2021 equivalent to 80% of expected oil production supporting anticipated cash flows, he believes Laredo is well-positioned to execute its strategic objectives of “capital efficient oil growth.”

“The company’s strong financial position and history as a low-cost operator underpin this strategy as we begin to develop our Howard County asset and remain focused on executing similar, reasonably-priced bolt-on acquisitions around our core position in Howard County,” he said.

Headquartered in Tulsa, Okla., Laredo is an independent oil and gas company focused primarily in the Permian Basin of West Texas. The company expects to complete its first 15-well package in Howard County during fourth-quarter 2020, according to a September investor presentation.