Update: Laredo Petroleum Q4 Production Numbers

| About: Laredo Petroleum (LPI)
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Summary

Laredo Petroleum reported Q4 production numbers.

The stock is a tentative buy for high-risk portfolios.

The original investment thesis predicted that operations would improve.

Ironically, Laredo Petroleum (NYSE:LPI) announced exceeding Q4'14 production guidance just as the stock plunged to new all-time lows. The biggest frustration of investors was the company consistently missing production guidance and the lack of fast enough production growth for a firm focused on Permian Basin oil. The stock is down substantially in the last few months, dropping from a high over $30 during the summer months to below $10 at the close on Monday.

Prior to the market open, Laredo Petroleum increased Q4 production guidance to 3.4 to 3.6 million boe, up from 3.2 to 3.5 million boe. The company now forecasts completing 15 horizontal wells for the quarter, compared to guidance of only 12. The biggest concern of investors appears with the $1.6 billion of long-term debt on the balance sheet as of September 30. A key to the success of the stock going forward might be whether the company can complete a transaction for a portion of the northern Permian-Garden City proved and unproved oil and natural gas properties. Laredo currently has plenty of liquidity, with roughly $1 billion available on the senior secured credit facility. The company has oil hedges for roughly 75% of Q4 oil production at prices closer to $90, providing some price shock absorption for the quarter.

The previous analysis in the article "Laredo Petroleum: Focus On Solid Well Results" accurately predicted that the company would eventually solve operational issues. Luckily, the previous issues with production led us to exit a position on the original weakness in the stock months ago, knowing it was a marginal producer in the region. The improved Q4 production numbers, combined with the substantial stock declines makes the stock an attractive addition to a high-risk portfolio. An attractive transaction that raises cash and reduces leverage would make Laredo a very attractive buy in the beaten-down energy sector.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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