Vital Energy Inc (VTLE)

[tdeck]

$LPI Laredo Petroleum: Deleveraging Helped By Positive 2019 Cash Flow

Laredo may be able to generate around $87 million in cash flow in 2019 at current strip prices. This does not include its $42.5 million settlement from Shell.

Laredo's valuation is currently low due to its tightly spaced wells showing a sharp decline in oil production.

If its wider spaced 2019 wells can meet expectations, it has significant upside with its current EV to 2019 EBITDAX multiple at only 3.2x.

Laredo has also reduced its G&A costs by around 25% going forward.

Laredo Petroleum (LPI) appears to be a good value at its current share price. It appears capable of generating a decent amount of positive cash flow in 2019 and doesn't have any debt maturities until January 2022. Laredo does need to demonstrate that wider spacing can improve its well level results, but if it can do that, there should be significant upside with its stock.

Laredo has also reduced its G&A costs going forward and may be able to reduce its leverage to 1.7x by the end of 2019 with its positive cash flow and the benefit of its settlement with Shell