Vital Energy Inc (VTLE)

[Timothy Smith]

Laredo budgets $1.0 billion for Permian development
The new year will see Laredo Petroleum move into full-scale development of its Permian-Garden City asset, increasing capex 38% YOY to $1.0 billion driving a 30% annual production increase. Laredo will culminate processes begun in 2012, including horizontal development from multiple zones and the optimal spacing of laterals, both vertically and horizontally.

Drilling capital will be concentrated on horizontal development of the Upper, Middle and Lower Wolfcamp and Cline shale zones, primarily with two, three and four-stacked laterals from multi-well pads. Laredo will continue delineation efforts across its 142,000 net acres of Permian-Garden City leasehold by horizontally testing additional zones and acreage.

The company expects to operate six to seven horizontal rigs to drill 70-75 gross horizontal wells, 85% of which will be development wells. Five vertical rigs will drill 120-125 gross wells for development and data gathering purposes as well as meeting lease maintenance obligations.

To maximize efficiency, development rigs will operate in concentrated geographic areas where Laredo has started building out production corridors. While $894 million of capex is slated for drilling and completion, Laredo will spend $130 million to maximize cost savings from common facilities and “hydrocarbon manufacturing.” Annual production for 2014 is expected at 34,100 boepd (58% oil) on a two-stream basis.