Shares of Laredo Petroleum (NYSE:LPI) slipped on Thursday and were down 12% at 10:45 a.m. EST after the Permian Basin producer updated investors on its operations during the fourth-quarter and announced its capital budget for 2018.
Laredo Petroleum stated that it completed 18 wells during the fourth quarter, which was less than expected because it took longer to finish wells since the company was drilling in a new area and testing where it landed them. That pushed some wells into early 2018. Further, the company noted that two wells encountered operational issues, which permanently reduced their production. Because of that, output averaged 61,922 barrels of oil equivalent per day (BOE/D) during the quarter. While that was a record, it was at the lower-end of the company's 61,000 to 64,000 BOE/D guidance range.
In addition to that, the company announced its spending plan for 2018, budgeting $555 million. That's less than the $630 million it expected to spend last year but will enable the company to drill enough wells to boost production about 10% this year. That budget puts the company on pace to finance its current spending rate by the end of the year as long as oil is around $55 a barrel. This forecast is slightly different from the company's previous guidance. Last quarter, Laredo said that it could deliver a double-digit production growth rate over the next two years, with it on pace to operate within cash flow by the end of 2019.
Laredo's recent troubles in the Permian seem like those rival Pioneer Natural Resources (NYSE:PXD) ran into earlier in the year. However, Pioneer Natural Resources worked through its issues and bounced back. That bodes well for Laredo, as does the fact that it's reigning in spending to better align it with cash flow because that will help protect it if oil prices take another tumble.