Vital Energy(VTLE) - 2022 Q1 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements This statement warns readers about uncertainties and risks in forward-looking information presented in the report Part I Consolidated Financial Statements (Unaudited) Unaudited consolidated financial statements for Laredo Petroleum, Inc. for Q1 2022 and 2021, with detailed notes Consolidated Balance Sheets This section provides a comparative overview of the company's financial position as of March 31, 2022, and December 31, 2021 | Metric (in thousands) | March 31, 2022 | December 31, 2021 | Change ($) | Change (%) | | :-------------------- | :------------- | :---------------- | :--------- | :--------- | | Total Assets | $2,726,330 | $2,551,824 | $174,506 | 6.8% | | Total Current Assets | $302,352 | $235,857 | $66,495 | 28.2% | | Total Liabilities | $2,302,542 | $2,038,044 | $264,498 | 13.0% | | Total Current Liabilities | $775,502 | $526,913 | $248,589 | 47.2% | | Total Stockholders' Equity | $423,788 | $513,780 | $(89,992) | (17.5)% | Consolidated Statements of Operations This section details the company's financial performance for the three months ended March 31, 2022 and 2021 | Metric (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total Revenues | $532,395 | $250,230 | $282,165 | 112.8% | | Total Costs and Expenses | $263,939 | $147,427 | $116,512 | 79.0% | | Operating Income | $268,456 | $102,803 | $165,653 | 161.1% | | Total Non-operating Expense, net | $(356,114) | $(179,004) | $(177,110) | (99.0)% | | Net Loss | $(86,781) | $(75,439) | $(11,342) | (15.0)% | | Basic Net Loss per Common Share | $(5.18) | $(6.33) | $1.15 | 18.2% | Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity for the three months ended March 31, 2022 and 2021 - The company reported a net loss of $86.781 million for the three months ended March 31, 2022, contributing to an accumulated deficit of $(2.362) billion. Total stockholders' equity decreased from $513.780 million at December 31, 2021, to $423.788 million at March 31, 2022[19] - Share-settled equity-based compensation added $2.636 million to additional paid-in capital, while stock exchanged for tax withholding resulted in a $5.847 million reduction in total equity[19] Consolidated Statements of Cash Flows This section presents the company's cash flow activities for the three months ended March 31, 2022 and 2021 | Cash Flow Activity (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net Cash Provided by Operating Activities | $170,882 | $71,151 | $99,731 | 140.2% | | Net Cash Used in Investing Activities | $(151,696) | $(69,020) | $(82,676) | (119.8)% | | Net Cash Used in Financing Activities | $(10,847) | $(6,626) | $(4,221) | (63.7)% | | Net Increase (Decrease) in Cash and Cash Equivalents | $8,339 | $(4,495) | $12,834 | 285.5% | | Cash and Cash Equivalents, End of Period | $65,137 | $44,262 | $20,875 | 47.2% | Condensed Notes to the Consolidated Financial Statements This section provides detailed notes supporting the consolidated financial statements, covering various accounting and financial items Note 1—Organization and Basis of Presentation This note describes Laredo Petroleum's business and its basis of financial statement presentation - Laredo Petroleum, Inc. is an independent energy company focused on the acquisition, exploration, and development of oil and natural gas properties, primarily in the Permian Basin of West Texas[25] - The company operates as a single segment: exploration and production[25] Note 2—New Accounting Standards This note addresses the adoption and impact of new accounting standard updates - No new accounting standard updates (ASUs) were adopted or deemed meaningful to disclose as of March 31, 2022[33] Note 3—Acquisitions and Divestiture This note details the company's significant acquisition and divestiture activities during the period - In October 2021, the company completed the Pioneer Acquisition for $206.3 million, acquiring approximately 20,000 net acres in the Midland Basin[36][37] - In July 2021, the company closed the Sabalo/Shad Acquisition for $863.1 million, acquiring approximately 21,000 net acres in Howard and Borden Counties, Texas[43][45] - In July 2021, the company completed a Working Interest Sale for $405.0 million in cash proceeds, divesting 37.5% of its working interest in certain producing wellbores in Glasscock and Reagan Counties, Texas, and recorded a gain of $93.5 million[47][52] Note 4—Property and Equipment This note provides details on the company's property and equipment, including oil and natural gas properties and capital expenditures Property and Equipment (in thousands) | Property and Equipment (in thousands) | March 31, 2022 | December 31, 2021 | Change ($) | Change (%) | | :------------------------------------ | :------------- | :---------------- | :--------- | :--------- | | Evaluated oil and natural gas properties, net | $2,060,717 | $1,948,998 | $111,719 | 5.7% | | Unevaluated oil and natural gas properties | $156,899 | $170,033 | $(13,134) | (7.7)% | | Midstream service assets, net | $94,632 | $96,528 | $(1,896) | (2.0)% | | Total property and equipment, net | $2,347,622 | $2,250,149 | $97,473 | 4.3% | Incurred Capital Expenditures (in thousands) | Incurred Capital Expenditures (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Property acquisition costs: Evaluated | $4,780 | $0 | $4,780 | N/A | | Property acquisition costs: Unevaluated | $3,274 | $0 | $3,274 | N/A | | Exploration costs | $6,753 | $3,957 | $2,796 | 70.7% | | Development costs | $161,615 | $64,492 | $97,123 | 150.6% | | Total oil and natural gas properties incurred capital expenditures | $176,422 | $68,449 | $107,973 | 157.7% | Note 5—Debt This note outlines the company's long-term debt structure, including notes and credit facilities Long-term Debt (in thousands) | Long-term Debt (in thousands) | March 31, 2022 | December 31, 2021 | Change ($) | Change (%) | | :---------------------------- | :------------- | :---------------- | :--------- | :--------- | | January 2025 Notes | $572,097 | $571,568 | $529 | 0.1% | | January 2028 Notes | $356,230 | $356,020 | $210 | 0.1% | | July 2029 Notes | $393,494 | $393,270 | $224 | 0.1% | | Senior Secured Credit Facility | $100,000 | $105,000 | $(5,000) | (4.8)% | | Total Long-term Debt, net | $1,421,821 | $1,425,858 | $(4,037) | (0.3)% | - The Senior Secured Credit Facility had $100.0 million outstanding as of March 31, 2022, with a borrowing base of $1.0 billion and an aggregate elected commitment of $725.0 million, maturing on July 16, 2025[66] Note 6—Stockholders' Equity This note details changes and components of the company's stockholders' equity - The ATM Program, which allowed the company to sell up to $75.0 million in common stock, was completed during the year ended December 31, 2021[70][71] Note 7—Equity Incentive Plan This note describes the company's equity incentive plan and related compensation expenses - Stockholders approved an amendment to the Equity Incentive Plan in May 2021, increasing the maximum number of issuable shares from 1,492,500 to 2,432,500[72] Equity-Based Compensation Expense (in thousands) | Equity-Based Compensation Expense (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :----------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total share-settled equity-based compensation, net | $2,053 | $2,068 | $(15) | (0.7)% | | Total cash-settled equity-based compensation, net | $6,128 | $1,128 | $5,000 | 443.3% | | Total equity-based compensation, net | $8,181 | $3,196 | $4,985 | 155.9% | Note 8—Derivatives This note explains the company's use of commodity and interest rate derivatives to manage market risks - The company uses commodity derivatives (puts, swaps, collars, basis swaps) to hedge price risk and an interest rate derivative swap to hedge interest rate risk, none of which are designated as hedges for accounting purposes[84][86][92] Loss on Derivatives, net (in thousands) | Loss on Derivatives, net (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Commodity | $(329,724) | $(154,033) | $(175,691) | (114.1)% | | Interest rate | $13 | $4 | $9 | 225.0% | | Contingent consideration | $3,895 | $(336) | $4,231 | (1259.2)% | | Total Loss on Derivatives, net | $(325,816) | $(154,365) | $(171,451) | (111.1)% | - As of March 31, 2022, the company had significant open commodity derivative positions for oil (swaps and collars), NGL (swaps), and natural gas (swaps and collars) extending into 2023[90] Note 9—Fair Value Measurements This note provides information on the fair value measurements of the company's financial instruments, particularly derivatives Net Derivative Liability Positions (in thousands) | Net Derivative Liability Positions (in thousands) | March 31, 2022 | December 31, 2021 | Change ($) | Change (%) | | :------------------------------------------------ | :------------- | :---------------- | :--------- | :--------- | | Net derivative liability positions | $(342,945) | $(142,500) | $(200,445) | (140.7)% | - The fair value of the Sixth Street Contingent Consideration, classified as Level 3, increased from $35.9 million at December 31, 2021, to $39.8 million at March 31, 2022[94][104] Note 10—Net Loss Per Common Share This note details the calculation of basic and diluted net loss per common share Net Loss Per Common Share (in thousands, except per share data) | Net Loss Per Common Share (in thousands, except per share data) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :-------------------------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net loss | $(86,781) | $(75,439) | $(11,342) | (15.0)% | | Weighted-average common shares outstanding (Basic & Diluted) | 16,767 | 11,918 | 4,849 | 40.7% | | Net loss per common share (Basic & Diluted) | $(5.18) | $(6.33) | $1.15 | 18.2% | - All non-vested restricted stock awards, outstanding stock option awards, and non-vested performance share awards were anti-dilutive due to the company's net loss and were excluded from diluted EPS calculation[111] Note 11—Commitments and Contingencies This note outlines the company's various contractual commitments and potential contingent liabilities - The company incurred firm transportation payments on excess pipeline capacity of $2.1 million and $1.6 million for the three months ended March 31, 2022 and 2021, respectively, due to unfulfilled commitments[115] - As of March 31, 2022, the estimated aggregate liability for firm transportation payments on excess capacity was $5.4 million, and future firm sale and transportation commitments of $199.3 million are expected to be satisfied[115] - The company has a sand purchase commitment requiring a certain volume or a shortfall payment of $3.9 million at contract end[116] Note 12—Supplemental Cash Flow and Non-Cash Information This note provides additional details on cash flow activities and non-cash transactions Supplemental Cash Flow Information (in thousands) | Supplemental Cash Flow Information (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :------------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Cash paid for interest, net | $63,057 | $48,030 | $15,027 | 31.3% | | Change in accrued capital expenditures | $18,433 | $(351) | $18,784 | (5351.6)% | | Capitalized share-settled equity-based compensation | $583 | $670 | $(87) | (13.0)% | | Capitalized asset retirement cost | $181 | $397 | $(216) | (54.4)% | Note 13—Asset Retirement Obligations This note details the company's asset retirement obligations and changes during the period Asset Retirement Obligation (in thousands) | Asset Retirement Obligation (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :----------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Liability at beginning of period | $72,003 | $68,326 | $3,677 | 5.4% | | Liabilities added | $181 | $397 | $(216) | (54.4)% | | Accretion expense | $1,019 | $1,143 | $(124) | (10.8)% | | Liabilities settled/removed | $(555) | $(57) | $(498) | (873.7)% | | Liability at end of period | $72,648 | $69,809 | $2,839 | 4.1% | Note 14—Income Taxes This note explains the company's income tax expense, deferred taxes, and net operating loss carryforwards - The company has federal net operating loss (NOL) carryforwards totaling $2.0 billion and state NOLs of $34.4 million, but a valuation allowance of $455.3 million has been recorded against federal and Oklahoma net deferred tax assets[121][122] - The effective tax rate for operations was 1% due to the Texas franchise tax[123] Note 15—Related Parties This note discloses transactions and relationships with related parties - Halliburton, whose board includes the Company's Chairman, provided drilling and completions services, with capital expenditures of $30.141 million in Q1 2022, up from $11.780 million in Q1 2021[126] Note 16—Subsequent Events This note reports significant events that occurred after the balance sheet date - On April 13, 2022, the Senior Secured Credit Facility was amended, increasing the borrowing base to $1.25 billion and aggregate elected commitment to $1.0 billion, and expanding bond buyback and energy transition investment baskets[128] - As of May 3, 2022, the outstanding balance under the Senior Secured Credit Facility was $50.0 million, following a $30.0 million borrowing and an $80.0 million repayment in April 2022[127] - The company updated its natural gas derivative positions, including Henry Hub NYMEX swaps and collars, and Waha Inside FERC to Henry Hub NYMEX basis swaps, extending into 2023[129] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Laredo Petroleum's financial condition and operational results for Q1 2022 and 2021, covering revenues, costs, non-operating items, taxes, liquidity, and non-GAAP measures Executive Overview This overview introduces Laredo Petroleum's business, operational focus, and key financial highlights for the period - Laredo Petroleum is an independent energy company focused on oil and natural gas properties in the Permian Basin, holding 165,518 net acres as of March 31, 2022[131] - The company is operating two drilling rigs and one completions crew, with planned capital expenditures of approximately $550.0 million for 2022[132] Metric (in thousands) | Metric (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change () | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Oil sales volumes (MBbl) | 3,627 | 2,183 | 1,444 | 66% | | Oil equivalents sales volumes (MBOE) | 7,661 | 7,109 | 552 | 8% | | Oil, NGL and natural gas sales | $451,187 | $202,457 | $248,730 | 123% | | Net loss | $(86,781) | $(75,439) | $(11,342) | (15)% | | Free Cash Flow (non-GAAP) | $23,207 | $21,760 | $1,447 | 7% | | Adjusted EBITDA (non-GAAP) | $222,089 | $93,323 | $128,766 | 138% | Recent Developments This section highlights recent market trends and significant corporate actions impacting the company - Commodity prices remained strong in Q1 2022 due to increased demand outpacing supply, influenced by decreased Omicron variant cases and the Russian-Ukrainian military conflict[134] - The Senior Secured Credit Facility's borrowing base increased from $1.0 billion to $1.25 billion, and the aggregate elected commitment increased from $725.0 million to $1.0 billion as of April 13, 2022[139] Pricing and Reserves This section discusses commodity pricing strategies and the company's reserve position - The company maintains an active, multi-year commodity derivatives strategy to minimize price volatility and support cash flows[140] Realized Prices (as of March 31, 2022) | Realized Prices (as of March 31, 2022) | Price | | :------------------------------------- | :---- | | Oil ($/Bbl) | $75.42 | | NGL ($/Bbl) | $26.85 | | Natural Gas ($/Mcf) | $2.93 | - No full cost ceiling impairments were recorded for the three months ended March 31, 2022 and 2021, and none are anticipated if prices remain at current levels[141] Results of Operations This section analyzes the company's operational performance, including revenues, costs, and non-operating items Revenues This section details the sources and changes in the company's revenue streams Revenue Source | Revenue Source | 3 Months Ended Mar 31, 2022 (%) | 3 Months Ended Mar 31, 2021 (%) | Change (%) | | :------------- | :------------------------------ | :------------------------------ | :--------- | | Oil sales | 65% | 51% | 14% | | NGL sales | 12% | 17% | (5)% | | Natural gas sales | 7% | 13% | (6)% | | Sales of purchased oil | 15% | 18% | (3)% | Sales Volumes & Revenues | Sales Volumes & Revenues | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change () | Change (%) | | :----------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Oil (MBbl) | 3,627 | 2,183 | 1,444 | 66% | | NGL (MBbl) | 1,994 | 2,321 | (327) | (14)% | | Natural gas (MMcf) | 12,243 | 15,630 | (3,387) | (22)% | | Total oil, NGL and natural gas sales revenues | $451,187 | $202,457 | $248,730 | 123% | | Average sales price ($/BOE) | $58.90 | $28.48 | $30.42 | 107% | - Oil revenues increased by 172% due to higher oil prices and increased sales volumes from the Sabalo/Shad and Pioneer Acquisitions. NGL and natural gas revenues increased due to higher prices, partially offset by decreased sales volumes from the Working Interest Sale[146] - Midstream service revenues increased by 81% to $2.344 million, and sales of purchased oil increased by 70% to $78.864 million, driven by higher prices and volumes[147] Costs and Expenses This section analyzes the various costs and expenses incurred by the company Costs and Expenses (in thousands) | Costs and Expenses (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Lease operating expenses | $40,876 | $18,918 | $21,958 | 116% | | Production and ad valorem taxes | $27,487 | $13,283 | $14,204 | 107% | | Transportation and marketing expenses | $14,743 | $12,127 | $2,616 | 22% | | Costs of purchased oil | $82,964 | $49,916 | $33,048 | 66% | | General and administrative (excluding LTIP) | $13,393 | $9,635 | $3,758 | 39% | | Depletion, depreciation and amortization | $73,492 | $38,109 | $35,383 | 93% | | Total costs and expenses | $263,939 | $147,427 | $116,512 | 79% | - Lease operating expenses increased by 116% due to inflationary pressures and costs associated with integrating recently acquired assets, particularly for artificial lift and flowback management[153] - Depletion expense per BOE sold increased by 87% to $9.13, primarily due to increased future development costs and volumes of proved reserves from the Sabalo/Shad and Pioneer Acquisitions and improvements in commodity prices[161][162] Non-operating Income (Expense) This section details income and expenses not directly related to core operations, such as derivative gains/losses and interest Non-operating Income (Expense) (in thousands) | Non-operating Income (Expense) (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :-------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Loss on derivatives, net | $(325,816) | $(154,365) | $(171,451) | (111)% | | Interest expense | $(32,477) | $(25,946) | $(6,531) | (25)% | | Total non-operating expense, net | $(356,114) | $(179,004) | $(177,110) | (99)% | - The non-cash loss on derivatives, net, increased by 64% to $(200.446) million, primarily due to the changing relationship between outstanding contract prices and future market prices in forward curves[163] Income Tax (Expense) Benefit This section outlines the company's income tax expense or benefit for the period Income Tax (in thousands) | Income Tax (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Current | $(1,218) | $0 | $(1,218) | (100)% | | Deferred | $2,095 | $762 | $1,333 | 175% | - The company recorded a current tax expense of $1.2 million for Texas franchise tax in Q1 2022[167] - A total valuation allowance of $455.3 million has been recorded against federal and Oklahoma net deferred tax assets, resulting in an effective tax rate of 1% due to the Texas franchise tax[167] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations and fund operations Cash Requirements for Known Contractual and Other Obligations This section details the company's future cash outflow commitments for various contractual obligations Obligation (in thousands) | Obligation (in thousands) | Short-term | Long-term | Total | | :------------------------ | :--------- | :---------- | :---------- | | Senior unsecured notes | $122,457 | $1,833,039 | $1,955,496 | | Senior Secured Credit Facility | $0 | $100,000 | $100,000 | | Asset retirement obligations | $2,971 | $69,677 | $72,648 | | Performance unit award cash payout | $13,077 | $13,466 | $26,543 | | Lease commitments | $14,335 | $7,193 | $21,528 | | Total | $152,840 | $2,023,375 | $2,176,215 | Cash Flows This section analyzes the company's cash inflows and outflows from operating, investing, and financing activities Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $170,882 | $71,151 | $99,731 | 140% | | Net cash used in investing activities | $(151,696) | $(69,020) | $(82,676) | (120)% | | Net cash used in financing activities | $(10,847) | $(6,626) | $(4,221) | (64)% | - Operating cash flows increased by 140% primarily due to a $248.7 million increase in oil, NGL, and natural gas sales revenues, partially offset by changes in derivative settlements and operating assets/liabilities[178] - Investing activities used more cash, increasing by 120%, mainly due to higher drilling and completions activity, inflationary pressures, non-operated capital expenditures, and acquisitions of oil and natural gas properties[179] Incurred Capital Expenditures (in thousands) | Incurred Capital Expenditures (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Oil and natural gas properties | $168,368 | $68,449 | $99,919 | 146% | | Midstream service assets | $459 | $876 | $(417) | (48)% | | Other fixed assets | $2,072 | $600 | $1,472 | 245% | | Total incurred capital expenditures, excluding non budgeted acquisition costs | $170,899 | $69,925 | $100,974 | 144% | Sources of Liquidity This section identifies the primary sources of funds available to the company for its operations and investments - As of March 31, 2022, total liquidity was $646.0 million, comprising $65.1 million in cash and $580.9 million available under the Senior Secured Credit Facility. By May 3, 2022, liquidity increased to $1.01 billion[172] Senior Unsecured Notes (in millions) | Senior Unsecured Notes (in millions) | Principal | Interest Rate | | :----------------------------------- | :-------- | :------------ | | January 2025 Notes | $577.9 | 9.500% | | January 2028 Notes | $361.0 | 10.125% | | July 2029 Notes | $400.0 | 7.750% | | Total senior unsecured notes | $1,338.9 | | - The company's wholly-owned subsidiaries, LMS and GCM, jointly and severally guarantee the senior unsecured notes[190] Non-GAAP Financial Measures This section provides reconciliations and explanations for non-GAAP financial measures used by management Free Cash Flow This section reconciles Free Cash Flow, a non-GAAP measure, to its most directly comparable GAAP financial measure Free Cash Flow Reconciliation (in thousands) | Free Cash Flow Reconciliation (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $170,882 | $71,151 | $99,731 | 140.2% | | Cash flows from operating activities before changes in operating assets and liabilities, net | $194,106 | $91,685 | $102,421 | 111.7% | | Total incurred capital expenditures, excluding non-budgeted acquisition costs | $170,899 | $69,925 | $100,974 | 144.4% | | Free Cash Flow (non-GAAP) | $23,207 | $21,760 | $1,447 | 6.6% | Adjusted EBITDA This section reconciles Adjusted EBITDA, a non-GAAP measure, to its most directly comparable GAAP financial measure Adjusted EBITDA Reconciliation (in thousands) | Adjusted EBITDA Reconciliation (in thousands) | 3 Months Ended Mar 31, 2022 | 3 Months Ended Mar 31, 2021 | Change ($) | Change (%) | | :-------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net loss | $(86,781) | $(75,439) | $(11,342) | (15.0)% | | Depletion, depreciation and amortization | $73,492 | $38,109 | $35,383 | 92.8% | | Loss on derivatives, net | $325,816 | $154,365 | $171,451 | 111.1% | | Interest expense | $32,477 | $25,946 | $6,531 | 25.2% | | Adjusted EBITDA (non-GAAP) | $222,089 | $93,323 | $128,766 | 138.0% | Critical Accounting Estimates This section discusses accounting estimates that require significant judgment and could materially impact financial results - There have been no material changes in the company's critical accounting estimates during the three months ended March 31, 2022[201] Quantitative and Qualitative Disclosures About Market Risk This section details Laredo Petroleum, Inc.'s exposure to market risks, primarily focusing on commodity price volatility and interest rate fluctuations, and outlines the strategies employed, such as derivative transactions, to mitigate these risks. It also addresses counterparty and customer credit risk Oil, NGL and Natural Gas Price Exposure This section discusses the company's exposure to commodity price fluctuations and hedging strategies - The company uses commodity derivative transactions (puts, swaps, collars, basis swaps) to hedge price risk for anticipated sales volumes, aiming to mitigate cash flow variability[204] Sensitivity Analysis (in thousands) | Sensitivity Analysis (in thousands) | 10% Increase | 10% Decrease | | :---------------------------------- | :----------- | :----------- | | Commodity | $(118,682) | $125,318 | | Contingent consideration | $4,856 | $(5,037) | | Total | $(113,826) | $120,281 | Interest Rate Risk This section describes the company's exposure to interest rate changes and its hedging activities - The Senior Secured Credit Facility bears a floating interest rate (3.000% as of March 31, 2022), while other notes have fixed rates[206] - The company uses an interest rate derivative swap to hedge interest rate risk on a portion of its Senior Secured Credit Facility debt, with the current contract ending in April 2022[206] Counterparty and Customer Credit Risk This section addresses the credit risks associated with derivative counterparties and major customers - The company mitigates credit risk from derivative counterparties by limiting exposure, engaging only with counterparties meeting minimum credit quality standards, and continuous monitoring[208] - Sales of production are typically made to a limited number of customers, but the company believes it could sell to numerous purchasers, mitigating the risk of losing a major customer[209][210] Customer Performance Risk This section highlights the potential adverse impact if a major customer fails to take delivery of oil - The inability of a major customer to physically take possession of oil could adversely affect the company's financial condition and results of operations[212] Controls and Procedures This section confirms the effectiveness of Laredo Petroleum, Inc.'s disclosure controls and procedures as of March 31, 2022, and states that there were no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures - Laredo's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022[213] Evaluation of Changes in Internal Control Over Financial Reporting This section assesses any material changes in the company's internal control over financial reporting - There were no changes in internal control over financial reporting during the quarter ended March 31, 2022, that materially affected or are reasonably likely to materially affect it[216] Part II Legal Proceedings Laredo Petroleum, Inc. is subject to various legal proceedings in the ordinary course of business but does not anticipate any material adverse effects on its business, financial position, results of operations, or liquidity from these matters - The company is involved in various legal proceedings but does not expect them to have a material adverse effect on its business, financial position, results of operations, or liquidity[219] Risk Factors This section highlights that there have been no material changes to the company's risk factors from its 2021 Annual Report, except for the added risk concerning the unpredictable impact of the ongoing Russian-Ukrainian military conflict on the global economy, energy markets, and the company's business Impact of Russian-Ukrainian Military Conflict This section discusses the unpredictable risks posed by the Russian-Ukrainian military conflict on global economics and energy markets - The ongoing Russian-Ukrainian military conflict poses unpredictable risks, including potential adverse effects on global macroeconomic conditions, increased volatility in oil and natural gas prices, supply chain disruptions, and capital market constraints[221] Purchases of Equity Securities Laredo Petroleum, Inc. purchased 75,132 shares of common stock during the three months ended March 31, 2022, primarily to satisfy tax withholding obligations related to equity-based compensation awards Common Stock Purchases This section details the company's common stock repurchase activities during the quarter Common Stock Purchases | Period | Total Shares Purchased | Weighted Average Price Paid Per Share | | :-------------------------- | :--------------------- | :------------------------------------ | | January 1, 2022 - January 31, 2022 | 238 | $60.13 | | February 1, 2022 - February 28, 2022 | 41,654 | $76.56 | | March 1, 2022 - March 31, 2022 | 33,240 | $79.52 | | Total | 75,132 | | - These purchases represent shares withheld by the company to satisfy tax withholding obligations arising from the lapse of restrictions on equity-based compensation awards[223] Defaults Upon Senior Securities Laredo Petroleum, Inc. reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[224] Mine Safety Disclosures This section indicates that Laredo Petroleum, Inc.'s Howard County sand mine operations are subject to MSHA regulations, and relevant safety disclosures are included in Exhibit 95.1 - The company's Howard County sand mine operations are regulated by the Federal Mine Safety and Health Administration (MSHA)[225] - Information concerning mine safety violations is included in Exhibit 95.1[226] Other Information This section states that there is no other information to report - No other information is applicable for this section[227] Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, credit agreements, equity award forms, certifications, and mine safety disclosures - The report includes various exhibits such as corporate governance documents, the Eighth Amendment to the Credit Agreement, forms for equity awards, and certifications from executive officers[229] Signatures This section contains the required signatures for the filing of the quarterly report