Laredo adds oil-weighted Midland basin leasehold, divests gas-weighted reserves

Laredo Petroleum Inc., Tulsa, Okla., agreed to acquire the assets of Sabalo Energy LLC—an EnCap Investments LP portfolio company—and a non-operating partner for $715 million ($625 million cash, 2.5 million Laredo common equity shares).

Upon closing, the company expects to hold over 30,000 productive, contiguous net acres in Howard County and a “near-term pathway [yearend 2021] to increasing our oil cut to more than 50% from the current 30%,” said Jason Pigott, president and chief executive officer, in a May 9 release.

The acquisition includes 21,000 contiguous net acres (86% operated, 100% held by production) directly offsetting Laredo's existing Howard County leasehold with 120 operated oil-weighted locations (91% WI) and 150 non-operated locations (12% WI). The assets are currently producing 14,500 boe/d (83% oil, three stream) of low-decline production with an estimated next 12-month oil decline of 35%. PDP reserves are estimated at 30 MMboe (73% oil, three stream).

Additionally, Laredo agreed to sell 37.5% of its operated proved developed producing (PDP) reserves in Reagan and Glasscock counties to a Sixth Street Partners LLC affiliate for proceeds of $405 million and additional potential cashflow based earn-out payments over the next 6 years. None of the PDP reserves are in Howard or Western Glasscock counties.

Laredo is divesting reserves of about 94 MMboe (18% oil) with associated production of about 25,000 boe/d (23% oil). The sale is wellbore working interest only and Laredo retains all undeveloped locations.

Both transactions are expected to close July 1, 2021.