Q2 2020 Laredo Petroleum Inc Earnings Call
Good day, ladies and gentlemen, welcome to the Laredo Petroleum Inc.'s second quarter 2020 earnings Conference call.
My name is Christian I'll be your operator for today.
Participants aren't a lot listen only mode.
We'll be conducting a question and answer session after the financial and operations report.
As a reminder, this conference is being recorded replay purposes.
And it's now my pleasure to introduce Mr. Ron Hagood.
President Investor Relations you May proceed Sir.
[music]. Thank you good morning, joining me today, our Jason I get President and Chief Executive Officer Gear in Chandler Senior Vice President and Chief Operations Officer, Brian.
Senior Vice President and Chief Financial Officer swells additional members of our management team.
Well, we begin this morning, let me remind you that during today's call will be making forward looking statements.
These statements, including those describing our beliefs goals expectations forecasts and assumptions are intended to be covered by the safe Harbor provisions of the private Securities Litigation Reform Act at 1995.
Our actual results may differ from these forward looking statements for a variety of reasons many of which are beyond our control.
In addition, we'll be making reference to non-GAAP financial measures reconciliations to non-GAAP financial measures are included in yesterday's news release.
Sure day, after namely issued a news release, a presentation detailing financial and operating results for second quarter 2020.
Well I referred her presentation by age during today's call.
Additionally, we filed an amended 10 to for the quarter ended March 31st 2022 corrected understatement I've been on cash full cost ceiling impairment expense for the first quarter 2020.
The error was isolated to the first quarter 2020 and has no impact on our financial statements prior to that period.
Please see our amended tinchy for further information.
You do not have a copy of this future release. Your presentation you may access it on our website at Www Dot Laredo Petro Dot com.
I'll now turn the call Liberty, Jason Pigott, President and Chief Executive Officer.
Thank you for joining us this morning, it goes without saying with the second quarter was an extremely challenging environment Laredo performed very well I'm pleased to report that we have transitioned well jump, mostly remote workforce and there's always we've taken the health and welfare employees very seriously.
Well, we're committed to the safety of our employees, we're highly focused on creating value first stakeholders as well.
As you can see on slide three we exceeded expectations on both general and administrative expenses and lease operating expenses.
Our outperformance on production volumes whats directly associated with our low cost structure and transportation arrangements Braintree.
Which eliminates the need to shut in production or any material significant.
[noise] or had to support a cash flows and we continue to drive down costs.
First the first quarter of 2020, we increased adjusted EBITDA by 14%. Despite an average sales price decrease of 36%.
Moving to slide for our bedrock principles of how we manage the company have not changed.
Magic financial risk.
We've clearly demonstrated this a priority when we went to the market early this year to refinance our debt protected our 2020 cash flows through actors that we put into place last year after new hedges that we laid on this year.
Optimizing the assets. The team has made significant strides this year as we reduced our operating costs by 16% from the same quarter in 2019, our drilling and completion costs are anticipated to be somewhat the best amongst our peers as we drive down well cost to the $550 per foot range. This year.
Finally, we made some very difficult decisions to reduce our overhead staffing and compensation structure adjustments to maintain our peer leading GSK.
Acquiring additional high margin high return locations and increasing the scale the company Archie to delivering results in the future and our top priority Laredo.
There are opportunities first expand but rest assured moving deliberate about how we evaluate and finance these opportunities, but taking a conservative de risk spacing and productivity seeks to reduce financial leverage ratios would the transactions, we pursue and improve our debt to equity ratio.
On slide five or Howard County acquisition demonstrates our strategy and how it drives future results expected returns on their acquired locations outpaced those of our core existing acreage and those locations are at the front of our development schedule.
Got it our internal budget curve to the blocks, we have shown in the past which were pulled from a wider range of data.
These carrots represent the economics and production profile used to influence our decision to return to activity in Howard County.
We recently started to bid the bid process for service is ahead of our ramp up an activity and they support the 5.5 million dollar well cost used in this analysis.
We are leading DNC cost result in a lower breakeven cost and are the primary catalyst for the acceleration of activity in Howard County.
Moving to slide six you can see that we're able to rapidly reduced activity levels in response to lower prices and their impact on returns.
While this flexibility is necessary to preserve value when commodity prices drop rapidly operating at our current cadence as sub optimal in the long term.
Our goal is to maintain a normalized operational cadence that drives efficiency and support stable cash flows and EBITDA.
Driven by the return profile in Howard County development, we're resuming completion activities by adding a crew in Howard County.
Further current plans are to maintain this groups throughout 2021 and also to run two drilling rigs, which are needed to balance the spuds and completions. In addition to the obvious operational benefits of running a steady development program the value proposition for a company a discernible slide seven demonstrates the stabilization oil production under our current plan.
And purchased a substantial degradation under the previous plan.
Cash flows and EBITDA, our stabilized even at lower hedged oil prices and we expect to accomplish this while operating within cash flow for full year 20 to 20 2021.
Additionally, we have underpinned the returns from this activity by adding commensurate oil hedges and 2021 in 2022.
Turning to slide eight we show the progress we've made in the previous nine months in adding high margin inventory.
Fine. This represents approximately three years of development and normalized cadence running two rigs and one completions crude.
As a tremendous progress we still see more opportunity to acquire inventory that can benefit from our operational expertise and low cost structure and moves toward our goal of increased scale and scope and long term free cash flow generation.
Before I turn the call over care and I would like to welcome our new CFO Bryan never meant to the team.
He brings a wealth of transactional expertise to Laredo, both financing an integration.
His background will be invaluable as we look to strengthen our balance sheet evaluating acquisition opportunities.
They are de leveraging opportunities improve and improve our debt to equity ratio.
Ill now turn the call over to Karen.
Thank you Jason Slide nine isn't update at this time, we've used to consistently demonstrate the success of the optimize spacing completion strategy on our established acreage position.
Jason just mentioned.
We've made acquisitions at all really are higher margin inventory in the last year and western Glasscock in Howard County.
Can you did that I wonder highlight on this slide our the early production results for the time will package, we completed during the second quarter on our Western Glasscock acreage, which was acquired in December 2019.
Although the will production results are already exceeding our established acreage type curve.
Early production on this package was curtailed as existing infrastructure was unable to accommodate initial volumes.
He is piece installed on three the five wells, we're not able to run at optimal capacity until additional four lines were installed.
The performance or the artificial lift has now been optimized on all five wells.
And the lowest performing at or above expectations.
If the current production trend continues we expect results for the five welcome package to continue to improve versus our established acreage type curve and our initial expectations for the package.
Turning to slide 10.
This is a slide we are particularly proud of for several reasons.
The top chart shows the continued progress week night in both drilling and completions performance.
Each time, we think performance improvements might be plateauing.
Operations teams have continued to implement new variants.
Deficiencies and we've continued to see improvements.
Especially impressive is our drilling team's ability to retain these efficiencies over the last few quarters as our drilling operations and transportation fully to Howard County.
Until the last quarter, we've seen the same progress on the completion truck.
The second quarter did see do think completions performance.
Which is not unusual Winchester lending operations as we get in second quarter.
As we resumed completions operations later this year, we expect to regain these efficiencies we began our first completion in Howard County.
On the bottom chart you see these efficiencies translating to our gains E commerce, there among the lowest in the basin.
As I just discussed related to our recent well performance.
We completed the five well could package during second quarter on our newly acquired Western Glasscock acreage before we suspended completions operation.
All of our service providers and our budgeting will cost of approximately $550 per foot.
And we've continued running drilling rigs in Howard County throughout the second quarter, we are delivering drilling cos below the levels in pie by a total will cost at $550 personally.
Turning to slide 11.
We highlight another operational area that we were extremely proud.
Our historical investment and infrastructure nacre operation safer and reduce environmental releases.
Since the beginning production in Midland Nathan we've focused dollar lemonade flaring ordered any of our produce natural gas.
Would you believe it is the right thing to do from both in environmental and economic standpoint.
Over the last two and a half years, we've only released 1.6 per cent of our gas production.
And with one exception handheld that number under two per cent Arnold quarterly basis.
To demonstrate our commitment to even further reducing firing our board of directors for the first time.
Is tied a portion of our bonus pay out to improve Nintendo <unk>.
Ah proud to say, we continue to see improvement in this area and in May June and July we were able to reduce our percentage of <unk> gas too well below one per cent.
The first half of 2020 has been an extremely challenging environment for operations team.
They have successfully managed through the difficulties of operating with the added risk associated with Cove at 19.
And they have continued to deliver improve performance and reduce costs.
Even with significant changes to our activity levels.
During this time of change we worked very hard can 19, our focus on operating safely.
Improving our environmental metrics and continuing to deliver operational excellent in all areas of our business.
I'm very proud of our team for the way that we've managed through the challenges and the first half of the year.
And I'm confident the team will continue to deliver.
Pier, leading result, as we resumed completions activities in Howard County This corridor.
I will now turn the call over to Brian's our financial update.
Good morning.
I went to start by saying I feel fortunate to be given the opportunity to assist the Laredo team and achieving nickels and plans Jason as outlined I'll look forward to supporting Laredo is plan of improving our balance sheet and financial strength.
As you saw and or onions, released yesterday as well as an attempt to a we filed for the first quarter, we had a material weakness and our controls.
This weakness centered around the cost included in the reserve report for Q1. This material weakness led to an error and the calculation of the ceiling test impairment understanding the impairment by approximately $160 million.
[noise] discharge is non-cash and has no impact on our financial ratio covenants or the business operations.
As we do not use a calculation a S E C reserves and they related depletion or impairment and running our business.
The <unk> the impairment charge has been corrected and the <unk> can we expect to file the second quarter tend to on a normal timeline.
We are also received a waiver from our bank group for the technical Department arising from this free statement.
Now I will touch on a few items the specifics to the second quarter, and then dive into some big picture items around activity levels, and 20, and 21 as well as our balance sheet.
Is Jason mentioned in his remarks accompanies overall operational and financial performance during the quarter was outstanding.
We continue or a long term trend of driving both unit L. O a N G N a expenses below that of our up tears as illustrated on slides 12th and 13th.
On the L O a side of the equation Alright, Oh continues to be a low cost leader and we continue to drive cause all the system is noted by the 24% decrease year over year, and 14% decrease quarter over quarter.
As we begin to complete and turn inline wells in Howard County, We would expect L. O N for those well to be approximately $4 per B O a.
These wells are substantially Euler than those of our established acreage base and we will utilize E. S. P. S for the artificial lived versus the gas lips. We currently use on our established acreage.
Alright, just seemed production will continue to benefit from our infrastructure assets and on a blended basis, we expect a unit L. O 821 to remain below $3 per B O E average for the years.
With respect to G N. A the company continues to monitor and manage our cost for the environment. We were in asked discuss previously management and the board of directors had taken salary reductions and we have a reduction in forest in June basalt in in a charge a $4.2 million.
Annual savings going forward are expected to reduce personnel expenses for the full you're 2020 by approximately 10% versus for your 2019.
Yeah that'll cost incurred in the second quarter or $78 million versus are expected to 65 million.
For the first half of the year and for the full year, we were on target for our Capex expectations <unk>.
The additional capital spending Q2 related to the estimates and timing of activity and invoicing during that period of rapid decreasing activity.
Jason I'm, Karen discussed, we expect to put completion cruise to work in Howard County later, this year, but activity stabilize and slowly growing in the back half the year, we were comfortable with our second half of the year of capital of guidance.
We will be thoughtful and our time you know when we put the completion cruise back to work balancing the impacts the cash flow.
We would like to point out they have cycle returns on these wells are extremely competitive extra prices and even more so as well as we were complaining are ducks.
Spending the dollars in Q3 will also help us maintain a reasonable production level going into 21 stabilizing are balance sheet and operations considerably over the plan, we were and executing and the low price environment a couple of months ago.
Turning to slide 14th we give some more data on how we intend to balance capital expenditures in cashflows in the updated 21 plant.
During the second quarter, we added an additional 4800 barrel of oil per day of oil hedges 21 take enough to approximately 70% of the anticipated oil production hedged at a Brent floor $51 as you can see on the bottom chart.
<unk> position substantially mitigate the impact of an oil price decrease verses unhedged position.
Additionally, the combination of pets, and unhedged oil exposed to 65% unexpected production to increasing prices.
We pursue taken assistant methodical hedging strategy, we enter into hedges to support our cash flows and lock and returns as much as possible.
This process has sort of the company well generating she would've settlements of more than 700 million since the beginning of 2014.
$87 million in the second quotas turning to 515.
Well positioned for the next few years, we have no term that maturities until 25.
Substantial liquidity provide a bar revolver.
And we are in a great position on our dead ratios. Additionally, we expect to reduce net borrowings with free cash flow of the second half of the year.
On the other hand, it is quite obvious N.
Many company than our space have two little equity relative to death, including Laredo, We're committed to bring in equity to the balance sheet and constructive and value added ways to our stakeholders, whether that'd be through using equity structures to acquire bolt on acreage are working with all of our stake holders and others to consolidate larger positions or entities.
We plan to make incremental steps every chance, we can wherever it makes sense.
While looking for a larger opportunity to benefit are stakeholders by substantially increasing scale.
As I said at the answer to my comments I am on her to be here working with so many great Laredo employees I believe thoroughly that as an industry and the company, we must continue to evolve and Jason's commitment to continue improvement with a large driver in my decision to come here.
Laredo employees are committed to find ways, we can continue to improve processes and use technology to become better and more efficient.
With that operator, please open the line for questions.
Thank you.
And as a reminder, ladies and gentlemen to ask a question you need the person stole one of your telephone.
Two of Joy. Your question. Please press the pound key.
Please dump all we can pull up Q&A roster.
My first question comes from a Lotta Burger with field Stifel you, let us know open.
Thanks, Good morning all.
Alright.
Perhaps for Jason with the understanding that you're providing more visibility than most with your current plan on page seven would it be fair to stay the current capital plan studies the ship within cash, but for the period shown and generate meaningful absolute girl and free cash flow in 2022.
With the head and you you guys are effectively put in place, it's simply unemployed bed on your ability to execute.
Yeah, No great Alright question and I agree with.
Everything you said there I monarchal has been to be free cash flow neutral, we've been that that way cents.
Last year and that's the plan that we've laid out for you today and as you can see and slide seven, especially on the right. There again, it where you're returning our protection.
Values to what we have in 2019 I could look at our covenant ratios they materially improve as part of the process.
As well so I feel confident about it and you know we got a lot of questions. You know inventory is one of the things that's M stand out.
I sit here and I I look back a year ago, all the wells that weird drilling today worked in our portfolio a year ago, and so I I feel really confident that in this.
A lower price environment, where there's more kind of stress on some of our peers R. P E companies.
Well, we'll have a great opportunity to add additional acreage I mean, there's continuous drilling obligations that are out there. There's acreage that's expiring. So we're really focused on the kind of two different strategies. One is just bolting onto the Howard County, there's lots of open acreage around us there, we've been very aggressive and reaching out to other operators are opportunities there.
<unk>.
And then a macro level as well the companies that have low cost structures are the ones that went in this environment and have you seen from our results this quarter.
Reduce Delaware you reduce G N a reduced our D. N C. S. L. We think in this environment again, Laredo as well positioned to not only add those both on opportunities, but that has the capability to do something on a a larger scale that could really I can double a side of the company overnight. So those are the things that were focused have a lot.
Confidence in our team's ability to execute on the planet continue to load the reschedule with additional opportunities.
Great and then it's my follow up but like the shipped over to your recent well cost savings projections, perhaps for Karen how much do we think about the sustainability of your ear to date will cost improvements on page 10, and specifically what I'm target is how much of that improvement from the 660 level.
It's structural versus market.
Yeah. Thank you for the question as we talked about we're currently bagging with a 550 dollar per foot costs going forward. So through the first order we delivered right at the Cook Wellesley mention specifically about $620 alright.
As we enter 2020 budgeting at about $680 a code. So we've continued to see as <unk>.
Mm Hmm, you too had drawing incompletions operations.
Which you know with early May this theory that coke, primarily due to performance improvements N and some cost structures. They solve this one things coming down during that time.
From that point from the six 620 per put forward to the 550, that's all service cost. So <unk> is that we will be running at the same performance levels that we were able to deliver in the first task alright and.
Working with our current service providers have you know incorporated there the actual service all set we're currently operate.
Having said that Ah drilling has continued to operate has fully transition to Howard County, as we mentioned they continued the secret appointment, so Christmas and a <unk> a number of areas around and they shall call savings and are delivering.
Hello, the M I $550 a foot. So we could continue to see some appointments improvements also went back with that number.
Oh very helpful. Thanks for your time.
Thank you Sir thank you.
Thank you and our next question comes from a line of Bryan singer with Goldman Sachs you, let us know open.
Good morning.
Alrighty, Alright, if you consider their right level of of activity capital spending how do you contemplate maintenance mode with free cash flow versus the more accelerated pace.
That that you're going out here and or or do you get to you guys get to have more of the same level of a free cash flow, regardless. So I'm just thinking about the the goal of Delevering and whether that gets accomplished more buying that that pay down versus by even Deborah.
Sure. This is Brian I think the the plan that we've outlined here targets free cash flow neutrality and and some of the same way is the plan would have in the lower price environment I think the the main difference is if you look forward in a in.
In a situation, where we were doing the earlier plan, you're you're dead Metro to your balance sheet I think struggle more sure you can generate some cash flow and you can pay down some that but your that to EBITDA ratios will be much weaker than in the plan we have here.
My opinion this the company that in a lot stronger position with higher production higher EBITDA, even with a slightly higher.
Amount of that.
Great. Thank you and then.
You mentioned just just here earlier that you wanted to try to be nimble here to pursue acquisition opportunities that may come about what what do you see based on your own leverage goals.
As the importance of targeting leverage reduction and then what do you see it the scope for capital and it can be deployed acquisitions.
Yeah, that's Jason I'll take a stab at at M. S. I got were grilled Tomatoes, we've highlighted trying to do over the company again, we we started last year before we made the acquisitions and that the ranch at 1.7 to 1.8 <unk>.
Company again, we ultimately you know we want to drive it down to that one range, what you Gotta pass through two and a half and to to get there. So I think one of the things that we are looking at as we think through the world of M&A again, we we will try to use equity as part of those transactions, which will allow us to be leather as a result debit where.
We're actively thinking through those I mean, there's assets that are coming to market the bankruptcies.
Or both an opportunity so it's hard to say exactly what is going to come to us, but we've been very successful with our bolt on strategy and working things like that as well. So I'll go and it's it's it's not quite clear exactly which one of these letters were pulling is gonna be successful first but what kind of pursuing them all simultaneously right now but.
Okay and at the end of the day actually I think so.
[noise], we're trying to run the business, it's clear and we're we're gonna continue to grow.
Plan, we've got here I think one other thing, we probably and I need to highlight of their stress little bit more is we're we're going to run the one completion crew, that's where we see the most operational synergies as prices rise or there's a benefit there or not planning to increase activity will use that extra cash flow to pay down debt as well.
So it's like those are things that is the world improves and all medium drops as a result of some of the cut backs.
Oh, Oh protection drops.
I mean, we're gonna take advantage of that we're not gonna wrap up to do it would create a healthy growth rate with just the one completion crew. So we're kind of working all these ankles together again when I was I mentioned, we we didn't have any of the inventory we're looking today today.
Eight months ago. So we're been executing on the plan I think it's slow down a little bit it's oil prices dropped so dramatically, but now that things have stabilized I think you can start to value properties with the current strip fries and for us and I think one of our other advantages are we don't have because we don't have the.
Linked of inventory the things that we acquire come to the front other reschedule. So we can create value from some of these opportunities out there that some of our peers can't right now because they've got inventory and there's not as much competition because some of them are more distress than us as well. So I think we are well positioned it's hard to say exactly what that next deal that's.
Going to look like but I think there are out there in Laredo has set itself up as the low cost operator to take advantage of.
Alright, great. Thanks, I just had one quick accounting question what is the sufficient period of time auditors look forward to consider the material weakness that was highlighted here remediated.
You bet.
I don't know that there's a definite answer I look at it as a quarter or two.
That's that's my that's that's what I'll I'll be using.
Thank you.
Okay and our next question comes from the from the line of Richard <unk> with a couple of what you might as no open.
Okay. Thanks, everyone. Good morning.
Jason No Bryan is we piece together the increases in and 20 and 21 Capex guidance I know that you provided the 21 oil production guidance could you give it a view I know, it's a long way off but you're <unk>.
Possible 2021 oil production exit right or maybe four four Q 21 average.
So Richard at the <unk> as you can see the average for the year is going to be higher and I think the way you need to think of it is the what we guided for our four 220 exit right.
Can see where that is and from there pretty continual March and so obviously with the with the average where it is for two of the <unk> 20th is gonna be considerably higher.
Four Q 21 wrong.
I'm sorry, yes for 221.
Okay. Okay, that's helpful and.
Jason going back to the M&A comments, a little earlier could you kind of give us the lady the landscape of what area you're open to looking.
For acquisition.
You know is it beyond the Midland Basin.
Yeah, how can I I think where are we are efficient today as in our backyard in Midland Basin, you only need to go about a couple miles west from where we are today to get all evening when when we're looking at things. It's what we bought before is 5000 acres and greater and kind of blocky, we're looking to pivot our oil to fish.
Five per cent <unk>, there are better and so those are the targets that we look at his blocky an oily.
So you can go a couple miles west and what you saw on the Coke acquisition in Howard County.
Or really focused right now I'm, just trying to expand from our position in Howard County, where we've got water infrastructure and things like those in place, but I think a lot of the things that we do it's really about the way we run our business are applicable to other basin. So if we if they're opportunity came up in Delaware base and again that was <unk>.
And sizeable enough to apply the synergies we create that's good again I'm I'm a fan of the Eagle for things don't really come to market as much there, but like those kind of place again, it's a line with oil here and it's aren't kind of our business plan going forward. So.
Those are probably the three two extra places I would look outside of Midland right now, but we're open to opportunities you know when we think about the world and M&A like we have we have cash flow and there's inventory out there and when we can take someone's inventory that maybe you're lacking the cash flow. When we put these two things together, that's where you get the the one plus one equals three.
Type scenario and those are the things that were looking for.
Very good thank you Jason.
Thank you. Thank you.
Thank you and our last question comes with a line of Noel parks with Coke or an Palmer. Your line is not open.
Good morning.
Alright.
You know I I think it's it's easy.
Especially for those of US were interested observers kinda think of the the Permian.
Sorta monolithic you know it would take it okay. It's oily here. It is gasior, there that's less desirable, but I was wondering is.
Are there areas that have like a product mix Oilgas N G. L S where you feel.
You know, they're persistently undervalued like like a discounted even.
Just just isn't rationale I wonder if any of those.
Are sort of in the mix of things you're looking at because I understand the advantages for being oil error and also wondering you know how sustainable a gas rally would you have to see before the economics, and and Ah Klein or what would start to creep back into competition <unk> with your.
You're newer acquisitions.
Okay I'll start with your last question first and we had it in our last Investor deck, we had a plot out there that show the Klein versus different gas prices that are you a R. B areas Alright <unk>.
In Howard County are oily are and so they don't benefit from the gas price increases, but that's again, we're more capital efficient there are client and our core position. We have the day does definitely benefit from higher gas prices I don't have that slot in front of me, but as gas prices rose it started to compete with a howard counting yeah, but it it.
$3 350 gas to really push that above our Howard counting, but we we don't talk about the client as much in this presentation again, it's focused on our county, but that is kind of a next layer of wells that we would go drill so a gas prices improve overtime, those <unk> economics, and those wells our in our back pocket.
And it's hard to say again, if you're thinking macro Permian you you see there there's definitely a differentiation N.
Productivity from Yeah, there's there's oily parts of it like again like you have in Howard County, I can't say that any of them are more or less discounted what we see when we think through the different companies that we evaluate in a different properties are the N. P. V degradation occurs when you can't get two Oh, well well then.
Let's say a five year period, so there's lots of value there that's being destroyed when you're not able to get to it again, that's where we think we've got an opportunity as we're able to bring a value.
Forward for again those properties are those companies and that's the way we're thinking about the world right now.
Got it and.
Thinking of me and the hedge book it looked like.
Some of what was added for 2021, where some new floors and to serve as a reality check what what's your premiums did you do you have to pay to sort of get puts in this environment <unk> I'm, just I haven't paid a lot of attention to that market lately.
Those are all swaps yeah. The the from the incremental ads from the last time that we gave our hedge position and we're all swaps and 2021 in 2022.
Oh, Okay earlier.
Yeah.
Yeah, I Gotta order again, one of those things, it's a little bit lost because we did it as we bought.
Puts for next year with some of our cash flow that we had anticipated for this year that occurred in the second quarter. So if you hadn't done that our second quarter would've been free cash flow positive I think to the tune of about $27 million.
And what we did as we decided made the decision to add the activity to Howard County, we wanted to secure our cash flow and that's the father capital required.
To bring that activity for an lock it in I think the team has done a really good job. We don't we haven't talked about it too much or had any questions on it.
But in our deck.
Perfect Alright, <unk> or slide 14, Yeah. This is the impact of our head strategy and you can see you know Corona virus R. Cove. It you know that lingers around and prices start to fall again.
<unk> been able to do is just protect the downside. So we've got the puts that I'm gonna allow us to benefit of oil prices rally, but we really started to again and this is part of our strategy is protect darn stakeholders. When you get into an environment where prices fall. So we added some swaps. This this quarter to protect this.
Incremental activity and May you know will continually look at adding another layer whereabout 70 per silver 70 per cent hedged right now, but may look to add more as we solidify kind of our plans for next year.
Great and just one last one for me and I'm sorry, she touched him that's already your your <unk> a goal per foot of the cost of the new Patty you're gonna be or pads, you're gonna be doing just.
Can I get into more scrutiny. Your your cost those are drilling incompletion cost Ah collateral foot and then I I was also burden with any facilities or infrastructure cost as well.
Yeah, Hi, this is carrying yeah. So everything that is facilities related that's associated with an individual wellbore is included in that a S. H. So for example, roughly $455 million 10000 foot lateral we've got about 500000 facilities cost associated with that a N T.
Great Yeah, because you know that there are certainly other companies that are.
Struggling to even get into the seven 700 is donna per foot bases and I just wanted to double check that we're we're all talking apples to apples with those so great. Thanks, so much.
Alright, Thanks no.
Thank you.
And this does include today's question and answer session never know what's on the call back to run a good for closing remarks.
Well. Thank you for joining us today, we appreciate your interest in Laredo. This concludes our call and have a great morning.
Ladies and gentlemen, this concludes today's conference cool. Thank you for participating you and I'm just gonna.
[music].