Laredo Petroleum announces second round of funding from Warburg Pincus
Amid falling oil prices and financial market turmoil, Tulsa's Laredo Petroleum has received a $300 million vote of confidence.
November 16, 2008
By Mella McEwen
The company, which recently established an office in Midland and is active in the Mid-Continent and Permian Basin, has just announced a second round of equity financing of up to $300 million with Warburg Pincus LLC, a global private equity firm. Warburg Pincus had made an initial $300 million equity financing commitment in July 2007 as Laredo was beginning operations.
"This is actually the third time Warburg Pincus has backed Randy and his companies," said Jerry Schuyler, company president and chief operating officer. He was referring to Randy Foutch, who founded Laredo Petroleum last year. He had previously founded Lariat Petroleum in 1997, selling it to Newfield Exploration in 2001, followed by Latigo Petroleum in 2002, selling it to Pogo Producing in 2006. That, Schuyler noted, established "a long relationship and trust" between Foutch and Warburg Pincus.
In a statement announcing the funding commitment, Jeffrey A. Harris, a Warburg Pincus Managing Director, said, "We are thrilled to be continuing our partnership with Randy Foutch and his team. Warburg Pincus has had a long and rewarding history with Mr. Foutch through his earlier ventures, and we are confident that Laredo will be similarly successful."
The funding, Schuyler said, will be used to continue the company's growth and its program of acquisitions, exploration and development activities.
"We play the Mid-Continent and Permian Basin," he said. "We've identified a lot of opportunities. We have nine rigs going today and probably will be adding more rigs later this year, building into next year."
Having established a Midland office, Schuyler said there are now seven employees "on the ground in Midland who have put together a good land position and we should see drilling later this year or early next year. If this play works as we expect, we will probably add people, which is countercyclical to today's trends."
Still, the 60 percent decline in oil prices since they peaked at $147 a barrel in July has impacted the company's operations, Schuyler acknowledged. Having ramped up activity rapidly, he said, the lower prices have affected how the company looks at projects and prompted company leaders to throttle back on activity.
"We are taking a wait-and-see approach. We're not reducing the number of rigs, but we are not expanding operations we had planned as quickly as we had planned," he said.
For companies like Laredo that have financing, he said, "being patient is the right approach. We're continuing to look at opportunities. A lot of people forget, three years ago we would have been ecstatic at $60 oil."
The company's positions in the Permian Basin and in the Mid-Continent, he added, are resilient to price levels, which is why Laredo has the luxury of being patient.
Falling commodity prices combined with turmoil on Wall Street and frozen credit markets is unprecedented, Schuyler said. "The biggest thing is we appreciate that Warburg has the confidence it has in us."
That confidence and the equity financing will give Laredo a big advantage as it looks for new prospects, he said.
"We have significant opportunities leased and we need capital to develop them."
Mella McEwen can be reached at firstname.lastname@example.org.