Iberia Capital To Laredo Petroleum Investors: Stock Now Fairly Valued

• Laredo Petroleum Inc LPI shares have appreciated 22 percent year-to-date.
• Iberia Capital Partners’ Blaise Angelico downgraded the rating on the company from Outperform to Sector Perform, while maintaining a price target of $12.
• Laredo Petroleum’s strong liquidity position and solid hedge profile will allow the company to face challenges due to low commodity prices, Angelico noted.

Laredo Petroleum’s shares have jumped 41 percent since August 2015, as compared to a nearly 8 percent rise in the EPX. “We feel that the current share price appropriately values the Company in light of the commodity price environment and our price deck forecast,” analyst Blaise Angelico mentioned.

“Despite our lowered recommendation, we remain positive on LPI’s longer-term outlook and see the potential for Earth-Model directed drilling to drive shares higher,” Angelico added.

Laredo Petroleum’s strength lies in its commanding and highly-contiguous acreage position in the Midland Basin and adequate midstream infrastructure for efficient full scale development. The company’s strong liquidity position and solid hedge profile are expected to enhance its ability to face the challenges due to a low commodity price environment, the Iberia Capital Partners report stated.

Angelico expects the use of the Earth model for Laredo Petroleum’s planned drilling activity to yield better results. The model will enable the company to better target the most “productive landing zone and tailor completions.” The analyst added, “While limited data is currently available, early time results from wells drilled utilizing the Earth model are showing promising results.”

Laredo Petroleum is capable of managing the downturn in the commodity prices and fund projected outspend over the next several years, the report stated.