Laredo gas field purchase proof of long-term goals

September 9, 2008

Featured in the Tulsa World
By Rod Walton
World Staff Writer

Laredo Petroleum Inc.'s $185 million acquisition of a natural gas field near Chickasha is proof of the year-old outfit's desire to plan for the long term, company officials say.

Tulsa-based Laredo, formed in May 2007 by chairman and CEO Randy Foutch, is buying up 50,000 net acres in the Verden area of south central Oklahoma from Linn Energy LLC. The area has proven natural gas reserves of 45 billion cubic feet equivalent, according to reports.

"It's a significant increase in our future drilling activity," Foutch said in a conference call this week.

Laredo already is running two rigs, bought from Houston-based Linn, in the Verden field, said company president and chief operating officer Jerry Schuyler. It plans to add two more rigs in the area early next year.

The exploration and production company already is operating seven rigs overall — in southern and western Oklahoma and in northern Texas.

The difference with the Verden field is that its wells are deeper than those in some of Laredo's other operations, senior vice president Pat Curth noted. Some wells go down beyond 19,000 feet.

"It's a higher risk, but its potential is a lot higher," he said.

Foutch is planning for the long haul with Laredo, which he started with up to $800 million in financing, including $300 million from private equity firm Warburg Pincus. He hopes to turn Laredo into a "legacy company" that lasts longer as an independent operation than his first two endeavors, Lariat Petroleum and Latigo Petroleum.

Lariat was formed in 1997 and sold four years later for $333 million to Newfield Exploration Co. Latigo started out in 2002 and was sold two years ago to Pogo Producing Co. for $750 million.

Many members of Laredo's management team were with Foutch at both of those companies. In fact, about half of the company's 85-member work force came from Lariat and Latigo.

"I think you cannot overstate the importance of that continuity," Foutch said. "The previous companies, while economically very successful, has given us the experience to take Laredo much further down the road to building a successful company, without some of the stalls and falters and fits we had to overcome with the previous companies."

Chief Financial Officer Mark Womble said the company projected having about 175 employees at its five-year mark. The current work force puts Laredo about a year ahead of schedule, he added.

This week's announcement included news of numerous promotions within Laredo's management team. Schuyler will help lead day-to-day operations, being hired after a 30-year career at companies such as Arco Oil and Gas, Dominion Exploration and Production, and St. Mary Land and Exploration.

Womble and Curth are part of the carryover management group that Foutch had at Lariat and Latigo.

What the managers share is a willingness to listen to ideas from all employees, regardless of rank or seniority, Womble said.

"I don't think a lot of companies communicate top-down or bottom-up as well as Laredo," he said.

Other Laredo promotions include Tony Swindell to vice president of operations; Dan Schooley to vice president of marketing; and John Minton to vice president of reservoir engineering. The company also appointed W. Bland Williamson as senior vice president and general counsel, and Travis Stice as vice president of operations in Midland, Texas.

"When we see a need to add to that management team, we go out and hire and attract very highly qualified people," Foutch said.

Rod Walton 581-8457
rod.walton@tulsaworld.com