Laredo Petroleum Inc.

S&P Global Ratings' outlook on Laredo is stable. We expect credit measures to be moderate over the next two years as the company maintains spending at or close to cash flow. We forecast weighted average funds from operations (FFO) to debt well above 30% for the next two years, and the company's hedge position next year provides a measure of cash flow protection. We would consider a downgrade if the company faces liquidity issues that limit its access to capital to fund its growth, or if FFO to debt drops below 20% for a sustained period. We believe this could occur if capital spending increases meaningfully above cash flow but production falls well short of expectations or is delayed for

...Laredo's production and reserves have a high proportion of liquids.Laredo's high crude oil content of production supports profitability even with the recent fall in prices. While oil prices in the Permian Basin can be subject to discounts, the company has transportation agreements and hedges in place that limit the negative effect on its margins. The company's operations are geographically concentrated in the Permian Basin.We view concentration in one basin as less favorably than a more diversified portfolio due to the exposure to regional disruptions, including infrastructure constraints or interruptions, adverse weather, or regulatory issues. Laredo operates in volatile, cyclical, and capital-intensive exploration and production (E&P) industry.We view the industry's exposure to volatile and cyclical commodity prices as a primary driver of Laredo's credit quality. The company's need to reinvest to replace production limits its flexibility to curtail spending....

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