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. 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. 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. S&P Global Ratings' outlook on Laredo is stable. We expect credit
