BUILDING A BETTER MOUSETRAP
WITH ROBUST INFRASTRUCTURE
But it’s not just the Earth Model database that’s driving increased
efficiencies across Laredo’s Permian Basin portfolio, it’s also
Foutch’s commitment early on to build-out a robust infrastructure while simultaneously maintaining liquidity and a disciplined
hedging program. Chalk it up to his early successes with Lariat
and Latigo or credit it to Foutch’s clear understanding of how
to develop an unconventional oil play, but from the beginning
Foutch knew and understood the value of efficiently moving
oil, natural gas, and water throughout his acreage position.
As with his previous endeavors, Foutch quickly went to work
installing a robust infrastructure of oil, water, and natural gas
gathering lines, a water recycling plant, and additional water
storage systems throughout Laredo’s contiguous acreage position, 85% of which is held by production. And as the company
grew and expanded its core acreage position in the Permian,
so too did it grow its field infrastructure. Today, Laredo has 44
miles of crude gathering lines that transport 73% of the company’s gross operated production via pipe. At the same time,
the company’s water assets consist of approximately 78 miles
of pipeline, a recycling plant capable of processing 30,000 barrels
of water per day, and linked water storage assets with a storage
capacity of more than eight million barrels of water.
The result is an advanced field infrastructure system that
transports 73% of Laredo’s oil and 65% of its produced water
via pipe leading to the company’s low lease operating expenses
(LOE). Put another way, in 2017, Laredo’s gathering systems
are expected to displace more
than 65,000 truckloads of oil and
100,000 truckloads of water, all
contributing to the company’s
increased efficiencies, capital and
operating cost savings, and
In the first quarter of 2017 Laredo reported a 26% decline in unit
LOE to $3.60 per BOE. Management attributes $0.46 per BOE of
that reduction in unit LOE to the
company’s enhanced production
For Foutch, the efficient field infrastructure wasn’t enough. He
needed to ensure that the oil and natural gas hydrocarbons
produced from the basin could always fetch the highest and
best price. To do that, he needed to ensure that Laredo had
pipeline access for its crude product outside the Permian Basin.
His hydrocarbons needed access to the Gulf Coast marketplace.
For this, the company turned to, and invested in, the Medal-lion-Midland Basin midstream system.
“We didn’t ever want to frac a well and have to wait for a
midstream company to come to us,” explained Foutch. “We
always wanted to frac a well on our schedule. Moreover, we also
wanted to be able to get our product to market and be able to
achieve the best pricing point, including delivery to a system
Left: Operations in Laredo’s core
acreage position in the Permian.
Below: Water is a key part of the
company’s field infrastructure.