Laredo expects 2019 to be a transitional year as the Company tailors operational cadence and corporate cost structure, including G&A expense, to balance capital expenditures and cash flow from operations. The evolution of Laredo’s development plan to focus on more widely spaced wells is expected to drive long-term capital efficiency improvements and higher returns versus 2018 results, enabling Laredo to hold oil production relatively flat within cash flow in 2020 compared to 2019’s exit rate.

Responding to the current commodity price environment of WTI strip pricing of approximately $54 per barrel, Laredo expects to invest approximately $365 million in 2019, excluding non-budgeted acquisitions. This budget includes approximately $300 million for drilling and completion activities and approximately $65 million for production facilities, land and other capitalized costs. Laredo anticipates adjusting capital spending levels to match operating cash flow if operating cash flow does not meet budgeted expectations. Should operating cash flow exceed budget expectations, free cash flow could be used to complete additional wells, repurchase stock or pay down debt.

By the third quarter of 2019, enabled by the Company’s operational flexibility, Laredo anticipates reducing activity from the current three horizontal rigs and two completion crews to operating one horizontal rig and utilizing a single completion crew, as needed. The front-loaded completion schedule and disciplined reduction in activity should drive free cash flow generation in the second half of 2019 that is expected to balance capital expenditures with cash flow from operations for full-year 2019.

The Company's 2019 budget is underpinned by a robust hedge position. Approximately 90% of 2019 forecasted oil production is hedged with a combination of puts and swaps at a weighted-average floor price of approximately $48 per barrel. Importantly, Laredo retains unlimited upside to oil prices on almost all of the Company's oil hedges since puts have no price ceiling.

Total production for 2019 is expected to grow approximately 9% versus full-year 2018 and oil production is expected to decline approximately 5% versus 2018. The Company expects to replace both total and oil production organically through development drilling in 2019. Under current conditions, beyond 2019, Laredo expects to hold annual oil production relatively flat within cash flow, compared to a fourth-quarter 2019 exit rate of approximately 23.0 MBOPD. Additionally, the Company's future corporate oil decline rates are expected to be lower, commensurate with reduced activity levels and wider well spacing, improving future capital efficiency.

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