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00:03 Good day, ladies and gentlemen, and welcome to Laredo Petroleum, Inc’s. Fourth Quarter 2021 Earnings Conference Call. My name is Shannon and I will be your operator for today. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session after the financial and operations report.

As a reminder, this conference is being recorded for replay purposes. 00:26 It is now my pleasure to introduce Mr. Ron Hagood, Vice President, Investor Relations. You may proceed sir..

00:35 Thank you, and good morning. Joining me today are Jason Pigott, President and Chief Executive Officer; Karen Chandler, Senior Vice President and Chief Operations Officer; and Bryan Lemmerman, Senior Vice President and Chief Financial Officer, as well as other additional members of our management team.

00:54 During today's call, we will be making forward-looking statements. These statements, including those describing our beliefs, goals, expectations, forecast and assumptions are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Our actual results may differ from these forward-looking statements for a variety of reasons, many of which are beyond our control. 01:22 In addition, we will be making reference to non-GAAP financial measures.

Reconciliations to GAAP financial measures are included in the two press releases and presentation we issued yesterday that detail our financial and operating results for fourth quarter and full-year 2021, as well as our 2022 capital budget and outlook. These press releases and presentation can be accessed on our website at www.laredopetro.com.

01:52 I will now turn the call over to Jason Pigott, President and Chief Executive Officer..

01:58 Thank you, Ron. Good morning and thanks for joining us today. We performed exceptionally well in 2021 safely navigating the second year of a global pandemic, capturing important acquisitions that extended our inventory life and making great strides to improve our balance sheet.

Our results were quite strong and our strategy to create future value to our shareholders is well defined and on track. 02:20 Our fourth quarter 2021 results were outstanding. Both total and oil production were above the top end of guidance, we generated 25 million of free cash flow and adjusted EBITDA of 182 million.

During full-year 2021, first, we materially increased our runway of high return oil-weighted drilling locations. We were able to identify and capture two significant acquisitions that fit us perfectly adding more than 40,000 acres at Howard and western Glasscock counties. These deals were accretive to shareholders and deleveraging.

02:53 These deals initially out of about 250 locations, but importantly, and recent drilling success has added an additional 125 locations across areas where we ascribe no value at the time of the acquisition. We now have eight years of oil weighted high margin inventory in Howard and western Glasscock counties.

03:12 Second, we grew improved oil reserves by nearly 80% and oil now makes up nearly 40% of our total reserves. The benefits of increased oil reserves paired with the sale of lower margin gas weighted assets is apparent in our margins and a 260% increase in the SEC PV-10 value.

At a WTI price of $75 more reflective of the current environment, we estimate our reserve value would increase by almost $1 billion from the SEC PV-10 to approximately $4.6 billion. 03:43 Third, we significantly improved our capital structure, the reduction of leverage and increased liquidity.

We issued $400 million of senior notes an attractive rate and raised $73 million through the issuance of common stock through our ATM program. Our investments have been disciplined, allowing us to reduce our 4Q annualized net debt-to-adjusted EBITDA ratio to 1.9x at year-end 2021, compared to a 2.4x a year ago.

04:12 Lastly, we continue to demonstrate our commitment to ESG and issued comprehensive ESG in climate risk reports with data through year-end 2020. We established meaningful targets to reduce greenhouse gas and methane emissions, as well as the elimination of routine clearing by 2025.

We understand shareholder expectations for our industry and our Board, management team, and other employees are committed to leading the way. 04:37 We aligned the Board oversight responsibilities for ESG and appointed a Chief Sustainability Officer reporting directly to me.

Additionally, we included EEO-1 data in our 2021 ESG report providing clarity into the diversity of our workforce. Our 2021 achievements provide a strong foundation for 2022.

Yesterday, we issued our outlook for this year, which aligns with our focus on capital efficient investments, the generation of free cash flow and the continued strengthening of our balance sheet. 05:07 Our leverage reduction is six months ahead of previous expectations of year-end 2022, benefiting from higher commodity prices.

We are quickly moving toward a time when we will be able to return significant cash to shareholders. We are excited about 2022 and the financial and operating opportunities that we see in front of us. We expect to generate about 300 million in free cash flow in 2022 at the current commodity prices.

05:32 Put this in perspective, that was about one-quarter of our market cap today. And over the next two years, we see the opportunity to deliver free cash flow equivalent to half of our current market gap. We understand the importance of leverage reduction, $300 million of free cash flow is equivalent to about $17 per share.

05:50 We believe that paying down debt is the most shareholder friendly initiative that we can deliver today. We expect their leverage ratio will be 1.5x for the third quarter and we have line of sight to 1x by mid-year 2023. Our capital investments are disciplined and are being allocated to our best opportunities.

06:09 We are fortunate to have a strong portfolio of high return oil projects and the [indiscernible] oil basin. We are maintaining our capital discipline keeping activity levels flat from 2021, keeping oil production approximately flat from our Q4 2021 exit rate.

From the field to the office, our people are dedicated to delivering results that will build value for our shareholders. 06:31 I will now turn the call over to Karen for an operations update..

06:35 Thank you, Jason. Our operations teams executed extremely well in 2021. As we seamlessly integrated two acquisitions, hosted strong well results in Howard County, and further extended our oil weighted inventory with the appraisal of two additional formations. These achievements in 2021 underpin our capital efficient 2022 development plan.

07:03 In Howard County, we closed the [Sabalo Energy] [ph] and went to work on new wells that are today among the best performing wells of all of our Howard County packages, driving oil production above the high-end of guidance for the fourth quarter.

07:18 In western Glasscock County, we completed the 10 well [indiscernible] package at the end of the fourth quarter.

Results of the 8 wells in the lower Sprayberry and Wolfcamp A and B formations are benefiting from our optimized completion design and are outperforming the previous package we completed in western Glasscock County by approximately 38%.

07:42 These recent acquisitions in Howard and Western Glasscock Counties, and our subsequent appraisal activities have extended our oil-weighted inventory runway to approximately 8 years at current activity levels with breakeven oil prices of $55 or below.

The slides in our deck had details to help you understand the quality and depth of our inventory in each of our operating areas. 08:07 As Jason said, our forward development strategy allocates our capital to our highest return projects in Howard County.

Returns and efficiencies benefited from the fact that our acreage is contiguous and in many areas we can drill extended laterals, and we plan to drill 18 15,000 foot lateral wells in 2022. Our corporate strategy continues to be focused on leverage reduction.

08:35 In order to accomplish this, we are maintaining flat activity levels this year as we keep oil production relatively flat and generate strong free cash flows.

To optimize our capital efficiency for the year, and synchronize our drilling and completion crews, we are currently operating three drilling rigs and two completions crews, and plan to release one rig and one crew by the end of the first quarter. After that, we will maintain two rigs and one crew through the end of 2022.

09:08 Like the rest of the industry, we are impacted by service cost inflation. From fourth quarter actuals, we have factored in an approximately 15% inflation into our 2022 capital budget and had locked in much of our pricing for services through the first half of the year, including frac services, sand, and casing cost.

09:32 We are currently working to extend our service contracts into the second half of 2022 and optimize our inventory management to further de-risk our full-year capital budget from any additional inflationary pressures. 09:46 I will now turn the call over to Bryan for a financial update..

09:51 Thank you, Karen. We've made exceptional progress over the last year. Both financially and operationally. These accomplishments have allowed us to enter 2022 with strong momentum and confidence in our ability to generate free cash flow, reduce leverage, and position us to return cash to shareholders in the near future.

For 2022, we expect to generate about 300 million of free cash flow at current commodity prices, and this cash flow will be directed towards leverage reduction. 10:20 Turning to our capital budget, our 2022 investment program is approximately five 520 million.

This plan tells flat activity levels when compared to 2021, offset by industry-wide inflationary pressures in the oilfield service costs, and higher non-operated activity levels. Our budget also includes ESG focus investments of about $10 million to work towards the company's achievement of our announced 2025 emissions targets.

10:50 Our capital is being allocated to our highest return projects and is expected to hold our production flat with fourth quarter 2021 levels. This will generate full-year oil production growth of 24% to 34%. There's no doubt that the recent run oil price has led to industry-wide inflation and higher cost at the field level.

Our people are focused on mitigating higher cost through cost and innovation and new efficiency gains. 11:17 We have locked in a significant portion of our cost for the first half of the year and has Karen noted, are working towards extending this price certainty into the second half of 2022.

To underpin our capital budget and deleveraging goals, we continue to focus on hedging. We have a strong track record of mitigating risk and ensuring strong returns for our capital investments.

11:37 Our free cash flow and leverage ratio projections are supported by our current hedge positions, covering about 75% of our projected oil production in 2022. We expect minor adjustments to our position throughout this year as we lock in near term prices to facilitate our leverage reduction goals.

11:55 For 2023, we have begun building our oil hedge position using collars with floors lined to further our leverage goals and ultimately returning cash to shareholders in 2023.

The current hedge volumes for 2023 are heavily weighted towards the front half of the year, giving us more confidence in achieving our leverage goals on the timelines previously messaged. 12:18 As previously discussed, A&D has been and continues to be a focus for us.

Since 2019, we have transformed Laredo through oil-weighted high margin acquisitions adding significant production and locations with higher oil cuts. These transactions accelerated our deleveraging were accretive to shareholders and put us in a position to deliver capital to shareholders well ahead of what we would have otherwise been able to do.

12:44 Our strategy is well defined and shareholders should expect that any future acquisitions would complement our strategy to return value to shareholders made possible by continuing balance sheet improvement.

12:55 We will continue to seek opportunities to grow our inventory of high margin wells to achieve the economies of scale necessary to drive sustainable free cash flow and to reduce volatility in our operations and in our equity performance. 13:09 I will now turn the call back over to Jason for closing comments..

13:13 Before we take your questions, I would like to sum up with our accomplishments in 2021 and really back to 2019 [indiscernible]. With eight years of high margin oil-weighted inventory we are now in a position for sustainable long-term free cash flow generation.

This means we believe that we can meet our leverage target of 1.0x by mid-year 2023 and begin to return capital to shareholders in 2023. 13:36 While we will continue to look at acquisitions, we can be patient and opportunistic in what transactions we pursue.

We have the right team, the right assets, and are excited to come to work every day and deliver on our value creation strategy. 13:49 Operator, please open the line for questions..

13:53 Thank you. [Operator Instructions] Our first question comes from Karl Blunden with Goldman Sachs. Your line is open..

14:10 Good morning. Thanks so much for the time. I think you had mention that you'd be prudent with regard to M&A, you may use a different word, but certainly activity has been high generally in the oil patch.

Be interested in more of your thoughts around if you were to pursue that, what kind of acquisitions you're looking for now that you've built relatively comfortable inventory position? And then perhaps a layer on top of that, historically, you've used some equity funding, you've used some debt funding, just when you think about how to work with the balance sheet as you continue this transition, be interested in any thoughts on that?.

14:46 Great question. I think the future acquisitions would be just held to the similar standards to the deals we've done in the past. They need to be accretive to shareholders, be deleveraging in a short amount of time, and we would again anticipate any transaction we would do with accelerate our deleveraging.

So, that's one of the key principles for it. 15:07 There's going to be – there's several packages that will be out there this year. I think what we've tried to highlight today though is the urgency for doing, kind of deals isn’t as high because we have built up that inventory. We are focused on, again, using our cash flows to pay down debt.

So, anything that we would do would be similar in nature to what we've done that have really allowed us to, you know if we hadn't done those acquisitions we've done before, we wouldn't be in the position we are today to pay – to deliver this type of cash flow and delever more quickly.

15:38 With respect to the balance sheet and how to fund it on, I’ll turn over to Bryan..

15:42 Thanks, Jason. Yes, I would just add to that that it will need to be a combination of cash and equity to facilitate both being deleveraging and being accretive to shareholders, and that's the way we've done in the past.

As Jason said, these transactions would be used for us to grow our business and we still have the financing in a way that still fits within those two frameworks. So, I would expect a balanced approach like we've done on the last two going forward..

16:15 It's very helpful. Just looking forward a bit, you did mention the hedges for the first half of 2023.

Appreciate that hedging gets tougher and more expensive as you go further out, but as you think about overall, how much of the production you'd like to have hedged as you move into this new zone of leverage, if you will, right? You've delevered pretty substantially and you're looking to delever more, is your hedging approach going to change? And how much of your volume you will be hedged? Is that going to change longer-term or any color on that would be helpful?.

16:52 Yes. I mean, we’ve put in collars for the first quarter, which allows us to – early next year, which allows us to again protect the downside, but it also gives us exposure to the upside. As we delever and achieve those milestones, you're correct. We don't need to be hedged at the same levels that we do and have in the past.

But as we look to start delivering a dividend or return cash to shareholders, we would want to be in a position that we feel confident we can do those and price fluctuations wouldn't mitigate our ability to deliver cash to shareholders.

17:27 So, we're going to consider all those things, but we will not need to be as hedged at the levels that we are today as we achieve those milestones, but right now the hedging is focused on allowing us to get there and so that's why we've got the hedges that we do [imply] [ph]..

17:42 Thanks Jason. Thanks Brian. Appreciate it..

17:45 Thank you..

17:47 Our next question comes from Derrick Whitfield with Stifel. Your line is open..

17:52 Thanks. And good morning all..

17:55 Good morning..

17:57 For my first question, I wanted to focus on your preference for allocation free cash flow over the next couple of years, assuming the leverage reduction targets as noted, how should we think about your preference for return of capital between dividends and share repurchases? And specifically, if your valuation remains depressed as outlined on Page 6 and it just seems like there's a remarkable buying opportunity of your stock and you can purchase it at a price lower than your PDP value?.

18:29 Sure. That's obviously a great reason why you would like to have both options on the table. I think where we sit today, we would highly approach it from a balance of using both.

It is too early for us to say where we are in the market and where our share prices will be at the time that we get to those deleveraging targets, but I think both of those would be on the table and as we get below 1.5 and have 1.0 clearly in our sight, we will articulate that plan much more clearly..

19:02 Great.

For my follow-up, I'd like to shift over to the technical side, perhaps for Karen, in light of your 2022 operating plan, could you speak [indiscernible] in drilling and completing 15,000 for laterals and comment on when you're targeting your first within the 2022 plan?.

19:21 Yeah, sure. So, as we transition the program to North Howard and really looking at extending those lateral lengths to give us efficiencies in our overall well cost and economics. We mentioned that we've got 18 in the plan for this year, all in Holland County.

It's been a couple of years since we drilled 15,000 foot wells, although we have drilled extended laterals in the past, actually quite significantly. 19:50 In the Central Howard area, that acreage position just laid out perfectly for us for 10,000 foot laterals.

So, that’s what we were developing from 2021, but now we're moving in to North Howard, we're seeing those extended laterals, be able to come in and impact overall economics. 20:06 Currently, we are finishing a package in our Howard County. We don’t have a first 15,000 foot laterals in recent development.

Those wells have been drilled, completed and in the final stages of drilling those out. So overall, from just an operation standpoint, everything is going well in those packages, and we're expecting the results on an appropriate basis similar to what we've seen in Howard County..

20:38 Great update. Thanks for your time..

20:41 Thank you..

20:44 Our next question from Nicholas Pope with Seaport Research. Your line is open..

20:49 Good morning, everyone..

20:51 Good morning, Nick..

20:54 I was kind of curious if you could give a little more detail on, kind of the well [indiscernible] kind of inflationary pressure you're seeing, I guess with the activity, kind of currently going with the three rigs and dropping one at the end of the quarter, I guess how much is, kind of locked in? How much have you all already seen versus what's kind of anticipatory on those well costs? I guess trying to understand where we are in that whole spectrum?.

21:28 Yeah, sure. So, as we talked about, what we're seeing is fairly significant cost pressures as we move through 4Q and now in the early 2022.

The supply chain team has worked really hard at really defining where we're locked in, either through fixed contracts or fixed inventory versus where we are potentially still exposed to additional inflationary pressures as we move forward.

22:01 I mentioned in just my comments that some of our larger components we've got locked in through first half that includes all our frac services, that includes all of our casing. As we've mentioned many times in past, we are providing our own sand from our own third-party operated sand mine.

So, we've got that contract in place basically through the rest of the year, which significantly helps us offset additional inflationary pressures in sand, which are quite high right now in this market.

22:37 So, overall, when we take a look at everything that we've got locked in, we feel very good about first half that we're pretty much locked in across the board on cost and can deliver on the capital budget as planned there. As we continue to work in the second half, we're really trying to get everything pushed out further.

And really tighten up third quarter and fourth quarter. So, we're doing that currently with areas such as casing and tubing and we'll just continue to work that through the program for the year..

23:09 Got it. That's very helpful.

And just real quick, how do you anticipate the split for the year between Glasscock and Howard County on the, kind of the activity front?.

23:24 Yes. So, as we finished up 2021, we bought our second package of western Glasscock wells, both wells, which we’ve referred to and showed some detail in the deck. Those came on right at the end of 4Q.

We've transitioned to Howard County and the expectation is all of our remaining completions, a run through in Howard County, you know Central and North Howard County for 2021, or 2022..

23:53 On Page 10 in our deck, if you have access to that online, we've put in a top right, there's a graph that just shows where all the [indiscernible] are coming from. So, we've got some wells coming in from Central Howard, but then it all transitions to North Howard..

24:09 Got it. That's very helpful. That's all I have. Thanks guys..

24:12 Thank you..

24:14 Our next question comes from Eric Seeve with GoldenTree. Your line is open..

24:19 Hey guys, thanks for the call, and to the slide. They do a lot of good transparency. We appreciate that. On Slide 10, you guys in the upper left hand quadrant you guys showed your CapEx by category, I was hoping you could give us a little bit more color on the facilities and land CapEx and the corporate CapEx.

If you could break out facilities versus land, that would be – or if you could give us a rough sense that would be appreciated? And if you could give us a little bit more color on what corporate CapEx is and for both of these categories are the amount you're spending in 2022, are they sort of normal going forward or they elevated for any reason this year? Thanks..

25:01 Okay. So, I will comment on the facilities and land components. And then also we’ll point out there, you know we’re starting to work in a non-op activity, which you can see that split out as well. So, from the facilities and land, this is a category that we report out on detail.

I think we have them split out for all of our 4Q and 2021 spend in the release. Pretty much – we run about a 15% on our DC&E for spend on facilities, land [indiscernible]. 25:36 So, this is pretty much in-line with that.

We did call out in the release that we've got $10 million earlier for facilities retrofit and just the work that we're doing that we've highlighted in the deck on ESG. So that would also be in that component..

25:53 And then on the corporate side, that is predominantly capitalized interest and G&A.

And if you look at this on a historical perspective, of the percent of budget that's allocated to DC&E and then what we've just kind of traditionally called other, it's very much in-line with past years with DC&E representing approximately 85% of the total budget, and that's very much in-line.

We just gave a little bit more granularity this time around in the breakout..

26:23 Okay, terrific. Thanks, guys. Appreciate the presentation and congratulations on strong results..

26:31 Thanks Eric..

26:34 Our next question comes from Gregg Brody with Bank of America. Your line is open..

26:38 Hey, good morning guys. I’ll second Eric's comments on presentation side are very helpful, and very well done..

26:46 Thank you..

26:48 Just, I was looking at Page 7 and you mentioned this in your press release, and on the call today, are you going to – your near term development focus is going to be on the – what looks to be the $40 to $45 breakeven opportunities in your inventory, how do you think about stepping out to approach the 50 to 55 that are still very good in today's environment? And why not do some of that now when we're in this environment?.

27:18 Yeah, It's a great question. We, again, I guess if you put through the spreadsheet, I mean your biggest benefit is drilling your best wells first. So, it looks we'll – if you look at that lowest bucket, you see more of that is in Howard County than it is western Glasscock.

So, that's the plan for us is to drill our best stuff versus generating the most cash flow in the highest price environment. That's what allows us to delever at the rate we're able to delever because those, Howard wells are so strong.

27:51 So, there is there is a risk as you mentioned if prices collapse, you may not get to the wells that are on those higher buckets, but right now, we've got a lot of cushion. So, that's how we allocate this drill, the best stuff first. We are excited about the new tests that open up additional wells in Howard County.

We highlighted Middle Spraberry, those wells are new, but they're both really strong and have achieved almost 900 barrels a day and are much flatter decline profile so far.

28:22 And so those are separated by 70 feet of rock, so we have an opportunity for those Middle Spraberry wells to either co-develop or we believe come back and develop them later, which allows us to, kind of reuse the facilities or not have to build facilities for those wells when they're at the right PV, so that may be the most efficient development option for us.

It's also [indiscernible] most wells that we kind of see in the Middle Spraberry so far. 28:52 So there is further delineation that can be done to help prove it up more Middle Spraberry wells in Howard County. So, I'd say that's how we focus it. And then again something new for this presentation as well as we do.

We’ve broken into the three groups Howard, Western Glasscock, and Eastern and there are wells in the Eastern that the team has looked at that don't require a whole lot of work to really get them drill schedule ready.

29:20 Those are things that you might think through a drill fund or something like that at some point to accelerate the value of those in this price environment, but again, you start including those, we've built out almost 11 years’ worth of inventory at $55 breakeven of less.

So, there's a lot of words, but gives you some character, but it's really drilling our best stuff first accelerates our deleveraging is how we think about it..

29:48 And that's very helpful. And you, kind of covered some additional questions I have there. So, is the hope that some of the higher cost inventory becomes lower as you can drill longer potentially in those areas or – and then also … You can go there. And then I'll just add to that. The Eastern legacy stuff I was going to ask you about that.

There is, is there some capital allocated this year and you mentioned maybe, I think I heard say a drill [indiscernible], is that something that you probably could actually see this year?.

30:24 We haven't really talked a lot about it, but it's just something that we think about in ways to create or accelerate value out there. It's a higher cost of capital to do those things, but it's an option, and what's interesting as we think through these wells, there are 5,000 foot wells out there, 5,000 foot laterals.

We really debate a lot on, do you include them, not include them because you could own 50% of a 10,000 foot well, but you've got to go, get the deal signed to own that 50% of a 10,000 or farm into somebody else or get them to sell it to you.

31:01 So, I think there's more even more, if you – inverse report or something like that, they have even more inventory than we highlight here, but it just – they require some deals and because those are at the back of the schedule, we're not working on those like we do getting Howard County rig schedule prepped and ready to go..

31:25 And just two more for [indiscernible], if you don't mind.

You noticed that in your balance – on your balance sheet, your accrued CapEx and undistributed revenues and royalties increased a bit over the previous quarter, is there – should we expect a negative working capital flow this year? And is that in some of the guidance you've given?.

31:51 Yes. I mean, I would expect it to fluctuate as prices go up, and we would capitalize, yes..

31:58 And then last one, [indiscernible] but my last question for you is just debt reduction you talked about doing at this year, is there clearly, I think if you dedicate all your free cash flow pay out the credit facility, you would have excess cash flow to maybe reduce your total quantum of senior debt, is something you're thinking about today or is it – obviously, if you just do an M&A, that may change that, but I'm just worried, I'm just curious what your current thoughts are? And maybe – [indiscernible] is that something you would maybe consider paying down some [indiscernible]?.

32:46 Yeah, so well throughout this year and next year, we'll constantly be looking at all liability management options. I am more focused on paying it off than I am extending it. So, it's callable now. At one rate it is callable next January at a lower rate. A lot of our cash build is in the back half of the year.

33:07 And so we'll just really have to see where things are. If I'm able to get some of those back this year at a rate that makes sense and as accretive to the company, it's clearly something we would do. It is not my goal to stack cash on the balance sheet and have senior notes outstanding. So, it's just managing through that process.

33:29 And everything can change from this month to next month on the best ways to do that. So, but it's something that we're constantly evaluating and monitoring the different options we have, but that is our focus through this year..

33:43 Great. Thank very much guys..

33:47 Thank you..

33:49 Next question is a follow-up from Eric Seeve with GoldenTree. Your line is open..

33:58 Hey guys, Gregg just to ask my question.

The final one for me is, just on hedging, it sounds like you don't believe you have to hedge as much in 2023 as you did in 2022, given you expect to make some progress on the balance sheet, can you just maybe give us some, sort of ballpark sense of parameters or what you're thinking about?.

34:20 Yeah. Again, we will continue to layer on some hedges, again, we have traditionally been again 75% hedged as we enter a year, kind of like we are this year. So, we're watching commodity prices.

Again, we've favored these wider collars with bigger spreads just because if oil price should fall again it protects us and we don't lose the progress that we've gained. So, we'll continue to look at those. 34:48 Again, we are favoring the first half of 2023 versus the full-year. So, it's just a decision that we look at and talk about.

We don't give specific parameters and we're going to be 50% hedged, but I'd say, it's more likely to be 50% hedged than 75%.

But again, we're going to just continue to monitor prices, see how things go, again we don't want to lose the ground we've gained on leverage reduction and so we will, kind of put those hedges in, so that we – once we get to those points, we have more flexibility, but we're not there yet. 35:25 We haven't achieved the 1.5, yet.

So, we got to get the 1.5 before we can mark start, kind of reducing our hedging activity, I guess is the way to think about it..

35:34 Thanks.

And I guess one of the problems with setting a leverage target in a $90 barrel oil price environment is what might look like prudent leverage at this point, the cycle might not look like prudent leverage at another point in the cycle, do you have other metrics that you're keeping an eye on with respect to your target leverage balance?.

35:59 I'd say long-term our [indiscernible] would be to get us, if we're in this type of price environment below 1x, I think of a [1.0] [ph] in that $55 to $60 price range is ideal, but we have to get there first.

Like Jason said, there's – we're in such a substantially different place than we were a year ago because of price and because of the steps we took. 36:27 It's easy for us to look forward and say, we've got [1.0] [ph] there, but we’re not.

Until we get to [1.5] [ph] until we get to [1.0] [ph], we've got to keep our heads down, but our goal would be to be below [1.0] [ph] at a price environment like this and target a [1.0] [ph] in that $55 to $60 range and that’s obviously easier said than done on a smaller company, but that's where we're heading. That's our focus..

36:54 Thanks, guys. Appreciate the call..

36:57 Thank you. And this concludes the question-and-answer session. I would now turn the call back over to Ron Hagood for closing remarks..

37:04 We appreciate your interest in Laredo. Thanks for joining us for our call this morning. And this concludes the call. Thank you..

37:11 Thank you..

37:12 This concludes today's conference call. Thank you for participating. You may now disconnect..