Permian pure-player Laredo Petroleum Inc. reported record production in 3Q2018, but moving forward the company expects to drill infill wells on wider spacing and may consider spending less in 2019.

Tulsa-based Laredo produced a record 71,382 boe/d (40% oil) in 3Q2018, which was above guidance (71,000 boe/d) and marked an 18.9% increase from a year ago. The company completed 16 net horizontal wells during the quarter, with an average completed lateral length of 11,300 feet.

Of the 16 net wells completed in the third quarter, 14 were included in two high-density packages. Six wells were based on a 24-well/drilling spacing unit (DSU), while eight wells were based primarily on 32 wells/DSU. The six-well package was underperforming mostly on longer clean-up times from 15,000-foot laterals, while the eight wells had not yet reached peak production.

During a conference call to discuss earnings on Tuesday, Senior Vice President Dan Schooley, who handles midstream, marketing and subsurface, noted that Laredo’s outperformance in 2016 had been driven by wider spacing and drilling into virgin rock.

“We weren’t drilling around other wells [in 2016],” Schooley said. The company was unconcerned about parent/child wells then because there weren’t many of them. “2016 does reflect wider spacing, but it also has a lot of the challenges that we’re going to have to face going forward.

“We’re going to have to drill in areas that have existing wells. We’re going to have to drill infill wells around that. So we don’t anticipate as good a performance as 2016, even though we’re going out to the wider spacing.”

The company expects to complete 15.3 net wells during 4Q2018, with an average lateral length of about 10,000 feet. Laredo is running four horizontal rigs and two completion crews, but reduced cycle times are expected to enable it to drop one completion crew in mid-November; the company expects to finish 2018 with one crew.

For the full-year 2018, Laredo plans to work within a $630 million capital budget to complete 71 net wells and grow total production by about 17%. Production should average 70,500 boe/d in 4Q2018.

CFO Richard Buterbaugh said the capital budget for 2019 should be issued in early January. But he hinted that Laredo would spend less in 2019. In response to a question from an analyst he said “using a $630 million program in 2019 is going to be above what you should be expecting. The primary driver from a cash standpoint is to operate within our operating cash flows.

“That will drive the amount of activity [in 2019], but we’ll also look at various investment opportunities…Our acreage position is primarily held by production, and we have a lot of flexibility on how we go about the development of that acreage. It’s a balance of at what level we would spend.”

Laredo reported net income of $55.1 million (24 cents/share) in 3Q2018, compared with net income of $11 million (5 cents) in the year-ago quarter. Revenues totaled $279.7 million in 3Q2018, compared with $205.8 million in 3Q2017.