Laredo Petroleum Inc. plans to raise its production in the Permian Basin by at least 10% this year after recording double-digit gains for 2017, the Tulsa-based explorer said Thursday.

A record 21.3 million boe was produced in the core West Texas holdings last year, which was 17% higher than in 2016. Proved developed reserves, concentrated in the Wolfcamp formation, increased by 50 million boe, or 36%.

"Laredo's 2017 development plan generated impressive results," with “above type-curve productivity” from 62 completed horizontal wells, said CEO Randy A. Foutch.

Revamped spacing designs were given some of the credit for the productivity gains, with preliminary field-level returns on invested capital exceeding 30%.

Total production in 4Q2017 hit a record 61,922 boe/d, comprised of 43% oil, 29% natural gas and 28% natural gas liquids.

“We were able to achieve all of this while continuing to test completion design, well spacing and new areas and landing points,” said Foutch.

The 2018 development program is designed to capitalize on the testing program. Laredo also plans by the end of this year to align capital expenditures (capex) with operating cash flow.

“Expected operational efficiencies from increased development density in our premium Upper and Middle Wolfcamp formations anchor this concept,” Foutch said. “Larger well packages targeting these formations, well productivity in-line with our type curve, longer lateral lengths and measured increases in activity are anticipated drivers of accelerated value creation in 2018 and beyond."

The board approved a $555 million capex budget for 2018, excluding acquisitions, with $470 million earmarked for drilling and completions activities and $85 million for production facilities, land and other capitalized costs. The budget is based on benchmark pricing of $55/bbl for oil and $3.00/Mcf for natural gas.

The development plan once again would primarily target Upper and Middle Wolfcamp formations. The budget is using an average cost of $600,000/well, with savings expected from using in-basin sand and through performance improvements and completion design changes. The budget also assumes current oilfield service cost pricing.

Laredo, which now operates three horizontal rigs in West Texas, expects to add one more in the last half of the year. About 60-65 net wells are scheduled to be drilled with average completed lateral lengths of 10,400 feet.

In the final three months of 2017, Laredo completed 18 wells, with total capex of $182 million. Fewer wells were completed than planned because of “increased cycle time,” which shifted some work to early this year.

“The increased cycle time was related to testing new landing points and drilling in a new area of our western Glasscock acreage,” management said. “As the company accelerates development activities in the area and operations are optimized, cycle time is expected to benefit.”

In addition to delays in completions, production was adversely impacted by two horizontal wells in the western Glasscock acreage that encountered operational issues, which permanently reduced production from the wells, management said.

Based on commodity prices, year-end proved reserves increased to about $1.8 billion, an 81% increase from 2016. Laredo had booked 26 proved undeveloped locations, or PUDs, at the end of 2017, down from 31 at year-end 2016.

Laredo last year added proved developed reserves estimated at 71 million boe. Proved developed reserve additions replaced 336% of production at a preliminary proved developed finding and development cost of $7.90/boe.

For 4Q2017, Laredo expects to report a derivatives loss of $37.8 million. For full-year 2017, a gain of about $300,000 is expected for derivatives. Laredo has hedges in place for 90% of anticipated 2018 oil production. It also has hedges for some of its liquids and natural gas through 2018, with basis hedges through 2019.

The company plans to issue its quarterly and year-end results in mid-February.