Laredo Petroleum Inc. said Tuesday it is budgeting $530 million for capital spending this year, nearly all for the Upper and Middle Wolfcamp formations of the Midland sub-basin of the Permian, with an eye on raising production volumes by 15% over 2016.

The Tulsa-based independent earmarked $450 million in capital expenditures (capex) for drilling/completions and $80 million for production facilities/capitalized costs, including completions testing, data acquisition and land. Not included in the capex plan are potential investments in Laredo Midstream Services LLC’s Medallion-Midland Basin pipeline system, whose transported volumes from the Permian are expected to increase this year by at least 50%.

“Our 2017 capital budget takes advantage of our contiguous acreage position and production corridor investments to generate capital-efficient production growth,” said CEO Randy A. Foutch. “The horizontal wells we expect to drill this year have an average lateral length of approximately 10,000 feet and almost all production and produced water from these wells is expected to be gathered by Laredo Midstream Services’ production corridors and pipeline assets, maximizing capital efficiency and minimizing operating costs.”

The development plans capitalize on the ability of Laredo’s “production corridors to handle the movement of large volumes of oil, gas and water, thus enabling the development of multi-well packages. We plan to primarily target our highly productive Upper and Middle Wolfcamp zones while continuing to optimize completions by adjusting stage and cluster spacing and proppant concentrations.”

Four horizontal rigs are planned this year, with 70 wells scheduled at an average working interest of 95%. About 85% of the drilling activity would target the Upper/Middle Wolfcamp with other funds directed to the Lower Spraberry and Cline zones.

All of the wells are to be drilled as “multi-well packages” with, on average, four to five wells per package. Developing wells in larger packages enables Laredo to minimize the impact of current drilling on future development plans by mitigating pressure depletion and fracture impact. Multi-well package development also is expected to benefit full-year production, but the size and timing of the packages could vary.

A fourth horizontal rig now working in the Permian, delivered in mid-November and used to drill a core test through the end of last year, should accelerate production growth in the second half of the year, with an anticipated increase of more than 17% in 4Q2017 from a year earlier.

Capital costs for Upper/Middle Wolfcamp wells drilled on multi-well pads are estimated at around $6.4 million using 10,000-foot laterals and 1,800 pounds/foot of sand. Laredo said recent increases in service costs have been incorporated into the budgeted well costs, a portion of which has been offset by efficiency gains.

The capital spending is to be funded with internally generated cash flows and borrowings. Additionally, Laredo this week expects to complete a sale of 2,900 net acres for $60 million. As of Monday (Jan. 16) hedges were in place for 6.85 million bbl of oil at a weighted-average floor price of $55.82/bbl, representing about 70% of anticipated 2017 production.

Fourth quarter and full-year 2016 earnings results are scheduled to be issued on Feb. 15, with a conference call planned on Feb. 16.