Talos Energy has announced its operational and financial results for the three and twelve months ended December 31, 2022. The Company also announced its year-end 2022 reserves figures pro forma for the recently closed acquisition, as well as 2023 operational and financial guidance for the combined company. Finally, Talos announced its participation in a major onshore CO2 sequestration leasehold in southeast Texas, bringing gross storage capacity in the region to more than 1 billion tons of CO2 in close proximity to multiple large industrial markets.
Fourth Quarter 2022 Highlights:
- Production of 56.6 thousand barrels of oil equivalent per day ("MBoe/d") (68% oil, 76% liquids), inclusive of impacts from loop currents, planned and unplanned maintenance, and other miscellaneous items.
- Net Income of $2.8 million, or $0.03 Net Income per diluted share, and Adjusted Net Income(1) of $16.6 million, or $0.20 Adjusted Net Income per diluted share.
- Adjusted EBITDA(1) of $185.2 million; Adjusted EBITDA excluding hedges(1) of $242.3 million.
- Capital Expenditures of $155.9 million, inclusive of plugging and abandonment and the settlement of decommissioning obligations.
- Paid off the balance of the Company's credit facility, bringing leverage to 0.7x(1) and liquidity of $846.5 million at year-end.
- Advanced sustainability disclosure with the issuance of 3rd ESG report and inaugural TCFD report.
Full Year 2022 Highlights:
- Production of 59.5 MBoe/d (67% oil, 75% liquids).
- Net Income of $381.9 million, or $4.56 Net Income per diluted share, and Adjusted Net Income(1) of $244.1 million, or $2.92 Adjusted Net Income per diluted share(1).
- Adjusted EBITDA(1) of $841.8 million; Adjusted EBITDA excluding hedges(1) of $1,267.3 million.
- Net cash provided by operating activities of $709.7 million.
- Capital Expenditures of $455.5 million, inclusive of plugging and abandonment and the settlement of decommissioning obligations.
- Adjusted Free Cash Flow(1) (before changes in working capital) of $260.8 million.
- Repaid $392.5 million in credit facility borrowings and second lien notes in 2022.
- Announced and subsequently closed the acquisition of EnVen Energy Corporation ("EnVen") for approximately $1.1 billion.
- Enhanced the Carbon Capture & Sequestration ("CCS") portfolio to nearly 1 billion metrics tons of saline aquifer storage capacity and added strategic partners.
2023 Guidance and Long-Term Outlook
- Pro forma Proved reserves (1P reserves) at year-end 2022 of 190.0 MMBoe, with a standardized measure of $6.0 billion and with a PV-10(1)(4) of $7.2 billion(2) at year end based on SEC prices (price sensitivity included further below).
- Production between 72.0 and 76.0 MBoe/d, including 10.5 months of production from the recent EnVen acquisition.
- Oil and gas capital investments of $650 to $675 million focused on developing recent drilling successes.
- CCS investments between $70 and $90 million, which may grow as additional key milestones and further portfolio expansions are achieved.
- Expected production growth of approximately 20-25% between 2023 and 2026, or a compound annual growth rate ("CAGR") of 6-8% per year over the same period.
- Projected cumulative Adjusted Free Cash Flow(5) of $1.7-$2.0 billion through 2026, assuming current strip pricing or $2.0-$2.5 billion assuming a flat $75/Bbl and $3.50/Mcf price deck, equating to approximately 75%-90% and 90%-110% of the Company's current market capitalization, respectively.
- Capital allocation framework focused on continued debt reduction, investment in key Upstream and CCS catalysts, and providing a path towards returning capital to shareholders. Additionally, Talos would consider participating in share repurchases in the event of any potential significant monetization by private equity holders, subject to Board approvals.
Talos President and Chief Executive Officer Timothy S. Duncan commented:
'2022 was full of milestones for Talos. We used our meaningful free cash flow generation to pay our revolver borrowings to zero at year-end. We also ended the year with a leverage ratio of 0.7x – well below our goal of 1.0x or below – and ended the year with record liquidity. In late 2022 we announced and closed in February 2023 a major acquisition that not only adds significant scale and asset diversity to our portfolio but is also very beneficial to Talos's shareholders. In our CCS business, we completed a first-of-its-kind CO2 storage transaction with Chevron early in the year, welcoming their considerable experience into our Bayou Bend project in southeast Texas.'
Duncan continued: 'We have a very positive outlook as we look forward to a busy 2023. Over the last four months, and pro-forma for our recent transaction, we have drilled six successful wells from our open water subsea and platform rig programs. We are prioritizing the acceleration to first oil from these discoveries in our 2023 capital program, with the most impactful production growth in 2024. We believe our remaining 2023 projects will help us achieve our target production growth rate while lowering our reinvestment rate over time, providing ample capital allocation opportunities. With Talos Low Carbon Solutions, we continue to add strategic U.S. Gulf Coast leasehold for CO2 storage to build the largest carbon sequestration portfolio in the United States, while advancing our efforts to build additional strategic partnerships and to attract captured CO2 volumes. Today we announced exactly that - an expansion of our partnership with Chevron in Southeast Texas with an additional major leasehold acquisition, bringing our total storage capacity in the region to over 1 billion tons, one of the largest CCS project sites in the United States.
'With respect to capital allocation, our priority continues to be generating free cash flow and lowering our total quantum of debt post-closing of our recent acquisition while also investing in our key catalysts. That includes the continuation of CCS growth and potential Upstream M&A opportunities. However, we are also very focused on building out a capital return model. That could include Talos participating in a share buyback program associated with private equity shareholder liquidity events that could occur over the next several years, helping to alleviate the short-term technical impact to Talos's shareholder base. Our team is committed to building a diverse and sustainable energy company and we could not be more excited to see what the next twelve months bring.'
Click here for full announcement
Source: Talos Energy
