Talos Energy has announced its operational and financial results for three months ended March 31, 2023. Additionally, the Company has updated its full year 2023 guidance as described further below.
Key Highlights:
- Authorized a $100.0 million share repurchase program in March 2023 and repurchased 1.9 million shares through the end of the first quarter.
- Executed a 21,000-acre onshore CO2 sequestration lease near the Company's River Bend CCS project, bringing total acreage within the Baton Rouge/New Orleans region to approx. 110,000 gross acres under lease or right of first refusal.
- Announced that the Company is exploring a capital raise in the near term to finance the accelerated growth of its Talos Low Carbon Solutions ('TLCS') platform.
- Completed the acquisition of EnVen and progressed integration activities; synergy capture estimates are on track to meet or exceed the previously guided annual $30 million.
- Submitted the Zama Unit Development Plan for formal approval and formed an Integrated Project Team ('IPT') to manage the development and operation of Zama going forward.
First Quarter Summary:
- Production of 63.6 thousand barrels of oil equivalent per day ('MBoe/d') (72% oil, 79% liquids), inclusive of a partial quarter of production from the acquisition of EnVen Energy Corporation ('EnVen').
- Revenue of $322.6 million, driven by realized prices (excluding hedges) of $71.28 per barrel for oil, $22.62 per barrel for natural gas liquids ('NGLs'), and $2.83 per thousand cubic feet ('Mcf') for natural gas.
- Net Income of $89.9 million, or $0.84 Net Income per diluted share, and Adjusted Net Loss(1) of $1.3 million, or $0.01 Adjusted Net Loss per diluted share.
- Adjusted EBITDA(1) of $203.1 million, or $35.48 Adjusted EBITDA per Boe, inclusive of $6.2 million of TLCS expenses.
- Upstream Capital Expenditures of $190.0 million, inclusive of plugging and abandonment. Capital investments in Carbon Capture & Sequestration ("CCS"), totaled an additional $21.2 million.
Talos President and Chief Executive Officer Timothy S. Duncan commented: 'Although we have encountered several operational challenges in recent weeks, we remain focused on the totality of our 2023 plan, which positions the business for long-term growth and value creation. We are seeing our capital and operating expenses trending below our plan and we will look to continue this trend while also progressing our Venice and Lime Rock discoveries to first production. We expect that production will exceed a rate of 80 MBoe/d early in 2024, and we continue to expect to achieve our 2024 – 2026 production and cash flow goals.'
Duncan continued: 'We are also making strong progress on several key projects in our business that underpin expanded shareholder value. We recently submitted the field development plan for Zama and announced an Integrated Project Team that will allow for better collaboration and execution on this world class project. In the deepwater Gulf of Mexico, we are currently drilling our high-impact Pancheron prospect, we expanded our inventory by acquiring 23,000 gross acres in the recent federal lease sale, and we completed another 23,000 acre trade that secured a high impact prospect named Daenerys, which is expected to commence drilling in 2024. In our CCS business, we more than doubled our storage capacity in multiple transactions in the first quarter and are preparing our first stratigraphic test well, leading us toward our goal of filing multiple Class VI permits in 2023. With the level of investor demand for CCS exposure, we believe a well-structured capital raise could potentially help accelerate the growth of the business in this critical phase. Lastly, we initiated our first share buyback program, and we will continue to be opportunistic with that program, which underscores our confidence on our long-term vision for the Company.'
RECENT DEVELOPMENTS AND OPERATIONS UPDATE
Shareholder Return Program: In March 2023, Talos announced a $100 million common stock repurchase program, the first shareholder return program in the Company's history. As of March 31, 2023, the Company has repurchased 1.9 million shares, or 1.5% of the total outstanding shares, for $26.6 million.
Zama Development Plan & IPT: In March 2023, the Zama Unit Development Plan was submitted to Mexico's National Commission of Hydrocarbons for formal approval. Additionally, an IPT comprised of representatives from all four Zama Unit Holders was established to manage the development and operation of Zama going forward. Talos will co-lead the planning, drilling, construction, and completion of all Zama wells and the planning, execution, and delivery of Zama's offshore infrastructure.
Drilling and Completion Updates:
Rigolets: Talos drilled the Rigolets exploitation prospect in the second quarter of 2023 and encountered non-commercial quantities of hydrocarbons in the well. Talos has now completed plugging and abandonment operations. Talos held a 60% working interest.
Pancheron: Talos is participating in the potentially high-impact Pancheron exploration prospect, which spud in late April 2023 following the completion of an eight-block swap in the Green Canyon and Walker Ridge areas in 2022. Talos holds a 30% working interest, bp holds a 33% working interest and Oxy holds a 37% working interest and is the operator. Results are expected around mid-year 2023.
Daenerys: In April 2023, Talos completed a farm-in transaction to combine approximately 23,000 gross acres in the Walker Ridge area with co-owners Red Willow Offshore LLC and Houston Energy LP. Talos will be the operator and plans to drill the Daenerys exploration well in the second half of 2024. The high-impact, subsalt project will evaluate the Miocene section with a gross unrisked recoverable resource potential between 100 – 300 MMBoe. Talos expects a target working interest of 30% in the initial test well.
Lease Sale 259: Talos was the apparent high bidder on four deepwater lease blocks in the Green Canyon and Mississippi Canyon areas, collectively representing over 23,000 gross acres with multiple potential future drilling prospects.
TLCS Updates:
East Louisiana Acreage Expansion: Talos executed lease agreements on private land in the first quarter of 2023 for more than 21,000 acres, nearly doubling the acreage under lease in the Baton Rouge / New Orleans, Louisiana industrial corridor and increasing the estimated gross prospective storage resource by more than 120 million metric tons of CO2. The region now holds a gross acreage footprint of approximately 110,000 acres under lease or right of first refusal, with over 620 million metric tons of gross prospective storage resource proximal to 80 million metric tons per year of existing industrial emissions along the Mississippi River corridor.
Chevron Transaction: In March 2023, Bayou Bend CCS, a carbon capture and sequestration project located along the Texas Gulf Coast, expanded its storage footprint through the acquisition of nearly 100,000 onshore acres in Chambers and Jefferson Counties, Texas located in the Houston Ship Channel and Beaumont and Port Arthur region. The expanded Bayou Bend CCS project now encompasses nearly 140,000 acres of offshore and onshore pore space for permanent CO2 sequestration. The total acreage holds more than one billion metric tons of gross prospective storage resource, positioning Bayou Bend CCS to be a leading carbon transportation and storage solutions for industrial emitters in one of the largest industrial corridors of the country. Equity interests in Bayou Bend CCS remain 50 percent Chevron Corporation ("Chevron"), 25 percent Talos, and 25 percent Carbonvert Inc. Effective March 1, 2023, Chevron became the operator of Bayou Bend CCS.
Class VI Permit Application Progress: The Bayou Bend partnership has contracted a rig and expects to drill an offshore stratigraphic data collection well in the state waters off Jefferson County, Texas, during the third quarter. TLCS is also acquiring and analyzing data across several projects with plans to file two to three EPA Class VI permit applications by year-end.
GUIDANCE UPDATES
Full-Year 2023 Production Guidance:
Talos now expects average daily production for the full year 2023 to be in the range of 66.0 to 71.0 MBoe/d. While production results for January and February of 2023 were in-line with original management expectations for both Talos and EnVen, delays in first production from new wells, certain underperformance, and unplanned downtime now forecasted for the remainder of the year have led to re-guiding the Company's 2023 production, with the following details:
Recent Drilling Program Updates: Recent production levels from selected new wells are below expected pre-drill contributions for the year, amounting to an expected impact of 2.0 – 3.0 MBoe/d as compared to original guidance, primarily due to delays in first production and lower than expected initial production rates from the Bulleit and Mt. Hunter wells. The Company is planning a well intervention in Bulleit in the second quarter to attempt to access production from a lower completion.
Selected Well Underperformance: Certain existing wells exhibited production rate declines earlier than planned, generating a 2023 production impact of 1.0 – 2.0 MBoe/d as compared to original guidance. Most notably, this includes two non-operated Shelf wells that began experiencing production declines due to earlier-than-expected water production.
Unplanned Downtime: Despite diagnostic and corrective operations in the fourth quarter of 2022 and the first quarter of 2023, Talos expects its operated Neptune facility to require intermittent production shut-ins resulting in a full-year 2023 production impact of 1.0 – 1.5 MBoe/d as compared to original guidance while Talos works to optimize flow assurance of the subsea system in the field.
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Source: Talos Energy
