Q2 2021 Talos Energy Inc Earnings Call
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[music].
Good day and welcome to the Telus Energy second quarter of 2021 earnings Conference call all participants will be in a listen only mode.
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I would now like to turn the conference over to Sergio My warm Vice President of Finance Investor Relations and Treasurer. Please go ahead.
Thank you operator, good morning, everyone and welcome to our second quarter of 2021 earnings Conference call.
Joining me today to discuss our results are of Tim Duncan President and Chief Executive Officer, Shane Young Executive Vice President and Chief Financial Officer, and Bob <unk> Executive Vice President and head of operations.
Before we get started I'd like to take this opportunity to remind you that our remarks today will include forward looking statements.
Actual results may differ materially from those contemplated by these forward looking statements factor.
Factors that could cause these results to differ materially are set forth in yesterday's press release and in our form 10-Q for the quarter ending June 30th filed with the SEC yesterday.
Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.
During this call we may present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures was included in yesterday's earnings press release, which was filed with the SEC and which is also available on our website at palace of energy of Dot Com.
And now I'd like to turn the call over to Tim.
Thank you Sergio.
Before I, specifically discuss the results and recent activities of the second quarter, it's worth reflecting more broadly on the year. We've had the date because I'm really excited about the execution of the results shown across our entire organization. The team has done a tremendous job we have seen back to back of record production quarters in improving margins, we had a significant deepwater.
Sub salt discovery of Puma West in the first quarter as well as the successful exploitation drilling program. There, we're looking to repeat as the rig moves to another key assets.
We extended the maturity of our credit facility and an evolving lending space and recently added a new lending bank to the syndicate, we launched the carbon capture of storage initiative that we believe reshaped what is possible for of Gulf Coast and Gulf of Mexico Energy Company, it's been a very busy 6 months and I'm encouraged by the great results year to date and I expect this to <unk>.
10, you into the second half of this year.
Moving into the specifics of the quarter, we're proud to report record production for the second straight quarter, reaching $66.3000 barrels of oil equivalent per day in the second quarter aided by very solid execution on minimizing production downtime.
Solid execution, coupled with the oil weighted production of 69% oil and 76% total liquid is reflected in our margins for the quarter, where we recorded adjusted EBITDA margins of over $36 per barrel of oil equivalent or approximately 72 per cent before including the impact of financial hedges the.
Realized adjusted EBITDA margin after hedges was approximately $25 per barrel of oil equivalent.
This led to an adjusted EBITDA values of over $217 million before hedges and $148 million after hedges.
The.
Second quarter capital expenditures of 117 million is expected to be the high quarter for the year as is typically the case in most years, where we plan our capital projects around what is generally our best weather window offshore during the second and early third quarters, Shane will talk about his guidance in his remarks, but we do expect our capital program to taper back.
<unk> from here with significant free cash flow generation in the second half of the year.
At tornado, we drilled and completed our attic well in the second quarter below budget and ahead of schedule. We've increased the water injection rates to over 30000 barrels of water per day from the injector well the we drilled in 2020 as a result, we are seeing initial production from the attic well above our original expectation of 8 to 10000 barrels of oil.
Evelyn per day gross this is a very complicated project, where the injection wells sources water from the same wellbore, which is an immediately injected into the deeper producing <unk>, creating reservoir energy to help maintain output in the producing wells. It is the first project of its kind of in the deepwater subsea environment and we're proud to share success from <unk>.
Our teams of innovative and creative approach here, which is expected to significantly improve recovery and extend the field life of tornado of 1 of our key assets.
In the first quarter earnings call. We discussed the success of our exploitation program of the Green Canyon field utilizing a platform rig for the immediate production impact that.
Of that allowed this field the enjoy production rates it had not seen in over 20 years.
In the second quarter, we moved that platform rig to our Pompano field, where we believe a multi year field study bolstered by proprietary seismic reprocessing project will lead to numerous drilling opportunities to revitalize this deal.
The pumping of drilling campaign will begin in the coming weeks and we expect to see some production from our first project there in the fourth quarter.
We are also utilizing the spare capacity of our Pompano facility. The host third party production with log of explorations trailing discovery initiating first oil in the third quarter.
As a reminder, production handling fees from this project and from many other projects around our owned infrastructure help lower our already competitive cost structure across our asset base.
Additionally on the non operated side, we also announced the success of our Crown and anchor development, well, which we expect online late in the third quarter.
In the second quarter, we also made key announcements on the ESG front in.
In May we presented to the market our long term <unk> emissions reduction targets, which is the lower our scope 1 emissions from our assets by 30% from our 2018 base line by 2025, we're continuing to advance towards that goal and making solid progress.
We also made adjustments to executive compensation to better align specific ESG objectives with a portion of our annual bonus program.
From a social and governance perspective, and our most recent annual meeting we added a key new board member in Pollock lover, Paul has a long history of advocating for energy efficiency issues in how energy policy impacts local communities. She will bolster our sustainability and community responsibility initiatives and will help inform our ESG reporting going forward.
As a reminder, we expect houses second ESG sustainability report to be published by the end of the third quarter.
Over a year ago, we initiated an employee led grassroots approached ESG not only looking at more ways to get involved in our communities, but also reviewing where we can apply the same core skill sets that have made us the successful oil and gas company into the evolving low carbon economy and energy solutions space.
We concluded that the natural space, where we could leverage our organization the skill set with the most impact wasn't carbon capture and storage.
In the second quarter, we announced an exclusive carbon capture and storage venture along the U S. Gulf Coast. We are pleased to be partnering with story of Geo technologies, 1 of the most recognizable firms in the space and the company responsible for the Acorn project, which is being developed in real time today in the U K North sea with partners, including shell.
On Exxonmobil.
So regular brings a solid ccs value chain and project delivery track record and was looking to expand in the United States. When we will now be their exclusive operating partner across the U S. Gulf Coast, we're excited to be working with them going forward from.
Tell us offshore Ccs is the natural extension of our existing skill set an excellent way for us the leverage our core competencies and add diversity of energy solutions and eventually add important scale to our business. The region contains a significant concentration of the United States industrial and petrochemical activity yet it's almost immediately adjacent to 1 of the largest.
Potential storage provinces in the country is well located in the inland state and federal waters of Texas, Louisiana, and Alabama, a region, we have a long history of operating in safely and successfully.
Many of the functions, we handle on a daily basis, and our hydrocarbon business are directly applicable to the Gulf coast and offshore carbon capture offshore operations and project management drilling wells understanding the appropriate conventional geology for sequestration seismic data interpretation and reservoir management as well as things like regulatory.
Procedures permitting and leasing.
So we see this as a way to take the skills and corporate knowledge, we have in house and add of new element to our business.
Our Ccs offering is off to a fast start since announcement, we built the dedicated team led by our executive Vice President Bob average Shine and we have been advancing numerous discussions with potential partners along the full value chain just in the last 60 days, including emitters midstream and infrastructure providers and storage site landowners among others. We believe we have of 10.
Nickel on commercial advantage in addition to our speed and commerciality that permeates our culture.
We expect Ccs can be an integral part of our business going forward and grow into a real driver overtime. We are hopeful that we will show progress in this rapidly advancing area in the near term.
Across the Gulf in offshore Mexico, We received disappointing news from the Mexico's Ministry of energy or sooner as the award of unit operator ship of Telus, The Zama discovery to Pemex.
To be clear, we are committed to preserving and optimizing the value of our zama discovery for shareholders, which includes evaluating all commercial and legal options at our disposal, we will limit our comments on this topic at this point given the sensitivity of evolving status of the situation, but I want to reemphasize to our investors. The Dallas is doing absolutely everything possible given.
The circumstances to maximize value from this asset.
As I reflect on the quarter and our positioning today, it's clear that the investment case in Dallas is very solid and continues to be attractive. We're the largest pure play independent of our basin and our assets are strong as evidenced by this quarter's production of margins right.
Executing through the drill bit and across the board and innovative projects like the tornado infill well waterflood and exploration partnerships with majors like BP, and Chevron and Puma West and as short cycle development opportunities around our infrastructure like Green Canyon 18.
And Pompano platform rig program.
We have a strong balance sheet solid credit and we are utilizing our core skill set to be a player in the low carbon energy solution.
Finally, we are more bullish on the accretive and value, creating inorganic growth opportunities through business development and M&A.
And we see those not only in the Gulf of Mexico, which remains our core focus area, but outside of the Gol, particularly in other basins with rich producing history that we believe where we believe there's also exploration upside.
M&A will always be a significant part of our strategy, we continue to actively evaluate opportunities.
Of some closing comments, but in the interim I'll hand, it over to Shane to provide more financial details for the quarter.
Thank you Tim Good morning, everybody. We appreciate you taking the time to join our second quarter conference call today.
This morning, I will address 4 topics.
The first the company record setting results from the second quarter.
Second the reaffirmation of our full year 2021 guidance.
Third I will provide a preview of how we will approach 2022.
Finally, I will address the recent success of our Army L extension and how that leaves tallo is well positioned for the second half of 2021 and beyond.
Suffice it to say there is a very exciting time of talos with so many positive things happening on both of the financial and operating fronts.
Let me start with the strong results for the quarter realized prices were $64.28 per barrel and $3.05 per mcf, resulting in revenue of approximately $304 million.
We performed well on the recurring cash cost front with L. O E and G&A of less than $12 per Boe and approximately $2.50 per Boe, respectively.
Strong commodity prices record production and disciplined cash cost resulted in EBITDA of $148.1 million for the quarter.
Adjusted for realized hedge losses, EBITDA would have been a company record $217.3 million in the second quarter with unhedged margins of over $36 per Boe or roughly 72%.
As discussed earlier on the call. The second quarter was expected to be the highest capital quarter for 2021, driven by the high level of operational activity. As we took advantage of what is typically the optimal weather window for the year.
We expect capital expenditures the taper over the balance of the year and should stay well inside our full year guidance for 2021.
The business continues to execute on all fronts and therefore, we are reiterating our operational and financial guidance for the full year 2021, originally issued back in March.
We believe that we are on pace and all production and expense guidance categories.
That coupled with the current commodity price environment should generate significant free cash flow for the full year.
You can find the specifics of our 2020.1 guidance included in last Night's press release.
Yeah.
Looking forward, we are in the very early stages of developing our 2022 outlook and capital program.
While it is too early to provide detailed operational and financial guidance, we do expect the stick to our principles and developing that plan.
That is having a healthy capital reinvestment rate likely in the range of 60% to 70% of the EBITDA and a diversified capital program that delivers new production and significant free cash flow.
We expect the allocated D&C capital across all 3 risk buckets in 2022.
<unk> field exploitation and exploration opportunities, albeit weighted towards the lower risk categories.
On the services front, we're seeing slight pressures on the cost of services.
I believe this impacts will be manageable and our margins and on our capital program economics.
We are currently in the process of evaluating our deepwater rig opportunities for next year and we'll provide an update on that in due course.
I continue to be pleased with where we stand in terms of delivery on the operations front and our ability to generate free cash flow.
We have plenty of liquidity and strong rapidly improving credit ratios.
Our leverage metric improved from 2.6 times in the first quarter to 2.2 times in the second quarter.
I expect the all of these trends to continue through the second half of the year as the capital program tapers and free cash flow generation increased strongly.
Turning to the capital structure during the quarter, we completed a significant maturity extension on our credit facility extending the maturity of approximately 3 and a half years, taking the facility maturity to November of 2024.
1 of the 'twenty was a challenging year and we appreciate the pressures with the lending community is under and therefore, we're very happy to have the 12, leading commercial banks that participated in our extension.
This extension coupled with our successful refinancing earlier in the year of our high yield notes maturity to 2026 allows us to continue to focus on growing the business.
Listening to all of us as a preferred strategic counterparty and maximizing the value of our business to our shareholders.
We've been fortunate over the years of consistently had strong partnerships with the army L relationship institutions.
This week, we were excited to add yet another valuable relationship to our facility between regularly scheduled redetermination, adding a 13th lender with the commitment of $75 million to the RVO.
This new commitment brings our liquidity to over $380 million on a pro forma basis at quarter end.
We also repaid approximately $65 million.
Of our outstanding Army L balance during the quarter, bringing our drawn balance of $400 million at quarter end.
In summary liquidity of solid and increasing total debt is very manageable and declining our maturity profile has been materially extended and our credit ratios should continue to significantly improve through year end.
All of this should take us back towards levels of pre pandemic balance sheet strength, we previously enjoyed.
With that I will hand, the call back over to Tom.
Thank you Shane.
It's important for me to reiterate that I have the highest expectations and confidence in our team to deliver on our strategic initiatives across the board.
We think the second quarter started the process of rethinking the impact of what an independent oil and gas company can become over the next 5 to 10 years.
First we think what we do is in oil and gas companies very important delivering low cost and efficient energy improves lives and makes our country stronger as we transitioned into other energy sources over the next several decades.
Additionally, as larger companies monetize the oil and gas portfolio is an important that the emissions and safety story on those assets improves not declines as they move into new hands, we have a history of being a trusted counterparty and we want to stay of leader among independents in this important area.
Lastly, as we focus on lowering emissions and our own production. We were also focused on lowering emissions in the communities, where we work and live through our Ccs initiative.
From our huge technical success in Mexico to our innovation net tornado to our early leadership in carbon capture we pride ourselves on being a nimble commercial in and outside of the box team with the tremendous amount of resolve and we're proud of the success. We've had with that approach as we look forward I'm counting on our team to continue to deliver with this call.
At its core.
To conclude our prepared remarks. This morning, I'm very pleased with our operational and financial performance in the quarter as well as all of the we've accomplished on the strategic front, we are executing well on everything that we can control and delivering solid results, while we find ways to add and accelerate catalysts to the business that will drive long term value creation in the future the.
The platform, we built the solid and we're excited about continuing to deliver in the second half of the year.
With that operator, we'll open the line for Q&A.
Thank you.
Now begin the question and answer session.
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The first question will come from Cmos genre with Northland Securities. Please go ahead.
Yeah, Hi, everybody, Hey, Tim I guess.
A question about 'twenty 2 and this is really a question for most e&ps, but.
You sort of look at your priorities and maybe it's the the false choice by lay it out anyway.
You talked about a 60 day ashamed talk about 60% to 75% reinvestment rate.
How would I prioritize the following the reinvestment rate.
Our production growth cap, which I don't think you've.
The previously communicated or paying off the revolver given.
Some of the liquidity concerns of the industry has been through I would think that you know that.
That might be a priority as well.
If you have to choose between those 3 and rank them.
How would you.
Yeah, I wouldn't rank case, you brush how are Ya man I wouldn't we wouldn't rank kind of growing production first I think we certainly want to continue to have that leverage ticked down I mean, I think it's a priority Shane talked about the direction of which is going that's something where we're very proud of in terms of the reinvestment rate I think the 1 thing that we talked about in previous calls and I think that it applies today.
As you know when you think about what we do compared maybe the different in our onshore friends you know, we're going to reinvest a little bit in exploration. So theres a maintenance component to what we do in the nurse and exploration component to what we deal we've added a little bit of that back and obviously you had some good result in Puma West we want to add more of that back next year as well if we had the right price environment and we have the portfolio we can do.
Dial that back if we don't have that price environment, but if we do we want to reintroduce that and that's part of that kind of distribution of reimbursement rate that that Shane talked about and I think it was more of <unk> 60 to 70 to 75, just by the way, but again part of that is the net exploration if you're lucky and you have success. The net exploration of we'd anticipate we do now you have to think about how to develop.
Those greenfields and Theres a portion of your budget the has to kind of be involved in that and that's really where you think about long term value creation is through the drill bit so.
It's not about growing production I think it's really you know more about maintaining the right level of free cash flow of maintaining the right level of discipline with respect to paying down the revolver and paying down debt, but reintroducing some of that high impact dollars that you can think about long term is of value creator, where you want to be is in a position where you have an abundance of riches and you have to pick between projects.
On the revolver.
Is there a comfort level.
That you have what.
What we've seen others, just kind of wanted to shake the banks.
Entirely.
And.
Would that be of preference for Ya.
Yeah, well you know look 1 thing about the revolver. If you you know I'm going to hand, some of this over to Shane but if you thought about kind of where we are in and you know kind of the current aspect of the banking community. So we had 12 banks affirm of $950 per million dollars base, and we think that's great and we love to have that affirmation that that sets that senior.
Secured credit capacity, we had commitments at $6.55 that gave us some room to add banks and we were able to attract a new bank and I think just that news alone speaks to the value of the content of our assets Shane can talk about the additional capacity, where we'd like to kind of keep those borrowings I don't know of any kind of comment on that yeah. Yeah.
So look.
Again, I think we see people trying to get away from the bank market and we're certainly cognizant of of the challenges of the bank market. The certainly lived through it a little bit of what we went through our extension process, but we have a great relationship with the banks, we want to keep the banks involved we may get that utilization rate down a little bit, but they are great partners to us whether it's our hedge book, which were pretty consistent.
Whether it's M&A, whether it's capital markets, whether it's other things we want to maintain the strong level of relationships that we've all we've always had in film and just highlighted we added a new bank. This week, we're glad to do it I think it's gonna be outstanding for us.
And look we'll continue to have dialogues as we head into the fall and then see where things shake out but today. We got 13 banks that are committed to Dallas and we like that position and it's not I think it's nice to out of bank from a different jurisdiction as well because it speaks to kind of the direction of where the firms going how we think about you know who where we went on how we want to look 5 to 10 years from now certainly centric in the Gulf of Mexico.
<unk> could be in other areas and I think bringing in an international bank I think solidifies that that message is being received.
Yeah.
And then can you sort of remind us how you're risking.
You know weather in the back half.
As you know the season is about to begin with if it isn't underway already.
Yeah, you know, we always it we'd probably talked about this on previous calls, but we always kind of had this 5 day excuse me 5 year Rolling average of downtime as the starting point as we build our corporate modeling and before last year and we thought about those 5.5 rolling years, we were averaging I think 6 or 7 days, a year, where we'd have some of material level of share.
And the storm, sometimes can only shut in 10% of your production for 3 days. That's fine another storm may or may not even be 2 powerful it just happens to move across your assets of niche assets in 80% of your production for 3 or 4 days you just never quite know, but we had a nice rolling 5 year average last year I would say disrupted that 5 year average, but we've tried to.
Stay at kind of true that at principal so we didn't we didn't put in a similar year. The last year. We think last year was an anomaly, but we did let those days blend into.
Kind of how we thought about what this year could be and I think that's why we guided that down. The obviously you know we're in August and so far so good and we had a certainly a nice month last month, but but we are in that point of the year going forward with the next 3 months could be busy. So we'll just have to see if there is slow we should have a really robust second half of the year. If we have the busy season.
You know then we might get closer to where we are in guidance, but I think that's why we you know it's easy to think when you look at the weight of production is running and our team has done a phenomenal job certainly on the downtime.
To think about the high end of that guidance, but we're just hitting that time of the year, where you just have to recognize you could have some storms.
Yeah.
And then the this quarter the PNA.
With the larger expenses has been.
The overhead something to do with it and you didn't change your overall budget, but I was wondering if there's a backstory to the PNA for the quarter, especially in light of some of the.
The other news announcements we've seen on the golf.
Yeah, No there's nothing special about that it's all weather you know those guys do a nice job of saying Hey look we're aware of my best weather months, whether my best weather Windows, and we're gonna have kind of high activities and I think that's why you know typically April may June and July are really really good weather windows offshore and you want to get as much done as you can and I think we tried to reemphasize.
The size and will continue to work with those who follow our story of when were on the road that the second quarter is always that lumpy capital quarter, you know and even if a guy comes to me and says Hey, this crews working great whether it's great can we move this crude from this platform to another facility and its may it's late may I'm, probably going to say, yes to that within the confines of an annual budget because of.
It just makes good operational sense to take those weather windows. So it's it's nothing you know kind of any more complicated than that.
Got it Okay and final 1 for me came on so.
You sort of the <unk>.
The S stuff I mean, it sounds like it's picking up momentum etcetera.
Could you sort of you know sort of even with the broad brush paint what the final outcome might look like.
Of the project.
Yeah, well I'll start it and the Bob muster weigh in on a little more he can as well.
I think the the what's interesting about it and they look <unk> you buy the thought leader here in <unk>.
Reading about this and you're trying to get your investors thinking about it the clients thinking about this as well I mean, it's a it's an enormous industrial complex along the Gulf Coast I think 300 of 350 million metric tonnes of emissions of year you know the.
Current tax structure doesn't work for all the emitters theres certain emitters that they'd probably need of higher you know kind of tax credit structure and I think that's probably coming in weekend different conversation for a different time, but there are some emitters chemical plants, you know of methane related plant's ammonia plants, where you know the current tax credit scheme works right now the question is.
You know when you when you kind of extract the C O 2 and then move it and sequester it Where's the right place to do it and I think that the key part here in the right place to do it is when youre not around a lot of wells.
We think the inland water state waters as a great place to do that you've got to have the right rock properties of the REIT depths the right celebrities in those off the first this is you know what as we contemplate. This it was not free of our purposes, we're really talking about just putting away C of O..2 I think as we looked at it what we realized is is that its right kind of in down.
The fairway of what we do very very well and its logistics and it's labor and its permitting it's drilling its monitoring and these are just yeah. The geoscience side of it. These are just skills, we have and how do we apply that to get into a different business segment. The frankly is a growing business segment and its 1 we need if we're going to focus on lowering overall global emissions. So we started working on.
On it we talked to our friends this drag of Nick the Ceos areas of Guy I've known a long time, they wanted to move their business to the states.
And I think the way you have to think about of project is it kind of starts with the store do you find the right store and that's where you're going to put away. The C. O..2 you can find the right tenant that's going to be in a meter and then as you find more tenants then youre going to get more throughput through your store and youre going to build the business and so it's a it's a clustering effect and and I think you really have.
Something that really clicks almost like a midstream assets. It kind of has you know it certainly has a predictability to it and you're just trying to add more volume into that store you create but the the value chain is the emitter of transportation partner and then the store and top Bob and his team are working on all elements of that.
And what I would kind of lean on you hear a little bit is when they regardless of some of the issues in Mexico and certainly can you know limited on what we can say about that but the execution of our team and going into an area that came out of the energy reforms I don't think people thought we were going to be the ones that signed that first contract and made that first big discovery, what we're doing in deepwater and the tour.
8 of Waterflood is 1 of the first of its kind that's probably what people Didnt think palace was going to go do I wouldn't bet against some of our team putting something together here. They are working really hard on it we believe in it.
And we just got to keep making progress.
Yeah.
And came out of promise last 1 just as a follow up to that the midstream element, which is the final element.
I guess some of the midstream company that sort of pushed back on the ability of older pipes to be retrofit for Seo to how would you characterize that.
I mean, it's just a pretty dense system of.
The pipelines there would you bracket.
Those pipelines in any way that they need to be built within the last several years or to be able to handle <unk> or do you not think it's that big of deal well. So there's a couple of things on that and it's actually you almost have to pull of map out and look at it but obviously, there's a lot of infrastructure that can't just be repurposed for various reasons.
C O 2 of the corrosive material theres certain pipe sizes, and working pressures and again, there's a little more of an in depth conversation around that but that doesn't mean some of it can't some pipeline systems have redundancies in separate lines and you might be able to use redundant lines, but the 1 thing a lot of these pipelines do half and so much of this is about timing and about urgency and about <unk>.
<unk> deliveries they have right of ways. They have the space and that that actually is an important key in when you think about putting a project together, which was your original question. So you know it's all bespoke snowbush every 1 of these is different they're gonna of different partners different emitters in different geographical locations. There's plenty of room for a lot of different stores here you know, we're not the only ones and we shouldn't be the.
All the ones, but the key elements that somebody's midstream guys have they've got access to of meters and they've got right of ways within their existing infrastructure that you potentially can use to speed up the timing of your project.
Thanks, Tim.
Thanks I appreciate it.
On the next question will come from David Heikkinen with Heikkinen Energy Advisors. Please go ahead.
Morning, guys and really wanted to continue on the carbon capture side did you all submit a proposal in the Texas land office.
Submissions that was doing in mid May.
Are you thinking more of Louisiana coast.
I think that I don't think those submissions of public David.
So if we did that on the island.
Right, Yeah, right well Thats great.
That's why I'm not answering.
But look here's what I would tell you the the the JV, we have wished to regulate contemplates kind of corpus Christi through the state of Mississippi, now and you know really even heading into Alabama, and Florida. So these guys.
Our leaders in the space in terms of how they think about these projects that the project in the UK North Sea that I think started with 2 to 3 million metric tons of commitments and then by clustering more folks that it could be up to 20, and so can we duplicate that you know in offshore Texas, absolutely can you duplicate that in the inland waters of the Louisiana that you know well.
So well David in your background, absolutely and so you know there isn't an area of along the Gulf Coast, we're not focused on.
Okay, and then looking at like Northern lights in Norway on Acorn.
The leases were awarded in 2019, and Theyre talking about 2021 for <unk>.
<unk> injection and then upscaling is that the type of cycle time, we're thinking of couple of years from award to the getting close to considering injection or having you know like you said opening the store is probably the better description.
Just trying to get an idea of cycle well ever since the north sea projects.
Well first of all of it I don't know if it was I don't know of is that quick on on the Acorn project I think and again, it's not our project or your projects. So we don't want of misquoted and I don't need net calling me, saying getting it on a project right, but I think they're kind of <unk> this year and looking at injecting in 2027.2020 'twenty.
25, okay. So they could call me what was it.
With the Alice.
The thing that's the opening of the store component. So you start.
And then you know the tenants are coming in in 5 years is the way I think about it but I think right now, but I think yeah, I think that 5 years from open store to inject we might be able to speed that up again for the so you're right in the 1 sense that getting the store and again the store in our view and I think this is the part that you understand very well as well is good.
Any of the store and the right geology of the right space. The right force base, the right amount of kind of geographical area. So you can grow plume.
But getting that store in place brings the clustered emitters and now Youre working can you get first injection sooner here then over there I think so by the way we can capture.
On the carbon emissions right off the stack, an end and move it in the Gulf Coast are so much infrastructure to somebody right of ways and I do think we can move on these projects may be a little quicker, but you know again. There also the spoke it's kind of hard to be able to compare 1 to the other you know what's the distance and proximity to that first anchor tenant the.
Things like that David, but yeah, I think it starts with the store, but you know not just the store.
If you're going to get a project moving quickly you've got to have other partners I mean, you've got to have of transportation partner.
To have an anchor tenant on the emitter side do you want you want all of that to come together as close to the same time as possible, but ultimately it's got to go somewhere.
No.
T O.
3 of the vision the Danish.
Danish oil and natural gas had before they became more standard it takes some years, but of vision in the upstream spaces.
That's something we're looking for them.
Like the way of thinking.
Well, David I appreciate that I mean, I think you know, it's not deemphasizing of what we do on the oil and gas side frankly, we want to be a much bigger conventional oil and gas company. We want to you know we have ambition of what that needs to look like in Soma needs zone oil and gas assets for the foreseeable future and we know the bigger companies or are thinking about monetizing those assets, but I think for an independent to.
Relevant in the space going forward and you get away just from oil and gas and kind of what I would call of energy solutions and this is what this is about using the talent. The team we have the solve more problems and keep it local and that's really what we're trying to do and I think I really think we're going to be able to pull it off we've got a lot of hard work, we got to keep finding partners, but I'm glad you see it.
Because we see it and if we see it we're determined to make it work.
Yes, I think you all of the partner of choice for buying properties fits we saw another private company in the Gulf of Mexico have some liabilities flow back to half of this year and probably some flow back the other people in all.
All of our good acquirer and you do things of the right way.
I don't have those abandonment costs come back at the at the seller so.
That's a good thing as well.
Thanks, David Thanks, guys.
Okay.
And the reminder, if you would like to ask a question. Please press Star then 1 the next question will come from Stephen Dechert with Keybanc. Please go ahead.
Hey, guys with the what's happened at the AMA just want to see where you guys plan to focus on opportunities you think it'll be more on the Gulf of Mexico or are you looking at more than other regions.
Yeah, well look we I wouldn't say, we have 100% given up on some of them I think theres just the process there to try to monetize the right value and so we won't go into great detail, but I would just say don't let's not consider ourselves, giving up we're going to work hard there and try to create value for shareholders, but as we think about the other areas. Yeah. You know look we're excited.
About the discovery of Puma West I actually noticed share of the day that it hit Bp's earnings release date. They mentioned it. So there's a lot more we want to kind of Peel, the onion back, but theres, a right process and timing around that type of project. It's underneath a lot of salt Theres appraisal that we're planning and so you'll learn more about that in time, but it's in a good neighborhood. It's around a lot of facilities. It speaks to the very thing.
We're trying to do there is other emerging plays on the eastern side of the Gulf of Mexico.
And I think there's wells that were not drilling, but some of the majors of drilling that could open up some plays where we have a lot of acreage and so we're excited about.
Some things happening in the eastern side of the deepwater Gulf of Mexico, and then absolutely you know we're looking outside the Gulf in areas, where we can buy both production or areas, where theres greenfield opportunities and so.
Again, we want to be a company that is not only growing the base business through exploitation in M&A, but has that Greenfield project you see the benefit it's created for folks like Hudson is of young engineer as it has and I'm proud of those guys from what Theyre doing in Guyana, but.
You want to have some of that in your portfolio and so we certainly did in zama in and we still do on we're not giving up on that but we are absolutely going to keep looking for areas to replace that both through our own investment and risk taking on our own portfolio are really through potentially other greenfield assets that have been found that are looking for partners.
Okay, great. Thanks.
And then just what's your expectation for higher production in the second half of the or do you think that kind of puts you towards the high end of your production guidance range for the full year.
Hey, Stephen Yes, Shane here look I'd say first half of the year, we averaged $66.2000 barrels of oil a day equivalent.
Our guidance range of 63 to 67, and we expect to be higher than $66..2 in the in the second half of the year. So.
Again, it's a tricky time of year. So we're not coming out with a of re guide or any statements, but I think it'd be safe to say that that'd be our outlook.
Okay. Thanks.
Alright, thank you.
At this time there are no further questions on the question queue. This will conclude today's question and answer session and I would like to turn the conference back over to CEO, Tim Duncan for any closing remarks.
Alright, Thank you operator, and again, thanks, everybody for joining the call good questions and conversation.
The team execution was fantastic both in the second quarter and in the first half of the year as we mentioned some of the Lumpiness on the capital side, obviously related to the second quarter weather window, youre going to see that taper off you're going to see a lot of free cash flow gets generated in the second half of the year, but I think what you also saw on the second quarter that of repeated our prepared set of my parents prepare.
Remarks, as you're starting to see the vision of what we're trying to become and how we think about ourselves over the next 5 and 10 years not only we are trying to grow the oil and gas side and proud of that proud of what we do we're tipping our toe into trying to diversify kind of how we're going to look as an energy company going forward and so a lot of hard work, we've got the team thats dedicated to doing it and we're excited.
Going to be excited about giving you those updates in the coming quarters. So thanks for your participation and we look forward to talking to everybody again soon.
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