Q3 2021 Talos Energy Inc Earnings Call

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Good day and welcome to the tireless energy third quarter 2021 earnings call. All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note. This.

And is being recorded 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 third quarter 2021 earnings Conference call John.

Joining me today to discuss our results are Tim Duncan President and Chief Executive Officer, Shane Young Executive Vice President and Chief Financial Officer, and Bob I've been Shine 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.

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 September 32021 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 <unk> Dot com.

And now I'd like to turn the call over to Tim.

Thank you Sergio.

Proud of our company's performance this quarter as we delivered solid operational results. Despite the challenges brought on by hurricane either.

The quarter results included strong unhedged EBITDA margins positive free cash flow generation and strong environmental health and safety performance. This is a testament to the resiliency and cost structure of our asset base, our ongoing ability to successfully invest in attractive opportunities around our infrastructure and our operational capabilities is one of the largest independent.

And peace in the Gulf today on.

On a strategic level as we diversify what we can deliver as an energy company. We've made significant strides advancing our carbon capture and storage initiatives, including a major first of its kind award for a dedicated offshore sequestration site located off the coast of Texas.

We look forward to sustaining these trends as we close out the final months of 2021 with expectations to deliver a full year of 2021 that will include record production at <unk>.

Active margins significant positive free cash flow leverage reduction and major progress in all of our strategic goals.

I'll first address some details of the quarter, including the impact of Hurricane Ida.

We generated average daily production of $56 5000 barrels of oil equivalent per day for the quarter reduced by approximately 10% to 11000 barrels of oil equivalent a day as compared to a pre hurricane expectations, which would have otherwise made this the third consecutive record production volume quarter.

To put that into perspective, the attractive and resilient nature of our assets that includes the commodity mix of 69% oil and 78% total liquids, even with the material a material weather related shut in are unhedged adjusted EBITDA margin was over 70%.

If we hadn't had to shut in this quarter and the deferred production was to be considered here. The unhedged adjusted EBITDA margin would have been upwards of 76%.

Hurricane either did not cause any major lasting impacts to our facilities across the Gulf, but rather drove production outages, resulting from issues at our downstream providers assets, such as pipelines terminals and refineries.

Although the vast majority of our production has been restored we are still expecting selected outages of approximately 4000 barrels of oil equivalent per day, which we expect to return by the end of the year and is reflected in our fourth quarter production guidance of 64 to 66000 barrels of oil equivalent per day.

We also anticipate having less capital expenditures in the fourth quarter compared to the third quarter, which should lead to significant positive free cash flow generation for the fourth quarter and full year 2021.

We expect to continue to pay down our revolving credit facility and continue to lower our overall leverage metrics below two times net debt to EBITDA at year end.

With respect to our ongoing drilling activities as we wrap up our 2021 capital program. We experienced early success in our Pompano platform rig program in recent weeks with the execution of certain low risk asset management projects that we believe will add between 502000 barrels of oil equivalent a day of production by year end, which will help set up 2022.

Duction at.

Following these asset management projects will begin a drilling program on Pompano in 2022, it will take up the bulk of next year and include a combination of infield development and step out exploitation opportunities around our 100% owned and operated Pompano facility in Mississippi Canyon.

As a reminder, a similar program at our 100% owned Green Canyon 18 facility recently brought online significant production additions at highly attractive economics and margins earlier this year. These.

These low risk and quick turnaround projects are a key part of our strategy of creating additional value from largely fixed cost that sits in our portfolio I Redeveloped. These assets with more modern seismic technology in imaging as well as drilling and completion techniques.

Additionally, in other areas of our portfolio. We're also planning a 2022 drilling program that we expect to include several subsea tie backs and other drilling opportunities. We expect it to 2022 wells will include a combination of low risk shorter cycle exploitation projects.

High impact exploration opportunities as well as the appraisal of our Puma West discovery in the second half of the year.

I also want to remind everyone that we will have our regularly scheduled dry docking of the HP. One floating production unit next year, which will result in approximately 45 to 60 days of total shut in time in our Phoenix complex. This is a regulatory required dry docking that needs to occur every two and a half to three years and the last one was in 2019, so it's Ty.

Now.

We expect to dry docking to take place in the summer months, which means the production deferral impact should occur in the second and third quarters of 2022.

We will aim to update the market with our formal 2022 operational and financial guidance in the coming months, but investors should expect the plan consistent with our focused on a balanced capital program across risk reward categories and appropriate reinvestment rate and significant free cash flow generation.

Material total debt and leverage ratio of reductions in advancement of other key catalysts for the business.

Turning to strategic initiatives.

We are particularly focused on growing our carbon capture business as well as our oil and gas business. So while discussed them individually.

I'm very pleased with our rapid advancement in carbon capture and storage segment of our business and our last earning call I spoke about the pride we have here at tell us with respect to our culture of being nimble commercial and forward thinking over the years. We've found success as an early mover in and out of the box stinker and that has been the case and how we thought about participating in the low carbon initiatives.

And committed ourselves to pushing hard into being the first mover in the carbon capture and storage space.

It was directly on our last call. When I said I was very confident what we could achieve with the right level of focus urgency and creativity and in the third quarter, we began to deliver on those expectations by being named the winning bidder and the operator of the Texas General land offices, Jefferson County, carbon sequestration site and a joint bid with our partner carbon Bert.

This location is the first major offshore carbon sequestration site in the United States comprising over 40000 acres just off the coast of Beaumont and Port Arthur Texas Industrial corridor.

Upon completing the lease agreement, which we expect will happen before the end of this year to house will be the only public company with a tangible large scale carbon capture and storage site, along the United States Gulf Coast. This is a great accomplishment for our team and one we believe will ultimately generate significant value for our shareholders. While also paying playing a direct route.

Paul and reducing industrial emissions in our communities and we do not want to stop there. This is only the first of what we expect to be several sequestration sites, we own and operate along the Gulf Coast.

We took our goal of being a meaningful leader of carbon capture and storage project development a step further by expanding our offering along the Gulf coast in state waters of the Gulf of Mexico with a joint venture with <unk> technologies <unk> is a dedicated Ccs company headquartered in the United Kingdom and as the architect of what will be one of the largest offshore.

<unk> capture projects in the World the Acorn project in offshore Scotland.

Since the announcement of the Texas Jello Award in the <unk> JV, we have laid out.

Our broader carbon capture ambition and our public investment materials, which is to have multiple identified storage sites along the Gulf coast in the coming 12 months and pulling together joint venture partners in the value chain, such as midstream providers and working with industrial sources to bring quote anchor tenants to our storage site.

All of these work streams are happening in parallel and we will provide additional information to the market as they become available we.

We are also building alliances with key service providers. One example of those include what we recently announced with Technip FMC, a leading global engineering and EPC company technique, FMC will contribute engineering services and feed studies.

It will help us accelerate a line of sight toward projects that <unk> with within our intended portfolio.

With the focus and commitment that we're putting into this offering we continue to expect that our carbon capture and storage business, which leverages the technical and operational skills. We already possess in house will become a tangible material portion of our business in the future.

Moving back to the oil and gas side. We're also very focused on continuing to grow our oil and gas business through both organic drilling and pursuing transformational M&A the.

The U S. Gulf of Mexico is still our primary focus for M&A, but we are seeing impactful opportunities in other areas of the Atlantic margin.

Such as West Africa, and South of South America, as well as in the North Sea.

We believe our skill sets can travel to these offshore provinces and we can create shareholder value in these areas as well, we believe our commitment to sustainability, including our carbon capture business makes us an attractive counterparty.

Transactions are not always easy to bring to cross the finish line, but we are absolutely focused on value enhancing and accretive M&A opportunities.

Lastly, I have also mentioned the stakeholder should expect our second annual ESG and sustainability report to be published in November. We're excited about the progress in all aspects of our ESG efforts from emissions reductions community impacts and governance changes at the board level and we look forward to highlighting those efforts in our upcoming report.

With that I'll turn it over to Shane to address some of the financial details of the quarter.

Thank you Tim Good morning, everybody. We appreciate you taking the time to join our third quarter earnings conference call today.

This morning, I will address four topics first.

Our financial results in the third quarter.

Next the reaffirmation of fourth quarter production in full year 2021 guidance.

Third I will give further thoughts on how we will approach 2022, and finally I'll briefly address our improving credit profile and ongoing fall redetermination process.

It has been a busy year, so far with must be proud of and we're looking forward to finishing strong.

Let me start with the results from the quarter.

As Tim mentioned expected production was negatively impacted by between 10 to 11000 Boe per day of deferred volumes in the quarter due to hurricane Ida and averaged $56 5000 Boe per day.

This compares to $66 3000 Boe per day in the second quarter.

Production was just under 70% oil and just under 80% liquids.

Despite the deferred production revenues were approximately $291 million on realized pricing.

Of $68 22 per barrel and $4 55 per Mcf.

On the recurring cash cost front, LOE and G&A were less than $13 50 per Boe and approximately $3 per BOE, respectively. Despite the deferred production volumes.

EBITDA was $131 4 million for the quarter.

Adjusted for realized losses, EBITDA would have been over $203 million in the third quarter with near record margins of approximately $39 per Boe.

Capital expenditures for the quarter were approximately $86 million and we continue to expect to stay within the range of our 2021 full year capital guidance.

Lastly, tell us generated approximately $13 million of free cash flow before working capital changes in the third quarter.

By the healthy capital program as well as substantial production downtime and $71 million of realized hedge losses.

Following hurricane Ida we have restored the majority of our production save approximately 4000 Boe per day related to a combination of third party facilities and ongoing issues downstream of our facilities.

We expect to have the remainder back online before year end.

Despite the impact of Hurricane Ida, we continue to expect to be inside the range of all of our cost guidance estimates for the year.

We now expect fourth quarter production to average between 64, and 66000 Boe per day and full year 2021 production to be at the low end of our production guidance range, which we originally issued back in March.

Given that coupled with the current commodity price environment, we should generate meaningful free cash flow for both the fourth quarter and the full year 2021.

Looking forward, we continue to develop our 2022 outlook and capital program.

While it is still too early to provide detailed operational and financial guidance. We will continue to stick to our publicly stated principles and developing that plan, assuming the current commodity price environment.

That is having an appropriate capital reinvestment rate of roughly $60 to 65% of EBITDA and a diversified capital program that supports the base production and deliver significant free cash flow.

The year will include the impact of a required drydock of the HP one around mid year 2022.

We expect to allocate capital across all three risk buckets in 2022 near field development exploitation and exploration opportunities, albeit weighted towards the lower risk categories.

I also expect we will see accelerating capital allocation to our carbon capture objectives in 2022.

So still a modest percentage of the total capital spend but incorporated into the overall reinvestment rate calculation.

On the service cost front, we continue to see modest pressures in the cost of services, but I believe the impact will be manageable in terms of both margins and capital program economics.

The business showed resiliency during the quarter, despite the impact of Hurricane Ida on both operations and our ability to generate free cash flow.

We have plenty of liquidity and strong rapidly improving credit ratios.

Our leverage metrics has improved from a two six times peak in the first quarter.

The year to two times now at the end of the third quarter I.

I expect these trends to continue through year end.

During the quarter, we added another lender to our facility with a commitment of $75 million to the RVO.

With this commitment our liquidity stood at over $375 million at quarters end.

We have also repaid approximately $65 million of RBS balance since the end of the first quarter a trend we expect to continue between now and year end.

In terms of the fall Redetermination, we expect to complete the process over the next four to six weeks.

And do not anticipate any surprises.

In summary, liquidity is solid and increasing <unk>.

That is very manageable and declining and our credit ratios should continue to improve significantly.

All of this will take us back towards the attractive pre pandemic balance sheet strength, we enjoyed and position us to continue to focus on growing the business being a preferred strategic counterparty and maximizing the value of our business to our shareholders.

With that I will hand, the call back over to Tim.

Thank you Shane.

Again, considering the large storm, whose impact was well documented I thought our team rebounded and executed very well posting a very strong quarter. Despite the challenges. We also intend to finish the year strong and what will ultimately be a record year from a production and free cash flow generation perspective.

We continue to make significant progress in art with our carbon capture business on several fronts and I hope to be able to announce some of those milestones to the market soon with that operator, we'll open up the line for Q&A.

Yeah.

Thank you we will now begin the question and answer session.

To ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Again, if you have a question. Please press Star then one.

There are no questions in the queue.

This concludes our question and answer session.

I'd like to turn the conference back over to Tim Duncan President and CEO for any closing remarks.

Thank you operator not.

Not only do we really feel good about how the team performed in the quarter overcoming the impacts of the Hurricane we were very bullish on how we're going to in the year.

And we're bullish on how we're transforming the business and where we go from here. It does look like you wont takeaway question. It looks like operator, we do have a late question. So maybe we we hit that.

Okay.

Yeah.

Okay. My first question is from Super Shandra from Benchmark Company. Please go ahead.

Hey, Tim I didn't want to.

I'll, let you off so easy.

The question I guess.

On the M&A environment.

You've been talking about for quite some time the prices have gone down they've gone up.

How would you characterize the current climate.

Versus what you sort of what is expected at this point.

Yes, Hi, Bob how are you.

Look thanks for jumping on I think when prices move throughout the course of the year.

If you're a seller you can think about how the timing of when you need to sell your assets and again that said there can be a private seller that sell it can be one of the majors that we all know and appreciate and so I do think it changes mandated changes goals and how people think about their asset. So I look I mean, we're I.

I'd like to tell you and we are we're always a buyer and we're always looking and we want to make sure. We do deals that make sense and they are accretive and we're focused on.

Free cash flow build ultimately with the assets, we owned over time, but on the other side of that trade you need a seller who looks at their own goals and ask themselves sometimes at $80 do I need to move this asset right now again.

I do think and you know this as you think about our business longer term I do think some of the biggest owners of assets in the world are going to still think about their portfolios over the next couple of years and Youre going to think about.

Their own emissions targets and I do think you'll see assets loosen up and we want to be around to be a good card counterparty for those for those assets and look we also want to be a counterparty for private owners of assets and thinking about their exits. So I'm bullish on where our M&A efforts can go but you've got to be patient in an environment like this where you see the commodity being as construct.

Visitors and stellar is kind of thinking about their portfolios.

Yes.

<unk> seen I would have thought the deal flow would slow.

But the announcements both onshore international they just keep coming.

Yes, so just kind of curious on that on.

And then also.

Is your intent.

Two over the next year clean up.

Yes.

As an RVO.

Or a revolver I forget but is it <unk>.

Bank debt.

Yet it minimized place you in a good spot for making cash transaction.

Or or.

Or do you think that.

That's not so necessary with a lot of that.

The deals out there taking equity.

Yes, there's two pieces of that and Shane can jump in here too first its an RV Alex's senior secured loans backed by the reserves, but we think just from a <unk>.

Part of that is kind of how do we think about cash in and look we I think our leverage debt going into the pandemic was around <unk>, one three somewhere in that neighborhood I would like to see that go back down to that level and we've done a lot. This year to get something that moved all the way up to maybe 2526 back under two and we want to keep pushing that down by year end, and frankly, I'd like to get that down to pre.

Pandemic levels, just as a general matter and how we'll do that in the near term, while you pay down debt <unk> and when you do that it's going to free up liquidity and then that cash is fungible and we can use it as part of our sources and uses and the transactions habash. It really depends on what's the transaction, what's the appropriate form of sources and uses where do you need cash where does it make.

If it's accretive to potentially use equity and Thats, just really deal by deal and it depends on the assets it depends on the seller.

I do think on onshore.

There are some bigger theres bigger there is I think a bigger <unk>.

List of buyers. If you will then you have offshore look one of the benefits of our basin I think there are potentially at times more assets for sale than there are buyers of those assets. The buyer universe is different than it is onshore. So I think that changes the pace of deal flow, but that's just a little more commentary there but for US you know kind of how we think about sources and uses is really deal dependent.

But I think the more liquidity, we have and the more we continue to pay down the <unk> the more flexibility. It gives us on how do we think about you know kind of utilizing it for purposes of transaction Shane everything on that no I mean look the only thing I'd say is.

Look at our successfully finishing up the extension that we did back in the spring we had the ability to add a new bank kind of interim little bit off cycle, and we think there is additional interest out there. So we were sort of like where the general community is with regard to us.

We sit today I think that utilization number has been trending down over the course of the year I think it will continue.

To trend down and provide a lot more liquidity and strategic.

Strategic capital for transactional opportunities, if that's what's required to get the deal done.

Yes.

And then Cts I guess you know.

The topics for 2022, probably.

You'll have more information that you said.

When you look at the.

The competitive posture. It seems now that you've got a lot of folks jumping in the game and it's not just other upstream producers its coal companies.

And who knows who else as we.

As we go along.

What would you say to sort of your competitive posture, what's compelling about your competitive posture versus the what seems like once a month type.

Ccs competitors.

Yes look there is a good question and there is no doubt.

It's a really competitive space, we understand that but I do think in <unk>.

<unk> studied it and you know it there's three parts of the value chain and obviously it all starts with an industrial emitter, who asked to decide that kind of captured in your carbon is a priority for them whatever makes that priority as an opening question is it an incentive visit a pledge that they made is it just kind of better as they think it just about kind of their own external view, it's better.

Way to manage their business, but they've got to make that commitment you've got to move the carbon and then you've got to inject and monitor and store. It in the midstream piece is important but the monitoring of storing and injection piece is important because in my view, that's where you have the project development tools as well and so I think what we bring to the table is I do think we are viewed as and we absolutely agree kind of.

Key thought leaders and experts around conventional geology, both in shallow water and around the Gulf coast in minutes, where we've built companies in the past personally. It's certainly palaces legacy and you have to have you can't just go grab 3000 acres 4000 acres to bus you've got to grab 40000 acres 50000 acres big chunks of land that have huge conventional.

Geological columns with good rock properties, they have to be well understood. You have to have shown you can execute and that geology and in that geography in that regulatory environment and in that space and you got to make sure you do it in a way that it doesn't create potential liabilities the industrial partner and that tenant you sign up needs to know that youre going to put that stuff away and monitor it and youre not going to see it back.

And so theres a lot more that goes into it than just I think grabbing land and so you've got to have confidence someone's going to be able to execute that and then once you pull the store together you really got to pull the whole project together and Thats marrying midstream into this and managing feed studies and managing getting that <unk> and if you think about what we do offshore that's a lot of what we do offshore.

Engineering design work pulling things together on multiple timeline to getting to a final investment decision that starts to sound a lot more like kind of an offshore project and so I think our experience. Both in project management project development, which are the key components. I think you have to have here and then just really executing on the drilling and injection and monitor wells I mean, there is a lot.

Actual deepwater technology, you can think about in bottom hole gauges and things of that nature and the seismic and all the things you need to do.

In conventional rock is what we're used to doing and so I think that's a differentiator.

There's no doubt, it's competitive and by the way to solve the problem you need to have a lot of these stores and I think we've talked about that if you could put away 100 million metric tons. A year, maybe you can solve 10% of the country's emissions problem by the way, we're only doing about 15% to 20, so there's a lot to do.

We just want to build out a visible position and tried to become a market leader and we want to throw some urgency added. So we're just we're continuing to work really really hard with the dedicated team.

Okay.

Thanks, guys.

Alright, thanks, It looks like the question board is lighting up suddenly.

Yes.

Again, if you have a question. Please press Star then one.

And our next question comes from Stephen Decker from Keybanc. Please go ahead.

Hey, guys. Just one quick one for me just wanted to get your thoughts on how Youre thinking about your hedging program for next year do you think you'll add on some more you kind of feel comfortable with but the amount of volumes you have hedged already.

Okay.

Yes, Stephen chain here I'll jump in look I think.

We've done.

Opportunistically systematic about the way we've added hedges over time.

We've got some some minimums that we liked it.

Adhere to and as well in our bank agreement there is some some minimums as well so look we will continue to.

To layer on I don't think Youll see.

Sort of any.

Any behavior sort of outside of the norm in any given quarter, but I do think you'll see us consistently add on and we'll be opportunistic I mean it was.

It was at the beginning of <unk> of January of 2020, when there was the attack over in Saudi on some facilities the price spike.

For a couple of days and we ended up layering in a substantial additional slug at that point, but I think youll see us be consistent with it and again continue to add overtime.

Yeah.

Okay, great. Thanks.

The next question comes from Michael <unk> from Stifel. Please go ahead.

Hey, good morning, everybody.

Hopped on the call late so I apologize if you've already discussed any of these topics certainly skip them, but.

Was curious on.

What you think the capital requirements for your Ccs business might be as you look into next year.

Yes look I don't think it'll be substantial next year at all look we're trying to put together. Some sites you can think about some bonus payments on the site were wrapping up and offer Jefferson County, I think we want to advance.

Some of what you are trying to do if you think about the timeline here Michael you've got a site as you as you firm up that site and kind of originate that now you are trying to move towards <unk> and so what's that mean, what are you going to put together. Some partnerships. So there is some business development there and then youre trying to take your site and get it ready and closer to that by being part of that is moving on some of the classics permit.

So you might drill it's strat well and go grab a whole core and so theres some cost on that youre going to share that cost with whoever your partners are in the project. So.

I think if we can put together additional sites next year, there's some lease payments around that potentially have a stress test on the sites. We close then you are moving the ball closer to <unk> and getting that project sanctioned and those costs are all manageable when you get into real bigger construction and our multiple injection wells.

Post step by the and that's where the cost come a little higher but that's also when financings probably secured and you've got kind of anchor tenants and you've got something that you can put some credit behind so there's a process here we launched it this year, we want to see some tangible growth in it next year, but it all probably be pre <unk> and so that's that's where you are in the more mass.

<unk> side of the cost structure. So it will be and I think Shane if you missed his comments I think theyre looking at we're looking at reinvestment rates somewhere around $60 to 65% and we see Ccs being inside that guidance and inside kind of how we think about building out our capital program and look at if the industry really really moves in and we're able to.

Do more than we think we can do then we can come back to the market, but I think we're pretty confident in how to kind of make Ccs. If you will kind of a slice of the pie as we think about reinvesting in our business.

Yeah.

Sounds good.

Does the amendment.

The build back better at change your your thoughts on the business at all in terms of.

Who youre talking to or what the toll might be that you would charge for storing sidoti.

With respect to Ccs.

Yes, yes.

You know look I don't think so I mean, I think it's certainly we're trying to talk to any place where we're really focused on hey look. This this area wherever that area could be along the Gulf Coast has that has the those ingredients that I talked about in the previous answer to a question. It's got the right geology meeting its conventional good perm good porosity. Good rock properties. It covers the right <unk>.

Area, meaning it's got to have a good amount of aerial coverage and it has the least amount of liabilities. We check those three boxes and we're trying to figure out every emitter in the area, whether it's someone who has got more of a pure sidoti stream or whether through various combustion. What it does is it's got multiple ways. It needs to go gather cotwo and so we're trying to talk to everyone. Some I think.

The question really becomes is the person on the other side of the table more receptive or less receptive at $50, a metric ton versus $85 a metric ton.

Everybody is a little more receptive 85, so it doesn't change our approach our approach is to really understand the market, where we're putting together these projects in it and thats our job to really understand the market be available to the market I mean, you're going from an operating oil and gas business on one side that providing a service on the other side.

But so it doesn't change our approach it might change the reception and it might make somebody industrial emitters think about hey, how do I really do.

Is there enough of an incentive scheme for me to really think about making the investment to capture my carbon and they may be more inclined to do that at $85, but I would tell you I think as a policy perspective, I think I think you need $85 really to make this market take off I think if we're going to be serious about this and I think Paul I do think this is an area where there's some bipartisan support.

In a world, where there's not a lot and that's why we're so interested in this space that you really need to push the incentive structure to get more people excited about the idea around Ccs is as opposed to just a segment of the market. So it doesn't change our approach it may help with the execution.

Yes makes sense.

Last one from me wanted to ask on the sub Salt Miocene play how are you thinking about that next year I know you've got.

And appraisal coming up.

BP your Puma West, but anything you might do on the operated side with that play next year.

So theres a couple of things that we're trying to line up and we've entered into a rig contract with sea drill for the second half of the year. We've got a couple of ideas that are just have been in our portfolio that some came out of that <unk> transaction. If you remember that we picked up in previous lease sales and so we're excited about kind of how do we pick and choose in that.

Portfolio to execute one or two projects outside of.

Puma West and so part of that is timing of the rig delivery part of it is where do we think we can pull and some partners and so.

We're honing in on which is always why you want the time to kind of wrap those up before you guide out the year, but I would just tell you. It's really one of the more exciting parts of our portfolio and we really want to try to execute on a couple of those a year last year, we were coming off the pandemic. The tornado waterflood project was an absolute right well to go drill it's been impactful for US it's been great.

I think next year, we're kind of looking at new projects and so we're excited to come back to the market and talk about a couple of subsea Miocene plays talk about the Puma West appraisal, which is in our view going to be a really exciting effort as well so.

We're we're trying to match if you think about next year I talked a little bit about the platform rig to move from Green Canyon 18 to Pompano off to a quick start there that's development step out exploitation sprinkle in a couple of kind of what I would call infrastructure led sub salt Miocene stuff and then it become a west appraisal.

Like how that capital program potentially sets up.

Yeah.

Sounds good thank you Tim.

Thanks, Dan.

Yeah.

This concludes our question and answer session I would like to turn the conference back over to Tim Duncan President and CEO for any closing remarks.

Well I think it's the same as I said before all the guy's jumped on for questions, but again the team did a great job trying to manage through its always tough when you have a hurricane roll through they rebounded quickly I think the fact that we're trying to keep everything inside the guidance we had for the year.

Estimate to what we did in the first half of the year and I think it's a preview of how good we feel about the fourth quarter. So we look forward to jumping back on and talking about 2022, when it's appropriate to do so.

And we're really happy with the quarter and happy with how we're wrapping up the 2021, so with that I want to thank everybody for joining and we look forward to talking to you again soon.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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Okay.

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Yes.

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