Q4 2023 Talos Energy Inc Earnings Call
Speaker Change: [music].
Operator: Good day, and welcome to the Talos Energy fourth quarter 2023 earnings call. All participants will be in listen only mode.
Good day and welcome to the <unk> energy fourth quarter 2023 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on a touch-tone phone.
The opportunity to ask questions to ask a question you May Press Star then one on a touch 10 phone to withdraw your question. Please press Star then two please.
Operator: To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Jordan Kaiser, Director of Corporate Finance. Please go ahead.
Please note. This event is being recorded I would now like to turn the conference over to Jordan Kaiser Director of corporate Finance. Please go ahead.
Jordan Kaiser: Good morning, everyone, and welcome to our fourth quarter and full year 2023 earnings conference call. Joining me today to discuss our results are Tim Duncan, President and Chief Executive Officer; Sergio Maiworm, Senior Vice President and Chief Financial Officer; and Robin Fielder, Executive Vice President, Low Carbon Strategy and Chief Sustainability Officer. Before we start, I'd like to remind you that our remarks will include forward-looking statements, and actual results may differ materially from those contemplated by these forward-looking statements.
Jordan Kaiser: Good morning, everyone and welcome to our fourth quarter and full year 2023 earnings conference call.
Jordan Kaiser: Joining me today to discuss our results are Tim Duncan President and Chief Executive Officer, Sergio <unk>, Senior Vice President and Chief Financial Officer, and Robin fielder Executive Vice President low carbon strategy and Chief Sustainability Officer.
Jordan Kaiser: Before we start I'd like to remind you that our remarks will include forward looking statements.
Jordan Kaiser: Actual results may differ materially from those contemplated by these forward looking statements.
Jordan Kaiser: Factors that could cause these results to differ materially are set forth in yesterday's press release and on our Form 10-K for the period ending December 31st, 2023, filed yesterday with the SEC. Forward-looking statements 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 GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in yesterday's press release, filed with the SEC, and is available on our website. And now I'd like to turn the call over to Jordan. Thanks, Jordan.
Jordan Kaiser: Factors that could cause these results to differ materially are set forth in yesterday's press release and on our Form 10-K for the period ending December 31 2023.
Jordan Kaiser: Yesterday with the SEC.
Jordan Kaiser: Forward looking statements 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.
Jordan Kaiser: During this call we may present, GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in Yesterdays press release filed with the SEC and available on our website.
Jordan Kaiser: And now I'd like to turn the call over to Tim.
Timothy S. Duncan: Thanks, Jordan and thanks to everyone for joining the call as a reminder, we're going to use our earnings deck that you can pull from our website.
Timothy S. Duncan: And thanks to everyone for joining the call. As a reminder, we're going to use our earnings deck that you can download from our website. We're going to start that deck on page three. On the left side, we're going to talk about recent developments. And it's been a really busy three months. Let's start with the solid financial and operating quarter that we're going to talk about on the next slide. A lot of this was due to bringing on Venice and Lime Rock ahead of schedule and above our own rate expectations. We had three different drilling JVs we structured in the fourth quarter. Those are all outlined in the appendix.
Timothy S. Duncan: Chart that deck on page three on the left side. When you talk about recent developments and it's been a really busy three months.
Timothy S. Duncan: With the solid financial and operating quarter that we're going to talk about on the next slide a lot of this was due to bringing on Venice, and lime rock ahead of schedule and above our own rate expectations.
Timothy S. Duncan: We had three different drilling JV restructured in the fourth quarter. Those are all outlined in the appendix one of those was our activity in the lease sale. Our second one was an acreage and prospects swap with BP Chevron. It has the third one was a large drilling JV acreage area with repsol.
Timothy S. Duncan: One of those was our activity in the lease sale. A second one was an acreage and prospect swap with BP, Chevron, and Hess. And the third one was a large drilling JV acreage area with Repsol. We announced our quarter north transaction that we're super excited about, and we spent a lot of time talking about today. We exited the year with our leverage stat at one time and $788 million of liquidity. And then, as you walk into January, we were able to do a refinancing of our high-yield notes, extending our maturities, and lowering our borrowing costs. And we're super proud of that.
Timothy S. Duncan: Now start corridor transaction that we're super excited about we spent a lot of time talking about today, we exited the year with our leverage stood at one times and $788 million of liquidity and then as you walk into January we were able to do a refinancing of our high yield notes and extending our maturities and lowering our borrowing cost and we're super proud of that effort.
Timothy S. Duncan: Now, where it really gets interesting to me is on the right side of the page as we start to outline our 2024 objective. What we're talking about in quarter north is owning those assets for nine months out of the year as we anticipate closing that transaction in March. But even with only owning those assets for nine months, we're talking about a 35 to 40% increase from a year over year basis in production, but with that, an actual lowering of our capital expenditures.
Timothy S. Duncan: Now where it really gets interesting to me is on the right side of the page as we start to outline our 'twenty 'twenty four objectives, but.
Timothy S. Duncan: Well, we're talking about in quarter North is owning those assets for nine months out of the year as we anticipate closing that transaction in March, but even with only owning those assets in nine months, we're talking about a 35% to 40% increase from a year over year basis, our production, but with that and actual lowering of our capital expenditures.
Timothy S. Duncan: That's going to allow us to generate meaningful free cash flow, and with that free cash flow, we expect to pay down debt by approximately $400 million and end the year in 2024 with a leveraged stat at one time. We're still going to invest in our upstream projects, and we've got a nice mix of risk and reward that we'll talk about on the drilling calendar. Those projects are outlined in the appendix.
Timothy S. Duncan: That's going to allow us to generate meaningful free cash flow and with that free cash flow will be expect to pay down debt by approximately $400 million and end year end 'twenty 'twenty four with the leverage that at one time were still going to invest in our upstream projects and we've got a nice mix of risk and rewards will talk about on the drilling calendar. Those projects are outlined in the appendix certainly still going up.
Timothy S. Duncan: Certainly, we are still going to pursue creative M&A, but what's not in this guidance is specific capital related to our TLCS business. Now, we're proud of being a first mover there, and we're proud of the portfolio we built. I think we disclosed in earlier calls that we had a capital raise process. And what we found out is that through that process, it presented optionality, so we can really think about a full strategic alternatives process.
Timothy S. Duncan: Pursue accretive M&A.
Timothy S. Duncan: But what's not in this guidance is specific capital related to our T. Lcs business now we're proud of being a first mover there and we're proud of the portfolio. We built I think we disclosed in earlier calls we had a capital raise process and what we found out is that through that process. It presented optionality. So we can really think about it.
Timothy S. Duncan: Full strategic alternatives process, and we're going to explore that as well.
Timothy S. Duncan: And we're going to explore that as well. You know, I think this really comes through in prioritizing capital allocation around free cash flow generation in the upstream business in 2025. So, as we turn to page four, and before we turn our attention to 2024, let's talk about the quarter we had in the fourth quarter of 2023. In the fourth quarter, we produced 67.7 thousand barrels of equivalent daily production, that is 76% oil and 83% liquid.
Speaker Change: No I think this really comes through a bus prioritizing capital allocation around free cash flow generation in the upstream business in 2024.
Speaker Change: So as we turn to page four and before we turn our attention to 'twenty 'twenty four let's talk about the quarter. We had in the fourth quarter of 2023 in the fourth quarter. We produced 67 7000 barrels equivalent a day of production.
That is 76% oil and 83% liquids total corporate adjusted EBITDA was $249 million, but I should note. The upstream adjusted EBITDA was $260 million, leading to a net back EBITDA margin of approximately $42 a Boe.
Timothy S. Duncan: Total corporate adjusted EBITDA was $249 million, but I should note the upstream adjusted EBITDA was $260 million, leading to a net back EBITDA margin of approximately $42 per BOE. CapEx was $174 million, which is actually a little lighter than we expected, allowing us to generate $27 million of adjusted free cash flow. As I mentioned earlier, we exited the year at one times 11.
Speaker Change: Capex was 174 million, which is actually a little lighter than we expected, allowing us to generate $27 million of adjusted free cash flow as I mentioned earlier, we exited the year at one times Levered now.
Timothy S. Duncan: Now, as we start to think about 2024, and because we were able to bring on Venice and Lime Rock a little earlier than expected, we exited the year on the Talos side at around 75,000 barrels equivalent a day. Now, as we pull in on quarter north and think about what that business was doing, both those businesses combined in January were producing 106,000 barrels equivalent a day. And I want to anchor that as I hand it over to Sergio later to talk about our production. So moving to page five, let's talk about Venice and Lime Rock and why we think it's such an important reflection of our strategy. You've got an image of the facility on the left, and again, it's really one of the anchor facilities in that part of the Gulf of Mexico. But as you shift the story to the right, and you look at the graph, what you see is kind of the strategy in action. First and foremost, the dashed curve represents what we underwrote in the transaction.
Speaker Change: Now as we start to think about 2024, and because we were able to bring on Venice, and lime rock a little earlier than expected we exited the year on the tallo side and around 75000 barrels equivalent a day now as we pull in quarter, North and think about what that business was doing both those businesses combined in January we're producing 106000 barrel.
Speaker Change: Equivalent a day and I want to anchor that as I hand, it over to Sergio later to talk about our production guidance.
Sergio: So I'm moving to page five let's talk about finished and lime rock and why we think it's such an important reflection of our strategy you've got an image of the facility on the left and again, it's really one of the anchor facilities in that part of the Gulf of Mexico, but as you shift the story to the right and you look at the graph what you see as kind of the strategy and action first and foremost the dashboard.
Sergio: Presents what we underwrote in the transaction from there the team was able to work on asset management projects, we were able to track some third party volumes into the facility, but more importantly, we were looking for drilling inventory and drilling inventory effort manifested in our ability to pull in Venice, and lime rock and the exciting part about that is what you see in the yellow on the far right side.
Timothy S. Duncan: From there, the team was able to work on asset management projects. For example, we were able to track some third-party volumes into the facility. But more importantly, we were looking for drilling inventory, and that drilling inventory effort manifested in our ability to pull in Venice and Lime Rock. And the exciting part about that is what you see in the yellow on the far right side of the graph. That is the impact of that Venice and Lime Rock production.
The graph that is the impact of that finished in line production and what we're noting in what we talked about in our release is this facility will now see the highest oil.
Timothy S. Duncan: And what we're noting and what we talked about in our release is this facility will now see the highest oil volumes in production through this facility than it's seen over the last 15 years. Now, let's turn to page six and go through the quarter north transaction. This is a slide many of you have seen on the call we did related to the transaction, and we'll start on the right side of the page. These assets should produce approximately 30,000 barrels of equivalent a day in 2024, keeping in mind that we expect to close this deal in the month of March, and what we're guiding here is nine months of production. It's 75% oil-weighted and over 95% operated.
Sergio: Oil volumes in production through this facility then it seen over the last 15 years.
Sergio: Let's turn to page six and go through the quarter North transaction.
Sergio: This is a slide many of you have seen on the call. We did related to the transaction and we'll start on the right side of the page. These assets should produce approximately 30000 barrels equivalent a day in 2020 for keeping in mind do we expect to close this deal in the month of March and what we're guiding here is nine months of production at 75% oil weighted in over 95% operated grateful.
Timothy S. Duncan: It's a great fit operationally and strategically, and it's a highly accretive transaction. One of the reasons it's a creative transaction is because we think it'll lower our corporate base decline, and that's influenced by Katmai's success. We also think we can unlock $50 million of annual synergy. We think it's going to be long-term creative and credit-enhancing. And we think there's a good portfolio of prospects, again, anchored by CAPMI and a lot of the assets they have in the Mississippi Canyon core area for us. If we move to page seven, we get to visually see how these assets lay over. So our acreage is in blue, and the quarter north acreage is in gold.
Sergio: Operationally and strategically and it's a highly accretive transaction one of the reasons. It's accretive it's because we think it will lower our corporate base decline and that's influenced by kept my success. We also think we can unlock $50 million of annual synergies.
Sergio: We think it's going to long term be credit accretive and credit enhancing and we think theres a good portfolio of prospects again anchored by katmai and a lot of the assets. They have in the Mississippi Canyon core area for us.
Sergio: Yeah.
Sergio: If we move to page seven lead to visually see how these assets layover. So our acreage is in blue and the corridor North corridor North acreage is in gold you can see keep facilities for both sides and so what you see here is a culmination again of the strategy. We have a lot of key infrastructure, it's oil weighted theres a lot of seismic.
Timothy S. Duncan: You can see key facilities for both sides. And so what you see here is a culmination, again, of the strategy. We have a lot of key infrastructure. It's oil weighted.
Timothy S. Duncan: There's a lot of seismic and a lot of acreage. In fact, if you look at the right side of the page, when you put the companies together, it's over 216 million barrels of approved equivalent reserves with a total approved value of over five billion dollars. In fact, just the PDP value alone at SEC prices is four point two billion dollars. As we continue to aggregate acreage, we find ourselves now as the fifth largest operator in the Gulf of Mexico, and the fourth largest by acreage. We think that puts us in a great position to execute the strategy that we believe in. So let's go to slide eight.
Sergio: And a lot of acreage.
Sergio: If you look at the right side of the page when you put the companies together, it's over 216 million barrels of proved equivalent reserves with a total proved value of over $5 billion. In fact, just the PDP value alone at FCC prices is $4 $2 billion.
Sergio: As we continue to aggregate acreage, we find ourselves now being the fifth largest operator in the Gulf of Mexico, and the fourth largest by acreage we think that puts us in a great position to execute the strategy that we believe it.
Sergio: So let's go to slide eight and before I talk about the capital program for the year I want to start and reminded the earlier comments that with nine months of owning quarter, nor do we expect to increase year over year production by 35% to 40%.
Timothy S. Duncan: And before I talk about the capital program for the year, I want to start and remind you of the earlier comments that, with nine months of owning Quarter North, we expect to increase year-over-year production by 35 to 40%. And if we think about that in a similar price environment, we think about a similar increase in our revenue generation as well. But yet, our CapEx for 2024 is expected to go down. If we isolated upstream CapEx alone, that would be lower than that guy; the midpoint of that guy would be lower than we were in 2023.
Sergio: And if we think about that in a similar price environment, we think about a similar increase in our revenue generation as well, but yet our capex for 'twenty 'twenty four we expect to go down if we isolate it upstream capex alone that would be lower than that guide the midpoint of that guide would be lower than we were in 2023, if we look at P&A and decommissioning guidance that we expect to be materially lower than we.
Timothy S. Duncan: And if we look at P&A and decommissioning guidance, we expect to be materially lower than we were in 2023, and we hope that's aided by a recent joint venture with Helix that helps us have more cost efficiencies in our P&A capital program. If we think about that on a reinvestment rate basis, what we're talking about is 45 to 50% if we're excluding P&A in the upstream business, 55 to 60% if we're including P&A. Again, we'll spend more time talking about the drilling program.
Sergio: We were in 2023, and we hope that is aided by our recent joint venture with helix. It helps us have more cost efficiencies in our PNA Cabinet program. If we think about that on a reinvestment rate. What we're talking about is 45% to 50%. If we're excluding PAA in the upstream business, 55% to 60%, if we're including P&A again, what we'll spend more time.
Sergio: Talking about the drilling program as always we have a robust asset management program and we're certainly going to lean in and think about new seismic expenditures with all the new acreage, we're getting through the quarter North transaction.
Timothy S. Duncan: As always, we have a robust asset management program, and we're certainly going to lean in and think about new seismic expenditures with all the new acreage we're getting through the Quarter North transaction. So let's go to page nine and dig into the capital program and look at our RIG program. You've got a nice mix and range of risk and reward, some development projects, including the Lobster Water Flood. We have some exploitation ideas, including what we're doing at Helms Deep and what we're doing at Ewing Bank 953 on a non-operated basis. And then we have the Daenerys Project, which is a high impact prospect that, if successful, has a 100 to 300 million barrel type of target. So to dive into more details and related to guidance, I'm going to hand it over to Sergio. Thanks, Tim. Good morning, everyone.
Sergio: So let's go to page nine and dig into the capital program and look at our rig program.
Sergio: <unk> got a nice mix in range of risk and reward some development projects, including the lobster waterflood, we have some exploitation ideas, including what we're doing at Helms deep in what we're doing at Ewing Bank 953 on a non operated basis and then we have the <unk> project, which is a high impact prospect that if successful has 100 to 300 million barrel type.
Sergio: Target range.
Sergio: So to dive into more details in related to guidance I'm going to hand, it over to Sergio.
Sergio: Thanks, Tim Good morning, everyone and thank you for joining our call. This morning.
Sergio L. Maiworm: And thank you for joining our call this morning. Turning to page 10 of the presentation, we are very pleased with the financing transactions that we executed earlier this year. We refinanced our old bonds and raised additional capital to close on the quarter north acquisition at very attractive rates. We've moved our maturities out of 2026 and moved them all over to 2029 and 2031. That was a significant process that we went through, and we're very pleased with the results. At the bottom right of the page, I just wanted to highlight one thing.
Sergio: Turning to page 10 of the presentation. We are very pleased with the financing transactions that we executed earlier this year.
Sergio: We refinance our old bonds and raised additional capital to close on the quarter North acquisition at very attractive rates, we've moved our maturities out of 'twenty 'twenty six and moved them all over to 2029 and 2031 that was a significant process that we went through and we're very pleased with the results.
Sergio: On the bottom right of the page I just wanted to highlight one thing we're very pleased with attracting and ultimately seen a large fundamental investor grow their position into the company. That's an investor that truly believes in the strategy of the company. The strong fundamentals that we have and the management team's ability to.
Sergio L. Maiworm: We're very pleased with attracting and ultimately seeing a large fundamental investor grow their position in the company. That's an investor that truly believes in the strategy of the company, the strong fundamentals that we have, and the management team's ability to execute on that strategy. So we're pretty happy with that. Overall, we feel like we have a very clean capital structure with very long data maturities and an attractive coupon associated with that capital structure that's going to serve us well going into the future. Turning over to page 11, I want to talk a little bit about how we thought about our production guidance for 2024. There are a few moving parts, so we decided to kind of take a more detailed approach to how we guide production this year.
To execute on that strategy. So we're pretty happy with that overall, we feel like we have a very clean capital structure with very long dated maturities and an attractive coupon associated with that capital structure, that's going to serve us well going into the future.
Sergio: Turning over to page 11, I wanted to talk a little bit about how we thought about our production guidance for 2024.
Sergio: A few moving pieces, so we decided to kind of take a more detailed approach to how we got production. This year as you can see here on the far left side on a pro forma basis. The combined business can consistently produce well above 100000 barrels of oil equivalent per day and on the right side. We show that January was actually.
Sergio L. Maiworm: As you can see here on the far left side, on a pro forma basis, the combined business can consistently produce well above 100,000 barrels of oil equivalent per day. And on the right side, we show that January was actually in that range, and February looks like it's going to be in that range as well. But because there's some partial contribution of quarter north and a few planned maintenance projects in 2024, we felt it was important to actually walk you through how we arrived at the ultimate guided range that we're estimating for this year. So, quickly looking at or walking through that waterfall chart.
Sergio: That range in February it looks like it's going to be in that range as well, but because there's some partial year contribution of quarter North and a few planned maintenance projects. In 2024, we felt was important to actually walk you through how we arrived at the ultimate guided range that we're that we're estimating for this year.
Sergio: So quickly looking at or walking through that waterfall chart. So we think the business can consistently run between 105 to 110000 barrels a day and you deduct some of that production for the for the part of the year that we will not have a contribution quarter north you deduct a certain portion of what we know.
Sergio L. Maiworm: So we think the business can consistently run between 105 and 110,000 barrels a day. And you deduct some of that production for the part of the year that we will not have a contribution for quarter north. You deduct a certain portion of what we know we're not going to be producing because we have some maintenance projects ongoing. And we're also accounting for some weather-related issues and some potential third-party downtimes that we don't have visibility as of now, but they may happen there. So that leads us to an 87 to 93,000 barrels of oil equivalent per day in 2024.
Sergio: So we're not going to be producing because we have some maintenance projects are ongoing and we're also accounting for some.
Sergio: Some weather related issues and some potential third party downtime that we don't have visibility.
Sergio: As of now, but it may happen in there so that leaves us to 187% to 93000 barrels of oil equivalent per day.
Sergio: And the Ah in 2024.
Sergio L. Maiworm: On page 12, we're going to discuss our financial guidance for 2024 in a little bit more detail. As Tim alluded to earlier on the call, our production in 2024 represents a 35 to 40% growth compared to last year, or capital expenditures represent a reduction compared to 2023. Those are key metrics that will allow us to generate a significant amount of free cash flow in 2024 and ultimately allow us to pay down debt of approximately $400 million this year. So going into a little bit more detail, let's start with production. As we saw on the last slide, we expect production to be between 87 and 93,000 barrels of oil equivalent per day, which is roughly 70 to 72% oil and 80% liquids.
Sergio: On page 12, we're going to discuss our operational and financial guidance for 'twenty, 'twenty, four and a little bit more detail.
Sergio: As Tim alluded to earlier on the call our production in 'twenty four represents a 35% to 40% growth compared to last year, where our capital expenditures represents a reduction compared to 2023. Those are key metrics that will allow us to generate a significant amount of free cash flow in 2024 and <unk>.
Sergio: Ultimately allow us to pay down debt of approximately $400 million throughout this year.
Speaker Change: So going into a little bit of more detail, let's start with production as we saw on the last slide we expect production to be between 87, and 93000 barrels of oil equivalent per day, which is roughly 70% to 72% oil and 80% liquids that is a very attractive commodity makes for tablets.
Sergio L. Maiworm: That is a very attractive commodity mix for Talos. On the cash operating expenses of $505 to $525 million, that includes approximately $15 million of HB1 one-time expenses related to the dry dock that starts now in March. The workovers that we have highlighted here, those are activities that will increase production throughout the year, so we think that this is actually a very good investment that Talos should make, and that only represents $45 to $55 million. And although these are production-enhancing activities, they're not capitalized; they're going to be expensed this year, so that's why we're breaking it down this way. On the G&A side, it's $100 million to $110 million, that includes a realization of all of the synergies that we expected from the NVEN transaction and a partial realization of the synergies that we expect from the Quarter North transaction, reminding everybody that the full realization of the synergies related to Quarter North will only occur at the end of the year. As I said before, our upstream capital expenditures of $565 Our P&A and decommissioning cost of $90 million to $100 million in 2024 is a reduction compared to what we spent in 2023.
Speaker Change: On the cash operating expenses of $505 million to $525 million that includes approximately $15 million of HB. One one time expenses related to the dry dock that starts now in March.
Speaker Change: The workovers that we have highlighted here those are activities that will increase production throughout the year. So we think that this is actually a very good investments. That's how this should make it not only represents $45 million to $55 million and although these are production enhancing activities theyre not capitalized we're gonna be did.
Speaker Change: They're going to be expense. This year, that's why we're breaking it down this way on the G&A side, it's $100 million to a $110 million that includes a realization of all of the synergies that we expected from the end Ven transaction and a partial realization of the synergies that we expect from the quarter North transaction.
Speaker Change: Reminding everybody that the full realization of the synergies related to quarter North as we only expect that to to occur at the end of the year.
Speaker Change: As I said before our upstream capital expenditures of $5 $65 million to $595 million represents a significant reduction to what we actually spend in 2023, even on a pro forma basis in 2024.
Speaker Change: Our PNA and decommissioning cost of 990000 to sorry, 90 million to $100 million in 2024 is a reduction to what we spent in 'twenty three.
Sergio L. Maiworm: And if you can remember, in 2023, there was a lot of non-operated activity that we were not expecting that caught us by surprise. This year, we expect to have much more control over that spending, so we feel good about this estimate this year. The interest expense of $175 to $185 million already assumes material debt paid down throughout the year, as we talked about earlier.
Speaker Change: You can remember in 'twenty three there were a lot of non operated activity that we were not expecting that caught us by surprise. This year, we expect to have much more control over that spending so feel good about this estimate this year.
The interest expense of $175 million to $185 million already assumes the material debt paid down throughout the year as we talked about earlier move.
Sergio L. Maiworm: Moving over to page 13, I'll turn that back over to Tim, so he can walk you through all of the capital allocation priorities for this year. Thanks, Sergio.
Speaker Change: Moving over to page 13, I will turn it back over to Tim. So he can walk you through all of the capital allocation priorities for this year.
Timothy S. Duncan: And I think by now, it's pretty clear what our priorities are. I mean, our first and foremost priority is to generate a significant amount of free cash flow. And our belief is that the increased scale that we achieve through the quarter north transaction, which also increases our oil-weighted portfolio that we believe has high net back margins coupled with a reduced capital program is going to achieve that goal of generating significant free cash flow. Now, what's interesting about that is we believe that most of the debt we actually utilize in the transaction gets paid back in the first nine months of owning the assets. It should also generate a very competitive free cash flow yield across E&P.
Timothy S. Duncan: Sergio and I think by now it's pretty clear what our priorities are I mean, our first and foremost priority is to generate a significant amount of free cash flow and our belief is the increased scale that we achieved through the quarter, nor transaction, which also increases our oil weighted portfolio that we believe have high netback margins with coupled with reduced capital program is going to achieve that.
Timothy S. Duncan: All of generating significant free cash flow now what's interesting about that.
Timothy S. Duncan: We believe that most of the debt we actually utilize into transaction gets paid back in the first nine months of owning the asset should also generate a very competitive free cash flow yield across the E&P space, we're still investing in the assets, though and we believe we've got the right mix of development and exploration in our portfolio to generate good organic value and we're not going to change our ambition to keep.
Operator: We're still investing in the assets, though, and we believe we've got the right mix of development and exploration in our portfolio to generate good organic value, and we're not going to change our ambition and keep our eye on the ball with respect to finding more accretive M&A deals. So with that, I'll hand it over to you for questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone.
Speaker Change: Our eye on the ball with respect to finding more accretive M&A deals so with that I'll hand, it over for questions.
Speaker Change: 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 if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Nathaniel David Pendleton: If you're using a speakerphone, please pick up your handset before pressing. If at any time your question has been answered and you would like to withdraw your call, please press star, then two. Our first question comes from Nate Pendleton with Stifel. Please go ahead. Good morning and congratulations on the strong quarter. Unknown Speaker Understand that you are somewhat limited in what you can say about the process for TLCS.
Speaker Change: Our first question comes from Nate Pendleton with Stifel. Please go ahead.
Nathaniel David Pendleton: Good morning, and congrats on the strong quarter.
Nathaniel David Pendleton: Thanks, I understanding that right.
Nathaniel David Pendleton: Somewhat limited in what you can say about the process for T. L. C. S. Can you provide some context around what drove you to change the nature of that capital raise and with some potential outcomes would be yes.
Timothy S. Duncan: Can you provide some context around what drove you to change the nature of that capital raise and what some potential outcomes would be? Yeah, sure, Nate, and happy to answer that. And thanks for asking. You know, I think it was a convergence of a convergence of a couple events.
Nathaniel David Pendleton: Yes.
Speaker Change: Sure Nate and happy to answer that and thanks for thanks for the question you know I think it was a conversion of a convergence of a couple of events I mean, I think as we mentioned on the remarks as we started the capital raise process and we've mentioned this I think on previous calls that interest level is certainly there for private capital, but really there on the strategic side and it really opened up.
Timothy S. Duncan: I mean, I think what we mentioned in the remarks, as we started the capital raise process, and we've mentioned this, I think, on previous calls, that the interest level was certainly there for private capital, but really there on the strategic side. And it really opened up, you know, kind of the optionality of what this process could look like. And so put that over on one side.
Speaker Change: Kind of the Optionality of what this process could look like and so put that over on one side and then in the middle of this we wrapped up this quarter North transaction and I would tell you. We have we think we have a very accretive free cash flow.
Timothy S. Duncan: And then, in the middle of this, we wrapped up this quarter's North transaction. And I will tell you, we think we have a very creative free cash flow, generative transaction, and we talked about it on the call. The very last statement I made is one that I'm honing in on where, really, we have an opportunity, if you think about that transaction as a 50-50 debt and equity transaction, some ability to pay back the majority of that debt in the first nine months of owning that asset. So as that TLCS business grows, its capital requirements are going to grow. And we have to really think about how we prioritize capital allocation. And I think we want to prioritize that for free cash flow generation within the upstream business. We have a process that has expanded its optionality, and we should probably take advantage of what that looks like. And so I think it's just, again, two different events on two different sides of the house, if you will, between the businesses.
Speaker Change: Generative transaction and we talked about it on the call. The very last statement I made is one that I'm honing in on where really we have an opportunity. If you think about that transaction is a 50 50 debt equity some ability to pay back the majority of that debt in the first nine months of owning that asset so.
Speaker Change: As that T. Lcs business grows the capital requirement is going to grow and we have to really think about how do we prioritize capital allocation and I think we want to prioritize that on free cash flow generation within the upstream business. We have a process that expanded its optionality and we should probably take advantage of what that looks like and so I think it's just again two different events on two different sides of the house.
Speaker Change: If you will between the businesses, we're super excited about the portfolio. We built we're proud of being a first mover. We also think there's a significant amount of interest on companies that have a little lower cost of capital to withstand some of the capital requirement. So capital allocation priority decision and I think it's the right window, we'll see where the process leads.
Timothy S. Duncan: We're super excited about the portfolio we built. We're proud of being a first mover. We also think there's a significant amount of interest in companies that have a little lower cost of capital to withstand some of the capital requirements. So capital allocation, priority decision, and I think it's the right one, and we'll see where the process leads.
Speaker Change: Got it thanks, and with the activity outlined on slide nine and the Workovers do you have plan how should we think about the production trajectory during the year end 2024 exit rate.
Timothy S. Duncan: Thanks. And with the activity outlined on slide nine and the workovers you have planned, how should we think about the projection trajectory during the year and the 2024 exit rate? Well, you know, I think, yeah, once we saw a couple things on that, I mean, I saw in one of the notes that the cash costs are going up a little bit. And certainly, when you include these workovers, it looks like it's $1.50 kind of on a BOE basis in cash costs. I would say, as Sergio said in his remarks, these are PV additive type projects; they happen to be encompassed in the same crude reserves, which is why they land on the expense side and not the capital side. But it's good.
Speaker Change: Well you know I think yeah. Once we so a couple of things on that I mean I saw in one of the notes.
The idea of the cash cost are going up a little bit and certainly when you include these workovers. It looks like it's $1 50 kind of on a BOE basis, the cash costs I would say as Sergio said in his remarks. These are PV additives type of projects they happen to be encompassed in the same proved reserves, which is why they land on the expense side and not the capital side.
Timothy S. Duncan: It's a good investment, and I think it's something that we wanted to line up. And we're using some of the Helix vessels to do that.
Speaker Change: But it's good it's a good investment and I think it's something that we wanted the lineup, but we're using some of the helix vessels to do that.
Timothy S. Duncan: You know, you're going to have I think what we tried to do in our guidance is really lay out where we end up with respect to, you know, kind of some downtime that we're going to do related to some planned maintenance and repairs, and some weather risking. Certainly, as we exit the year, we could exit, you know, as we bring these assets in, you know, we could actually be relatively flat to where we are today. We have some new wells that are coming online in the first half of next year. So when you get in the next year, that's where you start to think about CAP my enhancements as we start to think about sunspear coming in.
Speaker Change: You're going to have I think what we tried to do on our guidance is really lay out you know where we end up with respect to you know kind of some downtime that we're gonna do related to some planned maintenance and repairs some weather risking.
Speaker Change: Certainly we as we exited the year, we could exit as we bring these assets in.
Speaker Change: We could actually probably relatively flat to where we are today, we have some new wells that are coming online in the first half of next year. So when you get into next year, that's where you start to think about cat My enhancements, that's where you start to think about Sun spear coming in so I think this is a year and keep in mind, we've got pretty low reinvestment rate here and so you're talking about non P&A reinvestment.
Timothy S. Duncan: So I think this is a year, and keep in mind, we've got a pretty low reinvestment rate here. And so you're talking about non-P&A reinvestment between 4550. So if we can run these assets relatively flat to where they are today, see some increase in the first half of next year with some of these new projects coming online with that level of reinvestment rate, that level of free cash flow generation, I think we're in a pretty good spot. Absolutely. Thanks for taking my question. The next question comes from Michael Scialla with Stevens. Please go ahead. Good morning, guys. Stand on that table you have on page nine.
Speaker Change: Between $45 50, so if we can run these assets relatively flat to where they are today see some increase in the first half of next year with some of these new projects coming online with that level of reinvestment rate that level of free cash flow generation I think we're in a pretty good spot.
Speaker Change: Absolutely thanks for taking my questions.
Speaker Change: The next question comes from Michael <unk> with Stephens. Please go ahead.
Michael: Hey, good morning, guys.
Michael: On the people you have on page nine you're going to be go into four deepwater rigs in the second half of this year.
Michael Stephen Scialla: You're going to be going to four deepwater rigs in the second half of this year, versus none in the first half. I realize a couple of those are not up yet. Tim, you talked last quarter about the rig market being pretty tight. Are you anticipating better availability and better pricing in the second half? Just trying to get a sense of whether the timing of some of these prospects could move around, depending on how the rig market develops? Yeah, I love the question, Michael. I think if I said, yeah, I expect it to go down, I've had three CEOs call me and say, hell, no, I'm not saying that, you know, so and, you know, but look, so let's just look at that slide just for a second. If you look at Katmai West, Helms Deep, and Daenerys, that's one rig line, just so you understand which one that is
Michael: None in the first half realized a couple of those are non op.
Michael: Tim you talked last quarter about the rig market being pretty tight are you anticipating a.
Timothy S. Duncan: Better availability and better pricing in the second half and just trying to get a sense of could the timing of some of these.
Timothy S. Duncan: Prospects move around depending on how the rig market develops yeah I love. The question, Michael I think if I said, yeah I expect it to go down if it had three Ceos called me said Hell no I'm, not saying that you know so.
Timothy S. Duncan: And you know, but look I. So let's just look at that slide just for a second if you look at Katmai Wes Helms deepened. The nearest that's one rig line. Just so you understand what you want that is so that's one rig line and so then Ewing bank as a separate non operated opportunity and we have an opportunity to potentially take on another rig as we think about the completions.
Timothy S. Duncan: So that's one rig line. And then Ewing Bank is a separate non-operated opportunity, and we have an opportunity to potentially take on another rig as we think about the completion of Katmai West and the completion of Sunspear. So there's a little bit of where the market is. There's some optionality we have. We potentially could push that to the right and utilize a different rig line. So just to make sure we're on the same page, we're not taking on four rigs, certainly not operated. We have a platform rig.
Timothy S. Duncan: Of Cat my West into completion for Sun spear, So there's a little bit of where is the market. There's some optionality. We have we potentially could push that to the right and utilize a different rig lines. So just to make sure. We're on the same page were not taken on four rigs certainly operated where we have a platform rig we have one deepwater rig commitment another deepwater rig option. So.
Timothy S. Duncan: We have one deep water rig commitment and another deep water rig option, so I think we're in a good spot there. You know, look, I think the rigs are at a pretty high price relative to where we are from a commodity perspective. I think that relationship when rig inflation was happening and when commodity markets were fairly constructive, and they're still fairly constructive, but are they constructive enough for where rig rates are? It's one of the reasons we haven't entered into any long-term contracts, and we're still committed to not doing that for a company our size.
Timothy S. Duncan: We're in a good spot there.
Speaker Change: You know look I think the rigs are at a pretty high price relative to where we are from a commodity perspective, I think that relationship when the rig inflation was happening and when you had commodity markets being fairly constructive and they are still fairly constructive but are they constructive enough to where rig rates are it's one of the reasons. We haven't entered into any long term contracts and we're still committed to not doing.
Speaker Change: That for a company our size I mean, we've talked about that Michael and detail on what I think it's important for companies in the Gulf of Mexico that are our size, even as we aspire to be a bigger company, making sure. We understand how we think about obligations and so you know a big two year rig obligation doesn't makes sense for us. So we're playing in different types of windows, but we I think I'm happy with the Windows.
Timothy S. Duncan: We've talked about that, Michael, in detail about what I think it's important for companies in the Gulf of Mexico that are our size, even as we aspire to be a bigger company, making sure we understand how we think about obligations. So, you know, a big two-year rig obligation doesn't make sense for us. So we're playing in different types of windows, but I think I'm happy with the windows we've created to execute the program this year. That sounds good.
Speaker Change: Created to execute the program this year.
It sounds good.
Timothy S. Duncan: You talked about Sunspear and Katamai contributing to production next year. Are there any other of these prospects that could contribute to realizing Daenerys, and it looks like Helms Deep or, probably fairly long dated. I'm not sure about Ewing 953 or any of those potentially going to contribute next year. So Helm's Deep and Ewing Bank are the classics, you know; think about those like Venice, Lime Rock, and Sunspear, good exploitation, you know, similar to field pays in the area broadly, and it's going to require new subsea infrastructure. So those won't contribute next year. But this lobster water flood is an interesting one.
Speaker Change: You talked about.
Speaker Change: <unk> spearing kept my.
Speaker Change: Contributing to production next year.
Speaker Change: Are there any other of these prospects that could contribute to realize generic.
Speaker Change: It looks like Helms deeper.
Speaker Change: Probably fairly long dated Oh, I'm not sure about Ewing nine ships do you have any of those potentially going to contribute next year. So helps deepen Union bank or those classic you know think about those like Ventas lime rock and Sun spear. Good exploitation, you know similar to field pays in the area broadly and it's gonna have required new subsea infrastructure. So.
Speaker Change: Those won't contribute next year. This lobster waterflood is an interesting one so that's borne out of the dump flood success that we had in the Phoenix area as we owned the lobster assets now for a year and the team really examined every pay zone. There is a big producer in the field, it's got a large wet sand.
Timothy S. Duncan: So that's born out of the dump flood success that we had in the Phoenix area as we own the lobster assets now for a year, and the team really examined every pay zone. There is a big producer in the field that's got a large wet sand right in the column that we think we can utilize to do another one of these, quote, dump flood type of water flood projects. You don't get a response from that, you know, in the first couple of two, three months; you start to get a response from that as you get into the nine month, 12 month, 15 month market.
Speaker Change: Right in the column that we think we can utilize to do another one of these quote dumped blood type of waterflood projects you don't get response from that you know in the first two three months you start to get response from that as you get into the nine month 12 month 15 months markets I think we could see increased production from the lobster field.
Timothy S. Duncan: So I think we can see increased production from the lobster field in 2024, excuse me, five times that amount as well because of the project that we're initiating this year. Great, appreciate that. All right, got it. The next question comes from Jeff Robertson with Water Tower Research. Please go ahead. Thanks. Good morning, Tim.
Speaker Change: In 2024, excuse me five as well because of the project that we're initiating this year.
Speaker Change: Yeah.
Speaker Change: Great I appreciate that alright got it.
Speaker Change: The next question comes from Jeff Robertson with water Tower Research. Please go ahead.
Jeffrey Woolf Robertson: Thanks, Good morning, Tim.
Jeffrey Woolf Robertson: With the types of acreage trades that Talos was able to accomplish in 2023, does that tell you anything about the investment environment in the Gulf of Mexico as you look at 2024 and potentially even 2025 with the type of free cash flow you anticipate? Well, I'll make sure I understand the question. I'll try to answer where I think I heard Jeff, and I didn't make sure you ask it again.
With the types of acreage trades that tell us was able to accomplish in 2023 does that tell you anything about the investment environment in the Gulf of Mexico.
Jeffrey Woolf Robertson: You look at 2024 and potentially even 2025 with the type of free cash flow you anticipate.
Jeffrey Woolf Robertson: Yeah.
Well I'll make sure I understand the question I'll try to answer answer where I think I heard Jeff and I Didnt make sure you ask it again, but I think what you see in some of these trades is a is a better job I think of the operator group in the Gulf of Mexico trying to make sure they're maximizing the value of your acreage and there's no doubt the pace of lease sale should slow down there is alicia on the fourth.
Timothy S. Duncan: But I think what you see in some of these trades is a better job, I think, of the operator group in the Gulf of Mexico trying to make sure they're maximizing the value of their acreage. And there's no doubt the pace of lease sales has slowed down. But there was a lease sale in the fourth quarter.
Timothy S. Duncan: We were an active participant in that. As they slow down, and as we all try to develop inventory for the coming years, you have to think more broadly about how we do more business development to make sure we're all pulling our best inventory forward. And so, you know, there's still capital that wants to work in the Gulf of Mexico. And there's even new capital that's come into the Gulf of Mexico, which is interesting from a drilling program perspective. How can that capital go to work?
Jeffrey Woolf Robertson: We were an active participant in that as they slow down and as we all try to develop inventory for the outer years, you have to think more broadly about how do we do more business development to make sure. We're all pulling our best inventory forward and so you know there is still capital that wants to work in the Gulf of Mexico, and there's even new capital that's come into the Gulf of Mexico interesting from a drilling program perspective, how can that cap.
Timothy S. Duncan: And how can we make sure we're all being efficient? And so I think these three announcements we made, in the fourth quarter, and I think into the first quarter, are reflective of operators trying to do a better job really making sure they've got depth in inventory, as they think about 25 through 30, if you will. And these trades will all help build that depth. And so just a straight prospect swap, an acreage swap, is pretty interesting with BP, Chevron, and Hess. They're all different.
Jeffrey Woolf Robertson: We'll go to work and how can we make sure we're all being efficient as well.
Jeffrey Woolf Robertson: These three announcements we made in.
Jeffrey Woolf Robertson: In the fourth quarter and I think into the first quarter are reflective of operators trying to do a better job really making sure they've got depth in inventory as they think about 25 through 30. If you will in these trades will all help build that depth and so just a straight prospects swap and acreage swaps pretty interesting with BP and Chevron. It has they're all different the repsol one is really focused.
Timothy S. Duncan: The Repsol one is really focused on new sizes, making new reprocessing around our Neptune facility. And then the lease sales, that normal activity. And I think we had a map in that press release, and a lot of those leases are right by a couple of our facilities and reflective of our strategy of utilizing our infrastructure. So I think it's really about inventory enhancement and inventory development in a situation where you don't have the pace of lease sales that we used to do. We've got a huge acreage position and we've got to figure out how to monetize that the best way possible. Has the promotion cost of the cost of doing these types of trades or the cost of getting in to prospects changed much in the last year with the absence of lease sales? No, it hasn't.
Jeffrey Woolf Robertson: On new seismic and new reprocessing around our Neptune facility.
Jeffrey Woolf Robertson: And then the lease sales that normal activity and I think we had a map in that press release and a lot of those leases are right by a couple of our facilities and reflective of our strategy of utilizing our infrastructure. So I think it's really about inventory enhancement and inventory development in a situation where you don't have the pace of lease sales at <unk> that we used to do we've got a huge acreage position.
Jeffrey Woolf Robertson: Got to figure out how to monetize that the best way possible.
Jeffrey Woolf Robertson: How does the <unk>.
Jeffrey Woolf Robertson: Maybe the.
Jeffrey Woolf Robertson: Promote cost or the cost of doing these types of trades or the cost of getting in to prospects has that changed much in the last year with the absence of lease sales.
Speaker Change: No no. It hasn't you know typically it's gone down I mean for us the big just because of the level of competition has gone down.
Timothy S. Duncan: Typically, it's gone down. I mean, for us, just because the level of competition has gone down, the cost of entry on a lot of these leases has gone down. So I think it's not reflective of cost.
Speaker Change: The cost of entry on a lot of these leases has gone down. So I think it's not I think it's not reflective of cost I don't think these trades are really about kind of swapping opportunities and making sure everyone's got a depth of opportunities and there are some urgency around that but there is not as large of a promote market as there was when there were simply more activity and more participants.
Timothy S. Duncan: I don't think these trades are really about kind of swapping opportunities and making sure everyone's got a depth of opportunities. And there's some urgency around that. But there's not as large of a promising market as there was when there was simply more activity and more participants, you know, and more competition for these ideas.
Speaker Change: You know a more competition for these ideas I think we've narrowed the basin down to a group of players that are here for the long haul that are focused on inventory development of figuring out how to try to benefit from each other's inventory more than they are trying to figure out how to benefit other trade specifically.
Timothy S. Duncan: I think we've narrowed the basin down to a group of players that are here for the long haul that are focused on inventory development or figuring out how to try to benefit from each other's inventory more than they are trying to figure out how to benefit from a trade specifically. Thanks. Just a question on the guidance, Sergio, the planned downtime with HP One is that I presume that's going to be mostly a second quarter of 24 impact. That's right, Jeff.
Thanks, and just a question on the guidance Sergio the planned downtime with H P. One is that I presume that is going to be mostly a <unk>.
Speaker Change: Second quarter of 'twenty for impact.
Sergio: That's right Jeff It starts in March so theres going to be an impact in the first quarter as well, but it's mostly going to impact second quarter.
Sergio L. Maiworm: It starts in March, so there's going to be an impact in the first quarter as well, but it's mostly going to impact the second quarter. Thank you. Jeff, if you're ever moseying your way down to Galveston in the second quarter, and you're driving down Broadway on your way to the beach, just look left.
Thank you.
Speaker Change: Jeff if you're ever Moseley were way down to Galveston, and the second quarter and you're driving down Broadway on your way to the beach just looked left.
Timothy S. Duncan: Thank you. The next question comes from Tim Rezvan with KeyBank Capital Markets. Please go ahead.
Speaker Change: [laughter]. Thank you.
Speaker Change: Yes.
Speaker Change: The next question comes from Tim Redfin with Keybanc capital markets. Please go ahead.
Timothy A. Rezvan: Good morning, folks. Thanks for taking my questions. Tim, you know, the $400 million debt reduction is a big number. It really sort of validates this acquisition. I was a little surprised there was no commentary on repurchases, you know, with a portion of that free cash flow. So I was curious if you could maybe kind of reflect the board's thoughts on repurchases. I know you've been willing to do it in the past, with shares where they are today. I thought we might see some allocation there. So just any comments would be helpful.
Timothy A. Rezvan: Hey, good morning folks thanks for taking my questions.
Timothy A. Rezvan: Tim you know that the 400 million debt reduction is a big number really sort of validates. This acquisition I was a little surprised there was no commentary.
Timothy A. Rezvan: With purchases with a portion of that free cash flow. So I was curious if you could.
Timothy A. Rezvan: Maybe kind of reflect sort of the boards thoughts on repurchases I know you've been willing to do it in the past with.
Timothy A. Rezvan: Shares where they are today.
Tim: Thought we might see some allocation there so just any comments would be helpful.
Timothy S. Duncan: Yeah, look, I'll provide some comments, and Sergio can provide some comments. You know, we did those under a 10b18, and they were opportunistic at the time. I think, you know, doing something more prescriptive in that when you're really trying to prioritize free cashflow generation and debt repayment isn't probably the right move, as we thought about that, both at a management and a board level. Can we always continue to do some opportunistic things? We had a $100 million program out there; we used 52. But I don't want to guide you to that that's a priority.
Speaker Change: Yeah look I'll provide some comments as Sergio can provide some comments you know we did those under <unk> 18, and they're opportunistic at the time I think you know doing something more prescriptive in that when you're really trying to prioritize free cash flow generation and debt repayment isn't probably the right move as we thought about that both as a management and board level. You know I think can we always continue to do some opportunistic.
Speaker Change: Things, we had $100 million program out there we used 52, but I don't want to guide to that did that as a priority I think our absolute priority is making sure. We you know when you do a transaction like this making sure you know you spend those first nine to 12 months getting that balance sheet right back to where you had it and I think that's just is probably we can have for right now and then look we are happy with our <unk>.
Timothy S. Duncan: I think our absolute priority is making sure we, you know, when you do a transaction like this, make sure you spend those first nine to 12 months getting that balance sheet right back to where you had it. And I think that's just the highest priority we can have for right now. And then, look, we are happy with our program. Although the reinvestment rate is lower, we like reinvesting in the business. But we've reserved the right to always be opportunistic. I think just from a pure prioritization standpoint, debt repayment is it.
Speaker Change: Program, although the reinvestment rate is lower we like reinvesting in the business, but we reserve the right to always be opportunistic I think just from a pure prioritization standpoint debt repayment is it.
Timothy A. Rezvan: Okay, yeah, that makes sense. Thanks. And then, as a follow-up, I noticed in the release and in the presentation not a lot of commentary on Zama. We've heard from Pemex recently that they are pushing development. I'm curious if you can give us any update on what your understanding of that timeline is today. Yeah, look, I think it's a project that I'm always hesitant about how to guide because it just had so many delays. But I know, and I know it's frustrating for people following the company. And I can promise you, it's frustrating for me.
Okay, Yeah that makes sense.
Speaker Change: And then just my follow up I noticed in the release and the presentation not a lot of commentary on Zama, we heard from Pemex recently that they are pushing development.
Speaker Change: 2020 for 2025.
Speaker Change: Curious if you could give us any update on what your understanding is that that timeline is today.
Speaker Change: Look I think it's a project that I'm always hesitant to guide it because its just had somebody delays, but I you know and I know, it's frustrating for for people. Following the company and I can promise you. Its frustrating for me, but I would say the project is in a better spot. This is a project that we were operating then obviously Pemex is operating and we were trying to make sure we had a spot of influence with.
Timothy S. Duncan: But I would say the project's in a better spot. You know, this is a project that we were operating on, then, obviously, Pemex was operating on it. And we were trying to make sure we had a spot of influence within that structure. And it's not a secret that we were working hard on how to create that influence. You know, now we have Grupo Carzo in there helping as well. And they bring a certain level of expertise; they're an enormous industrial player in the Mexico sector.
Speaker Change: That structure.
Speaker Change: And it's not a secret that we were working hard on how to create that influence know now we have Grupo carso and theyre, helping as well and they bring a certain level of expertise that is an enormous industrial player.
Speaker Change: In the Mexico sectors. So I think this has to do with really.
Timothy S. Duncan: So I think this has to do with really getting the right plan in place and looking at the optionality within that plan. Some of the engineering design work has taken a little longer, but it's at a point of effort to get it right. And I'm okay with that, you know, and I'm okay with, and I certainly am thrilled with the partner that we brought in, and Talos Mexico, as a co-owner of that business, is that subsidiary in Grupo Carzo. So it's delayed, but I think it's delayed for the right reasons. I think it's delayed for the benefit of the project, but I don't love it.
Speaker Change: Getting the right plan in place and looking at the Optionality within that plan. Some of the engineering design work has taken a little longer but it's at a place of effort to get it right and I'm, Okay with that you know and I'm, Okay with and I certainly am thrilled with the partner that we brought in and tell US Mexico as a co owner of that business as that subsidiary and Grupo Carso, So it's delayed but I.
Speaker Change: It's delayed for the right reasons and I think it's the late for the benefit of the project I don't love It and I think we've actually got a couple of other options that we're looking at but I think it will yield the best results and so you know again and I look at a year honestly, what I'm trying to generate as much free cash flow as I can and show the market that these Gulf of Mexico companies can be significant free cash flow yield players you know putting.
Timothy S. Duncan: And I think we've actually got a couple other options that we're looking at, but I think this will yield the best result. And so, you know, again, and look at a year, honestly, where I'm trying to generate as much free cash flow as I can and show the market that these Gulf of Mexico companies can be significant free cash flow yield players. You know, putting, you know, taking a little more time to get it right, it's probably okay as well. Okay, so no CapEx this year. There's some CapEx. Look, there's some real work happening. There's some real engineering design work. There's still an outside chance this could move in a little bit into 24.
You know, taking a little more time to get it right is probably okay as well.
Speaker Change: Okay. So no capex this year so there's.
Speaker Change: There's some capex look theres some real work happening there's some real engineering design work Theres still an outside chance this could move in a little bit into 'twenty four but I don't think we have to guide a material amount of Capex and I think that's what you saw in the breakdown of our guidance.
Timothy S. Duncan: But I don't think we have to guide a material amount of CapEx. And I think that's what you saw in the breakdown of our guide. Okay, I appreciate the call. Thank you. You got it.
Speaker Change: Okay I appreciate the color. Thank you.
Speaker Change: Got it.
Operator: The next question comes from Jeff Robertson with Water Tower Research; please go ahead. Thanks, Tim. Just a question on TLCS.
Speaker Change: The next question comes from Jeff Robertson with water Tower Research. Please go ahead.
Jeffrey Woolf Robertson: Tim just a question on TLC S are there any regulatory hurdles that might be cleared in the next six to nine months that would impact the.
Jeffrey Woolf Robertson: Are there any regulatory hurdles that might be cleared in the next six to nine months that would impact the type of evaluation that the strategic alternative process could generate? I don't I don't think there are. There are a couple general regulatory discussions related to any potential M&A, but I you know, I don't think we have that here, Robin.
Jeffrey Woolf Robertson: The type of evaluation that the strategic alternative process could generate.
Tim: I don't I don't think there are there's a couple of general regulatory discussions related to any potential M&A, but you know I don't think we have that here, but robin can you think of any yeah. Just the main updates we provided last quarter with that we've got submitted permit right our harvest and project in Eastern Louisiana.
Robin H. Fielder: Yeah, Jeff, the main updates we provided last quarter were that we've got submitted permits over at our harvest bin project in East Louisiana for three wells and our White Castle project that were deemed administratively complete by the EPA late last year. Since then, the state of Louisiana has received primacy, so they now have jurisdiction over those permits. And so they're now sitting with the state regulatory body, the Louisiana Department of Energy and Natural Resources. Looking at it, they've got all the applications out on their website, and so we're pleased with that process and look forward to moving in. So that's all been positive. And then operationally, as you know, by event partner.
For three wells in our white capital projects that were deemed administratively complete by the EPA late last year and since then the state of Louisiana has received primacy and so they now have jurisdiction over that is permanent and so they're now sitting with the state regulatory body, the Louisiana Department of energy and natural resources.
Tim: It is now looking at it and they've got all the applications on their website.
Tim: And so we're pleased with that process and look forward to moving into a technical review and discussions with them.
Tim: So that's all been positive and then operationally as you know we're drilling a couple of wells there with her by your bank partners in that project, Yeah. I mean, I think operationally the business is moving really at its fastest pace ever I would tell you you know it both from the Bayou been perspective in the well that we're drilling there one of the first offshore dedicated injection wells right off the coast.
Robin H. Fielder: Yeah, I mean, operationally, the business is moving really at its fastest pace ever, I would tell you, you know, and both from a buy you've been perspective in the well that we're drilling there, one of the first offshore dedicated injection wells right off the coast of Jefferson County, Chevron's teeing up to drill some wells onshore, we have the permits progressing in Louisiana, and we have primacy in Louisiana So there's a lot of positive movement, which, of course, I think led to that optionality as well. So I don't want to dismiss the fact that that business is moving at full pace. But I can't answer your question. I can't pick up the top of my head.
Tim: Jefferson County, Chevron's teeing up to drill some wells onshore we have the permits progressing in Louisiana, we are promising in Louisiana. So theres a lot of positive movement, which of course, I think led to that optionality as well. So I don't want to dismiss the fact that that that business is moving at a full pace, but to answer your question I can't think off the top my head of regulatory hurdles.
Timothy S. Duncan: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Tim Duncan for any closing remarks. Yeah, thanks.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Tim Duncan for any closing remarks.
Timothy S. Duncan: Look, the team's worked really hard over the last three months, and I want to applaud them for their efforts and thank them for their efforts. I think, you know, hooking up two wells with a full subsidy development from Discovery to First Oil in 13 months is a really big effort, and I'm proud of them, and I'm proud of that execution. They did it safely and without incident. Meanwhile, our business development team is putting together joint ventures. They're going to impact how we think about our inventory levels from 25 through 28 and 29. And then, obviously, we're super happy with what we did in the Cordon Roar transaction and how accretive that will be for our shareholders. So, I have made a lot of effort in the last 90 days.
Timothy S. Duncan: Yeah. Thanks look the teams worked really hard over the last three months and I want applaud them for their efforts and thank them for their efforts I think you know hooking up two wells with a full subsea development from discovery to first oil and 13 months is a really big effort in and I'm proud of them and I'm proud of that execution. They did it safely without incident at the same time our business development.
Timothy S. Duncan: Putting together Jv's theyre going to impact how we think about our inventory and 25 through 28 29, and then obviously, we're super happy with what we did in the quarter North transaction and how accretive that will be for our shareholders. So a lot of effort in the last 90 days.
Operator: We might have ruined a couple of holidays, but I appreciate how hard this team works, and I want to take a moment to acknowledge them. We hope that this is going to be a year where you see a lot of impact on what these announcements have for the business, and we look forward to chatting with you all on future calls. So, thanks for joining us. Our conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Timothy S. Duncan: Modern ruin a couple of holidays, but I'd I appreciate how hard this team works I want to take a moment to acknowledge them. We hope that this is going to be a year, where you see a lot of impact on what these announcements have for the business and we look forward to chatting with those with you all on future calls so thanks for joining.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.