Q1 2025 Talos Energy Inc Earnings Call
Speaker Change: Good morning ladies and gentlemen and welcome to the Talos Energy First Quarter 2025 earnings conference call. At this time all lines are in listen only mode. Following the presentation we will conduct a question and answer session.
Speaker Change: If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, May 6, 2025. I will now like to turn the conference over to Clay Jeansonne. Please go ahead.
Clay Jeansonne: Thank you operator, good morning everyone, and welcome to our first quarter 2025 earnings conference call. Joining me today to discuss our results are Paul Goodfellow, President and Chief Executive Officer, and Sergio Maiworm, Executive Vice President and Chief Financial Officer.
Clay Jeansonne: For our prepared remarks, please refer to our first quarter 2025 earnings presentation that is available on Talos' website under the investors section. For a more detailed look at our results and operations update.
Clay Jeansonne: Before we start, I'd like to remind you that our remarks will include forward-looking statements subject to various cautionary statements identified in our presentation and earnings release.
Clay Jeansonne: Actual results may differ materially from those contemplated by the company. Factors that could cause these results to differ materially are set forth in yesterday's press release, and are formed 10Q for the period ending March 31st, 2025, filed with the SEC.
Clay Jeansonne: Forward-looking statements are based on assumptions as of today, and we undertake no obligations to update these statements as a result of new information or future events.
Clay Jeansonne: During this call, we may present GAP and non-GAAP financial measures. A reconciliation of certain non-GAAP to GAAP measures is included in yesterday's press release, which was furnished with our form 8K filed with the FCC and is available on our website.
Paul Goodfellow: and now I'd like to turn the call over to Paul. [inaudible]
Paul Goodfellow: Thank you, Clay. Good morning, everyone and thank you for joining us on our call today. I'd like to begin with some remarks on our financial and operational results for the course of.
Paul Goodfellow: Following that, I will hand the call over to Sergio, who will provide a more detailed overview of our financial performance and guidance. Finally, I'll conclude with some closing thoughts before opening the call to Q&A.
Sergio Maiworm: I want to start by saying how honored I am to be here and join you off my first earnings call as Talos' CEO . Over the past two months, I've spent a lot of time connecting with our employees and stakeholders.
These conversations have been invaluable.
Sergio Maiworm: They've given me a deeper understanding of where we stand as a company, the challenges we face, and the opportunities ahead.
Sergio Maiworm: I've spent my entire career in the oil and gas industry with a particular focus on deep water operations.
Sergio Maiworm: With over 30 years of experience, getting the chance to lead a company like Talos presented an extraordinary and exciting opportunity.
Speaker Change: Calis has a solid asset based in the Gulf, along with a history of operational performance.
Speaker Change: However, what is stood out even more is the entrepreneurial culture and the sense of pride shared by Calus' is talented skilled workforce.
Speaker Change: It is something I noticed early on in my time here, and it is a fundamental strength that I intend to build on during my tenure.
Speaker Change: I'd like to thank our talist team for their warm welcome, sharing their perspectives and their hard work and dedication that delivered the strong results that we will discuss with you today.
Speaker Change: We're leveraging a unique culture, history and strengths, to enhance our assets and foster stronger relationships with both internal and external stakeholders. Thank you very much.
Speaker Change: By maintaining open communication and collaboration with stakeholders, employees, shareholders, analysts and partners, we gain valuable insights that drive progress and build on calluses is success.
Speaker Change: My goal is to take a very good company and make it great [inaudible]
Speaker Change: I believe great companies are built on continuous improvement. So I'm challenging our entire team to enhance efficiency and reduce costs across the board.
Speaker Change: I understand that you are eager for more details. Rest assured, I plan to present the full plan to you in the coming weeks.
Speaker Change: Now I'd like to address our strong first quarter result, starting with Slide 4.
Speaker Change: Our first quarter results demonstrate our continued focus on operational execution and consistent free cash flow generation.
Speaker Change: We're extremely proud that the first quarter marks our fifth consecutive quarter of record production.
This is also highlighted on slide 5.
Speaker Change: For the first quarter, we achieved production totaling 100.9 thousand barrels of oil equivalent per day, which was at the top end of our quarterly guidance range.
Speaker Change: The production was comprised of 68% oil and including the NGL barrels with 7J% liquids.
Speaker Change: We believe we have consistently ranked in the top quartile among public EMP companies in netback margins as shown on slide 6.
Speaker Change: Typically, these activities are better performed during the summer months despite potential weather disruptions.
Speaker Change: As planned, we anticipate an increase in plugging and abandonment expenditures throughout the reminder of the year.
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Speaker Change: After taking into account our capital expenditures and pointing an abandonment spending, which received record-free cash flow of $195 million for the Corsa.
Speaker Change: Given our robust free cash flow and the inherent value of our asset base, the board has approved an increase in our stock repurchase authorization to $200 million.
Speaker Change: We plan to execute the share repurchase plan for a structured, programmatic approach and we expect to allocate up to 50% of our annual free cash flow to share buybacks.
Speaker Change: A strong financial result enabled us to maintain our leverage ratio of 0.8.
Speaker Change: At the end of the quarter, we built our cash balance to approximately $203 million, while also repurchasing our shares and improved our liquidity to approximately $960 million.
Speaker Change: This positions as well to capitalise on opportunities that may arise in the current environment.
Speaker Change: Operation Lee, we continue to make real progress in our drilling program, finishing our completion operations on our Sunspir discovery, and starting completion operations on Katmai West number two.
Speaker Change: Moving to slide seven and eight, our 2025 drawing program is progressing as planned with significant progress across multiple projects.
Speaker Change: The teams from Talos and the West Vailer Drawship are working in close coordination which is helping to drive smooth and efficient operations.
Ensuring with me to our operational milestones.
Speaker Change: At the Sunspare Discovery, completion operations have concluded successfully. First production
Speaker Change: Similarly, completion activities are underway on the cat-my-west number two well and a nearing completion as planned.
First production is also expected by late-second quarter 2025.
Speaker Change: Production will flow back to Talos' 100% owned and operated Tarantula facility which is expected to be running at maximum capacity.
Speaker Change: Tullis Hall is a 50% working interest in and operates the Katmai field.
Speaker Change: Following this, we expect drilling operations for the high-impact Myosene Prospect Daenerys to start late second quarter 2025.
Speaker Change: We estimate it will take around 100 to 120 days to drill the well with results expected to make it meet to late third quarter 2025.
Speaker Change: Talos holds a third chair working in trust in as serves as the operator of Demaris.
Speaker Change: Additionally, our non-operated Ewing Bank 953 Discovery and Monument Project are advancing as planned as we continue making investments in ordering and procuring long lead equipment
Speaker Change: As previously announced, preliminary assessments for you in bank 953 indicate an estimated recoverable resource potential of approximately 15 to 25 million barrels of oil equivalent, which we believe should lead to a production flow rate of between 8 and 10,000 barrels of oil equivalent per day.
Speaker Change: The well will be a single-subsea tie-back to the Megalodon platform which tell us partially owns.
Speaker Change: Talos owns a 33% working interest in the well from Expect First Production by mid-2026.
Speaker Change: For our Monument Development Project, a large Will Cox oil discovery in the deep waters of the Gulf, we estimate proved and probable growth reserves of approximately 150 million barrels of oil, with products expected to tie back to the Shenandoah production facility.
Speaker Change: We expect to spot our first well at Monument by late fourth quarter 2025, with first production anticipated in late 2026.
Speaker Change: Talos has a significant acreage position in the lower war cocks trend, which we believe represents a growth opportunity for the company.
Speaker Change: In March, we increased our working interest in monument from 21.4% to just under 29.8%.
Speaker Change: Before handing over the call to Sergio, I want to reiterate my gratitude to all Talos employees for their continued efforts for reviving our success while upholding our values and keep priorities.
Safety, and Environmental Performance and Protection.
Speaker Change: proactive maintenance, and to upholding the highest operational standards here at Talos.
With that I'll now turn over the call to Sergio.
Thank you, Paul, and good morning, everyone!
Speaker Change: For my remarks, I'll touch on Talos' commitment to financial discipline and our ability to deliver value through our strong cash flow generation and the flexibility of our capital budget, especially in light of lower commodity prices.
Speaker Change: Additionally, I'll provide a review of our guidance and our commitment to maintaining a strong balance sheet and robust hedging positions. [inaudible]
Speaker Change: These efforts aim to support cash flow stability and enhance shareholder value.
Speaker Change: Let me begin by reaffirming our commitment to achieving our operational and financial objectives by focusing on discipline capital allocation and free cash flow generation.
Speaker Change: Looking at slide 10, we have a lot of flexibility in our budget for the second half of 2025, allowing us to adapt if oil prices decline further.
Speaker Change: Our confidence remains strong in the economic viability of the key projects we are advancing though.
Speaker Change: For instance, our upcoming projects are expected to be economic on average at approximately $35 per barrel of oil.
Speaker Change: These projects underscore Talos' resilience, flexibility, and depth of portfolio, even in a volatile commodity price environment.
Speaker Change: and there were position to balance short cycle and long cycle investments with robust returns aimed at delivering production positive free cash flow and a robust shareholder value.
Speaker Change: If oil prices deteriorate materially, we will consider postponing certain projects, but as of now, we're convinced the right approach is to continue to invest in these projects.
Speaker Change: They are very economic at current prices, but more importantly we need to think about this with a through the cycle prices approach.
Speaker Change: On slide 11, we reaffirm our operational and financial guidance for 2020-25.
Speaker Change: Regarding our capital expenditure's guidance, we maintain our investment of $500 to $540 million for the full year.
Speaker Change: In addition, we expect to execute between $100 and $120 million of PNA and decommissioning activities this year.
Speaker Change: Our capital program reflects a strategic balance between low risk development and higher risk with the potential of high reward exploration projects.
Speaker Change: Asset management efforts are focused on cost-efficient, high rates of return production additions and enhancements, as well as extending the operational lifespan of fields.
Speaker Change: Additionally, our ongoing geological, geophysical and land investments aim to refine and bolster our inventory.
Speaker Change: Capital spending in the first quarter came lower than anticipated due to several projects phasing into the second quarter.
Speaker Change: Looking ahead, we anticipate the second quarter will reflect the highest level of investment for the year driven by our high level of activity and the phasing of projects including some long lead items pushed to the second quarter as well as timing of certain projects.
Speaker Change: Turning to slight wealth, I want to briefly review how we think about a production guidance for 25.
Speaker Change: As an offshore operator, we have a number of things that can impact production guidance.
Speaker Change: While these activities will temporarily lower our production rates for the year as shown on slide 12,
Speaker Change: They are essential to ensuring the long-term safety, reliability and uptime of our assets.
Speaker Change: Additionally, we account for external factors, such as weather-related disruptions including hurricanes, an estimated potential unplanned down time affecting third-party facilities and pipelines of the U.S.
Speaker Change: Taking all of these considerations into account, we continue to expect production for 2025 to arrange between 90 and 95,000 barrels of oil equivalent per day, of which approximately 69% is expected to be oil and 79% liquids.
Speaker Change: As previously mentioned, the warmer months are the ideal times for various offshore activities, including preventative maintenance on our assets and tie back operations.
Speaker Change: Specifically, scheduled downtime will impact operations at Brutus for routine maintenance in that's a rancher la as we complete cap my west number two.
Speaker Change: Additionally, the Prince facility will have some downtime as we tie back the Sun Spear Discovery alongside other scheduled third party pipelines and maintenance projects.
Speaker Change: With that said, we expect our production for the second quarter will be between 92 and 96,000 barrels of oil equivalent per day.
Speaker Change: This range is a little wider than the one we provided for the first quarter, but that is a reflection of the increased levels of simultaneous operational activities we are expecting in the second quarter, and therefore the greater uncertainty associated with that increased activity.
Speaker Change: But to be sure, we have confidence in this range and we're very happy with how the base business is performing as well as how the very scenes are executing on their on their projects. [inaudible]
Speaker Change: As I mentioned, our approach emphasizes adaptability amid the current lower all price environments.
Speaker Change: Even at current price levels, we still expect to generate free cash flow for the full year. Our robust hedge positions over this timeline, as shown on slide 13, support our cash flow stability in a fluctuating commodity market.
Speaker Change: This enhances our ability to continue generating free cash flow for the year, even at oil prices in the low 40s per barrel.
Speaker Change: Approximately 42% of the projected balance of our 2025 oil production based on the midpoint of guidance is hedge at prices over $72 per barrel of oil.
Speaker Change: These hedges provide robust financial stability and support the 2025 Capital Program.
Speaker Change: Maintaining a strong balance sheet is paramount to our financial strategy, providing us with options and flexibility for long-term success.
Speaker Change: As shown on slide 14, our strong balance sheet includes no near term debt maturities and no borrowings on our credit facility.
Speaker Change: At the end of the first quarter, we had $203 million in cash contributing to a total liquidity of approximately $960 million.
Additionally, we maintain the leverage ratio of 0.8 times.
Speaker Change: We're committed to maintaining our strong balance sheet to help ensure we're prepared to capitalize on opportunities that may arise in the current low oil price environment.
Speaker Change: Our financial framework is built on a balanced, three-pronged approach that targets sustainable investments in the business in high-returning projects to maintain production through the cycle and create value for shareholders.
Speaker Change: Looking at slide 15, we focus on making strategic long term investments to cultivate a sustainable asset base that generates robust returns through the cycle, strengthening our balance sheet to prepare to capitalize on opportunities, and returning cash to shareholders.
Speaker Change: As Paul mentioned earlier, our board increased our share repurchase authorization to $200 million and we now expect to allocate up to 50% of our annual free cash flow to share buybacks in a programmatic approach.
Speaker Change: We believe our shares are significantly undervalued and repurchasing them, representing compelling use of capital.
Speaker Change: A reproach also reinforces our commitment to enhancing shareholder value while maintaining flexibility for future inorganic and organic growth opportunities.
Speaker Change: Maintaining the longevity and stability of Talos' base business remains a top priority for how we allocate our cash while also striving to maintain a robust balance sheet and generating meaningful free cash flow.
Paul Goodfellow: With that, I'll now turn it back to Paul for some additional closing comments.
Thanks, Sergio.
Paul Goodfellow: This quarter are a bust operational performance and financial discipline led to solid results.
Paul Goodfellow: Including record production levels of 100.9 thousand barrels of oil equivalent per day, a record EBITDA of $363 million, and record free cash flow of $195 million.
Paul Goodfellow: Our approach to valuation is built around making long-term investments to maintain a sustainable asset base that delivers strong returns through commodity cycles.
Paul Goodfellow: We are committed to strengthening our balance sheet to capitalise on the opportunities that may arise from the current environment while returning cash to our shareholders.
Paul Goodfellow: By focusing on capital discipline, operational excellence, and free cash flow generation, we have achieved some significant milestones that I believe we have laid a solid foundation for 2025 and beyond.
With us, we'll open the line for Q&A. Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear a prompt that your hand has been raised.
Paul Goodfellow: Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment please for your first question.
Speaker Change: Your first question comes from Greta Dreke, from Goldman Sachs, please go ahead.
Greta Drakey: Good morning and thank you for taking my questions and congratulations on the quarter. I wanted to first touch on your sharing purchase authorization increase. Can you speak to any tentative expectations around the timeline for deploying the current authorization outstanding or any other key factors influencing how you're thinking about the timing?
Sergio Maiworm: Hi, Greta, good morning. This is Sergio. Yeah, happy to answer that. So the plan is effective immediately. So we have the ability to execute on that outside of our blackout windows. Right. So we have the ability to execute on that immediately.
Speaker Change: Great. Thanks so much. And then for my second question, I just wanted to touch on maybe the second half of the year's flexibility in the current program. Is the flexibility just mostly the unnamed Gulf of America well you have listed on slide seven? And if current market expectations persist or worsen, do you expect any changes to non-operated project or capital expectations? Okay, thank you very much.
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Paul Goodfellow: Hey Greta, good morning, this is Paul. Look, I'd say that we've kept guidance flat given there are bus projects set that we have for the rest of 25 and going into 2026.
Paul Goodfellow: Now, we do have flexibility, probably after the level of about 20% of the totality of the CapEx budget that we are guiding for the year.
Paul Goodfellow: And we'll look at making those calls as we go into the second quarter.
Timothy Duncan: Dependent on how the macro develops and so it is more than just the unknown project that we have at the moment. There are other projects that we can look to postpone.
Timothy Duncan: The break evens of the project set that we have are incredibly robust and of course we need to look at that through the lens of this 12 to 18 month investment cycle but it actually takes before we generate cash flow from those projects.
Thank you [inaudible]
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Speaker Change: Your next question comes from Tim Rezvan from Keybank Capital Markets. Please go ahead.
Tim Resvan: Good morning folks, and thanks for taking my questions. I wanted to follow up on repurchases. They've been challenging for a lot of small capy and peas.
Speaker Change: and a bean sickle go without a lot of dry powder to buy it at trough. So, Paul, can you, or maybe Sergio, can you explain, when you say you're going to be programmatic, what does that mean?
Tim Resvan: and then when we look at that 50% of free cash flow level, is it your expectation that you would, you know, if the share price, you know, stays kind of in the current range, that you would sort of allocate that amount on an annual basis, just trying to get more color on, you know, timing and intensity. Thanks.
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Thank you for watching.
Thanks to, let me maybe start with that.
Tim Resvan: I think as we mentioned in the comments, balancing, investing in the business,
Tim Resvan: with having a strong balance sheet and actually returning cash to shareholders via a buyback program is really our focus and that's why we announced that we would return up to 50% of free cash flow per year.
Tim Resvan: I think it's in that that we talk about the programmatic effect so rather than just doing it as a one-off
We're actually looking.
Tim Resvan: forward to say, as we balance these three components of investing in the business,
Maintaining a Strong Balance Sheet
and actually returning cash to shareholders.
Tim Resvan: that we would look to return. That's the conversation agreement that we have with the board, hence the announcement of increasing the level up to $200 million and also announcing it as a programmatic approach that looks to return up to 50%.
on an annual basis.
Okay, thank you for that context.
Speaker Change: So Paul, kind of what do you think holistically is sort of the right, you know, debt load for this company?
Speaker Change: and then related to that, some of your debt is now trading closer than 90% of par.
Sergio Maiworm: So, how do you think about the right level of debt and maybe being opportunistic on debt reduction if you can kind of pick some debt off at a discount? Thank you.
Sergio Maiworm: I think we've said that it's important that we maintain a strong ballot sheet.
Sergio Maiworm: First, that is having leverage, you know, the way one, as we look at it over a period of time. That's the word that we've done to get the balance sheet in that strength and we will, you know, continue in that vein as we go forward. Again, balancing those three components of looking to invest in the business. [inaudible]
to maintain that free cash flow.
Maitraining the Strength of the Ballet Sheet. [inaudible]
and then looking to also return.
Cash to Shell,
All of us at the frame.
Sergio Maiworm: in which I think you should think about it. But let me hand over to Sergio, maybe to fill in some of the color. Yeah, thanks Paul. Tim, that's a good question. Look, we are, as Paul said, we're balancing all of those things, but...
Sergio Maiworm: from a total leverage or total debt load. We feel comfortable where we are. I think the business is doing really well, still generating free cash flow. So we're in a really good spot.
that much more.
Sergio Maiworm: But if there are opportunities to do so in a way that creates a better economic proposition for us, we will absolutely evaluate that.
Okay, thank you for the comments.
Speaker Change: Your next question comes from Nate Pendleton, Texas Capital. Please go ahead.
Thanks, right?
Speaker Change: With the softness and oil prices, are you seeing any deflation on the cost side or increased rig availability that could benefit investing through the cycle as you've mentioned previously? Yes, I am.
Good morning, nice to speak to you again.
Speaker Change: I would say it's early in the cycle at this point in time. You know, we're not seeing...
Speaker Change: Mass Reductions in terms of the price levels at this point. We do get indications that there is maybe some softness coming in the rig market for the second half of the year. But I think what's important is the fact that we have break even.
Speaker Change: Project in the 30s and 40s dollars of barrel that allows us to have robustness against the current price environment that we see. Now, clearly, if we stay at that level of price, we would
Speaker Change: The Service Sector in Totality, to maybe soften a little bit with…
Respect to prices.
But what's important, of course, is that we drive...
Speaker Change: as we have with the West Vellorig at the moment.
Speaker Change: versus just always going after, you know, the marginal dollar. And so, again, that is really the focus that we have looking at how do we drive down the cost.
Speaker Change: of the project and therefore the break evens in totality but clearly you know I think with the macro that's within the moments we would expect to see some softening as we continue into the second and third quarters of this year.
Speaker Change: Thanks, Paul. And referencing slide 15, you talk about having the balance sheet to capitalize on potential opportunities. Is there a cash on hand target that you're contemplating there? And how would you characterize the size of potential opportunities that you are looking to take advantage of? [inaudible]
Speaker Change: Hey Nate, this is Sergio. There's no target of cash balance on hand. I think as Paul mentioned and we've mentioned many times during the call is we're going to look to what is the best deployment of that cash. [inaudible]
Speaker Change: Whether that is investing in new organic opportunities, whether that is...
Speaker Change: Or whether that's some inorganic opportunity that we've seen in the market. All of those things are in consideration and we just have to look at the value that we can generate by doing that.
Got it. Thanks for taking my questions.
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Speaker Change: Hi, good morning, thanks for picking my questions and good luck to our session on one actually quite large.
Speaker Change: Thank you. My question is about L.O.E. I think L.O.E. has been low since 424 and we have started again in the 1st 425. So I just want to ask for this because of any one-time items. Is this going to be the runway moving forward for L.O.E.?
Thanks for the question.
We're having incredibly... [inaudible]
Speaker Change: that really searches after every dollar of efficiency and effectiveness that it can take out to the business. And that, I think, is what you're seeing.
Speaker Change: But as I said in my comments, the challenge that we have, and we've laid down to the organisation, is how do we drive continuous improvements and efficiency and how do we forge our own future of which one element of that will be how do we actually take
Cost and drive efficiency further into the business. [inaudible]
So I would expect...
Unknown Executive: at the type of run rate that we see the future that we see at the moment is what we continue to see in the future and clearly that is something that we will update about when we sort of roll out the broader strategic frame towards the back end of Q2.
Yeah, let's only hear about that.
Unknown Speaker 0
Unknown Executive: So the strategic frame that we're developing is progressing well. And as I just mentioned we will come and share that with the markets towards the end of the second quarter.
Unknown Executive: Clearly as part of that, Talos has shown that it can create significant value from both organic and inorganic activity and we will continue to look at both tracks for creative opportunities.
William Moss: and where that's from being active in lease sales to looking at how we can give a bolt-on type of
Speaker Change: Opportunities into the portfolio, as we did with the Monument Project, but always with the lens of what is the incremental or creative value that we can create through that.
Speaker Change: and so, yes, we will be looking at opportunities both within the Gulf and maybe outside the Gulf to actually further bolster the robustness of the company.
All right, thank you so much.
Speaker Change: Your next question comes from Michael Scialla from Stevens, please go ahead.
Speaker Change: More than everybody. Paul, you mentioned the 12 to 18 month cycle for most of your investments.
Speaker Change: With that in mind, I wanted to ask about the visibility you have on activity that could impact next year's production, and I know you mentioned...
Speaker Change: Ewing Bank should be online kind of mid-year and monument late in the year. Are there any other exploitation projects you're doing this year that could help keep production flat next year, or would you expect based on what you're seeing right now for production to decline? Yeah, that's right.
Speaker Change: So, I would say that the investment programme that we currently think about.
Speaker Change: For next year is probably in line with the levels that we are looking at today. We have a number of projects that are in the funnel that we'll need to actually think about bringing through to
Speaker Change: Maturity. And there are a number that are in the sort of exploration going into the exploitation phase, it would then add in to that. But that Michael is sort of work that is underway at the moment and we will build that as we go through the second and third quarters.
Speaker Change: Are any of those possible to shift toward natural gas versus oil given the outlook for the two commodities, or are they pretty well set on oil?
Yeah.
Speaker Change: We are probably a liquid-rich company. We have some projects that clearly have a higher proportion of gas, such as the Brutus, Wells that are performing incredibly well at the moment which is...
Speaker Change: that we've died is for the year. We will continue to look for robust projects.
Speaker Change: that have low brake evens where we can deploy our skills and that's almost irrespective of whether they are oil or gas given that you know this is a cyclical commodity market in which we work.
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One more if I could put in the...
Speaker Change: Bill, you've sold Zama, your interest there, way down. Looks like Pemex is contemplating monetizing at least a portion of their interest and maybe giving up operator ship altogether. Is there any interest in that given that you have a, looks like a distress cellar, especially if you could take over operator ship completely?
Speaker Change: We're very happy with the partnership that we have down in Mexico-Rezama at this point in time and we'll continue to work out project through to a potential investment decision later in the year.
Don't get burnt up, thank you.
Speaker Change: Your next question comes from Michael Furrow from Pickering Energy Partners, please go ahead.
Michael Furrow: Hey, good morning. Thanks for having me on and taking my questions.
Michael Furrow: Typically what we see with pullback and commodity prices, there's divergence between bid-ask spreads, which makes these an organic growth opportunities a bit more challenged with the current macro environment so . . .
Unknown Speaker
[inaudible]
Michael Franks, for joining.
Speaker Change: You know, I would say that it's not just a bad M&A.
It's about, what is the...
Michael Furrow: The cost at which we can develop all of the opportunities.
Michael Furrow: added value because of the way we can integrate those assets drive costs as capture synergies with the footprint that we have. Then we will absolutely look towards that. I would probably leave it at that at this point in time given that. [inaudible]
This market is probably just starting to evolve.
All right, great color. Appreciate it.
Speaker Change: Next I want to hit on the West Stella that rig seems to be performing at or above expectations.
Michael Furrow: You know, with completing the Katmai West, it would raise the plans to be mobilized to drill the Daenerys.
Michael Furrow: Upon successful drilling and completions there, what's on deck for that rig? And, you know, where is that rig in terms of its contract, and where does the company see that, see that rig involved next year?
Sergio Maiworm: Michael, this is Sergio. I'll start and Paul can provide additional comments if needed.
Sergio Maiworm: After that, I don't believe the rig has any additional contracts, so we still have the ability to extend that contract or sign a new contract with that.
Sergio Maiworm: That is also part of the broader opportunities in this lower commodity cycle. We may have better opportunities to lock in some differentiated rates.
Speaker Change: and differentiated service costs as well. So it's not just M&A as Paul mentioned, there's an ability to actually partner with some of the service providers as well and increase value through that. So, and the West Vella probably falls on that category as well. If you continue to see softness in the oil markets, we may have even better opportunities to continue to lock up their rig for longer periods of time. So, if you continue to see softness in the oil markets, we will continue to see softness in the oil markets.
Alright, thanks, that's great, I'll turn it back. [inaudible]
Thank you. Bye bye. Bye bye.
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Speaker Change: Your next question comes from Tara Kamen from JP Morgan. Please go ahead.
Speaker Change: Hi, good morning. This is Devon for TARC. Of the bucket that you have built into your production guidance for weather and unplanned down times, how much of that is specific to hurricane season and through Q and can you quantify any potential upside from if we have a more modest hurricane season and through Q.
Speaker Change: Yeah, let me start on that and talk and supplement the answer. Look, most of that is related to weather disruptions. Right, we have a couple of different buckets there and the bucket related to whether it's focused on hurricanes, potential loop currents, etc.
Speaker Change: Look, we have not even gotten into hurricane season yet, so I don't want to speculate on what's the potential upside. We tend to take a very conservative view on that, we tend to look at what's the average disruption we've had over the last few years, and we tend to bake that into our projections.
Speaker Change: is larger than what we expected. So I'll just leave it at that. There's still a lot to happen as we go into the second quarter and third quarter, which is where the biggest part of the hurricane season is.
Speaker Change: Let me just add maybe a comment on the maintenance and the turnaround component.
Speaker Change: So we do have a significant set of activities this year both in terms of the planned maintenance that we do and we...
Speaker Change: and we focus on that because that is what helps drive our uptime.
Speaker Change: towards the top quarter of the industry. In addition, we have some outages to take to tie in the Sunspir and cap my projects, which will happen later in a second.
Speaker Change: Quarter. And so, you know, we have significant sort of maintenance and shutdown activities related to Katmai, to Pompano, to Prince, to Brutus, and then some other third party related activities. Now
But again, so the way we're guiding that.
Speaker Change: I would say think about it as a midpoint that's based off sort of the current levels of performance that we've seen but clearly we will always be searching for ways to do that more effectively and to mitigate the risk of it taking longer than we planned.
I appreciate the color. Thank you.
Speaker Change: Your next question comes from Paul Diamond, from City, please go ahead [inaudible]
Thank you. Good morning. I'll finish taking the call.
Paul Diamond: I want to touch quickly on Katmai West 2 in Sunspir, both kind of tentatively aligned up for first oil end of this coming quarter. It's want to get an idea of like how much of that is built in the 92-96 guidance, I guess how we should be thinking about modeling up the timing of that.
Yeah, thanks, Paul.
Paul Diamond: and so, you know, for both of those, in our plan, we have...
Paul Diamond: We've built in to the plan that they will be on, sort of at the midpoint of the range that we are planning with the rates that we've shared in terms of the 8-10,000 miles away for some spirit.
Etc.
Paul Diamond: Now clearly with any new well, there is always a possibility of those well performing better but there's also a possibility of those well performing not quite as well as we expect.
Paul Diamond: from everything that we've seen at the moment. I would say that the guidance range we have given you for those is extremely robust, but clearly we will update you as we start to see those as well as come on and start their production journey.
https://otter.ai
Speaker Change: and you're still to appreciate the clarity. And just one quick one following up on our CTG. You mentioned that your parents pre-ordered well out on the horizon. Just wanted an idea if that was 25 or if that extended to 26 or any potential tariff induced inflationary pressures could start to bite at that point.
Speaker Change: Yeah, so because we have, you know, one of the things the differentiations that Talos has is that we do look to design our offshore and deep water wells in a standardized way.
Speaker Change: and so where we sit at the moment is the majority. [inaudible]
Speaker Change: of all of the OCTGs that we need for 25 and well into 2026.
Speaker Change: Actually, we have under our control and a purchase and therefore our exposure to tariff is minimal if you think about the well in totality because that part is taken care of.
Understood. I appreciate the clarity over there.
Thank you.
Speaker Change: Your next question comes from Noel Parks, from Tui Brothers, please go ahead.
Hi, good morning. Just had a couple.
Speaker Change: Paul, with your coming aboard and sort of taking a fresh look at the portfolio, I'm just thinking of what the last few years the company has grown a lot through acquisition and as a result the company has current size
Speaker Change: Just definitely has more resources to apply to the various prospects and I'm just wondering do you sort of see the ownership interest typical interest that? [inaudible]
Speaker Change: The company has been taking in projects or retaining in projects.
Speaker Change: as being about right now considering the strength of the balance, the benefits of higher interest as far as the higher impact on cash flow.
Speaker Change: General, look, I would say that the development of the GoFour strategy that we're working on is progressing well. As I mentioned, we'll look to come to yourselves at the back end of the second quarter, as I promised to do, and share that with sort of full colour.
Now, within that, we'll look at.
Speaker Change: The very time horizons in terms of how we think about it.
Speaker Change: how we drive for self-help within the near-term, how we look at opportunities in the mid-term as well as
Speaker Change: Part of that will be, how do we think about the risk return of the various sort of elements of the portfolio that we have? So clearly where we have...
Speaker Change: Great, thanks. Yeah, I was thinking of it partly in the context of just with the with the acquired assets, the track record to date has has been terrific as far as [inaudible]
[inaudible] just, just, [inaudible]
Speaker Change: in both the Explorator and in the development projects. So I just wonder if that meant that we're in a technology threshold where the average product is just somewhat less risky than we used to think of it as.
Speaker Change: but maybe one more comment on that. I think what it shows is the just tremendous capability that the organisation at Talos has to take us to integrate them and to create incremental value.
Speaker Change: because of the capabilities that we have. And I think that's probably the lens at which you should think about this. Thank you so much for your time.
Speaker Change: You know, I just talked about exploration before we are seeing more dollars going to the deep water in general and in particular even some . . .
Speaker Change: a little bit more exploratory work going on than we had for quite a while. So, just any thoughts or interests you that are on your radar screen?
Speaker Change: I am the deep water is an advantaged play segment in the energy complex in totality. It can give us, you know, advantage margins as well as sort of advantage carbon intensity, which is great.
Speaker Change: As part of the go forward strategy that we're working on, we're looking at the totality of the opportunities that lay in front of us from...
Organic Opportunities for Deeping Where We Are.
Speaker Change: to also looking at the global basins and where can we leverage our capabilities.
Speaker Change: to actually create incremental value and take advantage of opportunities that may exist there.
Speaker Change: and the totality of that. And we'll share the outcome of that as I've mentioned in the end of the second quarter.
Thank you. Bye. Bye.
Great. Thanks a lot.
Speaker Change: Your next question comes from Jeff Robertson from Water Tower Research. Please go ahead.
Thanks, good morning.
Jeff Robertson: Paul and Sergio have given the commentary around this strong liquidity position that Talos has. Can you talk about whether or not that's actually attracting M&A activity or prospects of people who recognize you position and want to come talk to you about either acquiring or partnering on prospects.
Thank you for watching.
Jeff Robertson: So, we're very happy with the liquidity position that we have and we're going to continue to look for opportunities to create value for the company using that liquidity, but on that I can't comment any further.
Jeff Robertson: Very happy with the acquisitions that we've made over the last two years. Each one of them set us in a course that is kind of led to where we are now with a very strong base production with really good and robust portfolio. So we're very happy with how those acquisitions.
Half-Performed, some of them... Uh...
Jeff Robertson: Some of the assets have really unlocked a really good upside potential for us, catmised a great example of that but there are others in the portfolio.
Jeff Robertson: So we feel like the inventory that we've acquired plus the inventory that Talos already had and the inventory that the team continues to generate [inaudible]
Speaker Change: is very attractive and as Paul said, very low breakeven prices and I think those two acquisitions have just bolstered that so we're very happy with the outcome of all of those.
Thank you.
Speaker Change: There are no further questions at the prime. I will now turn the call over to Paul Goodfellow, President and Chief Executive Officer. Please continue.
Speaker Change: Thank you Desiree and let me thank you all for joining us this morning for the interest that you've shown in Talos and your questions and we look forward to further engaging with you in the months ahead and again just a huge huge thanks for your time this morning.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect your lines.
Paul Goodfellow, Paul Goodfellow, Paul Goodfellow,