Q2 2025 Talos Energy Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the talus energy. Second 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.
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This call is being recorded on Thursday, August 7th, 2025.
I would now like to turn the conference over to Clay Johnson.
Please go ahead.
Thank you, operator. Good morning, everyone and Welcome to our second quarter 2025 earnings conference call.
Joining me today to discuss our results for Paul Goodfellow president, and chief executive officer and Greg, Babcock Vice President, Chief accounting officer and interim CFO.
For our prepared remarks, please refer to our second quarter 2025 earnings presentation, that is available on taluses website under the investor relations section. For a more detailed. Look at our results and operations update
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 actual results, May differ materially from those contemplated. By the company factors. That could cause these results to differ materially or set forth in yesterday's, press release and our form, 10 Q for the period ending June 30th 2025 filed with the SEC.
Before we 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 certain non-GAAP to GAAP measures is included in yesterday's press release, which was furnished with our Form 8-K filed with the SEC and is available on our website.
And now I'd like to turn the call over to Paul.
Thank you, clay. Good morning, everyone. And thanks for joining us on our call today.
I will begin today with some remarks and our financial and operational results for the course of
Following that, I will hand over to Greg who provide a brief overview of certain Financial items and guidance. Finally, I'll conclude this in closing thoughts before opening the call to Q&A.
It's been a very busy, but exciting five months since I joined Talos. A strong financial and operational result in the second quarter reflects early progress against our strategy and demonstrates our ability to deliver on our commitments.
As shown on, slide, 3 of today's presentation. Thales has a solid asset base and a proven history of strong operational performance. And we are, well, positioned to capitalize on growth opportunities across the Gulf.
We will continue to leverage our unique culture, history and strengths to enhance our Assets in short. As I highlighted, when I started my role is to take a very good company and make it great as we execute our strategy and become a leading Pure Play offshore EMP company.
Our focus is squarely on continuous Improvement.
Turning to slide 4 in June, we announced our enhanced corporate strategy designed to fuel our future. Through 3, strategic pillars focused on the near-term, midterm and long term to build Upon Our strong assets and further. Strengthen the organization.
First we focused on improving our business every day.
Focus on slide 7. But the key takeaway here is that we have identified and executing on initiatives. Designed to generate $100 million of additional free, cash flow annually, starting in 2026 with approximately 25 million in contributions. Anticipated by the end of 2025
Second, we'll grow production and cash flow through our continued focus on high-margin projects to further drive our profitability. We will focus on organic growth and will supplement that with disciplined evaluation of both acquisitions, as we demonstrated with the Monument project.
We will also maintain a strategic focus on the Gulf of America while evaluating opportunities. In other select conventional deep water basins as appropriate.
And third, we will build a portfolio with scale and Longevity by developing projects with significant reserves in the Gulf of America and other conventional basins that fit our technical capabilities. We Believe participation in Greenfield developments selectively, exploring for large resource potential and acquiring and developing projects with significant reserves and production will be key to our third strategic pillar.
Together executing against these pillars will enable us to build on our core competencies and to grow our cash flow per share and position Talus to create significant value for our shareholders.
Through our discipline Capital, allocation framework. We remain committed to financial discipline. When investing in our business, only pursuing selective accretive growth opportunities while maintaining a strong balance sheet and returning cash to shareholders.
Turning to our strong second-quarter results. Please see Slide 5 for a list of our accomplishments that will be discussed later in this call.
As I said earlier, we operate. Great Assets in great locations, but the driving force behind our continued, success Remains, the hard work and dedication of our talented Workforce.
The result was a strong second quarter across the board, that helped Drive our improved outlook for 2025.
In short, this team remains laser focused on best-in-class execution, to drive consistent free. Cash flow generation for support. Our long-term commitment to a consistent. Return of capital for our shareholders.
Simply put we delivered on our commitments, while prioritizing safety, and protecting the environment.
as highlighted on slide 6, second quarter production, averaged 93.3% barrels of oil equivalent per day with all making up to 69% of the total
Including ngls liquids, accounted for 77% of overall production.
We outperformed consensus estimates for adjusted ibida. Posting 294 million for the second quarter.
Our strong adjusted ebit performance was bolstered by cost. Savings associated with improving our business every day initiatives.
This equates to an adjusted ebit back margin of approximately 35 dollars per barrel of oil equivalent.
And Talus consistently ranks, the top quartile amongst public EMP companies in netback margins as shown in more detail. On slide, 9 continuing on slide 6. Our capex in the second quarter was 126 million and we spent an additional 29 million on plugging an abandonment or PNA activities.
After considering our Capital expenditures and PNA spending which achieved adjusted free cash flow of 99 million for the quarter.
During the second quarter, we repurchased 3.8 million shares for a cost of 33 million. Bringing total repurchases under the program to 100 million.
This fits squarely with our strategy of using up to 50% of our free cash flow to repurchase shares.
Despite repurchasing our shares, our continued strong financial results enabled us to continue strengthening the balance sheet by lowering our leverage ratio to 0.7 times and to grow our cash balance by 75% from the first quarter to some 357 million US dollars.
The result was an increase in liquidity to 1 billion. Keep in mind that we achieve these improvements in a volatile and decline in commodity price environment.
Turning to slide 7 as we discussed in mid June. I'm impressed with the capabilities and performance of our assets. Having said that we do believe and more importantly have identified and begun to execute on several significant opportunities to further, improve our ongoing cash flow.
These opportunities are included in our Target to collectively. Generate an additional $100 million in cash flow for the full year 2026 with a sustainable run rate, impact beyond that.
Enhancement. Commercial opportunities and general organizational improvements.
Realizing this expansive cash flow will require us to focus on how we use Capital efficiently across the organization deliver on high margin projects, realize commercial excellence, and improve an overall high performance culture.
All the while of course, ensuring we stay laser focused on safe and efficient operations. As shown on slide 8, we outline a high level breakdown of the opportunities. We're executing on to achieve our 100 million dollar annual run rate, target on the right side of the slide. We have a detailed list of projects underway to achieve our targets of $100 million of additional cash flow to date. We've executed on $8 million in savings and have a clear path to realize the 25 million in 2025 and our Target of $100 million in 2026. The Arnold PNA project is a strong example of our commitment to improving our business every day.
Originally budgeted at 52 million gross. This project was successfully completed for under 35 million of gross.
This achievement was made possible by assembling a multi-disciplinary team of experienced Talus employees, and fostering close collaboration with the contractor, who shared valuable lesson, learned from similar operations, the team, re-engineered the execution plan, minimizing unplanned downtime, and implementing batch processing across
Plus the 3 Wells to reduce vessel usage, which ultimately drove significant cost savings demonstrating the ability to do more with less.
Lessons Learned through this Collective process will clearly be applied in future projects. On the commercial front, our marketing team has improved oil and gas price realizations by leveraging. Our increased volumes and focusing on several initiatives, including direct sales to end users, extending contract, duration, and optimized Transportation strategies. We believe that this will lead to an uplift of approximately 5 million dollars per year in 2025 alone.
Within the organizational improvement work stream. We've simplified our entity structure to make it more efficient. Resulting in future cash tax savings.
As part of our margin Improvement strategy, thales has increased utilization of internal Resources by deploying company, personnel, and dedicated third-party vessels and helicopters to monitor select offshore unmanned facilities work. That was previously performed by contractors.
This transition reduces dependence on the service sector lowers, our operating cost and approves our, our overall operational efficiency.
I'm encouraged by the progress we've made, which reflects our strong performers culture, and the team's enthusiasm for this way of working.
As mentioned earlier, Talus consistently ranks, the top quartile amongst public EMP companies in their back margins.
Underscoring, the strength of our low-cost all weighted asset base. During the second quarter, we delivered on several major operational milestones.
As shown on slide 10, we've updated our drilling schedule for the second half of 2025 and the first half of 2026.
Our team continues to work closely, with the west villa crew, creating a high performance partnership, enabling smooth and efficient operations.
Due to the strong performance of the West Valor rig. Thales has extended its use through the first half of 2026,
The rig is scheduled to drill the card owner and CPM Wells followed by a third. Well, that is currently in the final stages of planning.
Additionally we've added the non-operated Manta raid Prospect to our portfolio with drilling scheduled to begin early in the new year.
Slide 11 lists a couple of our current projects and some of our second quarter accomplishments.
This includes initiation of production from our sunspear and cut my walls, the spotting of our Daenerys, well targeting the high impact, myosin Prospect with drilling results, expected in late, September and continued advancement of our Monument development project with our first Wells, targeted to spot in the fourth quarter of this year.
On slide 12. We take a closer look at the cap. My West number 2, well, which was placed on line late in the second quarter as per plan.
We delivered the project under budget and ahead of schedule total production from the cap. My West and East Fields is currently running at approximately 35,000 barrels gross of oil, equivalent per day and is expected to remain at that level for several years to come.
We currently have an active study underway to evaluate opportunities for increasing their time production, throughput at tarantula and as a reminder Talus holds a 50% working interest in and operates for cap. My field turning to slide 13 first production for the sunspear discovery was also bought online as planned late in the second quarter of this year.
Sunspear is tied back to the talus operated Prince platform. We hold a 48% working interest in sunspear.
Initial productive capacity is at the upper end of expectations although the well is still in the cleanup phase. We recently had to shut in the well due to the early failure of a surface control subsurface safety valve. Of course, we will do a full review with the manufacturer to determine the cause of the failure. Once we retrieve the valve and to help ensure this does not happen again.
To conduct these remedial operations. The West Valor rig will be mobilized to sunspear after the drilling of Daenerys with sunspear expected to be back online by the end of October of this year.
The cost to repair the safety valve and the estimated downtime will affect our annual production guidance by approximately 800 barrels of oil equivalent per day, both of which have been factored into our revised guidance.
While I won't get into a lot of details. Slice 25 through 26 in the appendix for the presentation, provide additional information on our Daenerys and Monument projects.
We began drilling operations on Daenerys late in the second quarter of this year drilling is progressing. Well and as planned and we estimate, it will take around 100 to 120 days to drill the well with results. Expected. Mid to late third quarter of this year, Talus holds a 30%, working interest in and serves as the operator of Daenerys.
Frank Monument project, a large Wilcox oil Discovery in the Gulf we expect to spread our first. Well at Monument by late, fourth quarter of this year with first production, anticipated in late 26th
in March, we increased our working interest in Monument from 21.4 to just under 29.8%
On slide 14. We highlight our continued strong, safety environmental performance which is closely aligned with our operational excellence. This reflects our team's commitment to rigorous Safety Systems, proactive, maintenance, and upholding the highest standards of care and performance across Talus.
With that, I'll now turn the call over to Greg.
Thank you, Paul, and good morning, everyone as Paul mentions, We performed very well in the second quarter. Exceeding consensus estimates on adjusted ibida and adjusted free cash flow. However, during the quarter, we recorded a non-cash impairment of 224 million related to the full cost ceiling tests under the FCC guidelines. As a reminder. This test primarily compares the net capitalized cost of our oil and gas properties to the present value of future. Net cash flows from our approved Reserve using a trailing 12-month pricing which we expect to continue lower in the third quarter of this year.
The impairment. This quarter was primarily driven by an accumulation of historical non-productive Capital expenditures, such as dry holes, that did not result in additions to proved Reserves.
Under the full cost method, these costs remain in the full cost pool and contribute to the ceiling test calculation regardless of technical success.
Turning to slide 15. We've made a modest adjustment to our 2025 capital budget. This reflects the modification of our drilling schedule. The addition of incremental work at sunspear and better than expected drilling efficiencies.
The net result is a reduction of approximately 10 million to the overall budget.
We now estimate full year Capital spending to range between 500 and 90 million and 650 million. We remain highly confident in the economic resilience of the key projects that were advancing which are estimated to break even at an average oil price of approximately $35 per barrel.
On slide 16. We provide updated guidance for the full year 2025 as well. As a first look at our expectations for the third quarter production.
We have reduced our operating expense guidance by 25 million driven primarily by early savings executed on or identified from our improving our business every day initiative. In short, we are enhancing our full year. Range of expectations to reflect the second quarter actual results combined with our full year outlook that includes increased production complemented by lower capital and operational spending.
Moderating in the fourth quarter.
On slide 17. We include a waterfall presentation, showing our methodology and how we arrived at production and guidance outlooks,
As an offshore operator, we have a number of things, both internally and externally that can impact production, guidance, such as maintenance turnaround and weather related disruptions, including hurricanes in estimated potential. Unplanned downtime affecting third-party facilities and Pipelines.
The good news is that due to our detailed planning and strong execution. We've reduced our plan downtime in the first half of 2025, which should more than offset the impact of the sunspear shut in.
Taking all considerations into account. We now expect production for 2025 to range between 91,000 and 95,000 barrels of oil equivalent per day.
Inclusive of potential hurricane, downtime and preventive maintenance. We expect our production for the third quarter to be between 86,000 and 90,000 barrels of oil, equivalent per day. Our hedge positions as shown on slide 18 support our cash flow stability in a fluctuating commodity Market.
During the second quarter we capitalize on oil price volatility to strengthen our hedge portfolio. Our current hedge portfolio for the second half of 2025. Reflects our typical approach to hurricane season. When we hedge at lower levels. The mark-to-market value of these hedge positions stood at 56 million as of June 30th.
Looking at slide 19 as Paul discussed in his comments. We focus on making strategic long-term Investments to cultivate and a sustainable asset base that generates robust returns through the cycle. Strengthening our balance sheet to prepare to capitalize on opportunities and growing the business through selective accretive expansion. Initiatives while consistently returning, cash to shareholders.
As shown on slide 20, our strong balance sheet provides us with options and flexibility for the long term success.
At the end of the second quarter, we had 357 million in cash. And a leverage ratio of only 0.7 times Talus. Recently completed its scheduled borrowing base redetermination resulting in a reduction from 800 million to 700 million in available borrowing capacity under the company's Bank. Credit facility, we are committed to maintaining our strong balance sheet to help. Ensure we are prepared to capitalize on opportunities that may arise in the current low oil price environment. Our financial framework is built on a balanced 3-pronged approach that targets sustainable investments in the business in high returning projects, to maintain production, through the cycle and create value for shareholders
On slide 21. We provide an update on our share repurchase program. The authorization for which is increased by our board to 200 million. The expectation is to allocate up to 50% of our annual free cash flow to share Buybacks in a programmatic approach.
We continue to execute on the program in the second quarter with purchases of $33 million for the period and $100 million cumulatively since the program's inception last year.
We continue to believe our Shares are significantly undervalued and repurchasing them represents a compelling use of capital with that. I will now turn it back to Paul for some additional closing comments. Thanks Greg in closing by continuing to focus on Capital discipline, operational excellence and free cash flow generation. We have achieved much success today in 2025 and have laid a solid foundation for the second half of the year and Beyond,
Our efforts have and will continue to squarely support our vision for Talus which is simple become a leading, Pure Play offshore, EMP company and capitalize on the increasing role of Shore and especially deep water is expected to play meeting the world's energy needs.
We Believe callus is in a unique position to capitalize on this opportunity and we look forward to keeping everyone appraised on our progress with that. We'll open the line for Q&A. Thank you.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
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When moment, please for your first question.
Your first question comes from Michael tiala of Stevens.
Your line is already open.
Hi, good morning. Um
Flow priorities. Now, with your leverage at 0.7 times. You have almost as much liquidity as as total debt.
Is there anything more you want to do with the balance sheet at this point or
Uh, do you think BuyBacks could increase going forward? Or are you saving some dry powder for for acquisition opportunities?
No. Thanks. Michael for the question. Good. Good morning to you. I mean, look, I would put it in the frame of the sort of capital discipline framework that we laid out, huh? Um, that is the lens that which we sort of look at, um, the company in totality. And so, how do we really sort of make sure that we're investing in the business? Um, today, um, whilst you know, maintaining strength of the balance sheet, um, returning cash to shareholders as we've spoke.
Spoken about. But also giving ourselves the options to actually um, add and growth for the company through accretive, or opportunities that we see either in the Gulf or in other bases around the world. And that's, that's exactly what we're doing. And, and, and yeah, that is a lens at which we will look at the as of the strength of the balance sheet, going forward and I, and Greg and the rest of the team here, want to make sure that we give ourselves, you know, the optionality such that as opportunities come along, we can actually um, look at those. Um, and if we do find that they sort of meet our requirements from, you know, being because of a creative to the business but also you know sort of fulfilling um,
The needs that we have in terms of being sort of adjacent to the to the skills that we have, then we have got the ability to do that and the ability to do that through various means either by using the strength of the balance sheet, um, first and foremost, or, you know, if if if, if we choose to go a different route by using, let's say data and so, you know, I'd say, um, we'll keep monitoring that. Um, we'll look at it through the, through the lens of the sort of strategy that we put in place and we sort of shared with you. Um, the middle of June, and I'm just sort of a very pleased with how the organization has sort of stepped stepped up and started sort of work along those sort of 3 straight pillars that we outlined.
I appreciate that detail. Uh, 1 to ask on on slide 10. You you did mention a few
I guess a couple at least uh new development projects and you also mentioned the uh you're hanging on to the the west villa. Um I wanted to uh ask you about that decision to maintain that rig and maybe if you could provide some some color on those new projects.
Yes. So again, you know, I say look at those projects through the sort of the lens of sort of capital framework that we laid out and and and you know that is all about investing in uh based business leveraging the strengths we have within the Gulf of America, making sure we bring forward. Um high value accretive projects within the portfolio and then execute them via a team. That is highly performance focused both both in terms of the execution of the project and in terms of doing it in a safe, environmentally friendly way. And I would say the west villa rig, um, in combination with the Talis team here has really shown, um, you know, an outstanding level of performance and an outstanding level of collaboration. And that's absolutely the type of partnership that, you know, we will continue to forge with the service sector to make sure that we are, you know, at sort of the top of the Benchmark when it comes to.
Execution. And so it was a fairly easy choice for us. When looking at how to sort of execute the the program as we go into 2026 to start with the basis of building off, the sort of great performance that we've had. Um, and I will say, you know, we've also been able to take advantage of a slight sort of softening in the rig markets. That's that the rate that we have for that rig is certainly below. Um the rate we were paying in the earlier part.
Lots of 2025 and, you know, and comes in now, just sort of south of the 400,000 a day Mark. So we saw a very pleased all around both with perspective of delivering on the capital framework that we have doing that. With a, you know, highly competent and highly performance focused rig team and then being able to do it at a a sort of a cost Advantage relative to where we were earlier in 20125.
Thank you, Paul.
Thanks. Thanks. Tim, Michael.
Your next question comes from Tim razan of Key Bank, Capital markets.
Your line is already open.
I want to say thank you for the, the granularity you provided on, on the cost savings. It's, uh, it's helpful and, and actually pretty impressive this early on. So thank you for that. Um, the first question I had, um, you know, there's been recent news about PMX, um, discussing using Zama to try to sort of resuscitate. Its domestic, you know, oil production levels.
at the same time there's been Market shatter about Talos, maybe resuming operator ship,
And then I, excuse me, on top of that, I noticed that you didn't close the cell down of of Zama interest in the second quarter. So it's a bit of a conspiracy, theorist question, but can you help us connect the dots and or maybe provide a a little bigger picture lens into anything that's happening uh with the Zama partners?
Sure, um, let me hand over to Greg to talk about the timing, and then I'll make a few comments on the broader question that you asked him.
Yeah, thanks Paul. I think we're we're looking at the timing we had to refile. Some paperwork around kind of changing control in the operator in Mexico, that paperwork was filed restarted, some of the clock. We, we certainly expect that transaction to close here. Toward the end of the of the third quarter from a timing perspective.
Thanks, Greg. I look Tim to the broader question. Um, no conspiracy theory the the partnership between sort of ourselves and harbor and castle. Of course, who, who, uh, invested in Talus make Mexico is incredibly strong and we, you know, are working with PMX 2.
Progress that project. Um we feel that the development concept can be somewhat um easier lower cost simpler than the wallet PMX is putting forward. And we work with PMX to try and make sure that we should develop that project in the most um, effective from a cost perspective, as well as a risk perspective, way that we can before we invest in that. And so, you know, and that is the work that we will, can can continue to do. Um, I think it's a positive that that, you know, some from some of the PMX and a country point of view that Zama is seen in 1 of the keys to the projects. Um, and we will continue to work with the partnership to to ensure that when we bring that project forward for FID, that it is, you know, in the most value, accretive way that we can.
Okay, I appreciate that update. I guess we'll have to stay tuned. Um, and then as my my follow-up, um, Paul you've been in the seat. Now, for 5 months, it's been 2 months since you, um, unrolled. Your, your strategic update. I was wondering if you could give a little more clarity on on any, um, acquisition targets. You're looking at, or just basically what what the state of the market is for, you know, deep water offshore and what you're seeing. Thank you.
No thanks Tim. I'll keep this sort of relatively short and so I'd say, look, I'm I'm not going to talk about specific opportunities that we're looking at. Um we are looking at, you know, a a number of
Opportunities both sort of within the Gulf of Mexico as well as on the international front. That's sort of made the criteria that we've laid out, and you know, both ones that are out in the market, um, as well as the ones that we've identified ourselves. We will clearly update you, um, as and if and when those progress.
I would say on the broader question, relative to sort of where, where, where the market is, we continue to see, you know, a lot of interest in deep water, which I think underpins, you know, our belief and my belief that we'll see, um, you know, more of a Resurgence of interest in offshore and deep water, as a way of sort of providing
High margin lower cost, low carbon intensity barrels into the Energy Mix. Um, I think so. Taluses. You know, positioned incredibly well, um, sort of take advantage of that both within the gulf, given the sort of incredibly strong, operating foot footprint and ability. We have to sort of capture, um, V volumes on a relatively short cycle basis, and then sort of leveraging that out into um, other sort of
Conventional basins. We're in the deep water theater and I've probably sort of leave my comments at that for now Tim but thank you for the question.
Thank you. I appreciate the comments.
Your next question comes from.
Newton Kumar of mizuho.
Your line is already open.
Hi. Good morning. Um, Paul and team, uh, thanks for taking my questions. I want to start off. Uh, the 1 big, beautiful bill. Um, I'm sure I'm getting the name wrong. Um,
Leases in, in the Gulf of Mexico and, and has made some changes. Could you maybe talk us through? How is that sort of fitting into your organic growth plans? Um, and and as, as Bill sort of pure play, golf of America company. Um, how do you how do you view those regulations for yourself?
Yes, thanks. Nathan.
I think it's incredibly positive move in terms of, you know, sort of, um, bringing back regular leasing activity. Um, and so we'll have 1 to release sale, uh, towards the end of this year. And of course, under that bill, it's mandated for 2 lease sales per year. Um, you know, the, the, the sort of brings forward at least sort of 80 million acres per per lease sale, um, has reduced to the royalty rates. And so, those are all clearly sort of positives. Um, for us as, you know, focused deep water operator that clearly has a very, very strong footprint within the Gulf of America, um, and we will, you know, sort of use that as a, as a key sort of pillar. Um, and a key sort of lens of activity that underpins the sort of organic activity, that, that we will.
On the take. And so, you know, we will look to be, um, active participants in those lease sales. Of course, looking at the opportunities through the through the sort of capital discipline framework that we've spoken about and you know sort of leveraging the significant technical um knowledge base that we have inside the company. Le leveraging, the sort of the seismic data and interpretation skills that we have. And so, you know, we're very, um, well, we look forward to the great interest to those lease lease sales and working, that both by ourselves and also in
Partnership with, um, you know, sort of key partners that we have here within the Gulf.
Great. Appreciate the answer there. Um, my follow-up, uh, my just, maybe I'll try Tim's question with a different hack here. You know, you've been here for, I think 5 months now. Um, you you have international experience with your prior role as you look at Talos today, as an organization, you've talked about inorganic growth outside of the Gulf of America. But if you were to look at sort of technology or or sort of technical experience marketing, regular regulatory experience Finance.
Are there any areas where you feel the organization either has underappreciated strengths, or or maybe some some challenges, as you look to broaden outside of the Gulf of America?
I think.
You know the the the overall capability of this company is outstanding and so our task is to um work collectively to apply that across um the opportunity space that we see in a disciplined and structured way. And and whether that's in terms of how we think about quality of Investments, um or whether that's how we think about leveraging, the technical expertise that we have um then sort of you know, that is the focus that we will take. Now what I will say is um I'm very very pleased with the organization in terms of recognizing where maybe it doesn't have, um, the organic knowledge of those other basins. Um and its ability to actually go out and bring that knowledge in. And so, although we are at the moment, you know, sort of purely focused on the Gulf of America with Tsar in Mexico,
We do have a lot of people that have worked all over the world in many, many deep water.
Basins both from a technical side and a non-tech technical side. And so I would not like you to have the view that just because our activity, at the moment is Gulf of America Focus that that is purely where our skill set lies, because I see it very differently to that.
Recognizing that as we.
As opportunities come along. Um, and if we, you know, are so successful in sort of creating those that are accretive to the company, then we'll make sure that as part of that, we have the appropriate depth and level of skills and competence. Um, you know, to make sure that we can execute those with the same level of skill of performance as we're executing here in the Gulf of America, at the moment.
Great, thanks for the answers.
Thanks m.
Your next question comes from Nate Pendleton of Texas Capitol. Your line is already open.
Good morning, and congrats on the strong quarter, despite the temporary shutdown at sunspear. Can you provide a little more detail about the drivers behind your improving guidance, for the year that you should allow on slide 17.
Sure, maybe I'll make a few comments and and and Greg um, you know, please feel free. So I I would say Nate the simplistic level. So if I just take it at a high level,
it is because of the focus and dedication that we are showing as a company, a cross every activity that we execute in whether that's,
Capital activity in drilling whether that is in terms of how we think about um the Effectiveness and efficiency of our Capital spend around production uh sorry around PNA whether that's the focus we have on availability and uptime on our first for facilities. It's it's the culture of Palace that we're building to look at every activity that we have and ask ourselves. A question, is there a way to do that more, effectively more efficiently for higher valve View? And I think you're starting to see that come through now. Clearly there are, you know, some elements that we have to consider from a planning point of view such as, you know, knowns of how large will or how impactful will the hurricane season be. And clearly, we sort of build that into the production forecasts as we have, um, you know, and the Sun
Time when we think about planned downtime, and I've been very sort of pleased with how the teams have, you know, responded to the challenge of how can we, you know, move from being a good company to a great company? I think that's one of the things you started to see come through with a slight change of forecast in our planned downtime is that, you know, we've already delivered the first half of the year slightly better, and we're playing that through into the second half of the year. But again, I think at the highest level, it really sort of reflects the focus that the organization has in totality on every activity that we do, every dollar that we spend, and every opportunity that comes our way.
Thanks. It's really encouraging commentary and uh and with the current Administration advocating for more offshore development and deregulation. Is there any particular policy or set of policies that you feel could be updated to help achieve the administration's goal of increasing production in the Gulf of America?
Uh look I think, you know the the the the the drive to um to increase the frequency of leasing, of course, is really important. If you think about the front end of the funnel, I think the uh, you know, the change around the co-mingling rules and regulations is absolutely a positive especially for, um, assets to sort of sit in the middle life where we can then, actually, you know Drive,
The efficiency of that at a greater level. Um, and you know, I think the other.
lens that I would take on it is not just looking at within the sort of production space but then thinking about it from a life cycle point of view is can we sort of manage more effectively the abandonment um liability and the abandonment process and that's a conversation that we and others in the industry are actually sort of starting with the administration now and I think will become, you know, more and more important part of the overall mix given the um maturing nature of the Gulf of America.
Got it. Thanks for taking my questions.
Thank you.
Your next question comes from creta draft key of Goldman Sachs. Your line is already open.
Good morning all. Thank you for taking my questions. I was just wondering if at first you could talk a little bit about the low-hanging fruit or near-term targets for the hundred million dollar. Savings plan. Beyond those that tell us is already executed on which of the buckets Capital efficiency, commercial opportunities. Etc. Do you think kind of have the the clearest line of sight from here?
Transportation Logistics really revamping how we think about the supply chain of the business, how we really think about production, optimization, and enhancement, um, really digging into the capital planning so that we can make all of our drilling activities look like cat my West, number 2, drilling. Um, and continuing the work around procurement and supply chain. And so we've got the, the layout of the 100 million on on slide 8, in the presentation. That's kind of what parts of the business. We think. Each of those come from between the commercial opportunities, margin enhancement, Capital efficiency and and certainly the the organizational Improvement.
Great. Thank you and I appreciate your call on Capital allocations thus far on the call. I was just wondering if you could talk a little bit more about your outlook for the Cadence of incremental, Sherry purchases from here, is the 33 million or so. You did this quarter, a good quarterly run rate or what would be the right framework to use to think about Cherry purchases going forward.
Yeah. Look I I think um you know we we rolled out our strategy at the latter part of the second quarter which which included our share buyback program and and the strategy around the 50% or up to 50% of the free cash flow. Um, you know, is that is that program uh or is it the strategy began to mature? You know, there was a time we had to be out of the market. We were in the market as soon as we could, after we announced our corporate strategy, we were proud of the team's execution on on being able to buy back about 33 million in the quarter, which was in the middle of the Fairway, of what we said with respect to up to 50% of the free cash flow, you know, a couple comments, I do think we should, you know,
Sure. Things can be a little lumpier than on shores, as you think about our strategy, and how we're going to buy back and how much we're going to buy back? I think you should think about that over, what we do over the next couple quarters and let's not just focus on this quarter. As we, as we rolled out the initial strategy, But ultimately, the basis is centered around, the capital, allocation framework and and making sure that we can stay balanced and investing in the business, maintaining the strong balance sheet. We've got, and, and, and being opportunistic, if, if the a creative opportunity presents itself, but but certainly we continue to find the the stock to be attractive at these prices and and will continue to to execute on that program in the third quarter.
Thank you.
Thanks professor.
Your next question comes from Foo Han of Ross Capital.
Your line is already open.
Hi, thanks for taking my questions. So, I just have a question about, um,
Like the the shut out of sere. And can you elaborate more about like the delay of the mamala to infield, uh, like it's supposed to be in the second quarter? But now I think he's, uh, pushed out to the meet third quarter. So can you elaborate more on that? Thank you.
Yeah, thanks, F. So, look on Sun Sunspear. As we said, we um,
The, well, and completion was successfully installed. It was successfully tested. It met. All the requirements, we started production. Um, we were in the middle of cleaning. The well up the well, looks very promising. In terms of the initial data that we have. Hence, my comments, that that, I see that, well, sort of performing at the upper end of the expectation range that that we have. And, and in regular testing that we have to do on all our wells. Um, the subsurface safe safety valve failed to hold pressure. Um, now, that's a critical safety valve, and we will not operate without that. Therefore, we have shut the well in, um, and we will bring the West Vela rig round after we've finished operating at Daenerys to, um, pull the tubing, replace that safety valve. Run it back into the well and then we'll come straight back on on to production. Um, we don't know why that valve has failed at this point in time. Um, once we get
it to surface, we'll work with the supplier and the manufacturer, which is a, you know, 1 of the very large service companies to make sure we understand the root cause of that so. Incredibly disappointing. Um but also incredibly proud of how the team has reacted incredibly quickly to allow us to bring a rig to go and um in
All right. Thank you.
Thanks Ruth.
Your next question comes from Michael farro, of Pickering, Energy Partners. Your line is already open.
Hey, good morning, Paul rest, the rest of the Talis team there. Uh, Paul, I just want to hit on 1 of your your last remarks, in the, in the previous question, uh, regarding the issues around around the safety control valve at, at the, uh, sunspear Prospect look issues happening, you know, says the number 1 priority. Um, my question is, does the repair require a rig with the capabilities like the West Bella? Um you know it sounds like that rig has been performing well and the the best use would be to keep that rig Drilling and set up returning to make sort of a minor repair. So I'm sure thales has looked into this and looked into the other options so could you maybe explain to us why the West fellow seemed like the best option to perform this work?
Sure Michael. I I I mean look at a gross level, your assumption is correct and so you don't need all the capabilities of the West Villa to go and pull the tubing and replace the safety valve and run it back in. But what you do need is a team that is on the top of its game can do that incident free. And when you pick up a new rig or a different rig, there's always a time of actually making sure that the team gels and
And and and and that there's always a risk in terms of um, you know, unintended errors and mistakes. And so, when we looked at it in the round, um, given the, you know, Advantage rate that we could extend the west of a 4, these are incredible performance that it has, um, from a value point of view. The best value against risk for us was to go and do this job very quickly and efficiently with the west villa. And that is the lens through which we sort of. Look at all the decisions we take in terms of what is the quality decision to give us the highest chance of delivering the outcome that we're after. And the outcome here is to get sunspear back on production. Um, at the lowest cost in the shortest time time frame that that we can, uh, and the selection of the West Villa met, all of those criteria versus Alternatives that were out there for us to consider, which as you rightfully assumed, we did consider.
Thanks, Paul. That's great detail. I completely understand the value of the strong operational team.
so just quick follow up to that. How long do you think it would take for the west villa to leave the nearest arrive at sunspear? Make the repairs and then return back to Daenerys or Cardone or whatever? The next asset is on the on Deck.
Yes, so we will not leave Daenerys before. Daenerys is completed and we've said, we're in the process of that. Well, and performance is going very well on Daenerys. Um, and so, you know, the timing from when we leave the nearest to having the world back on production, we forecast within 30 days at this point in time. Um, you know, and I would hope we could do it on the uh sort of the plus side of that. So less than than 30 days but we have very contingency sort of planned into that time. And so I think it's prudent that we'll sort of stick with the 30 days for a planning point of view.
And we do have a guest, we do have a gap between we work at some sphere in, in before, we pick up the rig it Cardona. So there is a space between those 2 operations.
Understood, thanks for your time.
Thanks Michael.
Thank you. And gentlemen, we have time for 1 more question.
The last question is going to be.
For Michael or sorry, Noel parks.
Of Toy Brothers, your line is already open.
Great, thanks. I was just wondering, um, I apologize if you touched on this already. But, um, any updated, uh, thoughts on your non-operated opportunities, either us internationally, uh, worrying. If you're seeing any interesting things, if, you know, price is more or less having stabilized in the 60s, um, has maybe sort of helped bid, ask is the Summer's worn on any thoughts there.
Yeah, thanks. Know, so look, we are, um.
Certainly, you know, we will look at not operated.
Opportunities. Um, especially if we can sort of, you know, bring value to the partnership through, um, you know, the skills and capabilities that we have, you know, we do see some, um, opposites is out in the marketplace for, um,
Is looking for partners, both within the gulf America and in the international, um, Arena as well. Where sort of clearly, you know, we could bring um, our capabilities to bear. I think to strengthen those power Partnerships. And um, and so it is all about I think is you said, you know, can we do that for the right value? Um, and that's the work that we are, you know, in the middle of undertaking on a number of opportunities at the moment, um, I don't think anything can sort of fundamentally shifted between last quarter and this quarter, um, you know,
We tend to sort of think about price over the mid to long term given to the cycle times of some of the projects, even, you know, the the sort of very fast subzi time backs that that come from like, thales can do where we can sort of go from Discovery to bringing an opportunity, um, onto production within our control infrastructure. You know, there are less than 20 than 24 months means that we do have to sort of think about pricing in a in in sort of a slightly longer term. And that's the, you know, lens that will continue to look at that through um within the sort of capital allocation framework that we've touched on a number of times during this call this morning.
Great. Thanks a lot.
Thanks nol.
There are no further questions at this time. I would hand over the call to Paul Goodfellow for closing remarks. Please proceed.
Thanks Alan. Um, and thank you all for joining the call this morning for the questions that you've asked and, and, and uh, you know, the confidence that you have in talison. Yeah, we look forward to um, continuing this dialogue with you in the weeks and months ahead. Um, with that I'll close the call and we wish you all a a good and safe day. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect