Talos Energy, Inc. · NYSE:TALO
Talos Energy — Q2 2024 Earnings Presentation
31 slides from Talos Energy's earnings presentation, Aug 8, 2024
Slide 1: 2Q 2024 Earnings Conference Call & Webcast
2Q 2024 Earnings Conference Call & Webcast August 8, 2024 1
Slide 2: Cautionary Statements
Cautionary Statements Cautionary Statements In addition, we use the terms such as “estimated resource” in this presentation, which are not measures of "reserves" prepared in The information in this presentation includes “forward-looking statements” within the meaning of Section 27A of the Securities
Slide 3: Talos Has a Differentiated Offshore Strategy
Talos Has a Differentiated Offshore Strategy LA TX • High margin oil weighted production FL Offshore Gulf of Mexico • High quality and stable asset base • Significant growth potential Gulf of Mexico • Infrastructure focused • Short cycle offshore drilling inventory MEXICO • Material free cash flow g
Slide 4: 2Q 2024 Financial and Operational Highlights
2Q 2024 Financial and Operational Highlights RECENT HIGHLIGHTS 95.5 MBOE/D 73% / 81% Average Daily Production Oil / Liquids Record production, Adj. EBITDA, and Adj. FCF Repurchased shares and increased repurchase $344 MM $40/BOE authorization Reduced debt and maintained leverage of 1.0x(1) Adj. EBIT
Slide 5: Talos Is Delivering on Expectations
Talos Is Delivering on Expectations 1Q 2024 2Q 2024 $267.5 $77.7 95.5 $148.0 79.6 $344.0 $251.1 94.6 $70.1 78.7 $119.6 $312.9 Production Adj. EBITDA Adj. Free Cash Flow Production Adj. EBITDA Adj. Free Cash Flow (MBOE/D) ($MM) ($MM) (MBOE/D) ($MM) ($MM) Consensus Actual Consensus Actual Operational
Slide 6: Focusing on Execution: Progressing Strategic Priorities
Focusing on Execution: Progressing Strategic Priorities Operational Financial Significant Pursue Select Execution Execution Growth Business • Achieved over $225 MM of • Continue to generate Potential Development • Adj. FCF YTD(1)(2) Completed integration of • significant FCF Continue to reduce lever
Slide 7: Integration Complete – Raising Synergy Estimates
Integration Complete – Raising Synergy Estimates Tracking Ahead of Forecast Planning Efforts Yielded Seamless Integration Increased Projected Cost Savings ($MM/Year)(1) 2024 Cost Saving • G&A (~$15 MM) • Insurance (~$10 MM) • Operational economies of scale ($5 MM) • TLCS (~$5 MM) $65+ MM $55+ MM $35
Slide 8: 2024 Capital Program Balances Risk With Material Resource Exposure
2024 Capital Program Balances Risk With Material Resource Exposure 2023 2024 2025 Prospect Category Host Facility 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Lime Rock Exploitation Ram Powell Venice Exploitation Ram Powell Lobster Development Lobster Drilling Achieved First Injection Waterflood Stimulation Green Can
Slide 9: Greater Katmai Area
Greater Katmai Area Exploitation Well to Materially Increase Proved Reserves Structure Map TEXAS LOUISIANA Strategic Elements salt Katmai West • Katmai West #2 development well Katmai West #2 Gulf of Mexico could materially increase proved Future reserves Well • The Katmai field is expected to produ
Slide 10: Katmai West #2 Potential to Add Material Proved Reserves
Katmai West #2 Potential to Add Material Proved Reserves Expected to Spud in 3Q 2024 400’ Gross Thickness Katmai West Structure Map salt ~100 MMBOE Tarantula Potential Talos: 100% WI Katmai West #2 Katmai West #1 Spud 3Q 2024 (50% WI) Producing (50% WI) Future Well Katmai West #2 Katmai West #1 Prov
Slide 11: Daenerys
Daenerys High-Impact Subsalt Miocene Exploration Opportunity Structure Map TEXAS LOUISIANA Strategic Elements A • Farm-in transaction combining Gulf of Mexico 23,000 gross acres • Large Middle and Lower Miocene Proposed Wellsite 4-way turtle structure • Talos as Operator (WI 27%) Type Log GC 859 SS1
Slide 12: Wilcox Trend – A Prolific and Well-Established Play
Wilcox Trend – A Prolific and Well-Established Play Green Canyon LOUISIANA Garden TEXAS Banks Anchor D Dunharrow RE N Sparta OX T Shenandoah ILC D W Yucatan Coronado WILCOX TREN Cascade Monument Kaskida Enterprise Wilcox Trend Chinook • ~1.0 BBOE produced to date (10 Fields) Julia Stones • 260,000 B
Slide 13: Monument – High-Impact Subsalt Wilcox Discovery
Monument – High-Impact Subsalt Wilcox Discovery Farm-In Transaction to Major Discovery with Material Resource Life Structure Map TEXAS LOUISIANA Strategic Elements 2P Reserves • Wilcox discovery with two well ~3,300 penetrations (FID Feb 2024) Acres Gulf of Mexico • Good seismic image, faulted 4-way
Slide 14: Advancing Total Debt Paydown Objectives
Advancing Total Debt Paydown Objectives • 2Q 2024 leverage ratio of 1.0x(1); Targeting long-term leverage ratio below 1.0x • Increased 2024 debt reduction target from $400 MM to $550 MM • Paid down $325 MM of debt since closing QuarterNorth (QNE) Acquisition • Continue to reduce leverage $550 MM RBL
Slide 15: Share Repurchase Update
Share Repurchase Update Cumulative Value of Shares Repurchased We repurchased 3.8 million of our shares in the second quarter because we are $150 MM confident in our business and committed to opportunistically allocating capital to maximize shareholder value. We have also increased the share repurch
Slide 16: Significant Shareholder Value From Proved Reserves and Probable Resources
Significant Shareholder Value From Proved Reserves (1P) and Probable Resources (2P) Pro Forma YE 2023 SEC Reserves 2P Product Mix MATERIAL Net PV-10 grossed UPSIDE 8.5% up for ARO then from Proved Reserves (1P) deducted for $6,233 clarification PV-10 NAV Value to 22.3% current valuation 364 $1,037 M
Slide 17: Talos Is a Differentiated Company Focused on Upstream Growth
Talos Is a Differentiated Company Focused on Upstream Growth Significant Growth High Quality One of Highest $/BOE Potential and Stable Asset Base Netback Margins High-impact drilling program Decline of ~20% requires modest in E&P Space underway investment to maintain production Significant exposure
Slide 18: Appendix
Appendix 18
Slide 19: Lobster Intra-Well Waterflood
Lobster Intra-Well Waterflood Expecting Incremental Production of ~2,000 BO/D in 12-18 Months Bul-1 70/80 Sand Structure TEXAS LOUISIANA Strategic Elements • Targeting significant unswept reserves in Expect a rate increase Bul-1 70/80 of ~2,000 BO/D Gulf of Mexico • Bul1 Lobe 70/80 have exhibited we
Slide 20: EW Prospect
EW 953 Prospect Low-Risk Exploitation Opportunity to Talos Infrastructure Structure Map TEXAS LOUISIANA Strategic Elements A’ EW 953 ~575 Acres • Class 2/3 AVO anomaly within a Prospect shale Gulf of Mexico robust structural trap with Polygon conformance to structure • AVO response and trap style ar
Slide 21: 2024 Upstream Investments
2024 Upstream Investments Capitalized G&A and Other • Expected reduction in Y/Y CAPEX from Talos 5-10% standalone 2023 • Upstream CAPEX: $570 - $600 MM Plugging and US Drilling and Abandonment 10-15% Completions • P&A, Decommissioning: $90 - $100 MM 50-55% • Attractive reinvestment rate on a recent
Slide 22: 2024 Operational and Financial Guidance Unchanged
2024 Operational and Financial Guidance Unchanged • 2024 focus is on solid execution, free cash flow generation • Reduced operating and G&A per unit costs • Upstream investments less than Talos standalone 2023 spending levels • Reinvestment rate of less than 45-50% (excluding P&A) and targeting ~$55
Slide 23: Pro Forma YE 2023 SEC Proved Reserves
Pro Forma YE 2023 SEC Proved Reserves* Talos SEC Reserves PF SEC Reserves PF SEC PV-10(1) (MMBOE) (MMBOE) ($MM) PDP 97 129 $4,214 PDNP 35 43 438 PUD 21 44 442 Total Proved (Net of P&A) 153 216 $5,094 Total Probable (Net of P&A) 87 148 $3,878 Product Mix Category Mix Proved PV-10 9% 21% 21% 9% 8% 216
Slide 24: High Quality and Growing Asset Base
High Quality and Growing Asset Base Project Inventory 29 115 52 Projects 34 Gulf of Mexico Development Exploitation Exploration Shelf 2013-2024E Avg. Daily Production(MBOE/D) 89-95 64 66 60 52 55 46 26 29 22 24 18 Talos Acreage Talos Seismic Notes: Combined Talos and QuarterNorth. 24
Slide 25: Non-GAAP Reconciliations
Non-GAAP Reconciliations Three Months Ended ($ thousands) June 30, 2024 March 31, 2024(4) December 31, 2023(4) September 30, 2023(4) Reconciliation of Net Income (Loss) to Adjusted EBITDA: Net Income (loss) $12,381 ($112,439) $85,898 ($2,103) Interest expense $48,982 $50,845 $44,295 $45,637 Income t
Slide 26: Non-GAAP Reconciliations
Non-GAAP Reconciliations Three Months Ended ($ thousands) June 30, 2024 Reconciliation of General & Administrative Expenses to Adjusted General & Administrative Expenses: Total General and administrative expense $48,247 (1) Transaction and other (income) expenses ($9,857) Non-cash equity-based compe
Slide 27: Non-GAAP Reconciliations
Non-GAAP Reconciliations Three Months Ended ($ thousands) June 30, 2024 Reconciliation of Adjusted EBITDA to Adjusted Free Cash Flow (before changes in working capital): Adjusted EBITDA $343,984 Upstream capital expenditures ($122,812) Plugging & abandonment ($22,221) Decommissioning obligations set
Slide 28: Non-GAAP Reconciliations
Non-GAAP Reconciliations Three Months Ended, June 30, 2024 ($ thousands, except per share amounts) Basic per Share Diluted per Share Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss): Net Income (loss) $12,381 $0.07 $0.07 Transaction and other (income) expenses(1) $6,629 $0.04 $0.04
Slide 29: Non-GAAP Reconciliations
Non-GAAP Reconciliations Three Months Ended ($ thousands) June 30, 2024 Reconciliation of Net Debt: 9.000% Second-Priority Senior Secured Notes – due February 2029 $625,000 9.375% Second-Priority Senior Secured Notes – due February 2031 $625,000 Bank Credit Facility – matures March 2027 $225,000 Tot
Slide 30: Talos Hedge Book as of August 6, 2024
Talos Hedge Book as of August 6, 2024 Avg. Daily Instrument Type W.A. Swap W.A. Sub-Floor W.A. Floor W.A. Ceiling Volume Crude – WTI (Bbls) (Per Bbl) (Per Bbl) (Per Bbl) (Per Bbl) July – September 2024 Fixed Swaps $39,696 $76.75 — — — Collar $1,000 — — $70.00 $75.00 Long Puts $4,000 — — $70.00 — Sho
Slide 31: www.talosenergy.com
www.talosenergy.com NYSE: TALO 31