Estimate Update
Talos will release 1Q24 financial and operating results after market close on Monday, May 6, 2024. Management will host a conference call, broadcast live over the internet, on Tuesday, May 7, 2024, at 10:00 am ET. 1Q24 results will include roughly one month of contribution from the assets acquired in the QuarterNorth transaction, which closed on March 4, 2024. The QuarterNorth acquisition added an oil-weighted (~75% oil production) asset base (>95% operated), bolstering Talos’s position in the Mississippi Canyon and Green Canyon areas offshore in the Gulf of Mexico. Management expects to realize $50 million of estimated annual run-rate cost synergies by year-end 2024. Adjusting for the QuarterNorth closing in early March and planned and unplanned downtime, Talos estimated FY24 production in the range of 89.0-95.0 MBOE/d. Before the adjustments, production would have been expected to be in the 105-110 MBOE/d range. Adjustments include reductions of 5.9-5.7 MBOE for a 10-month QuarterNorth contribution, 6.1-5.8 MBOE/d for planned downtime, and 4.0-3.5 MBOE/d of weather/unplanned downtime risking to arrive at the 89.0-95.0 MBOE FY24 estimate. Our 1Q24 production estimate remains 79.0 MBOE/d and our FY24 estimate remains 92.5 MBOE/d. We are adjusting our lease operating expense estimates to pull forward expenses related to Talos’s planned three-well stimulation program at the Gunflint Field in Green Canyon, which began in 1Q24. Costs for the program will be reflected as expensed workovers. Our prior estimates weighted the outlays in 2Q24. Management’s workover expense estimate for FY24 is $45-55 million. Coupled with $510-530 million of estimated cash lease operating expenses, total FY24 production expenses are estimated to fall in the range of $555-585 million. Our model incorporates an FY24 estimate of $570 million. Management’s latest (March 11, 2024) guidance is summarized in Figure 1. Our updated 1Q24 adjusted EBITDA estimate is $259 million, reflecting the lease operating expense adjustment. Our FY24 and FY25 adjusted EBITDA estimates are essentially unchanged. Our estimates are summarized in Figures 2 to 4.Talos Energy is a holding company. Through its subsidiaries, the company is an exploration and production company with operations in the United States Gulf of Mexico and offshore Mexico. The company's focus in the United States Gulf of Mexico is the acquisition of deep water assets with existing infrastructure and the exploration, exploitation and development of such assets in key geological trends.
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