Talos Energy (TALO) Update - July 4

[dan_s]

Talos Energy is the only pure play offshore upstream company that is in our Small-Cap Growth Portfolio.
All of the Company's operations are in the Gulf of Mexico, therefore it has annual hurricane risk and geopolitical risk for a few more months.
On the other hand, TALO has significant exploration upside.

TALO closed on July 1 at $15.56. My valuation is lowered by $1 to $39.00 just because of lower natural gas prices.
TipRanks: "On June 3, 2022, Michael Scialla from Stifel Nicolaus maintained a Buy rating on Talos Energy (TALO), with a price target of $41.00."

What I like:
> Talos has a first class management team and lots of running room in their prospect inventory.
> It is free cash flow positive and the balance sheet is in good shape.
> I have "risk adjusted" my Q3 forecast by lowering production by 12,000 Boepd from Q2 to Q3.
> Talos gets a Gulf Coast premium for their liquids, which may offset all of the impact of lower natural gas prices.
> They have a Carbon Capture business that is not factored into my valuation.