Talos Energy (TALO) Valuation Update - Aug 8

[dan_s]

At the time of this post TALO was trading at $17.72.

TipRanks: "In the last 3 months, 2 ranked analysts set 12-month price targets for TALO. The average price target among the analysts is $30.00."

I have updated my forecast/valuation model for TALO for their strong Q2 results and fresh guidance. I am lowering my valuation by $2 to $36 per share.

Why?
> I put a big cushion in my Q3 forecast for hurricane risk. Plus, they will be doing some maintenance during the quarter that will take some production offline.
> Talo's operating cash flow is expected to double YOY in 2022; from $392.7 million ($4.80/share) in 2021 to $785.7 million ($9.52/share) in 2022.
> TipRanks' operating cash flow estimate is higher than my forecast for 2022 at $10.21 operating CFPS.
> Based on my forecast, 2023 operating CFPS should be over $12.00.
> The Puma West confirmation well that will be drilled in Q4 could draw a lot of attention to TALO. It has the potential to be a world class oil discovery.
> There is nothing in my valuation for Zama.
> There is nothing in my valuation for their new Carbon Capture business.

Talos Energy is an offshore Gulf of Mexico company that has a lot of exploration upside. The Company has first class management and technical teams.