Talos Energy (TALO) Update - Dec 27

[dan_s]

Talos Energy (TALO) is the only offshore company in our three model portfolios.

On December 27th the Company announced that the closing of the EnVen Energy Acquisitions has been pushed back to early February. The actual Closing Date does not impact my valuation since the “Effective Date” determines the amount of cash that will be paid at closing. Operating cash flow from the Effective Date to the Closing Date just becomes a purchase price adjustment.

Talos also announced that the borrowing base on their credit line will be increased from $1.1 billion to $1.5 billion upon closing of the acquisition. Further, the maturity date of the facility will be extended to March of 2027 from the current November of 2024. The Company will have more favorable interest rate margins, an increased Letters of Credit sublimit, increased flexibility to grow its Carbon Capture and Sequestration ("CCS") business and more favorable administrative terms. At closing of the EnVen acquisition, Talos's liquidity is expected to be approximately $1.0 billion and the Company will have no debt maturities until 2026.

IMO, the EnVen Acquisition is a “Transformative” transaction that should cause several energy sector analysts to increase their price targets for TALO. It will make Talos a larger company with a more diverse asset base and significant exploration upside. First Call's current price target is $28.67.