Talos Energy (TALO) Update - Sept 6

[dan_s]

TALO is on my Watch List. I have not had much time to look at it, but I will today.

HOUSTON, Sept. 5, 2024 /PRNewswire/ -- Talos Energy Inc. ("Talos") (NYSE: TALO) today announced that its Ewing Bank 953 well ("EW 953 well") successfully discovered commercial quantities of oil and natural gas.
Separately, Talos entered into an agreement to participate in the Sebastian prospect, currently drilling in the Mississippi Canyon Block 387 of the U.S. Gulf of Mexico.

The EW 953 well encountered approximately 127 feet of net pay in the target sand at approximately 19,000 feet true vertical depth ("TVD"). Preliminary data indicates an estimated gross recoverable resource potential of approximately 15 – 25 million barrels of oil equivalent ("MMBoe") from a single subsea well with an initial gross production rate of 8 – 10 thousand barrels of oil equivalent per day ("MBoe/d"). First production is expected in mid-2026. Current plans are for the well to be tied back to the South Timbalier 311 Megalodon host platform, which Talos partially owns. Talos holds 33.3% working interest ("W.I.") in the EW 953 well, with Walter Oil & Gas Corp. (Operator) holding 56.7% W.I. and Gordy Oil Company holding 10% W.I.

The Sebastian prospect began drilling in late August 2024, targeting the regionally prolific Upper Miocene K-1 reservoir at approximately 12,000 feet TVD. This amplitude-supported prospect contains an estimated gross resource potential of 9 – 16 MMBoe with a potential initial production rate of 6 – 10 MBoe/d. Results are expected late fourth quarter 2024. If successful, the Sebastian prospect will be tied back to the Delta House facility, where Talos has a partial interest. Murphy Oil Corporation will be the operator.

Talos Interim President and Chief Executive Officer Joe Mills stated, "We are excited about the results of the Ewing Bank 953 well. The well logged better than expected rock properties, which we believe should lead to a robust initial flow rate. This discovery follows a series of successful single-well subsea exploitation wells tied back to Talos-owned existing infrastructure, like Venice and Lime Rock, Sunspear, and Claiborne sidetrack. Additionally, we were able to include the Sebastian prospect in our second-half 2024 drilling portfolio without requiring updates to our capital expenditures guidance for the year. These drill-ready projects exemplify our focus on tactical, lower-risk opportunities that can be brought online relatively quickly and supplement our larger, longer lead drilling projects."
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(Reuters) - U.S. company Talos Energy said on Thursday it had discovered commercial quantities of oil and natural gas in a subsea well in the Gulf of Mexico.

The company, backed by billionaire Carlos Slim, said the Ewing Bank 953 well's preliminary data indicated an estimated 15 to 25 million barrels of oil equivalent (boe) in resources and an initial gross production rate of 8,000-10,000 boe per day.

The well's first production is expected to start in mid-2026, the company added.

Houston-based Talos Energy had been part of a small list of companies that made significant discoveries in the oil and gas exploration areas in offshore Mexico.

"This discovery follows a series of successful single-well subsea exploitation wells tied back to Talos-owned existing infrastructure, like Venice and Lime Rock, Sunspear, and Claiborne sidetrack," said interim CEO Joe Mills.

Talos has also signed an agreement to participate in a separate prospective well named Sebastian, it said.

Oil and gas producer Murphy Oil would be the operator of the Sebastian prospect, where drilling results are expected in the fourth quarter this year.

The prospect has an estimated gross resource potential of 9 to 16 million boe and a potential initial production rate of 6,000-10,000 boe per day, Talos said.
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This surprised me on August 30:
(Bloomberg) -- Talos Energy Inc., a US oil producer whose biggest shareholder is billionaire Carlos Slim, slid after the unexpected departure of its chief executive officer.

Tim Duncan, who was also one of the company’s founders, stepped down on Thursday, Talos said in a statement that didn’t provide a reason for his exit. Board member Joseph Mills will serve as interim CEO, and Talos has hired an executive search firm to find a permanent successor. Shares slid as much as 10.3% in New York, the biggest intraday tumble since November.

Earlier this month, Carlos Slim, Latin America’s richest person, took advantage of the equity-market selloff to boost his stake in Houston-based Talos, which focuses on oil exploration and production in the Gulf of Mexico. Slim’s family holding company owned about 22% of Talos as of Aug. 7, data compiled by Bloomberg show.

Duncan’s departure came as news to the Slim family, according to a representative.

“We had no prior notice he was about to leave the company and have no further comment,” Arturo Elias Ayub, a family spokesman, said in a text message.

Tim Rezvan, an analyst at KeyBanc Capital Markets, called Duncan’s exit a surprise — and a negative. Rezvan wrote in a note to clients that KeyBanc spoke with the company and learned the board, after becoming concerned about Talos’ share performance, decided new leadership was needed to rebuild credibility with investors.

Before the announcement of Duncan’s exit, Talos was down 16% this year, compared with a 3% gain for the S&P Oil and Gas Exploration and Production index. Talos reaffirmed third-quarter production guidance as well as its full-year view on operational and financial results in Friday’s statement.

“We appreciate the unchanged 2024 outlook, but admit to having less confidence on the 3Q outlook following this news,” Rezvan wrote. The analyst said he wonders whether other issues factored into the management change, including the company’s operations in the field as well as differences over acquisition strategy and how to address Slim’s growing position. Talos didn’t immediately return phone and email messages seeking comment.

Neal Goldman, Talos’ board chair, said in the statement that the company has “complete confidence in Joe’s capabilities to carry out Talos’ strategy as we search for a new CEO to lead Talos into the future and unlock further value.”

Mills joined the board in March after Talos acquired the closely held Gulf producer QuarterNorth Energy Inc., where Mills was a director.

[ChuckGeb]

Carlos Slim is back this month picking up another $26 million in shares so far. He must like what he sees and not miss Tim terribly. Shame, I really liked Tim.

[Fraser921]

Why did Tim get canned?

[dan_s]

I have no idea why he resigned. I hope it is not because of medical reasons. Tim Duncan is a good guy.

Talos's Q2 results beat my forecast, primarily because of more production and much higher oil production than I was expecting.

Talos still has hurricane risk, so I don't recommend buying it now. If they can avoid hurricane related shut-ins this year, they should continue to generate solid free cash flow from operations. Based on my forecast, which does include a "cushion" in Q4 for hurricane risk, they should generate over $300 million of free cash flow this year.

The Company's strategic acquisitions of EnVen Energy that closed in February 2023, and the QuarterNorth Energy acquisition that closed March 4, 2024, have increased Talos' production from 59,520 Boepd in 2022 to 95,418 Boepd in Q2 2024 (above my forecast). Based on the midpoint of the Company's production guidance, production should be over 98,000 Boepd by year-end. Production mix is 71.5% crude oil, 20% natural gas and 8.5% NGLs. Talos sells their oil into the Gulf Coast market where oil sells close to Louisiana Light Sweet (LLS) index prices that are about $2/bbl higher than Brent.

Talos has ~60% of their 2H 2024 oil and ~50% of their 2H 2024 natural gas hedged at higher than current prices, so commodity price risk is low on this one.

My updated valuation of TALO is $19/share. My forecast model has been posted to the EPG website.

TipRanks: "In the last 3 months, 4 ranked analysts set 12-month price targets for TALO. The average price target among the analysts is $16.13. All 4 of the analsyts rate TALO a BUY with price targets of $14 to $20."

At the time of this post TALO was trading at $11.00.

There is a perception of higher risk in the Gulf of Mexico, but there is still a lot of oil and gas under that water.

[ChuckGeb]

Word of street from someone who knows: "A disaster. Board stupidity."

[cmm3rd]

Per 9/5/24 Form 4 filing, Carlos Slim's company bought another 2.4 million shares on 9/3 and 9/4 in the open market, upping its stake to 42.5 mm shares. https://d18rn0p25nwr6d.cloudfront.net/CIK-0001724965/42c76483-1ac3-4229-86fa-c67e1bebaf44.pdf

Per 13D filed 9/5, he now owns 42.8 million shares, or 23.8% of the shares outstanding. https://d18rn0p25nwr6d.cloudfront.net/CIK-0001724965/67c5c18d-cd09-4087-b567-f5f20fbcb9a3.pdf

He must really like what he sees.

[ChuckGeb]

Carlos Slim continues his daily accumulation of Talos and is also adding meaningful tranches of PBF Energy,a refiner. Most recent tranche was $40 million chunk. Smaller trades picked up by executives at Matador and Blackstone Minerals CeEO added 100,000 shares at $1.4 million.