Energy Prospectus

Stifel Update: Talos Energy Inc. (TALO, $9.77, Buy; Target 15.00) - Borrowing Base Reaffirmed, 4Q Production Guidance Lower - Michael S. Scialla
We view the release as neutral. On the plus side, the borrowing base on TALO's credit facility was reaffirmed, maintaining liquidity of $300MM+. In addition, production from the Ram Powell facility has stabilized at pre-shut-in levels. On the negative side, an extraordinarily active hurricane season caused the company to lower 4Q20 production guidance again. While we are reducing our 4Q20 CFPS estimate, we continue to expect positive FCF for the quarter.

Michael Scialla is a extremely good energy sector analyst. - Dan

Talos Press Release:
https://www.talosenergy.com/news/press- ... fault.aspx

TipRanks: In a report released today, Subash Chandra from Northland Securities maintained a Buy rating on Talos Energy, with a price target of $19.00.

Subsequent to the Company's October 7, 2020 operational and financial guidance, three major storms have caused additional operational disruptions in the Gulf of Mexico. Hurricane Delta, Hurricane Zeta and Tropical Storm Beta resulted in additional production shut-ins by Talos of approximately 11 full days in the fourth quarter of 2020 as well as delays in reaching first oil in multiple new drill projects and delays to the repairs at Ram Powell.

Production from Ram Powell has since been re-established and has stabilized in line with pre-shut-in levels. Talos now expects its Kaleidoscope development to commence production in mid-December and, once online, the Company expects its average daily production to be approximately 71.0 – 73.0 MBoe/d for the remainder of December 2020.

I have lowered my Q4 forecast production volumes to the midpoint of the Company's fresh production guidance of 60,000 Boepd, which compares to their actual production of 48,583 Boepd in the 3rd quarter. Q3 production was significantly impacted by hurricane activity in the GOM. Q1 2021 production should be over 71,000 Boepd.

Thanks to higher liquids prices in Q4 and 2021, my valuation of TALO actually increases by $0.50 to $16.50. The updated Excel version of the forecast/valuation model will be posted to the EPG website this afternoon.

Time to update your update now that the have issued lots of shares.

It really depends on what the Company does with the money.
> Lowering debt with a big slug of equity is a good thing. My valuation was based on just 3X operating cash flow. A stronger balance sheet justifies a higher multiple.
> Having a strong balance sheet should allow Talos to fund production and reserve growth. My 2021 forecast is based on 75,000 Boepd of production, which is slightly higher than what the company says their production will be by the end of January.
> Talos has some World Class upside offshore Mexico with two large confirmed oil discoveries in shallow water.

Selloffs because of equity offerings are very often good buying opportunities.