Talos Energy (TALO) Update - Jan 11
Posted: Mon Jan 11, 2021 2:19 pm
HOUSTON, Jan. 11, 2021 /PRNewswire/ -- Talos Energy Inc. (the "Company" or "Talos Energy") (NYSE: TALO) today announced that Talos Production Inc. (the "Issuer"), a wholly owned subsidiary of the Company, has commenced an offering (the "Offering") of $100 million in aggregate principal amount of additional 12.00% Second-Priority Senior Secured Notes due 2026 (the "Additional Notes"). The Additional Notes will be issued under the same indenture as the notes issued by the Issuer on January 4, 2021 (the "Existing Notes") and will form a part of the same series of notes as the Existing Notes. The Issuer intends to use the net proceeds from the Offering to repay a portion of the outstanding borrowings under its reserves-based lending facility.
The Additional Notes will be guaranteed on a senior basis by the Company and certain of the Issuer's subsidiaries and initially be secured on a second-priority basis by substantially the same collateral as the Issuer's existing first-priority obligations under its senior reserve-based revolving credit facility.
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On January 7th I updated my forecast/valuation model for TALO, raising my valuation to $19.00/share.
Even with ~42% of their 2021 estimated oil production hedged at a weighted average of approximately $42.00/bbl, the Company should generate over $550 million of operating cash flow this year ($6.65/share), which compares to $308 million of operating cash flow in 2020 ($3.74/share).
Talos is going to report a big increase in production from 48,583 Boe per day in Q3 (down due to hurricane shut-ins) to a 2020 exit rate of more than 71,000 Boepd.
With much higher oil prices in Q1 than expected a few months ago, Talos should generate a significant revenue boost from Q4 to Q1.
Most of Talos' production comes from the Central Gulf of Mexico, so the higher than normal tropical storm activity in the region last year caused a lot of shut-ins and completion delays. Barring a repeat this year, Talos' production should be up over 36% year-over-year in 2021 to an exit rate of 78,000 to 80,000 Boe per day in December, 2021.
The BIG UPSIDE is their Zama Project offshore Mexico, a world-class oil discovery that has been confirmed by four wells. See our recent profile on Talos under the Sweet 16 tab.
The Additional Notes will be guaranteed on a senior basis by the Company and certain of the Issuer's subsidiaries and initially be secured on a second-priority basis by substantially the same collateral as the Issuer's existing first-priority obligations under its senior reserve-based revolving credit facility.
---------------------------
On January 7th I updated my forecast/valuation model for TALO, raising my valuation to $19.00/share.
Even with ~42% of their 2021 estimated oil production hedged at a weighted average of approximately $42.00/bbl, the Company should generate over $550 million of operating cash flow this year ($6.65/share), which compares to $308 million of operating cash flow in 2020 ($3.74/share).
Talos is going to report a big increase in production from 48,583 Boe per day in Q3 (down due to hurricane shut-ins) to a 2020 exit rate of more than 71,000 Boepd.
With much higher oil prices in Q1 than expected a few months ago, Talos should generate a significant revenue boost from Q4 to Q1.
Most of Talos' production comes from the Central Gulf of Mexico, so the higher than normal tropical storm activity in the region last year caused a lot of shut-ins and completion delays. Barring a repeat this year, Talos' production should be up over 36% year-over-year in 2021 to an exit rate of 78,000 to 80,000 Boe per day in December, 2021.
The BIG UPSIDE is their Zama Project offshore Mexico, a world-class oil discovery that has been confirmed by four wells. See our recent profile on Talos under the Sweet 16 tab.