Talos Energy(TALO) - 2025 Q2 - Quarterly Results

Second Quarter and Recent Key Highlights Talos Energy reported strong Q2 2025 financial and operational results, exceeding estimates and advancing strategic initiatives - Adjusted EBITDA and Adjusted Free Cash Flow exceeded consensus estimates[3] - Repurchased approximately 3.8 million shares for $32.6 million, demonstrating commitment to returning capital to shareholders[3][4] - Increased cash position to $357 million, with a leverage ratio of approximately 0.7x and total liquidity of approximately $1.0 billion[3][4] - Achieved first production from Katmai West 2 and Sunspear wells, and resumed drilling at the high-impact Daenerys prospect[3][4] - Announced an enhanced corporate strategy to position Talos as a leading pure-play offshore E&P company[3][4] Q2 2025 Key Financial and Operational Highlights | Metric | Value | | :--------------------------------- | :------------------------------- | | Produced | 93.3 MBoe/d (69% oil, 77% liquids) | | Net Loss | $(185.9) million | | Net Loss per diluted share | $(1.05) | | Adjusted Net Loss | $(48.3) million | | Adjusted Net Loss per diluted share | $(0.27) | | Adjusted EBITDA | $294.2 million | | Capital expenditures | $126.1 million | | Net cash provided by operating activities | $351.6 million | | Adjusted Free Cash Flow | $98.5 million | | Cash (as of June 30, 2025) | $357.3 million | | Net Debt to LTM Adjusted EBITDA | 0.7x | - Increased hedge positions covering over 38% of H2 2025 expected oil production, with a weighted average floor price of approximately $71.50 per barrel[4] Recent Developments and Operations Update Talos implemented a new corporate strategy, executed share repurchases, and advanced key production and exploration projects Corporate Strategy Talos announced an enhanced corporate strategy in June 2025, aiming to become a leading pure-play offshore exploration and production company - Enhanced corporate strategy announced in June 2025 to position Talos as a leading pure-play offshore E&P company[6] - Strategy pillars include improving business efficiency, targeting approximately $100 million increased annualized cash flow in 2026, growing production and profitability, and building a long-lived, scaled portfolio[6][12] Share Repurchase Program Talos repurchased 3.8 million shares for $32.6 million in Q2 2025, committing up to 50% of annual free cash flow to repurchases - Repurchased approximately 3.8 million shares for $32.6 million in Q2 2025, at an average price of $8.48 per share[6] - Year-to-date, the company repurchased 6.1 million shares for $54.6 million[6] - Management expects to allocate up to 50% of its annual free cash flow to share repurchases[6] Production Updates Talos initiated production from Sunspear and Katmai West 2 wells, with Katmai fields maintaining high capacity Sunspear First production from Sunspear well initiated in late Q2 2025, with expected return in late October after temporary shut-in - Initiated first production from the Sunspear well in late Q2 2025[7] - Temporarily shut in July 2025 due to an early failure of the surface-controlled subsurface safety valve (SCSSV), with expected return to production in late October 2025[5][7] - Estimates of Sunspear's initial productive capacity are expected to be at the high end of the range, with Talos holding a 48.0% working interest[7] Katmai West Katmai West 2 initiated production in late Q2 2025, contributing to 35 MBoe/d from the greater Katmai area - Initiated first production from the Katmai West 2 well in late Q2 2025[8] - Total gross production from the Katmai East and West fields is approximately 35 MBoe/d (71% oil), flowing to the Talos-operated Tarantula platform[8] - Current production rate is estimated to remain at maximum capacity for several years, with the greater Katmai area estimated to contain up to 200 MMBoe total resource potential, and Talos holding a 50% working interest[8] Project Updates Talos is drilling the high-impact Daenerys well and increased its interest in the Monument discovery, with first production expected by late 2026 Daenerys Talos is drilling the high-impact Daenerys exploratory well, with results expected by the end of Q3 2025 - Talos is currently drilling the Daenerys exploratory well, a high-impact subsalt prospect[9] - Estimated pre-drill gross resource potential between 100–300 MMBoe, with results anticipated by the end of Q3 2025, and Talos holding a 30% working interest[9] Monument Discovery Farm-in Talos increased its interest in the Monument discovery to 29.76% W.I., with first production expected by late 2026 - In March 2025, Talos increased its interest in the Monument discovery to a 29.76% W.I., up from 21.4% W.I.[10] - Monument is a large Wilcox oil discovery, expected to be developed as a subsea tie-back to the Shenandoah production facility[10] - First production is expected between 20–30 MBoe/d gross by late 2026, with an additional drilling location estimated to contain 25–35 MMBoe[10] Impairment Talos recorded a $223.9 million non-cash ceiling test impairment charge in Q2 2025 due to SEC-defined pricing - Recorded a $223.9 million non-cash ceiling test impairment charge in Q2 2025[11] - The ceiling test calculation is performed quarterly utilizing pricing as defined by the U.S. Securities and Exchange Commission (SEC)[11] Second Quarter 2025 Results Talos reported Q2 2025 financial and operational performance, including revenues, net loss, production volumes, and expenses Key Financial Highlights For Q2 2025, Talos reported total revenues of $424.7 million, a Net Loss of $185.9 million, and Adjusted EBITDA of $294.2 million Q2 2025 Key Financial Highlights | Metric ($ thousands, except per share) | Three Months Ended June 30, 2025 | | :------------------------------------- | :------------------------------- | | Total revenues | $424,721 | | Net Income (Loss) | $(185,937) | | Net Income (Loss) per diluted share | $(1.05) | | Adjusted Net Income (Loss) | $(48,316) | | Adjusted Net Income (Loss) per diluted share | $(0.27) | | Adjusted EBITDA | $294,247 | | Adjusted EBITDA excluding hedges | $260,932 | | Capital Expenditures | $126,057 | Production Talos's Q2 2025 average daily production was 93.3 MBoe/d, with 69% oil and 77% liquids, and average realized prices of $64.08/Bbl for oil Q2 2025 Production Volumes and Composition | Metric | Three Months Ended June 30, 2025 | | :-------------------------- | :------------------------------- | | Oil (MBbl/d) | 64.0 | | Natural Gas (MMcf/d) | 129.7 | | NGL (MBbl/d) | 7.7 | | Total average net daily (MBoe/d) | 93.3 | | % Oil | 69% | | % Liquids | 77% | Q2 2025 Production by Segment | Segment | Production (MBoe/d) | % Oil | % Liquids | % Operated | | :---------------- | :------------------ | :------ | :-------- | :--------- | | Deepwater | 83.4 | 71% | 79% | 81% | | Shelf and Gulf Coast | 9.9 | 49% | 58% | 73% | | Total | 93.3 | 69% | 77% | 80% | Q2 2025 Average Realized Prices (excluding hedges) | Commodity | Price | | :-------------------- | :------------------------------- | | Oil ($/Bbl) | $64.08 | | Natural Gas ($/Mcf) | $3.34 | | NGL ($/Bbl) | $17.23 | | Average realized price ($/Boe) | $50.00 | Lease Operating & General and Administrative Expenses Total lease operating expenses for Q2 2025 were $137.0 million ($16.12 per Boe), with Adjusted G&A at $34.4 million ($4.05 per Boe) Q2 2025 Operating and G&A Expenses | Expense Type ($ thousands) | Three Months Ended June 30, 2025 | Per Boe | | :--------------------------------------- | :------------------------------- | :-------- | | Lease Operating Expenses | $136,971 | $16.12 | | Adjusted General & Administrative Expenses | $34,364 | $4.05 | Capital Expenditures Q2 2025 capital expenditures totaled $126.1 million, primarily allocated to U.S. drilling and completions Q2 2025 Capital Expenditures Breakdown | Category ($ thousands) | Three Months Ended June 30, 2025 | | :------------------------------------ | :------------------------------- | | U.S. drilling & completions | $102,961 | | Asset management | $7,042 | | Seismic and G&G, land, capitalized G&A and other | $14,058 | | Investment in Mexico | $1,996 | | Total Capital Expenditures | $126,057 | Plugging & Abandonment Expenditures Capital expenditures for plugging and abandonment and settled decommissioning obligations totaled $28.8 million in Q2 2025 Q2 2025 Plugging & Abandonment and Decommissioning Obligations Settled | Category | Three Months Ended June 30, 2025 | | :------------------------------------------------ | :------------------------------- | | Plugging & Abandonment and Decommissioning Obligations Settled | $28,847 | Liquidity and Leverage As of June 30, 2025, Talos had $357.3 million in cash, $1.1 billion in liquidity, and a Net Debt to LTM Adjusted EBITDA ratio of 0.7x - Cash was $357.3 million, providing approximately $1,114.5 million of liquidity at quarter end[22] - Total debt was $1,250.0 million, with Net Debt of $892.7 million and Net Debt to LTM Adjusted EBITDA of 0.7x[22] - Borrowing base under Bank Credit Facility redetermined from $925.0 million (subject to $800.0 million cap) to $700.0 million[22] Operational & Financial Guidance Updates Talos updated its full-year 2025 guidance, reflecting higher production, lower operating expenses, and reduced capital expenditures - For Q3 2025, Talos expects average daily production to be in the range of 86.0 to 90.0 MBoe/d, with 69% oil volumes[24] - Revised full-year 2025 operational and financial guidance reflects higher production, lower cash operating expenses and workovers, and lower capital expenditures[24] Full-Year 2025 Operational and Financial Guidance (Revised vs. Original) | Metric | Original FY 2025 Low | Original FY 2025 High | Revised FY 2025 Low | Revised FY 2025 High | | :----------------------------------- | :------------------- | :-------------------- | :------------------ | :------------------- | | Oil (MMBbl) | 22.7 | 24.0 | 23.0 | 24.0 | | Natural Gas (Bcf) | 41.9 | 44.3 | 45.0 | 47.0 | | NGL (MMBbl) | 3.1 | 3.3 | 2.8 | 3.0 | | Total Production (MMBoe) | 32.8 | 34.7 | 33.3 | 34.7 | | Avg Daily Production (MBoe/d) | 90.0 | 95.0 | 91.0 | 95.0 | | Cash Operating Expenses and Workovers ($ Millions) | $580 | $610 | $555 | $585 | | G&A ($ Millions) | $120 | $130 | $120 | $130 | | Capital Expenditures ($ Millions) | $500 | $540 | $490 | $530 | | P&A, Decommissioning ($ Millions) | $100 | $120 | $100 | $120 | | Interest Expense ($ Millions) | $155 | $165 | $155 | $165 | Hedges Talos has various crude and natural gas hedge positions in place through Q4 2026, utilizing fixed swaps and collars Contracted Volumes and Weighted Average Prices (as of June 30, 2025) | Period | Instrument Type | Crude – WTI Avg. Daily Volume (Bbls) | W.A. Swap (Per Bbl) | W.A. Floor (Per Bbl) | W.A. Ceiling (Per Bbl) | Natural Gas – HH NYMEX Avg. Daily Volume (MMBtu) | W.A. Swap (Per MMBtu) | | :-------------------- | :---------------- | :----------------------------------- | :------------------ | :------------------- | :--------------------- | :----------------------------------------------- | :-------------------- | | July - September 2025 | Fixed Swaps | 25,370 | $71.57 | — | — | 50,000 | $3.47 | | October - December 2025 | Fixed Swaps | 22,967 | $71.33 | — | — | 40,000 | $3.53 | | January - March 2026 | Fixed Swaps | 14,000 | $66.26 | — | — | 35,000 | $4.19 | | | Collar | 11,000 | — | $60.46 | $68.50 | | | | April - June 2026 | Fixed Swaps | 14,000 | $65.11 | — | — | 30,000 | $3.77 | | | Collar | 11,000 | — | $60.46 | $68.50 | | | | July - September 2026 | Fixed Swaps | 2,000 | $65.00 | — | — | 20,000 | $3.65 | | | Collar | 11,000 | — | $60.46 | $68.50 | | | | October - December 2026 | Fixed Swaps | 2,000 | $65.00 | — | — | 20,000 | $3.65 | | | Collar | 11,000 | — | $60.46 | $68.50 | | | Conference Call and Webcast Information Talos will host a conference call and webcast on August 7, 2025, to discuss Q2 2025 results, with replay available - Talos will host a conference call and webcast on Thursday, August 7, 2025, at 10:00 AM Eastern Time (9:00 AM Central Time) to discuss Q2 2025 results[31] - Listeners can access the conference call through a webcast link on the company's website or by dialing provided numbers, with a replay available until August 14, 2025[31] About Talos Energy Talos Energy is an independent, technically driven E&P company focused on maximizing value in the U.S. Gulf of Mexico and offshore Mexico - Talos Energy (NYSE: TALO) is a technically driven, innovative, independent energy company[32] - Focuses on maximizing long-term value through its Exploration & Production business in the United States Gulf of Mexico and offshore Mexico[32] - Leverages decades of technical and offshore operational expertise, with a focus on safe and efficient operations, environmental responsibility, and community impact[32] Cautionary Statement About Forward-Looking Statements This communication contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The communication includes 'forward-looking statements' subject to numerous risks and uncertainties, which could cause actual results and plans to differ materially from those expressed[34] - Forward-looking statements are based on management's current expectations and assumptions about future events and are not guarantees of future performance[34] - Risks include commodity price volatility, global demand, political risks, lack of equipment, adverse weather events, cybersecurity threats, elevated inflation, regulatory changes, and uncertainties in estimating reserves[34] Production Estimates Future production volume estimates are based on assumptions of capital expenditure levels and market conditions, subject to various disruptions - Estimates of future production volumes are based on assumptions of capital expenditure levels and market demand/prices, but are subject to disruption[36] - Disruptions can arise from transportation, processing, storage availability, mechanical failure, human error, adverse weather, global political and macroeconomic events[36] - Estimates are based on assumptions like well performance and estimated resource potential, which may vary significantly from those assumed, offering no assurance of realization[36] Reserve Information Reserve engineering is an inexact process dependent on data quality and assumptions, with estimates subject to revisions and inherent uncertainties - Reserve engineering is an inexact process of estimating underground accumulations, dependent on data quality, interpretation, and price/cost assumptions[37] - Results of drilling, testing, and production activities may justify upward or downward revisions of previous estimates[37] - The report uses non-SEC defined measures like 'estimated gross resource potential' and 'estimated ultimate recovery' (EUR), which are inherently more uncertain than SEC-compliant reserve estimates[37] Use of Non-GAAP Financial Measures This release includes non-GAAP financial measures with limitations, which should not substitute for GAAP results, and reconciliations are provided - This release includes non-GAAP financial measures (e.g., EBITDA, Adjusted EBITDA, Net Debt, Adjusted Free Cash Flow) not recognized by U.S. GAAP[38] - Non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP results[38] - Reconciliations for non-GAAP measures to GAAP measures are included at the end of this release[38] Condensed Consolidated Balance Sheets Talos Energy's condensed consolidated balance sheets show key financial positions as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (Selected Items) | Metric (in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 | | :------------------------------------ | :------------------------ | :------------------ | | Cash and cash equivalents | $357,287 | $108,172 | | Total current assets | $870,645 | $659,383 | | Total property and equipment, net | $4,746,835 | $5,215,274 | | Total assets | $5,924,702 | $6,191,795 | | Total current liabilities | $712,126 | $723,055 | | Long-term debt | $1,223,736 | $1,221,399 | | Total liabilities | $3,405,689 | $3,432,090 | | Total stockholders' equity | $2,519,013 | $2,759,705 | Condensed Consolidated Statements of Operations Talos Energy's condensed consolidated statements of operations detail revenues, expenses, and net income/loss for Q2 and H1 2025 and 2024 Condensed Consolidated Statements of Operations (Selected Items) | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total revenues | $424,721 | $549,165 | $937,780 | $979,097 | | Total operating expenses | $698,313 | $494,795 | $1,167,921 | $856,882 | | Operating income (expense) | $(273,592) | $54,370 | $(230,141) | $122,215 | | Impairment of oil and natural gas properties | $223,881 | — | $223,881 | — | | Net income (loss) | $(185,937) | $12,381 | $(195,805) | $(100,058) | | Net income (loss) per diluted share | $(1.05) | $0.07 | $(1.10) | $(0.59) | Condensed Consolidated Statements of Cash Flows Talos Energy's condensed consolidated statements of cash flows present operating, investing, and financing activities for H1 2025 and 2024 Condensed Consolidated Statements of Cash Flows (Selected Items) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $619,878 | $385,790 | | Net cash provided by (used in) investing activities | $(292,303) | $(1,062,845) | | Net cash provided by (used in) financing activities | $(76,923) | $683,221 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $250,652 | $6,166 | | Cash, cash equivalents and restricted cash, end of period | $465,084 | $142,165 | Supplemental Non-GAAP Information This section provides reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures Reconciliation of General and Administrative Expenses to Adjusted General and Administrative Expenses Q2 2025 General and Administrative expense of $39.4 million reconciles to Adjusted G&A of $34.4 million after specific adjustments Q2 2025 G&A to Adjusted G&A Reconciliation | Metric (in thousands) | Three Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | | Total General and administrative expense | $39,430 | | Transaction expenses | $(663) | | Non-cash equity-based compensation expense | $(4,403) | | Adjusted General & Administrative Expenses | $34,364 | Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA Q2 2025 Net Loss of $185.9 million reconciles to an EBITDA of $120.2 million and an Adjusted EBITDA of $294.2 million Net Income (Loss) to EBITDA and Adjusted EBITDA Reconciliation | Metric (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | | :------------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | | Net Income (loss) | $(185,937) | $(9,868) | $(64,508) | $88,173 | | Interest expense | 40,811 | 40,927 | 41,536 | 46,275 | | Income tax expense (benefit) | (36,426) | (91) | 9,448 | 18,111 | | Depreciation, depletion and amortization | 269,706 | 280,716 | 274,554 | 274,249 | | Accretion expense | 32,046 | 30,894 | 30,551 | 29,418 | | EBITDA | 120,200 | 342,578 | 291,581 | 456,226 | | Impairment of oil and natural gas properties | 223,881 | — | — | — | | Derivative fair value (gain) loss | (86,855) | 15,853 | 42,989 | (126,291) | | Net cash received (paid) on settled derivative instruments | 33,315 | 5,167 | 19,651 | 6,071 | | Non-cash equity-based compensation expense | 4,403 | 4,141 | 5,603 | 3,315 | | Adjusted EBITDA | 294,247 | 363,003 | 361,814 | 324,359 | | Adjusted EBITDA excluding hedges | $260,932 | $357,836 | $342,163 | $318,288 | Reconciliation of Adjusted EBITDA to Adjusted Free Cash Flow and Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow Q2 2025 Adjusted Free Cash Flow (before working capital changes) was $98.5 million, reconciled from Adjusted EBITDA and operating cash flow Q2 2025 Adjusted EBITDA to Adjusted Free Cash Flow Reconciliation | Metric (in thousands) | Three Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | | Adjusted EBITDA | $294,247 | | Capital expenditures | $(124,061) | | Plugging & abandonment | $(28,497) | | Decommissioning obligations settled | $(350) | | Investment in Mexico | $(1,996) | | Interest expense | $(40,811) | | Adjusted Free Cash Flow (before changes in working capital) | $98,532 | Q2 2025 Net Cash Provided by Operating Activities to Adjusted Free Cash Flow Reconciliation | Metric (in thousands) | Three Months Ended June 30, 2025 | | :------------------------------------------------ | :------------------------------- | | Net cash provided by operating activities | $351,637 | | (Increase) decrease in operating assets and liabilities | $(87,524) | | Capital expenditures | $(124,061) | | Decommissioning obligations settled | $(350) | | Investment in Mexico | $(1,996) | | Transaction and other (income) expenses | $(773) | | Decommissioning obligations | $76 | | Amortization of deferred financing costs and original issue discount | $(1,865) | | Income tax benefit | $(36,426) | | Other adjustments | $(186) | | Adjusted Free Cash Flow (before changes in working capital) | $98,532 | Reconciliation of Net Income to Adjusted Net Income (Loss) and Adjusted Earnings per Share Q2 2025 Net Loss of $185.9 million (or $(1.05) per diluted share) reconciles to an Adjusted Net Loss of $(48.3) million (or $(0.27) per diluted share) Q2 2025 Net Income (Loss) to Adjusted Net Income (Loss) Reconciliation | Metric (in thousands, except per share) | Net Income (loss) | Basic per Share | Diluted per Share | | :------------------------------------------ | :---------------- | :-------------- | :---------------- | | Net Income (loss) | $(185,937) | $(1.05) | $(1.05) | | Impairment of oil and natural gas properties | 223,881 | $1.26 | $1.26 | | Transaction and other (income) expenses | (773) | $(0.00) | $(0.00) | | Decommissioning obligations | 76 | $0.00 | $0.00 | | Derivative fair value (gain) loss | (86,855) | $(0.49) | $(0.49) | | Net cash received (paid) on settled derivative instruments | 33,315 | $0.19 | $0.19 | | Non-cash income tax benefit | (36,426) | $(0.21) | $(0.21) | | Non-cash equity-based compensation expense | 4,403 | $0.02 | $0.02 | | Adjusted Net Income (Loss) | $(48,316) | $(0.27) | $(0.27) | Reconciliation of Total Debt to Net Debt and Net Debt to LTM Adjusted EBITDA As of June 30, 2025, Talos's Net Debt was $892.7 million, resulting in a Net Debt to LTM Adjusted EBITDA ratio of 0.7x Q2 2025 Total Debt to Net Debt Reconciliation | Metric (in thousands) | June 30, 2025 | | :------------------------------------------ | :------------------------------- | | 9.000% Second-Priority Senior Secured Notes – due February 2029 | $625,000 | | 9.375% Second-Priority Senior Secured Notes – due February 2031 | $625,000 | | Bank Credit Facility – matures March 2027 | — | | Total Debt | $1,250,000 | | Less: Cash and cash equivalents | $(357,287) | | Net Debt | $892,713 | LTM Adjusted EBITDA Calculation | Period | Adjusted EBITDA (in thousands) | | :------------------------------------------ | :------------------------------- | | Three months ended September 30, 2024 | $324,359 | | Three months ended December 31, 2024 | $361,814 | | Three months ended March 31, 2025 | $363,003 | | Three months ended June 30, 2025 | $294,247 | | LTM Adjusted EBITDA | $1,343,423 | - Net Debt to LTM Adjusted EBITDA ratio was 0.7x as of June 30, 2025[69]