Talos Energy(TALO) - 2024 Q1 - Quarterly Report

Acquisitions and Sales - Talos completed the sale of its wholly owned subsidiary, Talos Low Carbon Solutions LLC, to TotalEnergies E&P USA, Inc. for a total of approximately $142.0 million[134] - The acquisition of QuarterNorth Energy Inc. was finalized on March 4, 2024, for a total consideration of $1,570.0 million, including $1,247.4 million in cash and $322.6 million in common stock[135] Commodity Prices and Forecasts - During the period from January 1, 2024, to March 31, 2024, daily spot prices for NYMEX WTI crude oil ranged from $70.62 to $84.39 per barrel, while NYMEX Henry Hub natural gas prices ranged from $1.25 to $13.20 per MMBtu[141] - The EIA forecasts that the NYMEX WTI spot price will average $85.30 per barrel in Q2 2024 and $83.78 per barrel for the entire year[142] Financial Performance - Total revenues for the three months ended March 31, 2024, increased by $107.35 million, or 33.3%, to $429.93 million compared to $322.58 million in the same period of 2023[155] - Oil revenues rose by $100.53 million, or 34.3%, driven by an increase in production volumes and higher average sale prices[155] - Production volumes increased by 16.0 MBoepd to 79.6 MBoepd, primarily due to contributions from the QuarterNorth and EnVen acquisitions[156] - For the three months ended March 31, 2024, the company reported a net loss of $112.4 million compared to a net income of $89.9 million in the same period of 2023[169] - Adjusted EBITDA for the three months ended March 31, 2024, was $257.7 million, an increase from $203.1 million in the same period of 2023[169] Expenses and Liabilities - Lease operating expenses increased by approximately $53.8 million, or 66%, to $135.18 million, largely due to major well workover expenses and costs associated with recent acquisitions[157] - Depreciation, depletion, and amortization expenses rose by $68.3 million, or 46%, to $215.66 million, reflecting increased production volumes[158] - General and administrative expenses increased by approximately $6.7 million, or 11%, to $69.84 million, primarily due to transaction and severance costs related to acquisitions[159] - Interest expense for the three months ended March 31, 2024, was $50.84 million, an increase of $13.26 million, or 35.3%, compared to the same period in 2023[162] - The company recorded a $60.3 million loss on extinguishment of debt due to the redemption of senior secured notes[165] Cash Flow and Capital Expenditures - Capital expenditures for the three months ended March 31, 2024, totaled $161.4 million, with $112.4 million allocated to upstream activities[172] - The company used $937.6 million in investing activities during the three months ended March 31, 2024, primarily due to the QuarterNorth Acquisition costing $916.0 million[177] - Cash flow from financing activities increased by $712.5 million, driven by the issuance of New Senior Notes generating $1,224.5 million[178] - The company redeemed $638.5 million of 12.00% Second-Priority Senior Secured Notes and $227.5 million of 11.75% Notes using proceeds from the New Senior Notes[182][183] Liquidity and Financial Position - As of March 31, 2024, the company's available liquidity was $650.2 million, consisting of cash and available capacity under the Bank Credit Facility[169] - The company has a capital spending program for 2024 estimated between $570.0 million and $600.0 million, along with decommissioning obligations of $90.0 million to $100.0 million[173] - As of March 31, 2024, there is $52.5 million remaining under the authorized stock repurchase program of $100.0 million[174] Risk Management and Derivatives - The company plans to mitigate risks related to cash flow generation and borrowing capacity through oil and natural gas derivative contracts[173] - The company has a net derivative liability position of $53.7 million related to commodity price risk management for 16,569 MBbls of crude oil and 29,677 MMBtu of natural gas as of March 31, 2024[192] - A hypothetical 10% increase in oil and natural gas prices could result in a fair value change of $122,360,000, while a 10% decrease could lead to a fair value change of $68,688,000[192] Contractual Obligations - Total contractual obligations amount to $2,694,170,000, with significant debt interest payments of $787,189,000 over the next several years[185] - Vessel commitments for deepwater operations represent gross contractual obligations totaling $49,958,000[185] - Operating lease obligations total $28,680,000, with annual payments ranging from $4,220,000 to $5,531,000 over the next five years[185] - Finance lease commitments amount to $54,656,000, with significant payments due in 2024 and 2025[185] Accounting and Estimates - The company has no recently adopted or issued accounting standards that are material to its operations[189][190] - Critical accounting estimates remain unchanged from those disclosed in the 2023 Annual Report, focusing on oil and natural gas properties and revenue recognition[188] - There have been no material changes in market risk exposures since the 2023 Annual Report[191]