Talos Energy(US:TALO)2021-11-06 02:25Financial Data and Key Metrics Changes - The company generated average daily production of 56,500 barrels of oil equivalent (BOE) per day for Q3 2021, a decrease of approximately 10,000 to 11,000 BOE per day compared to pre-hurricane expectations [10][34] - Revenues were approximately $291 million with realized pricing of $68.22 per barrel and $4.55 per Mcf [34] - EBITDA was $131.4 million for the quarter, with adjusted EBITDA over $203 million, resulting in near record margins of approximately $39 per BOE [35] - The company generated approximately $13 million of free cash flow before working capital changes despite production downtime and realized hedge losses of $71 million [36][42] Business Line Data and Key Metrics Changes - The company experienced a commodity mix of 69% oil and 78% total liquids, indicating a strong focus on oil production [11] - Capital expenditures for the quarter were approximately $86 million, with expectations to stay within the full-year capital guidance range [36] Market Data and Key Metrics Changes - The company expects fourth quarter production to average between 64,000 and 66,000 BOE per day, with full-year 2021 production anticipated to be at the low end of the guidance range [38] Company Strategy and Development Direction - The company is diversifying its energy offerings, making significant strides in carbon capture and storage initiatives, including being awarded a dedicated offshore sequestration site off the coast of Texas [8][22] - The company plans to continue its drilling program in 2022, focusing on low-risk asset management projects and a combination of infield development and step-out exploitation opportunities [15][19] - The company aims to maintain a balanced capital program across risk-reward categories while generating significant free cash flow and reducing total debt and leverage ratios [19][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver record production and positive free cash flow despite challenges from Hurricane Ida [9][47] - The company anticipates continued improvement in its credit profile and liquidity, with a goal to reduce leverage metrics below 2 times net debt-to-EBITDA by year-end [13][42] Other Important Information - The company is focused on growing its carbon capture business and pursuing transformational M&A opportunities, particularly in the US Gulf of Mexico and other offshore regions [28][29] - The company plans to publish its second annual ESG and sustainability report in November, highlighting progress in emissions reductions and governance changes [30] Q&A Session Summary Question: How would you characterize the current M&A climate? - Management noted that the M&A environment is influenced by fluctuating prices, and while they remain active buyers, the timing and goals of sellers can vary significantly [52][53] Question: What are your thoughts on cleaning up bank debt? - Management indicated a focus on reducing leverage and improving liquidity by paying down the RBL, which would provide flexibility for future transactions [56][58] Question: How do you view your competitive posture in the CCS space? - Management acknowledged the competitive nature of the CCS market but emphasized their expertise in project development and execution as a differentiator [60][62] Question: What are your thoughts on the hedging program for next year? - Management stated they will continue to layer on hedges opportunistically while adhering to minimum requirements set by their bank agreement [71][72] Question: What are the capital requirements for your CCS business next year? - Management indicated that capital requirements for CCS will be manageable and focused on pre-FID activities, with potential for growth as projects advance [76][78] Question: How does the Build Back Better Act affect your CCS business? - Management stated that while the act may influence market reception, it does not change their approach to developing CCS projects [81][85] Question: What are your plans for the subsalt Miocene play next year? - Management expressed excitement about upcoming projects in the subsalt Miocene play and plans to execute on a couple of projects outside of Puma West [89][90]