Talos Energy(US:TALO)2020-08-09 12:54Financial Data and Key Metrics Changes - The company recorded an average daily production rate of 52,400 barrels equivalent per day, which included a reduction of approximately 14,400 barrels equivalent per day due to production deferrals and the shuttering of 600 barrels equivalent per day of legacy shallow water production [10][21] - Revenue for the quarter was $174.9 million, with realized pricing averaging $22.71 per barrel and $1.59 per MMBtu, excluding hedges [23] - Adjusted EBITDA for the quarter was $97.5 million, equating to margins of $20.41 per barrel equivalent or approximately 56% [24] - The company ended the quarter with a leverage metric of 1.4 times net debt to the last 12 months EBITDA and over $400 million of available liquidity [13][25] Business Line Data and Key Metrics Changes - The company executed aggressive cost-cutting measures, expecting approximately $200 million in cost reductions from initial 2020 guidance, with sustained G&A cost reductions of approximately $20 million or 25% and LOE reductions of approximately $40 million or 12% [12] - The company completed a tactical bolt-on transaction, acquiring additional working interest in shallow water producing assets, which was value-accretive for shareholders [14] Market Data and Key Metrics Changes - The company was awarded over 23,000 acres in a bidding partnership with BP, covering high-impact deepwater sub-salt Miocene prospects at a lease cost of under $160 an acre [15] - The company reported proved reserves of approximately 189 million barrels of oil equivalent, representing a PV-10 of over $2.8 billion at SEC prices [19] Company Strategy and Development Direction - The company is focused on optimizing performance for the remainder of 2020 and looking towards 2021, with expectations of exiting the year with production rates of approximately 71,000 to 73,000 barrels equivalent per day [36] - The company continues to evaluate M&A and business development opportunities, believing that the Gulf of Mexico and other offshore basins are under-invested despite being proven hydrocarbon provinces with attractive investment economics [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the challenges posed by the pandemic and commodity price downturn, highlighting the importance of maintaining a strong balance sheet and shareholder interests [26][33] - The company anticipates a rebound in the market, supported by significant structural cost reductions and new wells expected to come online in the near future [47] Other Important Information - The company has a robust 1.4 million acres of federal leasing, with approximately half held by production and the other half in primary term or exploration acreage [45] - The company maintains a deep inventory of both short-cycle subsea tiebacks and high-impact exploration projects, providing several years of drilling activity [46] Q&A Session Summary Question: Context on Block 31 resource estimate - Management provided context on the 100 million barrel estimate for Block 31, indicating it was based on independent evaluation and highlighted the potential for further appraisal [51][54] Question: Clarification on exit rate number - Management clarified that the exit rate should be considered a clean run rate in December, with flexibility in managing production for the following year [56][57] Question: Impact of Mexican government statements on private sector activity - Management addressed concerns regarding the Mexican government's stance on private sector activity, emphasizing that existing contracts would be honored and the importance of private sector contributions to offshore Mexico [62][66] Question: Strategies for tackling 2021 maturities - Management discussed strategies for managing 2021 maturities, including refinancing options and creative solutions to maintain a strong credit profile [70][72] Question: Updates on Pemex discussions - Management provided updates on discussions with Pemex regarding unitization and emphasized the importance of transparency and collaboration in moving forward [80][81] Question: Details on debt exchange completed - Management explained the debt exchange transaction, which involved eliminating $40 million of principal through an exchange of debt securities for equity securities [87][90] Question: Initial production rates for Kaleidoscope and Bulleit projects - Management discussed the variability in initial production rates for the Kaleidoscope and Bulleit projects, citing the challenges in providing specific guidance due to the nature of the projects [94][96]