Talos Energy(US:TALO)2025-08-07 15:00Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $294 million for the second quarter, exceeding consensus estimates [11] - Adjusted free cash flow for the quarter was $99 million, with a netback margin of approximately $35 per barrel of oil equivalent [12] - Capital expenditures (CapEx) for the second quarter were $126 million, with an additional $29 million spent on plugging and abandonment activities [12] - The leverage ratio improved to 0.7 times, and cash balance increased by 75% from the first quarter to $357 million [13][31] Business Line Data and Key Metrics Changes - Second quarter production averaged 93,300 barrels of oil equivalent per day, with oil comprising 69% of total production [11] - The company aims to generate an additional $100 million in free cash flow annually starting in 2026, with $25 million expected in 2025 [7][14] Market Data and Key Metrics Changes - The company is focused on high-margin projects in the Gulf of America and is evaluating opportunities in other deepwater basins [8] - The current hedge portfolio has a mark-to-market value of $56 million as of June 30, providing cash flow stability [30] Company Strategy and Development Direction - The company has outlined a corporate strategy with three pillars: continuous improvement, growth through high-margin projects, and building a portfolio with scale and longevity [7][8] - The focus is on capital discipline, operational excellence, and free cash flow generation to enhance shareholder value [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the economic resilience of key projects, which are estimated to break even at an average oil price of $35 per barrel [27] - The company is optimistic about the increasing role of offshore and deepwater in meeting global energy needs [33] Other Important Information - The company repurchased 3.8 million shares for $33 million, totaling $100 million in repurchases under the program [13][32] - A non-cash impairment of $224 million was recorded due to historical non-productive capital expenditures [26] Q&A Session Summary Question: Free cash flow priorities with leverage at 0.7 times - Management emphasized a capital discipline framework, balancing investments in the business while maintaining a strong balance sheet and returning cash to shareholders [36][37] Question: Decision to maintain the West Vella rig - The West Vella rig was retained due to its outstanding performance and cost advantages, allowing for efficient execution of projects [40][42] Question: Update on Zama project and potential operatorship - The transaction related to Zama is expected to close by the end of the third quarter, with ongoing collaboration with Pemex to progress the project [46][48] Question: Acquisition targets and market state for deepwater offshore - Management is exploring various opportunities in the Gulf of America and internationally, with a positive outlook for deepwater investments [51][53] Question: Impact of new regulations on organic growth plans - New regulations are seen as positive, with plans to actively participate in upcoming lease sales in the Gulf of Mexico [57][58] Question: Near-term targets for the $100 million savings plan - Focus areas include capital efficiency, commercial opportunities, and supply chain optimization to achieve the savings target [72][74] Question: Cadence of incremental share repurchases - The company plans to continue share repurchases, targeting up to 50% of annual free cash flow, with a quarterly run rate of around $33 million [75][76] Question: Details on the shutdown of Sunspear and Marmalade Greenfield - The Sunspear well was shut in due to a safety valve failure, with repairs planned to be completed within 30 days [82][93]