Talos Energy(TALO)2023-11-07 20:48Financial Data and Key Metrics Changes - In Q3 2023, Talos Energy generated production of 63,700 barrels of oil equivalent per day, with 76% being oil and 83% liquids, leading to $383 million in revenue and $255 million in adjusted EBITDA, resulting in an EBITDA netback margin of approximately $45 per BOE [14][15] - The company reported a net loss of approximately $2 million or $0.02 net loss per diluted share, while adjusted net income was around $19 million or $0.15 adjusted net income per diluted share [15] - Capital expenditures for the quarter were $181 million in the upstream business and about $14 million in the CCS business, resulting in positive free cash flow generation of approximately $9 million [15][12] Business Line Data and Key Metrics Changes - The upstream business generated significant revenue and EBITDA, while the CCS business is progressing with the filing of multiple EPA Class VI permit applications [10][11] - The company is advancing its Lime Rock and Venice discoveries toward first production, with expectations for production growth from these projects in early 2024 [10][22] Market Data and Key Metrics Changes - The company anticipates production for Q4 2023 to be between 66,500 and 68,500 barrels of oil equivalent per day, aligning with the low end of the full-year guidance of 66,000 to 71,000 barrels of oil equivalent per day [26] - The company expects cash operating and G&A expenses for the full year to be between $410 million and $430 million, with capital expenditures tracking at the low end of the guided range of $650 million to $675 million [26] Company Strategy and Development Direction - Talos Energy plans to reduce capital investments in 2024 compared to 2023, focusing on generating free cash flow and evaluating reinvestment levels [16][17] - The company is actively pursuing M&A opportunities that align with its strategies and enhance shareholder value, while also maintaining a strong credit position [12][71] Management's Comments on Operating Environment and Future Outlook - Management expressed frustration with government energy policies that seem to favor certain sectors over traditional energy forms, emphasizing the need for balanced energy policy [19][35] - The company is optimistic about production growth in 2024, despite a tempered long-term growth trajectory, and aims to increase shareholder returns and debt reduction [16][17] Other Important Information - Talos closed a sale of a 49.9% minority equity stake in its Talos Mexico subsidiary for approximately $75 million, with an additional $50 million due upon first production [65] - The company is exploring capital raises for its Low Carbon Solutions business and expects to benefit from the Department of Energy's investment in a regional hydrogen hub in Texas [63][71] Q&A Session Summary Question: Can you provide thoughts on the further delay of announced lease sales? - Management expressed frustration over the delay and the impact on the industry, highlighting the need for timely lease sales to support energy development [29] Question: What are the expectations for production growth and spending in 2024? - Management indicated a focus on free cash flow generation and a potential slowdown in capital spending, with expectations for production growth despite reduced investment [38][39] Question: Can you provide details on the partnership with Repsol and its implications? - The partnership is seen as a long-term portfolio generation strategy, with expectations for new opportunities arising from the collaboration [36][78] Question: What is the status of the CCS business and its marketability? - Management noted that the partnership with Equinor enhances the marketability of the CCS project, with ongoing discussions with potential emitters [80][85] Question: How does the company view M&A opportunities in the current market? - Management is optimistic about M&A opportunities in the Gulf of Mexico, emphasizing the importance of being a trusted counterparty for potential sellers [61][79]