Talos Energy(TALO)2023-08-09 18:33Financial Data and Key Metrics Changes - Talos generated production of 73,000 barrels of oil equivalent per day, leading to $367 million in revenue and $253 million in adjusted EBITDA in the upstream business [8][30] - Adjusted EBITDA netback margin was close to $40 per BOE, placing Talos in the top quartile among public E&P companies [9] - Capital expenditures during the second quarter were $189 million in the upstream business, with a positive free cash flow generation of $13 million [10][31] - Net income for the quarter was approximately $14 million or $0.11 per diluted share, with adjusted net income of approximately $12 million or $0.09 per diluted share [30] Business Line Data and Key Metrics Changes - Upstream capital expenditures for the quarter were $189 million, while CCS CapEx was approximately $1.9 million [31] - The company made additional progress in its opportunistic share buyback program, repurchasing approximately $21 million or 1.5 million shares [33] Market Data and Key Metrics Changes - Pricing from production in the second quarter reflected softening in commodity markets, with realizations of approximately $70 per barrel of oil and NGLs at approximately 23% of realized oil prices [30] - Natural gas production realized over $2.40 per Mcf during the same period [30] Company Strategy and Development Direction - Talos is focused on high-margin upstream operations and has made a successful discovery in the Sunspear exploitation prospect, with first oil expected in the next 18 to 24 months [11][12] - The company is also advancing its CCS business, having filed its first EPA Class VI permit application for the Harvest Bend CCS project [19] - Talos is actively evaluating business development opportunities that fit its skill sets and strategies, including potential M&A activities [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering guided financial results for the remainder of the year, tracking in the lower half of upstream CapEx range [26] - The company anticipates a strong trajectory for its business, with a focus on reducing leverage and enhancing shareholder value [35] Other Important Information - Talos was recognized for its commitment to ESG and sustainability, receiving the 2023 Hart Energy ESG Award for a Public Producer [23] - The company expects to pay down debt and reduce its RBL balance in the second half of the year following the partial sale of Talos Mexico [33] Q&A Session Summary Question: What type of production is expected from the Sunspear discovery? - Management expects production to be in the range of 8,000 to 12,000 barrels equivalent per day gross, with a potentially higher oil cut than initially anticipated [42][47] Question: How does recent M&A in the CCS space impact ongoing capital raise for TLCS? - Management noted increased interest in CCS platforms and highlighted the company's prime storage sites adjacent to emission sources, which enhances its attractiveness [109] Question: What is the impact of the service environment in the Gulf of Mexico on capital investment decisions? - Management acknowledged rising rig rates and tight market conditions but emphasized the company's focus on its assets and the potential for moderated investment [111]