HOUSTON, May 6, 2024 /PRNewswire/ -- Talos Energy Inc. ("Talos" or the "Company") (NYSE:TALO) today announced its operational and financial results for fiscal quarter ended March 31, 2024. Talos also provided second quarter 2024 production guidance and reiterated its operational and financial guidance for the full year 2024.  Key Highlights Production of 79.6 thousand barrels of oil equivalent per day ("MBoe/d") (71% oil, 80% liquids) is at the high end of Talos's first quarter 2024 guidance range. Closed QuarterNorth Energy Inc. ("QuarterNorth") acquisition earlier than expected and progressing integration activities as planned. Completed the sale of Talos Low Carbon Solutions LLC ("TLCS") to TotalEnergies E&P USA, Inc. ("TotalEnergies") for approximately $148 million, which included Talos's entire Carbon Capture & Sequestration ("CCS") business. Achieved run-rate synergies from QuarterNorth acquisition and the TLCS sale of approximately $20 million in the first two months. Reduced debt by $225 million since closing the QuarterNorth acquisition, achieving a leverage ratio of 1.0x ahead of schedule. Refinanced approximately $865 million in 2026 notes, extending maturities and reducing interest rates on Talos's bonds by 275-300 basis points. Awarded 17 deepwater blocks comprising 95,000 gross acres in the U.S. Gulf of Mexico Outer Continental Shelf Federal Lease Sale 261. Sustained combined gross production rates of over 18 MBoe/d from the Venice and Lime Rock fields since starting production ahead of schedule in late December 2023. First Quarter Summary Revenue of $429.9 million, driven by realized prices (excluding hedges) of $76.01 per barrel for oil, $20.59 per barrel for natural gas liquids ("NGLs"), and $2.74 per thousand cubic feet ("Mcf") for natural gas. Net Loss of $112.4 million, or $0.71 Net Loss per diluted share, and Adjusted Net Loss* of $20.9 million, or $0.13 Adjusted Net Loss per diluted share*, excluding CCS investments. Adjusted EBITDA* of $267.5 million, excluding CCS investments. Upstream capital expenditures of $112.4 million. Net cash provided by operating activities of $96.4 million. Adjusted Free Cash Flow* of $77.7 million, excluding CCS investments and TLCS sale proceeds. Talos President and Chief Executive Officer Tim Duncan stated, "Talos had an extremely active first quarter and achieved solid execution across our business with production near the high end of our guidance range, representing record volumes. After completing two important transactions, we further repositioned the Company with capital market transactions that strengthened our credit profile. Our QuarterNorth acquisition, which closed one month earlier than scheduled, adds scale and high-margin oil-weighted production to our portfolio and is expected to generate sustainable free cash flow. I'm also very proud of the Talos team for their intense focus and dedication as the integration progresses smoothly and we work to realize the expected synergies by year-end 2024. We signed and concurrently closed the sale of TLCS, crystallizing a 2x multiple of invested capital for our shareholders. We used the proceeds to immediately repay borrowings under our credit facility. By the end of the first quarter, we repaid over $225 million in borrowings and ended the quarter with a leverage ratio of 1.0x, earlier than anticipated. "Talos's drilling program is underway, balancing a mix of low-risk and high-impact projects that could provide a material increase to our reserves. Projects for the second half of 2024 are in final preparations to execute upon rig delivery, including further appraisal of the Katmai discovery and drilling the high-impact Daenerys prospect. We remain focused on our strategic priorities to generate substantial free cash flow and have increased our total debt reduction target from $400 million to approximately $550 million in 2024." Footnotes: *See "Supplemental Non-GAAP Information" for details and reconciliations of GAAP to non-GAAP financial measures. RECENT DEVELOPMENTS AND OPERATIONS UPDATE QuarterNorth Acquisition: On March 4, 2024, Talos closed the previously announced acquisition of QuarterNorth. We expect the strategic transaction of oil-weighted deepwater assets and related infrastructure to enhance Talos's ability to consistently generate substantial free cash flow while expanding its portfolio of growth opportunities. Integration is on track as Talos works to realize the expected synergies from the combination by year-end 2024. Talos's full year 2024 operational and financial guidance includes ten months of contributions from the acquired assets. TLCS Divestiture: On March 18, 2024, Talos signed and completed the sale of TLCS to TotalEnergies for approximately $148 million, including the retention of $6 million of related cash, realizing approximately a 2.0x multiple on invested capital and an internal rate of return exceeding 100%. Talos used the proceeds from the sale to immediately repay borrowings under its Credit Facility. Talos may realize additional future cash payments upon achievement of certain milestones at the Harvest Bend or Coastal Bend projects or upon a subsequent sale of these projects by TotalEnergies. Outer Continental Shelf Federal Lease Sale 261: Talos acquired 17 leases covering 95,000 gross acres, with 12-15 potential drilling locations already identified on that acreage. Most locations are near existing Talos infrastructure, allowing for tie-back to Company facilities. Capital Markets Transactions: In January 2024, Talos issued $1,250 million in second lien notes, which were used to refinance approximately $865 million in 2026 second lien notes, extending maturities to the end of the decade and reducing interest rates on Talos's bonds by 275-300 basis points. In addition, Talos closed an underwritten public offering of Talos's common stock with net proceeds of approximately $388.0 million, which was used to fund the QuarterNorth transaction. Exploration and Production Updates: Katmai: Talos expects to commence drilling the Katmai West #2 well in the third quarter of 2024 to further appraise the field, potentially adding significant reserves. First quarter 2025 modifications to the host facility, Tarantula, will increase capacity from 27 MBoe/d to 35 MBoe/d, which will be constrained relative to the full rate capacity of the Katmai wells, allowing for extended flat production. Talos will hold a 50% working interest in Katmai. Talos is the 100% owner and operator of the Tarantula facility. Daenerys: Talos expects to drill the Daenerys exploration well, a high-impact subsalt project, that will evaluate the Miocene section and carries a gross unrisked recoverable resource potential between 100 – 300 MMBoe. Talos has a 30% working interest in the initial test well. The prospect is part of a broader farm-in transaction that was executed in 2023 with a combined approximately 23,000 gross acres in the Walker Ridge area. Lobster: Talos successfully drilled through the BUL-1 and Tex-Mex-E sand in the Lobster Field in the first quarter of 2024. The well is being completed as a waterflood (down-hole water injection) well and is expected to increase the hydrocarbon recovery of the existing producing wells in the prolific BUL-1 field pay. Production is expected to increase by over 2 MBoe/d gross in the next 12-18 months. Talos owns a 67% working interest. Claiborne: The Claiborne #1 well, operated by Beacon Offshore Energy LLC, recently reinstated production in April 2024. Talos holds a 25% working interest. Planned Downtime Updates: Following the deferral of planned drydock maintenance into the second quarter 2024, Talos mobilized the HP-1 vessel to shore for regulatory required maintenance in April. The vessel is expected to resume production in June. Talos expects the drydock to result in 5.0 – 6.0 MBoe/d of deferred production in the second quarter 2024. Talos's operational and financial guidance includes downtime estimates for the HP-1 drydock. FIRST QUARTER  2024 RESULTS Key Financial Highlights: ($ thousands, except per share and per Boe amounts) Three Months Ended March 31, 2024 Total revenues $ 429,932 Net Income (Loss) $ (112,439) Net Income (Loss) per diluted share $ (0.71) Adjusted Net Income (Loss) excluding CCS* $ (20,942) Adjusted Net Income (Loss) excluding CCS per diluted share* $ (0.13) Adjusted EBITDA excluding CCS* $ 267,548 Adjusted EBITDA excluding CCS and hedges* $ 271,042 Upstream Capital Expenditures $ 112,435 Production Production for the first quarter 2024 was 79.6 MBoe/d and was 71% oil and 80% liquids. Three Months Ended March 31, 2024 Oil (MBbl/d) 56.8 Natural Gas (MMcf/d) 95.2 NGL (MBbl/d) 6.9 Total average net daily (MBoe/d) 79.6   Three Months Ended March 31, 2024 Production % Oil % Liquids % Operated Green Canyon Area 24.0 81 % 88 % 90 % Mississippi Canyon Area 42.6 73 % 82 % 83 % Shelf and Gulf Coast 13.0 47 % 58 % 57 % Total average net daily (MBoe/d) 79.6 71 % 80 % 81 %   Three Months EndedMarch 31, 2024 Average realized prices (excluding hedges)(1) Oil ($/Bbl) $ 76.01 Natural Gas ($/Mcf) $ 2.74 NGL ($/Bbl) $ 20.59 Average realized price ($/Boe) $ 59.32 Average NYMEX prices WTI ($/Bbl) $ 77.50 Henry Hub ($/MMBtu) $ 2.15 Lease Operating & General and Administrative Expenses Total lease operating expenses for the first quarter 2024, inclusive of workover, maintenance and insurance costs, were $135.2 million, or $18.65 per Boe. Excluding workover expenses associated with the stimulation campaign, total lease operating expenses were $98.6 million, or $13.60 per Boe. Most of the 2024 projected workover expense is expected in the first half 2024.  General and Administrative expenses for the first quarter, adjusted to exclude CCS expenses, one-time transaction-related costs, and non-cash equity-based compensation, were $27.4 million, or $3.78 per Boe. ($ thousands, except per Boe amounts) Three Months EndedMarch 31, 2024 Lease Operating Expenses $ 135,178 Lease Operating Expenses per Boe $ 18.65 Lease Operating Expenses excluding workover $ 98,578 Lease Operating Expenses excluding workover per Boe $ 13.60 Adjusted General & Administrative Expenses excluding CCS* $ 27,386 Adjusted General & Administrative Expenses excluding CCS per Boe* $ 3.78 Capital Expenditures Upstream capital expenditures for the first quarter 2024, excluding plugging and abandonment and settled decommissioning obligations, totaled $112.4 million. ($ thousands) Three Months Ended March 31, 2024 U.S. drilling & completions $ 44,081 Asset management(1) 24,982 Seismic and G&G, land, capitalized G&A and other 43,372 Total Upstream Capital Expenditures $ 112,435 __________________________ (1) Asset management consists of capital expenditures for development-related activities primarily associated with recompletions and improvements to our facilities and infrastructure. CCS expenses for the first quarter 2024 totaled $9.9 million, which is included in Talos's reported Adjusted EBITDA* figure. CCS capital expenditures for the first quarter 2024 totaled $17.5 million. ($ thousands) Three Months EndedMarch 31, 2024 CCS Investments CCS Expenses $ 9,872 CCS Capital Expenditures 17,519 Total CCS Investments $ 27,391 Plugging & Abandonment Expenses Upstream capital expenditures for plugging and abandonment and settled decommissioning obligations for the first quarter 2024 totaled $31.4 million. Three Months Ended March 31, 2024 Plugging & Abandonment and Decommissioning Obligations Settled(1) $ 31,413 __________________________ (1) Settlement of decommissioning obligations as a result of working interest partners or counterparties of divestiture transactions that were unable to perform the required abandonment obligations due to bankruptcy or insolvency. Liquidity and Leverage At March 31, 2024, Talos had approximately $650.2 million of liquidity, with $640.0 million undrawn on its credit facility and approximately $21.0 million in cash, less approximately $10.8 million in outstanding letters of credit. On March 31, 2024, Talos had $1,575.0 million in total debt. Net Debt* was $1,554.0 million. Net Debt to Pro Forma Last Twelve Months ("LTM") Adjusted EBITDA* was 1.0x. OPERATIONAL & FINANCIAL GUIDANCE UPDATES For the second quarter 2024, Talos expects average daily production of 93.0 - 96.0 MBoe/d (70% oil), which includes the impact of 5.0 – 6.0 MBOE/D from the planned HP-I drydock and a full quarter contribution from QuarterNorth. Talos's reiterates its full year 2024 operational and financial guidance and continues to expect average daily production of 89.0 - 95.0 MBoe/d (71% oil). Talos increased its target debt reduction amount to $550 million from the previous $400 million. The following summarizes Talos's previously disclosed full-year 2024 operational and production guidance. FY 2024 ($ Millions, unless highlighted): Low High Production Oil (MMBbl) 23.4 24.7 Natural Gas (Mcf) 40.0 44.2 NGL (MMBbl) 2.5 2.7 Total Production (MMBoe) 32.6 34.8 Avg Daily Production (MBoe/d) 89.0 95.0 Cash Expenses Cash Operating Expenses(1)(2)(4)* $ 510 $ 530 Workovers $ 45 $ 55 G&A(2)(3)* $ 100 $ 110 Capex Upstream Capital Expenditures(5) $ 570 $ 600 P&A Expenditures P&A, Decommissioning $ 90 $ 100 Interest Interest Expense(6) $ 175 $ 185 (1) Includes Lease Operating Expenses and Maintenance.  (2) Includes insurance costs. (3) Excludes non-cash equity-based compensation and transaction and other expenses. (4) Includes reimbursements under production handling agreements. (5) Excludes acquisitions. (6) Includes cash interest expense on debt and finance lease, surety charges and amortization of deferred financing costs and original issue discounts. *Due to the forward-looking nature a reconciliation of Cash Operating Expenses and G&A to the most directly comparable GAAP measure could notreconciled without unreasonable efforts. HEDGES The following table reflects contracted volumes and weighted average prices the Company will receive under the terms of its derivative contracts as of May 7, 2024. The table includes derivative instruments assumed as part of the QuarterNorth acquisition: Instrument Type Avg. DailyVolume W.A. Swap W.A. Sub-Floor W.A. Floor W.A. Ceiling Crude – WTI (Bbls) (Per Bbl) (Per Bbl) (Per Bbl) (Per Bbl) April - June 2024 Fixed Swaps 43,522 $ 75.13 --- --- --- Collar 1,000 --- --- $ 70.00 $ 75.00 Long Puts 4,000 --- --- $ 70.00 --- Short Puts 1,000 --- $ 60.00 --- --- July - September 2024 Fixed Swaps 38,011 $ 75.40 --- --- --- Collar 1,000 --- --- $ 70.00 $ 75.00 Long Puts 4,000 --- --- $ 70.00 --- Short Puts 1,000 --- $ 60.00 --- --- October - December 2024 Fixed Swaps 38,674 $ 76.07 --- --- --- Collar 1,000 --- --- $ 70.00 $ 75.00 Long Puts 4,000 --- --- $ 70.00 --- Short Puts 1,000 --- $ 60.00 --- --- January - March 2025 Fixed Swaps 32,000 $ 72.52 --- --- --- Collar 3,000 --- --- $ 65.00 $ 84.35 April - June 2025 Fixed Swaps 21,000 $ 73.12 --- --- --- July - September 2025 Fixed Swaps 14,000 $ 74.04 --- --- --- October - December 2025 Fixed Swaps 12,000 $ 74.08 --- --- --- Natural Gas – HH NYMEX (MMBtu) (Per MMBtu) (Per MMBtu) (Per MMBtu) (Per MMBtu) April - June 2024 Fixed Swaps 38,407 $ 3.04 --- --- --- Collar 10,000 --- --- $ 4.00 $ 6.90 Long Puts 13,660 --- --- $ 2.90 --- July - September 2024 Fixed Swaps 30,000 $ 2.82 --- --- --- Collar 10,000 --- --- $ 4.00 $ 6.90 Long Puts 13,660 ---