HOUSTON, May 8, 2023
/PRNewswire/ -- Talos Energy Inc. ("Talos" or the "Company") (NYSE:
TALO) today announced its operational and financial results for
three months ended March 31, 2023. Additionally, the Company
has updated its full year 2023 guidance as described further
below.
Key Highlights:
- Authorized a $100.0 million share
repurchase program in March 2023 and
repurchased 1.9 million shares through the end of the first
quarter.
- Executed a 21,000-acre onshore CO2 sequestration
lease near the Company's River Bend CCS project, bringing total
acreage within the Baton
Rouge/New Orleans region to
approximately 110,000 gross acres under lease or right of first
refusal.
- Announced that the Company is exploring a capital raise in the
near term to finance the accelerated growth of its Talos Low Carbon
Solutions ("TLCS") platform.
- Completed the acquisition of EnVen and progressed integration
activities; synergy capture estimates are on track to meet or
exceed the previously guided annual $30
million.
- Submitted the Zama Unit Development Plan for formal approval
and formed an Integrated Project Team ("IPT") to manage the
development and operation of Zama going forward.
First Quarter Summary:
- Production of 63.6 thousand barrels of oil equivalent per day
("MBoe/d") (72% oil, 79% liquids), inclusive of a partial quarter
of production from the acquisition of EnVen Energy Corporation
("EnVen").
- Revenue of $322.6 million, driven
by realized prices (excluding hedges) of $71.28 per barrel for oil, $22.62 per barrel for natural gas liquids
("NGLs"), and $2.83 per thousand
cubic feet ("Mcf") for natural gas.
- Net Income of $89.9 million, or
$0.84 Net Income per diluted share,
and Adjusted Net Loss(1) of $1.3
million, or $0.01 Adjusted Net
Loss per diluted share.
- Adjusted EBITDA(1) of $203.1
million, or $35.48 Adjusted
EBITDA per Boe, inclusive of $6.2
million of TLCS expenses.
- Upstream Capital Expenditures of $190.0
million, inclusive of plugging and abandonment. Capital
investments in Carbon Capture & Sequestration ("CCS"), totaled
an additional $21.2 million.
Talos President and Chief
Executive Officer Timothy S. Duncan
commented: "Although we have encountered several operational
challenges in recent weeks, we remain focused on the totality of
our 2023 plan, which positions the business for long-term growth
and value creation. We are seeing our capital and operating
expenses trending below our plan and we will look to continue this
trend while also progressing our Venice and Lime Rock discoveries to first
production. We expect that production will exceed a rate of 80
MBoe/d early in 2024, and we continue to expect to achieve our 2024
– 2026 production and cash flow goals."
Duncan continued: "We are also making strong progress on several
key projects in our business that underpin expanded shareholder
value. We recently submitted the field development plan for Zama
and announced an Integrated Project Team that will allow for better
collaboration and execution on this world class project. In the
deepwater Gulf of Mexico, we are
currently drilling our high-impact Pancheron prospect, we expanded
our inventory by acquiring 23,000 gross acres in the recent federal
lease sale, and we completed another 23,000 acre trade that secured
a high impact prospect named Daenerys, which is expected to
commence drilling in 2024. In our CCS business, we more than
doubled our storage capacity in multiple transactions in the first
quarter and are preparing our first stratigraphic test well,
leading us toward our goal of filing multiple Class VI permits in
2023. With the level of investor demand for CCS exposure, we
believe a well-structured capital raise could potentially help
accelerate the growth of the business in this critical phase.
Lastly, we initiated our first share buyback program, and we will
continue to be opportunistic with that program, which underscores
our confidence on our long-term vision for the Company."
RECENT DEVELOPMENTS AND OPERATIONS UPDATE
Shareholder Return Program: In March
2023, Talos announced a $100
million common stock repurchase program, the first
shareholder return program in the Company's history. As of
March 31, 2023, the Company has
repurchased 1.9 million shares, or 1.5% of the total outstanding
shares, for $26.6 million.
Zama Development Plan & IPT: In March 2023, the Zama Unit Development Plan was
submitted to Mexico's National
Commission of Hydrocarbons for formal approval. Additionally, an
IPT comprised of representatives from all four Zama Unit Holders
was established to manage the development and operation of Zama
going forward. Talos will co-lead the planning, drilling,
construction, and completion of all Zama wells and the planning,
execution, and delivery of Zama's offshore infrastructure.
Drilling and Completion Updates:
Rigolets: Talos drilled the Rigolets exploitation
prospect in the second quarter of 2023 and encountered
non-commercial quantities of hydrocarbons in the well. Talos has
now completed plugging and abandonment operations. Talos held a 60%
working interest.
Pancheron: Talos is participating in the potentially
high-impact Pancheron exploration prospect, which spud in late
April 2023 following the completion
of an eight-block swap in the Green Canyon and Walker Ridge areas
in 2022. Talos holds a 30% working interest, bp holds a 33% working
interest and Oxy holds a 37% working interest and is the operator.
Results are expected around mid-year 2023.
Daenerys: In April
2023, Talos completed a farm-in transaction to combine
approximately 23,000 gross acres in the Walker Ridge area with
co-owners Red Willow Offshore LLC and Houston Energy LP. Talos will
be the operator and plans to drill the Daenerys exploration well in
the second half of 2024. The high-impact, subsalt project will
evaluate the Miocene section with a gross unrisked recoverable
resource potential between 100 – 300 MMBoe. Talos expects a target
working interest of 30% in the initial test well.
Lease Sale 259: Talos was the apparent high bidder on four
deepwater lease blocks in the Green Canyon and Mississippi Canyon
areas, collectively representing over 23,000 gross acres with
multiple potential future drilling prospects.
TLCS Updates:
East Louisiana Acreage Expansion: Talos executed lease
agreements on private land in the first quarter of 2023 for more
than 21,000 acres, nearly doubling the acreage under lease in the
Baton Rouge / New Orleans, Louisiana industrial corridor and
increasing the estimated gross prospective storage resource by more
than 120 million metric tons of CO2. The region now
holds a gross acreage footprint of approximately 110,000 acres
under lease or right of first refusal, with over 620 million metric
tons of gross prospective storage resource proximal to 80 million
metric tons per year of existing industrial emissions along the
Mississippi River corridor.
Chevron Transaction: In March
2023, Bayou Bend CCS, a carbon capture and sequestration
project located along the Texas Gulf Coast, expanded its storage
footprint through the acquisition of nearly 100,000 onshore acres
in Chambers and Jefferson Counties, Texas located in the Houston Ship Channel and
Beaumont and Port Arthur region. The expanded Bayou Bend
CCS project now encompasses nearly 140,000 acres of offshore and
onshore pore space for permanent CO2 sequestration. The
total acreage holds more than one billion metric tons of gross
prospective storage resource, positioning Bayou Bend CCS to be a
leading carbon transportation and storage solutions for industrial
emitters in one of the largest industrial corridors of the country.
Equity interests in Bayou Bend CCS remain 50 percent Chevron
Corporation ("Chevron"), 25 percent Talos, and 25 percent
Carbonvert Inc. Effective March 1,
2023, Chevron became the operator of Bayou Bend CCS.
Class VI Permit Application Progress: The Bayou Bend
partnership has contracted a rig and expects to drill an offshore
stratigraphic data collection well in the state waters off
Jefferson County, Texas, during
the third quarter. TLCS is also acquiring and analyzing data across
several projects with plans to file two to three EPA Class VI
permit applications by year-end.
GUIDANCE UPDATES
Full-Year 2023 Production Guidance:
Talos now expects average daily production for the full year
2023 to be in the range of 66.0 to 71.0 MBoe/d. While production
results for January and February of 2023 were in-line with original
management expectations for both Talos and EnVen, delays in first
production from new wells, certain underperformance, and unplanned
downtime now forecasted for the remainder of the year have led to
re-guiding the Company's 2023 production, with the following
details:
Recent Drilling Program Updates: Recent production levels
from selected new wells are below expected pre-drill contributions
for the year, amounting to an expected impact of 2.0 – 3.0 MBoe/d
as compared to original guidance, primarily due to delays in first
production and lower than expected initial production rates from
the Bulleit and Mt. Hunter wells. The Company is planning a well
intervention in Bulleit in the second quarter to attempt to access
production from a lower completion.
Selected Well Underperformance: Certain existing wells
exhibited production rate declines earlier than planned, generating
a 2023 production impact of 1.0 – 2.0 MBoe/d as compared to
original guidance. Most notably, this includes two non-operated
Shelf wells that began experiencing production declines due to
earlier-than-expected water production.
Unplanned Downtime: Despite diagnostic and corrective
operations in the fourth quarter of 2022 and the first quarter of
2023, Talos expects its operated Neptune facility to require
intermittent production shut-ins resulting in a full-year 2023
production impact of 1.0 – 1.5 MBoe/d as compared to original
guidance while Talos works to optimize flow assurance of the subsea
system in the field.
|
|
Original
|
|
Revised
|
|
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Production
|
Oil (MMBbl)
|
|
19.2
|
|
|
20.3
|
|
|
17.6
|
|
|
18.9
|
|
|
Natural Gas
(Mcf)
|
|
32.2
|
|
|
33.8
|
|
|
29.3
|
|
|
31.6
|
|
|
NGL (MMBbl)
|
|
1.7
|
|
|
1.8
|
|
|
1.6
|
|
|
1.8
|
|
|
Total Production
(MMBoe)
|
|
26.3
|
|
|
27.7
|
|
|
24.1
|
|
|
25.9
|
|
|
Avg Daily Production
(MBoe/d)
|
|
72.0
|
|
|
76.0
|
|
|
66.0
|
|
|
71.0
|
|
Full-Year 2023 Expense Guidance:
All previously guided expense categories remain unchanged from
prior guidance.
|
|
Original
(Reaffirmed)
|
|
($
Millions):
|
|
Low
|
|
High
|
|
Cash
Expenses
|
Cash Operating
Expenses(1)(2)(4)
|
$
|
410
|
|
$
|
430
|
|
|
G&A(2)(3)
|
$
|
90
|
|
$
|
95
|
|
Capex
|
Upstream Capital
Expenditures(5)
|
$
|
650
|
|
$
|
675
|
|
CCS
Investments
|
CCS Expenses &
Capex(6)(8)
|
$
|
70
|
|
$
|
90
|
|
P&A
Expenditures
|
Plugging &
Abandonment,
Settlement of Decommissioning Obligations
|
$
|
75
|
|
$
|
85
|
|
Interest
|
Interest
Expense(7)
|
$
|
155
|
|
$
|
165
|
|
(1) Inclusive of all Lease Operating Expenses and Workover
and Maintenance.
(2) Includes insurance costs.
(3) Excludes non-cash equity-based compensation.
(4) Includes reimbursements under production handling
agreements.
(5) Excludes acquisitions.
(6) Excludes future acquisitions. Cash contributions to
Bayou Bend CCS for the acquisition of additional acreage is
included in 2023 guidance.
(7) Includes cash interest expense on debt and finance
lease, surety charges, amortization of deferred financing costs and
original issue discounts.
(8) Includes CCS-specific G&A costs.
Note: Due to the forward-looking nature a reconciliation of Cash
Operating Expenses and G&A to the most directly comparable GAAP
measure could not reconciled without unreasonable efforts.
FIRST QUARTER 2023 RESULTS
Key Financial Highlights:
($
thousands):
|
Three Months
Ended
March 31, 2023
|
|
Total
revenues
|
$
|
322,582
|
|
Net income
|
$
|
89,860
|
|
Net income per diluted
share
|
$
|
0.84
|
|
Adjusted Net
Loss(1)
|
$
|
(1,255)
|
|
Adjusted Net Loss per
diluted share(1)
|
$
|
(0.01)
|
|
Adjusted
EBITDA(1)
|
$
|
203,063
|
|
Adjusted EBITDA
excluding hedges(1)
|
$
|
215,386
|
|
Upstream Capital
Expenditures (including Plug & Abandonment)
|
$
|
190,024
|
|
Adjusted EBITDA
Margin:
|
|
|
Adjusted EBITDA per
Boe
|
$
|
35.48
|
|
Adjusted EBITDA
excluding hedges per Boe
|
$
|
37.64
|
|
Production
Production was 63.6 MBoe/d net for the first quarter 2023 and
was 72% oil and 79% liquids. Production figures are inclusive of
the EnVen assets from the closing date of February 13, 2023 through the end of the
quarter.
|
Three Months
Ended
March 31, 2023
|
|
Average net daily
production volumes
|
|
|
Oil
(MBbl/d)
|
|
45.6
|
|
Natural Gas
(MMcf/d)
|
|
79.2
|
|
NGL
(MBbl/d)
|
|
4.8
|
|
Total average net daily
(MBoe/d)
|
|
63.6
|
|
|
Three Months Ended
March 31, 2023
|
|
|
Production
|
|
% Oil
|
|
% Liquids
|
|
% Operated
|
|
Average net daily
production volumes by Core Area (MBoe/d)
|
|
|
|
|
|
|
|
|
Green Canyon
Area
|
|
23.9
|
|
|
82
|
%
|
|
88
|
%
|
|
92
|
%
|
Mississippi Canyon
Area
|
|
25.2
|
|
|
78
|
%
|
|
86
|
%
|
|
60
|
%
|
Shelf and Gulf
Coast
|
|
14.5
|
|
|
45
|
%
|
|
54
|
%
|
|
60
|
%
|
Total average net daily
(MBoe/d)
|
|
63.6
|
|
|
72
|
%
|
|
79
|
%
|
|
72
|
%
|
Capital Expenditures
Upstream capital expenditures, including plugging and
abandonment, totaled $190.0 million
for the first quarter 2023.
|
Three Months
Ended
March 31, 2023
|
|
Upstream Capital
Expenditures
|
|
|
U.S. drilling &
completions
|
$
|
112,330
|
|
Mexico appraisal &
exploration
|
|
96
|
|
Asset
management(1)
|
|
44,944
|
|
Seismic and G&G,
land, capitalized G&A and other
|
|
21,833
|
|
Total Upstream Capital
Expenditures
|
|
179,203
|
|
Plugging &
Abandonment
|
|
10,113
|
|
Decommissioning
Obligations Settled(2)
|
|
708
|
|
Total
|
$
|
190,024
|
|
(1) Asset management consists of capital expenditures for
development-related activities primarily associated with
recompletions and improvements to our facilities and
infrastructure.
(2) 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.
CCS expenses totaled $6.2 million,
which is accounted for in the Company's reported Adjusted EBITDA
figure. CCS capital expenditures totaled $21.2 million, which includes our investments in
recent Bayou Bend and eastern Louisiana acreage expansions.
($
Millions):
|
Three Months
Ended
March 31, 2023
|
|
CCS
Investments
|
|
|
CCS
Expenses
|
$
|
6,157
|
|
CCS Capital
Expenditures
|
|
21,189
|
|
Total CCS
Investments
|
$
|
27,346
|
|
Liquidity and Leverage
At quarter-end, the Company had approximately $805.4 million of liquidity, with $800.0 million undrawn on its credit facility and
approximately $16.2 million in cash,
less approximately $10.8 million in
outstanding letters of credit.
On March 31, 2023, Talos had $1,061.0 million in total debt. Net Debt was
$1,044.9 million(1). Net
Debt to Pro Forma LTM Adjusted EBITDA was 0.9x(1). In
conjunction with the closing of the EnVen acquisition on
February 13, 2023, Talos drew
approximately $130.0 million on its
credit facility and assumed EnVen's previously issued and
outstanding 11.75% second priority senior secured notes.
Footnotes:
(1) Adjusted Net Income (Loss), Adjusted Earnings (Loss)
per Share, Adjusted EBITDA, Adjusted EBITDA excluding hedges,
Adjusted EBITDA margin, Adjusted EBITDA margin excluding hedges,
Credit Facility LTM Adjusted EBITDA, Net Debt, Net Debt to Credit
Facility LTM Adjusted EBITDA, Adjusted Free Cash Flow and PV-10 are
non-GAAP financial measures. See "Supplemental Non-GAAP
Information" below for additional detail and reconciliations of
GAAP to non-GAAP measures.
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 8,
2023:
|
Instrument
Type
|
Avg. Daily
Volume
|
|
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
2023
|
Fixed Swaps
|
|
27,000
|
|
$
|
74.12
|
|
|
|
|
|
|
|
April - June
2023
|
Collar
|
|
2,500
|
|
|
|
|
|
$
|
65.00
|
|
$
|
89.22
|
|
April - June
2023
|
3-Way Collar
|
|
9,200
|
|
|
|
$
|
51.32
|
|
$
|
64.57
|
|
$
|
108.63
|
|
July - September
2023
|
Fixed Swaps
|
|
14,348
|
|
$
|
73.92
|
|
|
|
|
|
|
|
July - September
2023
|
Collar
|
|
4,500
|
|
|
|
|
|
$
|
70.56
|
|
$
|
89.99
|
|
July - September
2023
|
3-Way Collar
|
|
9,200
|
|
|
|
$
|
51.86
|
|
$
|
65.11
|
|
$
|
109.25
|
|
October - December
2023
|
Fixed Swaps
|
|
12,000
|
|
$
|
75.25
|
|
|
|
|
|
|
|
October - December
2023
|
Collar
|
|
7,826
|
|
|
|
|
|
$
|
67.76
|
|
$
|
86.40
|
|
October - December
2023
|
3-Way Collar
|
|
9,200
|
|
|
|
$
|
51.86
|
|
$
|
65.11
|
|
$
|
109.25
|
|
January - March
2024
|
Fixed Swaps
|
|
15,000
|
|
$
|
72.55
|
|
|
|
|
|
|
|
January - March
2024
|
Collar
|
|
3,000
|
|
|
|
|
|
$
|
70.00
|
|
$
|
83.67
|
|
January - March
2024
|
3-Way Collar
|
|
3,200
|
|
|
|
$
|
57.27
|
|
$
|
70.00
|
|
$
|
98.01
|
|
April - June
2024
|
Fixed Swaps
|
|
13,500
|
|
$
|
74.15
|
|
|
|
|
|
|
|
April - June
2024
|
Collar
|
|
1,000
|
|
|
|
|
|
$
|
70.00
|
|
$
|
75.00
|
|
July - September
2024
|
Fixed Swaps
|
|
8,000
|
|
$
|
72.53
|
|
|
|
|
|
|
|
July - September
2024
|
Collar
|
|
1,000
|
|
|
|
|
|
$
|
70.00
|
|
$
|
75.00
|
|
October - December
2024
|
Fixed Swaps
|
|
7,000
|
|
$
|
70.68
|
|
|
|
|
|
|
|
October - December
2024
|
Collar
|
|
1,000
|
|
|
|
|
|
$
|
70.00
|
|
$
|
75.00
|
|
January - March
2025
|
Fixed Swaps
|
|
4,000
|
|
$
|
67.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas – HH
NYMEX
|
|
(MMBtu)
|
|
(Per
MMBtu)
|
|
(Per
MMBtu)
|
|
(Per
MMBtu)
|
|
(Per
MMBtu)
|
|
April - June
2023
|
Fixed Swaps
|
|
39,000
|
|
$
|
3.33
|
|
|
|
|
|
|
|
April - June
2023
|
Collar
|
|
10,000
|
|
|
|
|
|
$
|
5.25
|
|
$
|
8.46
|
|
July - September
2023
|
Fixed Swaps
|
|
20,000
|
|
$
|
3.35
|
|
|
|
|
|
|
|
July - September
2023
|
Collar
|
|
10,000
|
|
|
|
|
|
$
|
5.25
|
|
$
|
8.46
|
|
October - December
2023
|
Fixed Swaps
|
|
20,000
|
|
$
|
4.22
|
|
|
|
|
|
|
|
October - December
2023
|
Collar
|
|
10,000
|
|
|
|
|
|
$
|
5.25
|
|
$
|
8.46
|
|
January - March
2024
|
Fixed Swaps
|
|
25,000
|
|
$
|
3.48
|
|
|
|
|
|
|
|
January - March
2024
|
Collar
|
|
10,000
|
|
|
|
|
|
$
|
4.00
|
|
$
|
6.90
|
|
April - June
2024
|
Fixed Swaps
|
|
20,000
|
|
$
|
3.38
|
|
|
|
|
|
|
|
April - June
2024
|
Collar
|
|
10,000
|
|
|
|
|
|
$
|
4.00
|
|
$
|
6.90
|
|
July - September
2024
|
Fixed Swaps
|
|
10,000
|
|
$
|
3.52
|
|
|
|
|
|
|
|
July - September
2024
|
Collar
|
|
10,000
|
|
|
|
|
|
$
|
4.00
|
|
$
|
6.90
|
|
October - December
2024
|
Fixed Swaps
|
|
10,000
|
|
$
|
3.52
|
|
|
|
|
|
|
|
October - December
2024
|
Collar
|
|
10,000
|
|
|
|
|
|
$
|
4.00
|
|
$
|
6.90
|
|
January - March
2025
|
Fixed Swaps
|
|
10,000
|
|
$
|
4.37
|
|
|
|
|
|
|
|
CONFERENCE CALL AND WEBCAST INFORMATION
Talos will host a conference call, which will be broadcast live
over the internet, on Tuesday, May 9,
2023 at 10:00 AM Eastern Time
(9:00 AM Central Time). Listeners can
access the conference call through a webcast link on the Company's
website at:
https://www.talosenergy.com/investor-relations/events-calendar/default.aspx.
Alternatively, the conference call can be accessed by dialing (888)
348-8927 (U.S. toll-free), (855) 669-9657 (Canada toll-free) or (412) 902-4263
(international). Please dial in approximately 15 minutes before the
teleconference is scheduled to begin and ask to be joined into the
Talos Energy call. A replay of the call will be available one hour
after the conclusion of the conference until May 16, 2023 and can be accessed by dialing (877)
344-7529 and using access code 4517185.
ABOUT TALOS ENERGY
Talos Energy (NYSE: TALO) is a technically driven independent
exploration and production company focused on safely and
efficiently maximizing long-term value through its operations,
currently in the United States and
offshore Mexico, both upstream
through oil and gas exploration and production and downstream
through the development of future carbon capture and storage
opportunities. As one of the Gulf of
Mexico's largest public independent producers, we leverage
decades of technical and offshore operational expertise towards the
acquisition, exploration and development of assets in key
geological trends that are present in many offshore basins around
the world. With a focus on environmental stewardship, we are also
utilizing our expertise to explore opportunities to reduce
industrial emissions through our carbon capture and storage
initiatives along the U.S. Gulf of
Mexico. For more information, visit
www.talosenergy.com.
INVESTOR RELATIONS CONTACT
Sergio Maiworm
investor@talosenergy.com
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This communication may contain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than
statements of historical fact included in this communication,
regarding our strategy, future operations, financial position,
estimated revenues and losses, projected costs, prospects, plans
and objectives of management are forward-looking statements. When
used in this communication, the words "will," "could," "believe,"
"anticipate," "intend," "estimate," "expect," "project,"
"forecast," "may," "objective," "plan" and similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain such identifying words. These
forward-looking statements are based on our current expectations
and assumptions about future events and are based on currently
available information as to the outcome and timing of future
events.
We caution you that these forward-looking statements are subject
to numerous risks and uncertainties, most of which are difficult to
predict and many of which are beyond our control. These risks
include, but are not limited to, the anticipated future integration
of the assets acquired from EnVen Energy Corporation; the success
of our carbon capture and sequestration projects; commodity price
volatility; the lack of a resolution to the war in Ukraine and its impact on certain commodity
markets; the ability or willingness of the Organization of
Petroleum Exporting Countries ("OPEC") and non-OPEC countries, such
as Saudi Arabia and Russia, to set and maintain oil production
levels and the impact of any such actions; the success of any
future capital raise; the impact of the ongoing sub-surface water
flood project in the Phoenix Field and any updates to our estimated
ultimate recovery from such project; lack of transportation and
storage capacity as a result of oversupply, government regulations
and actions or other factors; sustained inflation and the impact of
central bank policy in response thereto; lack of availability of
drilling and production equipment and services; environmental
risks; drilling and other operating risks; regulatory changes;
adverse weather events, including tropical storms, hurricanes and
winter storms; cybersecurity threats; the continued impact of the
coronavirus disease 2019 ("COVID-19"), including any new strains or
variants, and governmental measures related thereto; the
uncertainty inherent in estimating reserves and in projecting
future rates of production, cash flow and access to capital; the
timing of development expenditures; the possibility that the
anticipated benefits of recent acquisitions are not realized when
expected or at all, including as a result of the impact of, or
problems arising from, the integration of such acquisitions;
changes to federal income tax laws and regulations, including the
Inflation Reduction Act of 2022; environmental risks; failure to
find, acquire or gain access to other discoveries and prospects or
to successfully develop and produce from our current discoveries
and prospects; geologic risk; drilling and other operating risks;
well control risk; regulatory changes; the uncertainty inherent in
estimating reserves and in projecting future rates of production;
cash flow and access to capital; the timing of development
expenditures; potential adverse reactions or competitive responses
to our acquisitions and other transactions; the possibility that
the anticipated benefits of our acquisitions are not realized when
expected or at all, including as a result of the impact of, or
problems arising from, the integration of acquired assets and
operations, and the other risks discussed in Part I, Item 1A. "Risk
Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2022, filed with the SEC
on March 1, 2023 and Part II, Item
1A. "Risk Factors" in our Annual Report on Form 10-Q for the
quarter ended March 31, 2023, filed
subsequent to the issuance of this communication.
Should one or more of the risks or uncertainties described
herein occur, or should underlying assumptions prove incorrect, our
actual results and plans could differ materially from those
expressed in any forward-looking statements. All forward-looking
statements, expressed or implied, included in this communication
are expressly qualified in their entirety by this cautionary
statement. This cautionary statement should also be considered in
connection with any subsequent written or oral forward-looking
statements that we or persons acting on our behalf may issue.
Except as otherwise required by applicable law, we disclaim any
duty to update any forward-looking statements, all of which are
expressly qualified by the statements in this section, to reflect
events or circumstances after the date of this communication.
Estimates for our future production volumes are based on
assumptions of capital expenditure levels and the assumption that
market demand and prices for oil and gas will continue at levels
that allow for economic production of these products. The
production, transportation, marketing and storage of oil and gas
are subject to disruption due to transportation, processing and
storage availability, mechanical failure, human error, hurricanes
and numerous other factors. Our estimates are based on certain
other assumptions, such as well performance, which may vary
significantly from those assumed. Therefore, we can give no
assurance that our future production volumes will be as
estimated.
RESERVE INFORMATION
Reserve engineering is a process of estimating underground
accumulations of oil, natural gas and NGLs that cannot be measured
in an exact way. The accuracy of any reserve estimate depends on
the quality of available data, the interpretation of such data and
price and cost assumptions made by reserve engineers. In addition,
the results of drilling, testing and production activities may
justify revisions upward or downward of estimates that were made
previously. If significant, such revisions would change the
schedule of any further production and development drilling.
Accordingly, reserve estimates may differ significantly from the
quantities of oil, natural gas and NGLs that are ultimately
recovered. In addition, we use the term "gross unrisked resource
potential" in this release, which is not a measure of "reserves"
prepared in accordance with SEC guidelines or permitted to be
included in SEC filings. These resource estimates are inherently
more uncertain than estimates of reserves prepared in accordance
with SEC guidelines.
Talos Energy
Inc.
Condensed
Consolidated Balance Sheets
(In thousands,
except per share amounts)
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
16,169
|
|
$
|
44,145
|
|
Accounts
receivable:
|
|
|
|
|
Trade, net
|
|
169,850
|
|
|
150,598
|
|
Joint interest,
net
|
|
80,549
|
|
|
54,697
|
|
Other, net
|
|
17,954
|
|
|
6,684
|
|
Assets from price risk
management activities
|
|
54,553
|
|
|
25,029
|
|
Prepaid
assets
|
|
60,127
|
|
|
84,759
|
|
Other current
assets
|
|
11,901
|
|
|
1,917
|
|
Total current
assets
|
|
411,103
|
|
|
367,829
|
|
Property and
equipment:
|
|
|
|
|
Proved
properties
|
|
7,368,652
|
|
|
5,964,340
|
|
Unproved properties,
not subject to amortization
|
|
410,932
|
|
|
154,783
|
|
Other property and
equipment
|
|
31,485
|
|
|
30,691
|
|
Total property and
equipment
|
|
7,811,069
|
|
|
6,149,814
|
|
Accumulated
depreciation, depletion and amortization
|
|
(3,653,556)
|
|
|
(3,506,539)
|
|
Total property and
equipment, net
|
|
4,157,513
|
|
|
2,643,275
|
|
Other long-term
assets:
|
|
|
|
|
Restricted
cash
|
|
100,973
|
|
|
—
|
|
Assets from price risk
management activities
|
|
12,059
|
|
|
7,854
|
|
Equity method
investments
|
|
22,023
|
|
|
1,745
|
|
Other well equipment
inventory
|
|
40,345
|
|
|
25,541
|
|
Notes receivable,
net
|
|
15,031
|
|
|
—
|
|
Operating lease
assets
|
|
18,572
|
|
|
5,903
|
|
Other
assets
|
|
18,136
|
|
|
6,479
|
|
Total
assets
|
$
|
4,795,755
|
|
$
|
3,058,626
|
|
LIABILITIES AND
STOCKHOLDERSʼ EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
$
|
184,471
|
|
$
|
128,174
|
|
Accrued
liabilities
|
|
201,360
|
|
|
219,769
|
|
Accrued
royalties
|
|
44,340
|
|
|
52,215
|
|
Current portion of
long-term debt
|
|
33,201
|
|
|
—
|
|
Current portion of
asset retirement obligations
|
|
45,592
|
|
|
39,888
|
|
Liabilities from price
risk management activities
|
|
35,848
|
|
|
68,370
|
|
Accrued interest
payable
|
|
31,210
|
|
|
36,340
|
|
Current portion of
operating lease liabilities
|
|
3,129
|
|
|
1,943
|
|
Other current
liabilities
|
|
92,041
|
|
|
60,359
|
|
Total current
liabilities
|
|
671,192
|
|
|
607,058
|
|
Long-term
liabilities:
|
|
|
|
|
Long-term
debt
|
|
977,011
|
|
|
585,340
|
|
Asset retirement
obligations
|
|
772,059
|
|
|
501,773
|
|
Liabilities from price
risk management activities
|
|
4,286
|
|
|
7,872
|
|
Operating lease
liabilities
|
|
25,981
|
|
|
14,855
|
|
Other long-term
liabilities
|
|
284,385
|
|
|
176,152
|
|
Total
liabilities
|
|
2,734,914
|
|
|
1,893,050
|
|
Commitments and
contingencies
|
|
|
|
|
Stockholdersʼ
equity:
|
|
|
|
|
Preferred stock; $0.01
par value; 30,000,000 shares authorized and zero shares issued or
outstanding as of March 31, 2023 and December 31, 2022
|
|
—
|
|
|
—
|
|
Common stock; $0.01
par value; 270,000,000 shares authorized; 127,455,965 and
82,570,328 shares issued as of March 31, 2023 and December 31,
2022, respectively
|
|
1,275
|
|
|
826
|
|
Additional paid-in
capital
|
|
2,531,402
|
|
|
1,699,799
|
|
Accumulated
deficit
|
|
(445,189)
|
|
|
(535,049)
|
|
Treasury stock, at
cost; 1,900,000 and zero shares as of March 31, 2023 and December
31, 2022, respectively
|
|
(26,647)
|
|
|
—
|
|
Total stockholdersʼ
equity
|
|
2,060,841
|
|
|
1,165,576
|
|
Total liabilities
and stockholdersʼ equity
|
$
|
4,795,755
|
|
$
|
3,058,626
|
|
Talos Energy
Inc.
Condensed
Consolidated Statements of Operations
(In thousands,
except per share amounts)
|
|
|
Three Months Ended
March 31,
|
|
|
2023
|
|
2022
|
|
Revenues:
|
|
|
|
|
Oil
|
$
|
292,694
|
|
$
|
353,886
|
|
Natural gas
|
|
20,183
|
|
|
42,981
|
|
NGL
|
|
9,705
|
|
|
16,699
|
|
Total
revenues
|
|
322,582
|
|
|
413,566
|
|
Operating
expenses:
|
|
|
|
|
Lease operating
expense
|
|
81,362
|
|
|
59,814
|
|
Production
taxes
|
|
606
|
|
|
851
|
|
Depreciation,
depletion and amortization
|
|
147,323
|
|
|
98,340
|
|
Accretion
expense
|
|
19,414
|
|
|
14,377
|
|
General and
administrative expense
|
|
63,187
|
|
|
22,528
|
|
Other operating
expense
|
|
2,838
|
|
|
136
|
|
Total operating
expenses
|
|
314,730
|
|
|
196,046
|
|
Operating
income
|
|
7,852
|
|
|
217,520
|
|
Interest
expense
|
|
(37,581)
|
|
|
(31,490)
|
|
Price risk management
activities income (expense)
|
|
58,937
|
|
|
(281,219)
|
|
Equity method
investment income
|
|
7,443
|
|
|
142
|
|
Other
income
|
|
6,666
|
|
|
28,134
|
|
Net income (loss)
before income taxes
|
|
43,317
|
|
|
(66,913)
|
|
Income tax
benefit
|
|
46,543
|
|
|
472
|
|
Net income
(loss)
|
$
|
89,860
|
|
$
|
(66,441)
|
|
|
|
|
|
|
Net income (loss) per
common share:
|
|
|
|
|
Basic
|
$
|
0.85
|
|
$
|
(0.81)
|
|
Diluted
|
$
|
0.84
|
|
$
|
(0.81)
|
|
Weighted average common
shares outstanding:
|
|
|
|
|
Basic
|
|
105,634
|
|
|
82,071
|
|
Diluted
|
|
106,950
|
|
|
82,071
|
|
Talos Energy
Inc.
Condensed
Consolidated Statements of Cash Flows
(In
thousands)
|
|
|
Three Months Ended
March 31,
|
|
|
2023
|
|
2022
|
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
(loss)
|
$
|
89,860
|
|
$
|
(66,441)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
Depreciation,
depletion, amortization and accretion expense
|
|
166,737
|
|
|
112,717
|
|
Amortization of
deferred financing costs and original issue discount
|
|
4,148
|
|
|
3,415
|
|
Equity-based
compensation expense
|
|
3,938
|
|
|
3,318
|
|
Price risk management
activities expense (income)
|
|
(58,937)
|
|
|
281,219
|
|
Net cash paid on
settled derivative instruments
|
|
(12,323)
|
|
|
(127,086)
|
|
Equity method
investment income
|
|
(7,443)
|
|
|
(142)
|
|
Settlement of asset
retirement obligations
|
|
(10,113)
|
|
|
(20,023)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
|
36,821
|
|
|
(56,817)
|
|
Other current
assets
|
|
7,735
|
|
|
4,505
|
|
Accounts
payable
|
|
(4,894)
|
|
|
9,381
|
|
Other current
liabilities
|
|
(116,637)
|
|
|
(26,423)
|
|
Other non-current
assets and liabilities, net
|
|
(36,035)
|
|
|
(4,013)
|
|
Net cash provided by
operating activities
|
|
62,857
|
|
|
113,610
|
|
Cash flows from
investing activities:
|
|
|
|
|
Exploration,
development and other capital expenditures
|
|
(103,962)
|
|
|
(53,978)
|
|
Proceeds from
(payments for) acquisitions, net of cash acquired
|
|
17,617
|
|
|
(3,500)
|
|
Proceeds from sale of
property and equipment, net
|
|
—
|
|
|
346
|
|
Contributions to
equity method investees
|
|
(12,835)
|
|
|
(2,250)
|
|
Investment in
intangible assets
|
|
(7,796)
|
|
|
—
|
|
Net cash used in
investing activities
|
|
(106,976)
|
|
|
(59,382)
|
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from Bank
Credit Facility
|
|
275,000
|
|
|
35,000
|
|
Repayment of Bank
Credit Facility
|
|
(110,000)
|
|
|
(70,000)
|
|
Deferred financing
costs
|
|
(11,346)
|
|
|
—
|
|
Payments of finance
lease
|
|
(3,987)
|
|
|
(6,256)
|
|
Purchase of treasury
stock
|
|
(25,173)
|
|
|
—
|
|
Employee stock awards
tax withholdings
|
|
(7,378)
|
|
|
(4,476)
|
|
Net cash provided by
(used in) financing activities
|
|
117,116
|
|
|
(45,732)
|
|
|
|
|
|
|
Net increase in cash,
cash equivalents and restricted cash
|
|
72,997
|
|
|
8,496
|
|
Cash, cash equivalents
and restricted cash:
|
|
|
|
|
Balance, beginning of
period
|
|
44,145
|
|
|
69,852
|
|
Balance, end of
period
|
$
|
117,142
|
|
$
|
78,348
|
|
|
|
|
|
|
Supplemental non-cash
transactions:
|
|
|
|
|
Capital expenditures
included in accounts payable and accrued liabilities
|
$
|
174,597
|
|
$
|
53,317
|
|
Supplemental cash flow
information:
|
|
|
|
|
Interest paid, net of
amounts capitalized
|
$
|
40,988
|
|
$
|
43,352
|
|
SUPPLEMENTAL NON-GAAP INFORMATION
Certain financial information included in our financial results
are not measures of financial performance recognized by accounting
principles generally accepted in the
United States, or GAAP. These non-GAAP financial measures
are "Adjusted Net Income (Loss)," "Adjusted Earnings per Share,"
"EBITDA," "Adjusted EBITDA," "Adjusted EBITDA excluding hedges,"
"Adjusted EBITDA Margin," "Adjusted EBITDA Margin excluding
hedges," "Adjusted Free Cash Flow," "Net Debt," "LTM Adjusted
EBITDA," "Credit Facility LTM Adjusted EBITDA,", "Net Debt to
Credit Facility LTM Adjusted EBITDA" and "PV-10." These disclosures
may not be viewed as a substitute for results determined in
accordance with GAAP and are not necessarily comparable to non-GAAP
measures which may be reported by other companies.
Reconciliation of Net Income (Loss) to EBITDA and Adjusted
EBITDA
"EBITDA" and "Adjusted EBITDA" are to provide management and
investors with (i) additional information to evaluate, with certain
adjustments, items required or permitted in calculating covenant
compliance under our debt agreements, (ii) important supplemental
indicators of the operational performance of our business, (iii)
additional criteria for evaluating our performance relative to our
peers and (iv) supplemental information to investors about certain
material non-cash and/or other items that may not continue at the
same level in the future. EBITDA and Adjusted EBITDA have
limitations as analytical tools and should not be considered in
isolation or as substitutes for analysis of our results as reported
under GAAP or as alternatives to net income (loss), operating
income (loss) or any other measure of financial performance
presented in accordance with GAAP. We define these as the
following:
EBITDA. Net income (loss) plus interest expense, income
tax expense (benefit), depreciation, depletion and amortization and
accretion expense.
Adjusted EBITDA. EBITDA plus non-cash write-down of oil
and natural gas properties, transaction and other (income)
expenses, decommissioning obligations, derivative fair value (gain)
loss, net cash receipts (payments) on settled derivatives, (gain)
loss on debt extinguishment, non-cash write-down of other well
equipment inventory and non-cash equity-based compensation
expense.
Adjusted EBITDA excluding hedges. We have historically
provided as a supplement to—rather than in lieu of—Adjusted EBITDA
including hedges, provides useful information regarding our results
of operations and profitability by illustrating the operating
results of our oil and natural gas properties without the benefit
or detriment, as applicable, of our financial oil and natural gas
hedges. By excluding our oil and natural gas hedges, we are able to
convey actual operating results using realized market prices during
the period, thereby providing analysts and investors with
additional information they can use to evaluate the impacts of our
hedging strategies over time.
We also present Adjusted EBITDA excluding hedges and as a
percentage of revenue to further analyze our business, which are
outlined below:
Adjusted EBITDA Margin. EBITDA divided by Revenue, as a
percentage. It is also defined as Adjusted EBITDA divided by the
total production volume, expressed in Boe, in the period, and
described as dollar per Boe. We believe the presentation of
Adjusted EBITDA margin is important to provide management and
investors with information about how much we retain in Adjusted
EBITDA terms as compared to the revenue we generate and how much
per barrel we generate after accounting for certain operational and
corporate costs.
The following table presents a reconciliation of the GAAP
financial measure of net income (loss) to EBITDA, Adjusted EBITDA,
Adjusted EBITDA excluding hedges, Adjusted EBITDA Margin and
Adjusted EBITDA Margin excluding hedges for each of the periods
indicated (in thousands, except for Boe, $/Boe and percentage
data):
|
Three Months
Ended
|
|
($ thousands, except
per Boe)
|
March 31,
2023
|
|
December 31,
2022
|
|
September 30,
2022
|
|
June 30,
2022
|
|
Reconciliation of net
income (loss) to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
Net Income
(loss)
|
$
|
89,860
|
|
$
|
2,750
|
|
$
|
250,465
|
|
$
|
195,141
|
|
Interest
expense
|
|
37,581
|
|
|
33,967
|
|
|
29,265
|
|
|
30,776
|
|
Income tax expense
(benefit)
|
|
(46,543)
|
|
|
281
|
|
|
121
|
|
|
2,607
|
|
Depreciation,
depletion and amortization
|
|
147,323
|
|
|
119,456
|
|
|
92,323
|
|
|
104,511
|
|
Accretion
expense
|
|
19,414
|
|
|
13,595
|
|
|
13,179
|
|
|
14,844
|
|
EBITDA
|
|
247,635
|
|
|
170,049
|
|
|
385,353
|
|
|
347,879
|
|
Transaction and other
(income) expenses(1)
|
|
22,009
|
|
|
4,343
|
|
|
3,219
|
|
|
(15,214)
|
|
Decommissioning
obligations(2)
|
|
741
|
|
|
21,005
|
|
|
20
|
|
|
10,204
|
|
Derivative fair value
(gain) loss(3)
|
|
(58,937)
|
|
|
41,058
|
|
|
(114,180)
|
|
|
64,094
|
|
Net cash payments on
settled derivative instruments(3)
|
|
(12,323)
|
|
|
(57,076)
|
|
|
(81,162)
|
|
|
(160,235)
|
|
Loss on extinguishment
of debt
|
|
—
|
|
|
1,569
|
|
|
—
|
|
|
—
|
|
Non-cash equity-based
compensation expense
|
|
3,938
|
|
|
4,276
|
|
|
4,310
|
|
|
4,049
|
|
Adjusted
EBITDA
|
|
203,063
|
|
|
185,224
|
|
|
197,560
|
|
|
250,777
|
|
Add: Net cash payments
on settled derivative instruments(3)
|
|
12,323
|
|
|
57,076
|
|
|
81,162
|
|
|
160,235
|
|
Adjusted EBITDA
excluding hedges
|
$
|
215,386
|
|
$
|
242,300
|
|
$
|
278,722
|
|
$
|
411,012
|
|
Production and
Revenue:
|
|
|
|
|
|
|
|
|
Boe(4)
|
|
5,723
|
|
|
5,207
|
|
|
4,876
|
|
|
5,953
|
|
Total
revenues
|
|
322,582
|
|
|
342,201
|
|
|
377,128
|
|
|
519,085
|
|
Adjusted EBITDA margin
and Adjusted EBITDA excl hedges margin:
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
divided by – Total revenues incl hedges (%)
|
|
65
|
%
|
|
65
|
%
|
|
67
|
%
|
|
70
|
%
|
Adjusted EBITDA per
Boe(4)
|
$
|
35.48
|
|
$
|
35.57
|
|
$
|
40.52
|
|
$
|
42.13
|
|
Adjusted EBITDA excl
hedges divided by – Total revenues (%)
|
|
67
|
%
|
|
71
|
%
|
|
74
|
%
|
|
79
|
%
|
Adjusted EBITDA excl
hedges per Boe(3)
|
$
|
37.64
|
|
$
|
46.53
|
|
$
|
57.16
|
|
$
|
69.04
|
|
(1) For the three months ended March 31, 2023, transaction expenses include
$35.2 million in costs related to the
EnVen Acquisition, inclusive of $22.6
million in severance expense. Other income (expense)
includes other miscellaneous income and expenses that we do not
view as a meaningful indicator of our operating performance. For
the three months ended March 31,
2023, it includes a $8.6
million gain on the funding of the capital carry of its
investment in Bayou Bend by Chevron. For the three months ended
June 30, 2022, it includes a
$13.9 million gain on partial sale of
our investment in Bayou Bend.
(2) Estimated decommissioning obligations were 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.
(3) The adjustments for the derivative fair value (gain)
loss and net cash receipts (payments) on settled derivative
instruments have the effect of adjusting net income (loss) for
changes in the fair value of derivative instruments, which are
recognized at the end of each accounting period because we do not
designate commodity derivative instruments as accounting hedges.
This results in reflecting commodity derivative gains and losses
within Adjusted EBITDA on an unrealized basis during the period the
derivatives settled.
(4) One Boe is equal to six
Mcf of natural gas or one Bbl of oil or NGLs based on an
approximate energy equivalency. This is an energy content
correlation and does not reflect a value or price relationship
between the commodities.
Reconciliation of Adjusted EBITDA to Adjusted Free Cash Flow
and Reconciliation of Net Cash Provided by Operating Activities to
Adjusted Free Cash Flow
"Adjusted Free Cash Flow" before changes in working capital
provides management and investors with (i) important supplemental
indicators of the operational performance of our business, (ii)
additional criteria for evaluating our performance relative to our
peers and (iii) supplemental information to investors about certain
material non-cash and/or other items that may not continue at the
same level in the future. Adjusted Free Cash Flow has limitations
as an analytical tool and should not be considered in isolation or
as substitutes for analysis of our results as reported under GAAP
or as alternatives to net income (loss), operating income (loss) or
any other measure of financial performance presented in accordance
with GAAP. We define these as the following:
Capital Expenditures and Plugging & Abandonment.
Actual capital expenditures and plugging & abandonment
recognized in the quarter, inclusive of accruals.
Interest Expense. Actual interest expense per the income
statement.
Talos did not pay any cash taxes in the period, therefore cash
taxes have no impact to the reported Adjusted Free Cash Flow before
changes in working capital number.
($
thousands)
|
Three Months
Ended
March 31, 2023
|
|
Reconciliation of
Adjusted EBITDA to Adjusted Free Cash Flow (before changes in
working capital)
|
|
|
Adjusted
EBITDA
|
$
|
203,063
|
|
Less: Upstream capital
expenditures
|
|
(179,203)
|
|
Less: Plugging &
abandonment
|
|
(10,113)
|
|
Less: Decommissioning
obligations settled
|
|
(708)
|
|
Less: CCS capital
expenditures
|
|
(21,189)
|
|
Less: Interest
expense
|
|
(37,581)
|
|
Adjusted Free Cash Flow
(before changes in working capital)
|
$
|
(45,731)
|
|
($
thousands)
|
Three Months Ended
March 31, 2023
|
|
Reconciliation of net
cash provided by operating activities to Adjusted Free Cash Flow
(before changes in working capital)
|
|
|
Net cash provided by
operating activities(1)
|
$
|
62,857
|
|
(Increase) decrease in
operating assets and liabilities
|
|
113,010
|
|
Upstream capital
expenditures(2)
|
|
(179,203)
|
|
Decommissioning
obligations settled
|
|
(708)
|
|
CCS capital
expenditures
|
|
(21,189)
|
|
Transaction and other
(income) expenses(3)
|
|
30,597
|
|
Decommissioning
obligations(4)
|
|
741
|
|
Amortization of
deferred financing costs and original issue discount
|
|
(4,148)
|
|
Income tax
benefit
|
|
(46,543)
|
|
Other
adjustments
|
|
(1,145)
|
|
Adjusted Free Cash Flow
(before changes in working capital)
|
$
|
(45,731)
|
|
(1) Includes settlement of asset retirement
obligations.
(2) Includes accruals and excludes acquisitions.
(3) For the three months ended March 31, 2023, transaction expenses include
$35.2 million in costs related to the
EnVen Acquisition, inclusive of $22.6
million in severance expense. Other income (expenses)
includes miscellaneous income and expenses that we do not view as a
meaningful indicator of our operating performance.
(4) Estimated decommissioning obligations were a result of
working interest partners or counterparties of divestiture
transactions that were unable to perform the required abandonment
obligations due to bankruptcy or insolvency.
Reconciliation of Net Income to Adjusted Net Income (Loss)
and Adjusted Earnings per Share
"Adjusted Net Income (Loss)" and "Adjusted Earnings per Share"
are to provide management and investors with (i) important
supplemental indicators of the operational performance of our
business, (ii) additional criteria for evaluating our performance
relative to our peers and (iii) supplemental information to
investors about certain material non-cash and/or other items that
may not continue at the same level in the future. Adjusted Net
Income (Loss) and Adjusted Earnings per Share have limitations as
analytical tools and should not be considered in isolation or as a
substitute for analysis of our results as reported under GAAP or as
an alternative to net income (loss), operating income (loss),
earnings per share or any other measure of financial performance
presented in accordance with GAAP.
Adjusted Net Income (Loss). Net income (loss) plus
accretion expense, transaction related costs, derivative fair value
(gain) loss, net cash receipts (payments) on settled derivative
instruments and non-cash equity-based compensation expense.
Adjusted Earnings per Share. Adjusted Net Income (Loss)
divided by the number of common shares.
|
Three Months Ended
March 31, 2023
|
|
($ thousands, except
per share amounts)
|
|
|
Basic per
Share
|
|
Diluted per
Share
|
|
Reconciliation of Net
Income to Adjusted Net Loss:
|
|
|
|
|
|
|
Net Income
|
$
|
89,860
|
|
$
|
0.85
|
|
$
|
0.84
|
|
Transaction and other
(income) expenses(1)
|
|
22,009
|
|
$
|
0.21
|
|
$
|
0.21
|
|
Decommissioning
obligations(2)
|
|
741
|
|
$
|
0.01
|
|
$
|
0.01
|
|
Derivative fair value
gain(3)
|
|
(58,937)
|
|
$
|
(0.56)
|
|
$
|
(0.55)
|
|
Net cash payments on
settled derivative instruments(3)
|
|
(12,323)
|
|
$
|
(0.12)
|
|
$
|
(0.12)
|
|
Non-cash income tax
expense
|
|
(46,543)
|
|
$
|
(0.44)
|
|
$
|
(0.44)
|
|
Non-cash equity-based
compensation expense
|
|
3,938
|
|
$
|
0.04
|
|
$
|
0.04
|
|
Adjusted Net
Loss
|
$
|
(1,255)
|
|
$
|
(0.01)
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding at March 31, 2023:
|
|
|
|
|
|
|
Basic
|
|
105,634
|
|
|
|
|
|
Diluted
|
|
106,950
|
|
|
|
|
|
(1) For the three months ended March 31, 2023, transaction expenses include
$35.2 million in costs related to the
EnVen Acquisition, inclusive of $22.6
million in severance expense. Other income (expense)
includes other miscellaneous income and expenses that we do not
view as a meaningful indicator of our operating performance. For
the three months ended March 31,
2023, it includes a $8.6
million gain on the funding of the capital carry of its
investment in Bayou Bend by Chevron.
(2) Estimated decommissioning obligations were a result of
working interest partners or counterparties of divestiture
transactions that were unable to perform the required abandonment
obligations due to bankruptcy or insolvency.
(3) The adjustments for the derivative fair value (gain)
loss and net cash receipts (payments) on settled derivative
instruments have the effect of adjusting net income (loss) for
changes in the fair value of derivative instruments, which are
recognized at the end of each accounting period because we do not
designate commodity derivative instruments as accounting hedges.
This results in reflecting commodity derivative gains and losses
within Adjusted Net Income (Loss) on an unrealized basis during the
period the derivatives settled.
Reconciliation of Total Debt to Net Debt and Net Debt to LTM
Adjusted EBITDA
We believe the presentation of Net Debt, LTM Adjusted EBITDA,
and Net Debt to LTM Adjusted EBITDA is important to provide
management and investors with additional important information to
evaluate our business. These measures are widely used by investors
and ratings agencies in the valuation, comparison, rating and
investment recommendations of companies.
Net Debt. Total Debt principal of the Company minus
cash and cash equivalents.
Net Debt to LTM Adjusted EBITDA. Net Debt divided by
the LTM Adjusted EBITDA.
|
March 31,
2023
|
|
Reconciliation of Net
Debt ($ thousands):
|
|
|
12.00% Second-Priority
Senior Secured Notes – due January 2026
|
$
|
638,541
|
|
11.75% Senior Secured
Second Lien Notes – due April 2026
|
|
257,500
|
|
Bank Credit Facility –
matures March 2027
|
|
165,000
|
|
Total Debt
|
|
1,061,041
|
|
Less: Cash and cash
equivalents
|
|
(16,169)
|
|
Net Debt
|
$
|
1,044,872
|
|
|
|
|
Calculation of LTM
Adjusted EBITDA:
|
|
|
Adjusted EBITDA for
three months period ended June 30, 2022
|
$
|
250,777
|
|
Adjusted EBITDA for
three months period ended September 30, 2022
|
|
197,560
|
|
Adjusted EBITDA for
three months period ended December 31, 2022
|
|
185,224
|
|
Adjusted EBITDA for
three months period ended March 31, 2023
|
|
203,063
|
|
LTM Adjusted
EBITDA
|
$
|
836,624
|
|
|
|
|
Acquired Assets
Adjusted EBITDA:
|
|
|
|
Adjusted EBITDA for
three months period ended June 30, 2022
|
$
|
132,084
|
|
Adjusted EBITDA for
three months period ended September 30, 2022
|
|
102,867
|
|
Adjusted EBITDA for
three months period ended December 31, 2022
|
|
73,891
|
|
Adjusted EBITDA for
period January 1, 2023 to February 13, 2023
|
|
33,120
|
|
LTM Adjusted EBITDA
from Acquired Assets
|
$
|
341,962
|
|
|
|
|
|
Pro Forma LTM Adjusted
EBITDA
|
$
|
1,178,586
|
|
|
|
|
Reconciliation of Net
Debt to Pro Forma LTM Adjusted EBITDA:
|
|
|
Net Debt / Pro Forma
LTM Adjusted EBITDA(1)
|
0.9
|
x
|
(1) Net Debt / Pro Forma LTM Adjusted EBITDA excludes the
Finance Lease. Had the Finance Lease been included, Net Debt / Pro
Forma LTM Adjusted EBITDA would have been 1.0x.
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SOURCE Talos Energy