TALOS ENERGY INC. Q4 FY2024 earnings call

• Management expressed appreciation to employees for their hard work, safety, and environmental commitment. - Paul Goodfellow to join as new CEO on March 3, 2025, with plans to refine strategic plan in first 100 days. - Financial highlights for Q4 2024: exceeded quarterly expectations, repaid credit facility, ended with $108 million cash. - Operational highlights: successful drilling of Katmai West number two well under budget and ahead of schedule; completion operations on Sun Spirit starting; plans for Daenerys exploratory well. - Reserves: larger oil-weighted base due to QuarterNorth acquisition in 2024. - 2025 guidance: CapEx between $500 million and $540 million, production expected 90-95 thousand barrels of oil equivalent per day, cash operating expenses $580-610 million, G&A $120-130 million.

For the fourth quarter of 2024, Talos Energy Inc. achieved record production of 98.7 thousand barrels of oil equivalent per day, with 70% being oil and 79% liquids. Record EBITDA of $362 million was reported, and free cash flow for the quarter was $164 million. For the full year 2024, production was 92.6 thousand barrels of oil equivalent per day, slightly above the midpoint of the full-year guidance range. Total annual EBITDA was approximately $1.3 billion, and free cash flow was $511 million. The company ended 2024 with proved reserves of 194 million barrels of oil equivalent, which is approximately 74% oil, with a PV-10 of approximately $4.2 billion. There are also significant probable reserves with a PV-10 of approximately $3 billion, totaling approximately $7.2 billion in total value.

• 2025 production guidance: 90 to 95 thousand barrels of oil equivalent per day, with approximately 69% oil and 79% liquids. - CapEx for 2025 is expected to be between $500 million and $540 million, with P&A allocation between $100 million and $120 million. - First quarter 2025 production is expected to be between 99 and 101 thousand barrels of oil per day.

• Weather-related downtime such as hurricanes and loop current shut-ins. - Unplanned downtime associated with third-party facilities and pipelines. - Regulatory and operational risks related to maintenance and safety to ensure safe operations and high uptime.

Q: Nate Pendleton asked about how the Katmai field compares to initial expectations and if there's upside to the 200 million barrel potential.

A: Sergio Maiworm responded that Katmai is a better field than initially thought, and there is upside to the 200 million barrel potential with ongoing investigations of other aspects of the field.

Q: Leo Mariani inquired about the 2025 CapEx and potential impact on 2026 production.

A: Sergio Maiworm stated that 2025 CapEx is influenced by high efficiency of the West Villa rig, leading to cost savings, and it's too early to indicate impact on 2026 production but capital returns to shareholders are under consideration.

Q: Tim Bresnan asked about the caution in 2025 outlook amid leadership change and oil macro.

A: Sergio Maiworm said the 2025 guidance is cautious due to maintenance programs, weather risks, and is part of the strategic planning with Paul Goodfellow, and results will be updated as the year progresses.

Q: Michael Scialla asked about planned downtime and update on Helm's Deep working interest.

A: Sergio Maiworm explained planned downtime involves multiple facilities and maintenance projects, and Helm's Deep working interest is still under consideration with ongoing commercial discussions for other wells.

Q: Jeffery Robertson asked about West Villa rig contract and drilling efficiencies at Katmai West two.

A: Sergio Maiworm said West Villa rig contract goes through Daenerys with option to extend, and drilling efficiencies at Katmai West two were due to good rig operations planning.

Q: Michael Ferro asked about West Villa usage and decision to continue using it for Katmai West completion.

A: Sergio Maiworm responded that the decision was due to Conqueror rig delay, allowing rearrangement of rig schedule to save capital by using West Villa for multiple operations.

Q: Paul Diamond asked about financial gearing and Tarantula expansion.

A: Sergio Maiworm said comfortable with current leverage ratio, and Tarantula expansion would be considered if additional successful wells justify the investment in expanding facility capacity.

Q: Arun Jayaram asked about path to prove up more resources at Katmai.

A: Sergio Maiworm explained reserves booking rules, with a combination of drilling additional wells and natural transfer of probables to proved reserves over time.

Q: Neil Mehta asked about A&D environment and organic vs. acquisition strategy.

A: Sergio Maiworm stated focus on organic growth and project execution currently, with consideration of bolt-on acquisitions and strategic opportunities depending on refined strategy.

Q: Neil Mehta followed up on Mexico asset sale update.

A: Sergio Maiworm said Talos Energy Inc. is still in Mexico, with ongoing regulatory process for the asset sale to Carso Group expected to close in coming months.