TALO - Earnings call transcript Q1 2020

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Operator

Good morning, and welcome to the Talos Energy First Quarter 2020 Earnings Call. [Operator Instructions]

I'd like to turn the conference over to Sergio Maiworm, Vice President of Finance, Investor Relations and Treasurer. Please go ahead.

Sergio Maiworm

Thank you, operator. to quarter welcome call. earnings and morning, our XXXX first conference Good and on Tim Shane Officer; President are call Young, Financial President Vice Speakers today Executive Duncan, the and Chief Executive Chief Officer. and

our you in may these I'd statements. started, XX-Q or statements forth Factors these XXXX, are press and today, include make on yesterday. take a to today get we as results events. statements from and materially that on Form Actual ending those set based like remarks future for results March Before new these our of we filed statements. Any we result the forward-looking cause to of XX, undertake materially that release this differ on that to yesterday's opportunity quarter are as could remind SEC differ this no forward-looking call with by obligations will information the contemplated assumptions update forward-looking to

non-GAAP both with the included During in talosenergy.com our filed at release, was this which was call, which reconciliation and yesterday's measures present we website press GAAP SEC GAAP financial non-GAP A may also to on available is of and measures.

turn over the like Tim. to And I'd now to call

Tim Duncan

and emerge is even The every challenge have and working rapidly as is the we all the look economy an and associated discussing across forward pandemic it before. company you, situation with Thank I sudden Sergio. that stronger to our well demand sectors are quarter results drop in global as a company the the meet an day to better-positioned of industry. COVID-XX effects environment the of for and as in unprecedented the for challenging, developments recent The combined but resulted industry. are

and to contractors foremost priority procedures In the community. among our daily COVID-XX in other our use as their crews. of health weeks, and we is and temperature Our any daily workforce. employees, offshore onboard advanced consistent offshore new first we always date, and work HSE surveys To cases bolstered techniques we our and include scans, of encountered recent health social our safety the face distancing masks screening not have and

moved quickly corporate work-from-home status. also We to our staff

begin to is various our stay we we weather people, well suppliers operate to their in protect which to our commodity broader of continue reopen, families vigilant positioned to still and I the downturn. in As Talos believe and jurisdictions this current network community. partners

entered ingredients As we abrupt March decline I manage our right to mentioned in last in an call, the prices. with oil

to flow allowing that positive the flexible margins us and opportunities infrastructure, in our remain hedges closing asset our robust minimum portfolio resilient recently acquisition, We combination diverse with following portfolio full a quarter and base material life even competitive production first ever utilize XXXX, free With base highly cycle, cash across our hedges. our is in current cash the asset have liquidity, with leverage, strip long-term commitments. more low and than flow for at prices expanded broad year still the and the high of a of generate our free asset

cash effective the closing, operators transaction area with exposure respect at free of throughout flow while and Job from acquisition, Marmalard, in adjustment reduced closing. the which It year. to date the XXXX, this of high-quality high-profile other substantially Claiborne. consideration numerous closed At XX transaction new also of as the our Odd assets, The brings With we increases that benefited our partnerships such Mexico cash February July Mississippi X, our of from core on Gulf interest Canyon Gulf introducing Mexico. in

of number of fixed the seller a of signed December when contract to with issued transaction, finance equity shares being the We we to in also used common part the our large the XXXX.

in these XXXX, an acquired the of For XX, of and average last to over an day day a drilling barrels development XX,XXX assets announced. the such The ending average is a the well Claiborne that of XXXX. continue upside, daily just of quarter was produce the equivalent equivalent production generated period #X encouraging transaction as first successful barrels near also term XX,XXX recently XX-month March providing

We online well be to year. this by expect that midyear

with You've in our also region, we announcement third-party primary discovery. the that discovery, impactful Equinor's offsetting this seen transaction that value that unlock of discovery Monument on acquired acreage the an is in the may term trend announced from

on entered as considering associated similar to savings reducing canceling expect the However, responded forma our G&A to find of the and our and is by to reducing currently When markets with pro our lower program the we continue XX% of assets XX%, and operating and the set suppliers the our in expenses. basis, or deteriorated COVID-XX total as On own, situation more a basis, capital than during spending projects, the costs now we our capital we and evolving and across XXXX. same economic March, down rapidly deferring G&A service we costs government-mandated capital a we've are and spread budget work providers. assets the shutdown, growth reducing operating

to hedges. and expect benefit throughout continue to year, from our add We book we have hedge to additional continued strong opportunistically the

of commenced of focuses continue adjusted of or the on Each will Looking and which utilizes infrastructure to the in half second the the environment. for uncertainty committed that of quarter that direction the attractive reduced forward these withstand access to and either have respect capital with markets. to collateral execute plan, profile projects we XXXX, we to even existing current projects liquidity quick any leads margin That commodity in already previously remain value our or own and the infrastructure on operate possible position to. second to resulting best a our portfolio, improved to turnaround allows our production, increases within

for XX,XXX equivalent barrels Production equivalent recent March day. quarter backdrop, let's highlights a day. from quarter, and to Production the totaled the inclusive was Capital barrels include Stone ties our inclusive remains included So day XX,XXX from $XX XXXX P&A, Seismic a Energy EBITDA the million results $XXX equivalent of which The of And million, change million XX,XXX $X.X acquisition. as barrels figures expenditures strong transaction. a of reminder, that our to of expenditure in quarter. with for turn an a all totaled one-month at control the of a hedges. approximately

and have for per We cash straight $XX quarters. our share, six Free totaled earnings adjusted approximately adjusted the free straight cash a flow. $X.XX positive quarter EPS trend of of million continuing solid third flow positive was quarter

where more a to us In healthy As we shut-ins several move in reduce price into while and required resulting the or in diverse broader midstream more order fields in maintaining current initiated or to a encountered planned base. gives production the weeks, flexibility we've accelerate environment do so from storage provided maintenance to it by has and to upgrade near sense makes previously shut-ins respond capacity recent production the yet portfolio term. constraint. any second The either the quarter, production activities production not optionality company

the in improve. which half of maintenance acceleration activities of current later should planned as throughout the year the driven shut-ins by company prices XXXX, position are the Approximately various better other and

shut-ins our environment we partners with in Importantly, in potential the and market operating term. work regarding production continuing the additional and to our planning near from are non-op assets monitor other

to rigs previously the a As & Helmerich relatively currently mentioned conducting our of Transocean as of of plans Upon project. XX release, these near drillship. utilizing recently low-risk hook-up flexibility and Green as Talos Both completion Inspiration Payne our discovery well the our earnings projects, Canyon well contract. platform, the the from platform including rigs, Discoverer are release short-term projects, in then Bulleit our Tornado Talos our delivery both Kaleidoscope waterflood the planned rig exploitation took

key positioning on coming the declare focus weeks, discovery step for to near complete of government a design also toward advance our to and reservoir, engineering we final delivery decision line shared we environment regulatory our time the push a work. to the we're continuing expect and term, unitization. our While the of directive the a investment by completion business the immediate a following and Zama from we In as best Zama

the to phase discovery the to reach as look We possible, our eventual progress on to first and as continuing are world-class FID we and project forward moving to oil. soon next

over the our results. of turn details I'll it financial discuss now to Shane to

Shane Young

during low February of leverage margins, you, Thank some details our performance liquidity, further financial strong the on good provide assets, In quarter. on first maintain included like the to our I'd and we the Tim. acquisition closed XX. to continued of which we quarter, impact which

strong of As of to in hedge book material second benefits, the prices provide EBITDA our margins to began cash helping strong over quarter, sustain the XX%. flow declined half

key a the Highlighting results few quarter. for

in of of the in XXXX, XX,XXX Talos As of results barrels the of transaction. assets from acquired generated first Tim oil the mentioned, one-month including quarter equivalent per ILX day production

including For equivalent the average XX,XXX same the under with barrel of barrels we transaction of of realized $XX March, average an line just of day, received the impact period. in over the over of WTI closing. the per after oil month price roughly produced oil, The company prices per

with on a EBITDA facility for million first per $XX cash for inclusive our assets, million, of company and $XX position credit credit of of hand. calculating $XXX RBL We full X.X quarter of million, cash ended $XXX $XXX after also of $XXX basis, liquidity million. quarter with quarter of months' margin the impact with position oil XX% representing flow forma million, the LTM Talos barrel company's Talos the agreement. of from the a free EBITDA revenue. pro the conservative under on of approximately a leverage generated accordance generated an closed available EBITDA million and approximately approximately adjusted a of $XX quarter approximately in XX times acquired equivalent the The a including operating of CapEx

biannual next in course, announce Talos expects we we bank in have current group, assets the borrowing begun to down normal come has our have pricing around adds of to supportive process borrowing has redetermination recently end the But our have as solid the the and reserve well, month. Clearly, base bank partners is base. results environment. performed its the and,

some will to some very absorb into manageable liquidity, downturn go borrowing the sufficient nice to $XXX read maintaining as will to volatility. in strong was market early it environment. to while is that million the it positioned more we it in it with was Our than liquidity the and will see reduction be be of relates reason One be base, current

initial prices. our XX XXXX resulting substantially, oil guidance dramatic in on drop in deteriorated February Following a year, global demand this provided for financial crude

including result, cost-saving XXXX costs, capital capital has aggressively and LOE responded other G&A non-committed reducing and Talos and measures. a As operating deferring or expenses eliminating by reducing projects,

In costs to outside relative XX% temporary of system pro roughly prices, X% And shut-ins of capital, full of overhead we X,XXX and these quarter have taken impact we second current deferrals aggregate, XXXX year. XXXX out by $XXX for forma positive our and of the for The in approximately alone the operated has and we day for reduced hedges. operating over million project the capital approximately flow of per will barrels feel XXXX on commodity production been cash remain inclusive at levels.

from book Finally, Talos throughout XXXX. strong benefit continues to hedge its

the million of or has currently expected For oil approximately for price of the year XX% XXXX, a company of remainder XX.X barrel. our the oil over of of average hedged $XX.XX the per remainder barrels at weighted production

where have as added good of on and the book gas for half hedges We the well. to recently full we and year about XXXX gas our XXXX second both feel are

the that, Tim. to With to I'd back hand over call like

Tim Duncan

market level, advanced closing, that performance despite and time Thank company broader with are and our diverse stronger, we you, we're We must a backdrop, for pleased successfully Shane. take commodity stock a we a year more world-class better-positioned ago. a financial discovery. this appraised quarter. than the the international immediate In On

and positioning profile, the better leverage company cost we the and in. for with increasing all increased a consistent drilling reductions. capital calendar, of with the maintaining development reallocation that reserve environment ourselves current busy while low acquisition inventory significantly operationally for future. now executed production a this quickly liquidity We've a find responded consistently And base we the and we've major significant We completed our done and and

Talos, we're flow including for the still inclusive a free even though, cash the for of industry, the holds. strip focused in expect on current if positive we second the year, Even generating our hedges, pullback quarter, entire

basin through XXXX Our including team our are in persevere navigating our in shift and successfully we XXXX confident in employees, despite and downturn, the the assets our experience in oil our term. cycles, ability to has prices abrupt commodity multiple the and near deep

prepare a year, and the in steps and prudent take I to continue we While look believe any the environment for still position thrive Talos that future. as is months to we coming toward in

the up line now open we'll for that, with Q&A. And

Operator

Jeff from question Instructions] with first today come [Operator Our Grampp Northland will Capital Management.

Jeff Grampp

I best the I of Hey. walk fluid was can, ultimately, that's to you, hoping as and, on of But you and kind I remarks can I predict. ultimately hard does kind Tim, appreciate through of Zama, know us kind as to operatorship allow of particular, on in need FID? you next wondering, to when kind be move timing to forward to to events? guys guess, And made the of decision continue

Tim Duncan

of Right. part hope the is Mexico question. out for an Yes. case oil Obviously, as the the knew certainly we've now the because important. thought, has Well, be had discovery oil-producing we of always same. of believe, execute it's knew We and look, But of relies discovery, there on even by revenue to somewhat in I goes its our done treasury, we than It that the and down and that went well. this And in we part thanks we entered bigger well that to we maybe had we've space be lease think doing on And been nation. to And will you're way, next when role that that. kind there going execute to California. door. we we

Aviso. contract our It that a call under filing. feels make the have there's to that to equivalent a filing filing we We down by Obviously, that had our it's which technical like department there. the made the energy an government common with a obligation we But filing analysis, of sense. after reservoir. that look, know element shared SENER, this lets to is appraisal we make. It an had the We believe we that

the shared on So which a a and lean regulator, decision is who leasing yes, then then reservoir. of, on CNH, technical regulator that is the information renders isn't they our in or

we Now and these make, Shell are it leases. BP Jeff, if next BP door on would side that was other or on filings the

neighbor. have doesn't Pemex it anything of part do this our to specifically with So really being

way, we've talking with been along Now Pemex. the

of has preunitization Certainly, a have is COVID speed. parallel in cadence. has a a I that and about talked would Pemex. process, We with agreement that where that own own that call It past. I've helpful. kind culture slows the its It's face-to-face down. its

fairly reservoir, So we're SENER engage decision We to see takes will formally render wrap going the you a in through quickly filings. CNH to unitization discussion want shared And it's then then says, believe interim, that guys up and the which that we SENER. these back a look, this process.

process more, I emphasis be So trying on unit. wrapping maybe if there's say, through then just a the there we to would little negotiate government practices, up normally, would were the normal business

too parallel wrap not that down to merge hopefully something into again, So an government parallel Those expectation we've try but been up. has tracks. these going the to we are running confusing, tracks

where does months between up that that to and could four Now doesn't FID just and six It's is. Jeff, it of And we wanted of It it be COVID. in six mean two, year. anywhere take the wrapped weeks, it three and think, to the the inconveniences I gets wrap reality to middle inefficiencies toward maybe that the up. of kind just the of year it this maybe a is one, what end negotiations; the in of: push

We that plan get then and together. what you plan then, wrapped we development plan we've as file partnership to this, once you've file of ruling, up, that we pulls want you unitization I process a file start graphics it and And the Now think partnership. part that the again, does, show our then has construction. had because, development to a and FID development is that reached

this construct and will. uncertain, is been together years That's the X.X kind you if to around unitization. oil. this It's in it's less get FID of always process said always to pulling partnership about to that and post we've pulling me first So

so a the think answer simply question? And Does net is is, we're you bit so a just negotiation, I your progress the government have independent seeing a process. just together more that that's something through which we that process think, we oversight, little coming little tightening have helpful from with of an don't

Jeff Grampp

terms implement just that Can is the of XQ. will guys online? maintenance Yes. And shut-in the you on in assume that follow-up that assumed my guys guidance pretty the guys it. Super on helpful. in you I looking what kind shut-ins in are deferred to Got you then on what's talk production the shut-in production are and of come when that's done, bringing accelerated front? seeing but straightforward and

Tim Duncan

they've I'm think just obviously, the you, It's I it's, proximity about a got have is got they've they interesting. when it hot think a you their onshore offshore, handling their differential, sure of maybe of you and little about. range we trickier. a Yes. pretty actually, would it's And pretty facilities lot They as When assets. bit topic basis quick short. a companies you offshore, things you around of Onshore, about cover. their tell go think go to different just wells, portfolio

just that a well You XX have subsea that can miles have costs. flows variable might

You a people cost. got higher fixed has on it operate a could XX you platform that have that that's

And the so all shut-in we offshore time.

we issues a We shut shut-in, downstream in named storm. have if maintenance if to a have we third-party for have pipeline

we're not with So in. unfamiliar shutting

terms I reservoirs, think dry as have to shutting health something X.X about it of the about think every long-term in dock. Phoenix reservoirs. think But do you the our periods of time, deal we for in years of for the in you is extended

a I But fixed structure cost tends little our higher. do think to be

facilities. where Now agreements revenue our have there create are to production us for areas handling we in

in a think calculations shut back as I helpful. they really more maybe We the And rebound, than where that decisions Pompano our say is liquidity by these that's way it's enhancing? they of bring quicker actually suspect than Phoenix to onshore. more just emphasis I on onshore have revenue they production down these asset accretive? to liquidity. the vary And do handling because to Are Canyon not XX. breakeven, think in Are those see you see liquidity flexibility. from area, will offshore, to overarching little assets asset we So get decisions things drives area, start complicated I I have our would But Green up a offshore that, you'll on third-party

our would and to, in of shut-in we the we Those expect a quite is our in start half persist see We why to running obviously, bit of a the some expect, best make May. in June. to those may year. try closer we to little normal we expect guidance, second do So would which through expect of things attempts

Operator

Marshall Instructions] from question [Operator Heikinen Advisors. Our comes next Carver with Energy

Marshall Carver

production, know as should morning good is spending Thank we And you and for should color good around guidance Yes, that from do response and cases your think how have company, next think XXXX year. spending But don't a updates, you of prudent I'm that? we reduction that's next guidance follow-on had to for CapEx guess, should have original given year? COVID my company? guidance reducing in in have have the year a now. rapid and that, you how any hear. spend you lower a you maintenance for How I that year quite this about you've this any your that you've the on do impacting we given haven't glad really question, to the a I any you the to should bit

Tim Duncan

Again, almost a I it don't shut-ins building the at as think I looking you that those you you if about argue, look, about less, shut-ins question, budget, Well, matter. the guide, maintenance in think will. a general obviously, when would think Yes. on you're new

you about then I this but assets to with have Marshall, quote, think and because of the just March my release assets you you and I to announcement that, would at purchased, I if assets we CapEx about in reconcile look CapEx assets with I So take in our back the and again, a March transcript you talked and think rate spend what to we million. own, kind clean those that earnings that $XXX deck, the if look think take pull those I was let's think the XXXX, about in our total and you would

various midpoint guidance million, of be obviously you $XXX And for shut-ins if not drop XX%. so would If for this a are updated that so have the of you flat around now not here where $XXX somewhere that's dramatic to some million, and in reasons you for the around somewhere number. get the oil the the price,

maintenance. So maybe gives little you a around color that

And about I've But thinking maybe past our next a and think I here's I to we capital compliance part obligations. year, to you tower stack have the that. related of around certain in program you can previous every there's the that's forward like a somewhat But P&A would of you, to we obviously, tell there's have and flexibility this in about some P&A some year, talked what it we in to talked try do our we've offshore, calls, program. some think and

In that's maybe full XX% year, a to XX%.

a As XX%. we pull There move X% around, the pull but spend of some lot some be might that back. we maybe money timing it's that to other back, on, we things

G&G. going the going back we're leasing, have dollars the pull to some maybe pull to there. minimum some back So in of We're

previous related the we you noticed, Stone We first in Seismic XXXX. a G&G merger to the payment on had in in quarter,

those system. do the That's us asset management. our We little XX% a of profitability because to our in help around the be of capital that typically do assets. might program like bit there P&A. manage They of So somewhere help been

things kind of know pumps, nature. that You what recompletion, changing out They're those are Marshall. of are,

stays that So asset management there. in

frankly, to softer explore, environment. And that we the we defer, that into to and cancel first infrastructure are stuff. so utilizing things when of and, as ourselves those to the then had year next try like commodity look, wells to are know the we when contracts a is year, trust which, to as keep have to defer, just exploration Obviously, some ought short, it's further. we're of And like keep the defer from those to very we system drilling. you in don't explore, me have one our we're might this in things we in where say get What those ourselves we we reasons I to the forcing we again, And hopefully, back a much way. to pull that to we find we try quick

up. because And well Canyon on the that we well, have The with reason to it found if taking drilling project a PUD, of so hooking and taking proved in water that we're we our the Green are reserves XX And platform putting immediately think into success, do we're The value Bulleit is of either we category that reserves development flood low of we're has hooking a that that those assets. it, up. immediately we're rig, aren't is impact. booked collateral we or we're raise well kind the we're kind the risk

low we group? thing, high value liquidity, it's highly think, isn't we're have got constantly a developed, liquidity, work that's focused to one base just I leverage, bank it reserve collateral but that's just our do that And can Marshall, isn't on, maintain that with we

investments, extent going repeated depending we And the to in. that is to And environment be year. in, to are going so can next on recipe those the stay keep them

So of that, this in And stay. the the are Did you is, we're probably to key get needed can guarantee make keep back elements to the will of those going price year. some going to cancel elements add to obviously, we question we support kind that sense? that

Marshall Carver

Yes.

much. thank Yes, you Okay. very

Operator

our for to back conclude remarks. Duncan would the will like to session. this any closing questions, I Tim further over no Seeing question-and-answer turn Instructions]. call [Operator

Tim Duncan

all the Look, of a several these times. similar in It's array call. know it's there operator. want we putting Certainly, us an out as time thank before. Thanks, for Right. navigated to everybody of morning joining cycles calls guidance frame. this unprecedented of our we've was We are

a good team decisions the clearly making keeping from to is hard the and to company feel right feel position this also the This of crisis, one defense have the safe, side response we're can. commitment that mindful in. our in We keep in to the this offense. place about folks other Everyone as position comes We frankly, it is our about that they to we're crisis is used out in our good working flip to this. a very to We through as right makes but community it footing and, our different.

we're We going thanks to hard. appreciate and support the the very And your participating for working company, so keep in call. of

Operator

now today's is for conference you concluded. The Thank attending presentation.

now You may disconnect.

Talos Energy (TALO) 10 May 202020 Q1 Earnings call transcript