Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Equity Bottom-Up

<ul><li>We are adjusting our 3Q24 estimates to reflect the impact of Hurricane Francine and actual NYMEX oil &amp; gas reference prices. Francine made landfall on September 11, 2024, as a Category 2 storm in Terrebonne Parish, Louisiana, about 30 miles south of Morgan City. The storm’s path through the central Gulf of Mexico resulted in industry-with temporary production shut-ins.</li><li>We are lowering our 3Q24 production estimate to 94 MBOE/d from 96 MBOE/d. Talos’s FY24 production guidance (August 7, 2024) was 89-95 MBOE/d. 2Q24 production averaged 95.5 MBOE/d and reflected a full-quarter contribution from the assets acquired in the QuarterNorth acquisition, which closed in 1Q24.</li></ul>

We are adjusting our 3Q24 estimates to reflect the impact of Hurricane Francine and actual NYMEX oil &amp; gas reference prices. Francine made landfall on September 11, 2024, as a Category 2 storm in Terrebonne Parish, Louisiana, about 30 miles south of Morgan City. The storm’s path through the central Gulf of Mexico resulted in industry-with temporary production shut-ins.We are lowering our 3Q24 production estimate to 94 MBOE/d from 96 MBOE/d. Talos’s FY24 production guidance (August 7, 2024) was 89-95 MBOE/d. 2Q24 production averaged 95.5 MBOE/d and reflected a full-quarter contribution from the assets acquired in the QuarterNorth acquisition, which closed in 1Q24.

Talos Energy Inc. - 3Q24 Hurricane Housekeeping and Upcoming Drilling Schedule...

<ul><li>We are updating our estimates to reflect actual 2Q24 NYMEX reference prices of $80.66/bbl for oil and $2.32/MMBtu for natural gas.</li><li>We have also increased our 2Q24 lease operating cost estimate to reflect workover activity and bumped our DD&amp;A estimate.</li><li>Talos’s latest guidance and our updated estimates are outlined in Figures 1 – 4.</li></ul>

We are updating our estimates to reflect actual 2Q24 NYMEX reference prices of $80.66/bbl for oil and $2.32/MMBtu for natural gas.We have also increased our 2Q24 lease operating cost estimate to reflect workover activity and bumped our DD&amp;A estimate.Talos’s latest guidance and our updated estimates are outlined in Figures 1 – 4.

Talos Energy Inc. - Estimate Update/Stepping Up to the Plate

<ul><li>1Q24 results will include roughly one month of contribution from the assets acquired in the QuarterNorth transaction, which closed on March 4, 2024.</li><li>The QuarterNorth acquisition added an oil-weighted (~75% oil production) asset base (&gt;95% operated), bolstering Talos’s position in the Mississippi Canyon and Green Canyon areas offshore in the Gulf of Mexico.</li><li>Management expects to realize $50 million of estimated annual run-rate cost synergies by year-end 2024.</li></ul>

1Q24 results will include roughly one month of contribution from the assets acquired in the QuarterNorth transaction, which closed on March 4, 2024.The QuarterNorth acquisition added an oil-weighted (~75% oil production) asset base (&gt;95% operated), bolstering Talos’s position in the Mississippi Canyon and Green Canyon areas offshore in the Gulf of Mexico.Management expects to realize $50 million of estimated annual run-rate cost synergies by year-end 2024.

<div><div><div><div><ul style="list-style-type: disc;"><li><p>Talos’s FY24 operating plan prioritizes free cash flow generation. The midpoint of FY24 production guidance is nearly 40% above FY23 production, while the midpoint of the FY24 upstream capex budget is 7% lower than FY23.</p></li><li><p>Our modeling suggests the combination could generate $479 million of free cash flow in FY24, compared with $3 million in FY23.</p></li><li><p>The anticipated free cash flow waterfall could allow Talos to repay nearly $400 million of borrowings under the existing RBL credit facility. </p></li></ul></div></div></div></div>

Talos’s FY24 operating plan prioritizes free cash flow generation. The midpoint of FY24 production guidance is nearly 40% above FY23 production, while the midpoint of the FY24 upstream capex budget is 7% lower than FY23.Our modeling suggests the combination could generate $479 million of free cash flow in FY24, compared with $3 million in FY23.The anticipated free cash flow waterfall could allow Talos to repay nearly $400 million of borrowings under the existing RBL credit facility. 

Talos Energy Inc. - Targeting Free Cash Flow Waterfall in 2024

<div><div><div><div><ul style="list-style-type: disc;"><li><p>Talos’s current valuation implies a steep discount to net asset value (NAV).</p></li><li><p>Management estimates the company’s year- end 2022 pro forma proved reserves have a gross PV-10 value of ~$5.5 billion (~$4.8 billion net of asset retirement obligations [ARO]) based on oil and natural gas prices of $75/bbl and $3.50/Mcf.</p></li><li><p>Adjusting for March 31, 2023, balance sheet items, leaves an estimated NAV of ~$3.6 billion, or $28.38/share.</p></li></ul></div></div></div></div>

Talos’s current valuation implies a steep discount to net asset value (NAV).Management estimates the company’s year- end 2022 pro forma proved reserves have a gross PV-10 value of ~$5.5 billion (~$4.8 billion net of asset retirement obligations [ARO]) based on oil and natural gas prices of $75/bbl and $3.50/Mcf.Adjusting for March 31, 2023, balance sheet items, leaves an estimated NAV of ~$3.6 billion, or $28.38/share.

Talos Energy, Inc. - Value Creation Catalysts

United States

Talos Energy Inc. operates as an oil and gas company. The Company engages in exploration, development, and production of oil and natural gas properties. Talos Energy serves customers worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Talos Energy Inc (TALO US)

Talos Energy Inc. - 3Q24 Hurricane Housekeeping and Upcoming Drilling Schedule...

We are adjusting our 3Q24 estimates to reflect the impact of Hurricane Francine and actual NYMEX oil & gas reference prices.

Water Tower Research

Talos Energy Inc. - Estimate Update/Stepping Up to the Plate

We are updating our estimates to reflect actual 2Q24 NYMEX reference prices of $80.66/bbl for oil and $2.32/MMBtu for natural gas.

Water Tower Research

Talos Energy Inc. - Estimate Update

1Q24 results will include roughly one month of contribution from the assets acquired in the QuarterNorth transaction, which closed on March 4, 2024.

Water Tower Research

Talos Energy Inc. - Targeting Free Cash Flow Waterfall in 2024

The midpoint of FY24 production guidance is nearly 40% above FY23 production, while the midpoint of the FY24 upstream capex budget is 7% lower than...

Water Tower Research

Talos Energy, Inc. - Value Creation Catalysts

Management estimates the company’s year- end 2022 pro forma proved reserves have a gross PV-10 value of ~$5.5 billion (~$4.8 billion net of asset...

Water Tower Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)