Talos Energy Inc. Q3 FY2025 earnings call

• Talos' transformation into a leading pure-play offshore E&P company is centered around 3 strategic pillars: improving the business daily, growing production and profitability, and building a long-lived scale portfolio. • Strengthened leadership team with appointments of Zach Dailey and Bill Langin. • Outstanding operational performance led to production exceeding guidance range; debottlenecking at Tarantula facility and successful Sunspear workover. • Generated $103 million in free cash flow, exceeding consensus. • Discovered oil at Daenerys well, with appraisal well planned for Q2 2026. • Lowered full-year operating expense and capital guidance by 2% due to structural cost savings.

Production of over 95,000 barrels of oil equivalent per day was achieved, with approximately 70% being oil. During the quarter, $103 million in free cash flow was delivered, significantly exceeding consensus estimates. Year-to-date, approximately $400 million in free cash flow has been generated.

• Full-year 2025 oil and oil equivalent production expected to be ~3% higher than prior guidance. • Fourth quarter production mix averaging 72% oil. • 2026 program expected to deliver flat year-over-year oil volumes while investing in near-term development and longer cycle projects. • Exited 2025 with strong operational momentum.

• Commodity price volatility remains an ongoing challenge. • Surety market has tightened with reduced bond capacity and lower risk tolerance of surety providers, leading to potential collateral calls for some companies.

Q: Wanted to dig into the strong run rate at Tarantula. Was it one-off or start of growth efforts?

A: It's the latter. First step was maximizing throughput without additional capital. Second phase studying ~20% capacity expansion in early 2026, third phase linked to Katmai North opportunity.

Q: More color on near-term opportunities for $100 million savings plan beyond $40 million executed?

A: Opportunities across production enhancement, capital efficiency, and commercial opportunities. No single clear area, but looking at all spending and value enhancement.

Q: Comments on Daenerys discovery, pay found, prospect size, and Northern Fault block?

A: Found pay in 3 zones in Daenerys. Need to confirm presence in Northern Fault block for commercial decision. Multiple development options dependent on outcome.

Q: Thoughts on M&A environment after LLOG potential sale?

A: Keep eye on market, set high bar for M&A, look for opportunities that complement existing skill sets and low-cost operations.

Q: Comments on production outperformance due to no storms and uptime?

A: Benefited from quiet storm season, but also from well-run operations and debottlenecking. Interdependent, and will continue to see benefits from robust operations.

Q: Thoughts on 2026 production shape given projects coming online?

A: Still building plan, shape similar to 2025 with dip in middle of year due to weather/turnarounds and uptick later with new projects.

Q: Outlook on surety agreement and surety market?

A: Unique agreement with sureties to provide certainty amidst volatile market. Offshore surety market has tightened, but this arrangement is beneficial for Talos.