Talos Energy Inc. Q1 FY2026 earnings call

1. Recognized employees' hard work and dedication. 2. Provided context on energy market with geopolitical tensions highlighting importance of reliable hydrocarbons. 3. Key takeaways: disciplined operational performance as foundation, strong execution start in drilling/completion year, low costs and high margins continuing into first quarter with free cash flow enhancements from various factors. 4. Mentioned upcoming Daenerys appraisal well objectives and seismic investments leading to successful lease sale with identified prospects. 5. Zach discussed first quarter financial performance with strong execution leading to adjusted EBITDA and free cash flow, unchanged capital allocation framework, balance sheet strength, and hedging activity.

Total company lease operating expenses were approximately $16 per barrel of oil equivalent in quarter one, which was in line with 2025 average. Adjusted EBITDA was $293 million and adjusted free cash flow was $113 million on production of approximately 89,000 barrels oil equivalent per day. Oil production was approximately 64,000 barrels per day. Disciplined operational performance, strong new well productivity at Cardona, solid base performance, and high facility uptime contributed. Execution in drilling and completion for the year, with CPN well drilled and completed, Genovese well remediation on track for mid-year, and Monument project drilling underway.

Full year 2026 operational and financial guidance ranges unchanged. Second quarter expected oil production 63,000 - 67,000 bbl/day, total production 88,000 - 92,000 boe/day. Expect to spread Daenerys appraisal well late in second quarter with objectives to test northern prospect and evaluate reservoir/fluid properties.

Mechanical risks in drilling deep sub-salt wells, uncertainty in timing of rig availability and project execution, volatility in oil prices and macroeconomic environment affecting market conditions and hedging activity, risks associated with exploration and appraisal wells in terms of de-risking reservoir and fluid properties

Q: Update on free cash flow uses like holding cash, share purchases, M&A.

A: Clear capital allocation framework focusing on investing in business, maintaining balance sheet, returning cash to shareholders, investing in future with low break-even projects.

Q: Longer-term outlook and organic growth opportunities.

A: Look for projects with low break-evens, successful lease sale with prospects working towards 2027 capital, not chasing oil curve.

Q: Risks of Daenerys appraisal well.

A: Risks of reservoir/fluid properties not being as expected, mechanical risks but strong team to mitigate.

Q: Effect of higher oil prices on strategy.

A: Strategy doesn't change, focus on three pillars and capital discipline.

Q: Offshore rig market and Talos's position.

A: Market tightening in 2027, tender for deepwater rig activity in 2027, considering intervention vessels for flexibility.

Q: Balance sheet and notes.

A: Notes trading well, flexible balance sheet, repurchases at 34% of free cash flow in Q1.

Q: Optimal performance plan and Katmai/Tarantula.

A: Plan has $100 million target, 40% achieved, Katmai field doing well with potential for expansion.

Q: Growth into 2027 and new leases.

A: Too early to predict growth, 11 new leases with eight prospects in key areas, pre-invested in seismic.

Q: Recompletion activity and M&A.

A: Similar recompletion at Brutus, focus on mid/late life assets, M&A focus on becoming leading pure play offshore EMP, interest in suitable asset level acquisitions.

Q: Cost savings and Genovese well timing.

A: 40% of 2026 $100 million target achieved, Genovese well remediation mid-year with ongoing execution.

Q: Exploration and 2027 strip.

A: Excited about exploration opportunities from lease sale, focus on unit costs regardless of oil price strip