Talos lowers full year production guidance on operational problems

June 5, 2023
Talos Energy Inc., Houston, has lowered its full year 2023 production guidance after experiencing operational problems.

Talos Energy Inc., Houston, has lowered its full year 2023 production guidance after experiencing operational problems.

Production for the Gulf of Mexico-focused company in this year’s first quarter was 63,600 boe/d (72% oil, 79% liquids), inclusive of a partial quarter of production from the company’s $1.1-billion acquisition of EnVen Energy Corp. (OGJ Online, Sept. 22, 2022).

Production results for January and February were in-line with expectations, but delays in first production from new wells, certain underperformance, and unplanned downtime now forecasted for the remainder of the year have led to a decrease in 2023 production guidance to 24.1-25.9 MMboe from 26.3-27.7 MMboe (OGJ Online, Aug. 5, 2022).

Recent production levels from selected new wells are below expected pre-drill contributions for the year, amounting to an expected impact of 2,000-3,000 boe/d, primarily due to delays in first production and lower than expected initial production rates from Bulleit and Mount Hunter wells. Talos is planning a well intervention in Bulleit in this year’s second quarter to attempt to access production from a lower completion.

Additionally, certain existing wells exhibited production rate declines earlier than planned, generating a 2023 production impact of 1,000-2,000 boe/d. Most notably, this includes two non-operated Shelf wells that began experiencing production declines due to earlier-than-expected water production.

Finally, despite diagnostic and corrective operations in fourth-quarter 2022 and first-quarter 2023, Talos expects its operated Neptune platform to require intermittent production shut-ins resulting in a full-year 2023 production impact of 1,000-1,500 boe/d while Talos works to optimize flow assurance of the subsea system in the field.

Prospects

Despite operational challenges, Talos president and chief executive officer Timothy S. Duncan said the company remains focused on the 2023 plan. Capital and operating expenses are trending below plan and the company plans to continue that trend while also progressing Venice and Lime Rock discoveries to first production. “We expect that production will exceed a rate of 80,000 boe/d early in 2024,” he said.

Noting project progress, Duncan pointed to the recently submitted field development plan for Zama, current drilling of the Occidental Petroleum-operated Pancheron prospect (Talos, 30%, spudded in April; a 23,000-gross acre acquisition in the latest Gulf of Mexico lease sale; and a farm-in in the Walker Ridge area with Red Willow Offshore LLC and Houston Energy LP that adds the subsalt Daenerys prospect, which will evaluate the Miocene section and is expected to begin drilling in 2024.

Financials

In first-quarter 2023, Talos had net income of $89.9 million and an adjusted net loss of $1.3 million. Revenue for the quarter was $322.6 million, driven by realized prices (excluding hedges) of $71.28/bbl for oil, $22.62/bbl for NGLs), and $2.83/Mcf for natural gas.

Upstream capital expenditures for the quarter were $190 million, inclusive of plugging and abandonment. Capital investments in CCS, totaled an additional $21.2 million.