Talos Energy Inc., Houston, expects its 2022 capital expenditure budget of $450-480 million to include a range of drilling and completions projects, all plugging and abandonment expenditures, and about $30 million in carbon capture and storage (CCS) investments (OGJ Online, Feb. 16, 2022).
Expenditures are expected to be weighted to the year’s third and fourth quarters, and about 50% of the drilling and completion program are targeted to generate production beginning in 2023.
The year’s upstream capital plan will invest across project types, “including several with short-cycle times to first production through our owned infrastructure and a series of deepwater subsea drilling projects,” said Timothy Duncan, president and chief executive officer.
The company expects to generate over $1.0 billion in free cash flow through 2025.
Operational, financial guidance
For the year, the company expects production of 60,000-64,000 boe/d (66% oil, 75% liquids), which includes about 45-60 days of planned downtime for HP-1 dry-dock maintenance and about 30 days of unplanned downtime realized to date from the EIPS third-party pipeline outage impacting a portion of its asset base.
The HP-1 dry-dock process satisfies regulatory requirements for periodic maintenance of the company's HP-1 floating production unit, which operates the company's Phoenix and Tornado fields. The 2022 dry-dock is expected to occur in June and July.
Talos expects its upstream capital expenditures to equate to a 55% reinvestment rate.
The company will execute one asset management and up to six drilling and completions projects utilizing both an ultra-deepwater floater rig and a platform-based rig. Subject to final business development activities and timing of rig delivery in second-half 2022, two to three wells drilled from the deepwater floater rig will be operated by Talos in the Mississippi Canyon Miocene fairway, with working interests of 40-60%. All wells from the platform-based rig will be operated by Talos.
The company expects to participate in up to three additional non-operated subsea wells with working interests of 10-20%. The asset management project will lead to production in 2022. The subsea tie-back wells, all nearby facilities that Talos operates or has access to, will generate production in second-half 2023 and 2024.
Talos (25%), along with affiliates of bp plc (operator, 50%) and Chevron (25%) expects to begin operations of the Puma West appraisal program in the year’s second half (OGJ Online, Apr. 13, 2021). The 2021 Puma West discovery well was drilled to 23,530 ft and found high-quality pay containing rock and fluid properties consistent with other high impact discoveries in the area.
The appraisal well will delineate the discovered resource while also evaluating additional prospective Miocene sands. The owners are working through potential subsea tie-back options.
Fourth-quarter 2021 production was 68,700 boe/d (69% oil, 77% liquids). Net income was $81 million, and adjusted net income was $37.4 million. Capital expenditures were $64.2 million, inclusive of plugging and abandonment, and free cash flow (before changes in working capital) was $93 million.
Full year production was 64,400 boe/d (69% oil, 77% liquids). The company reported a net loss of $183 million for the year and adjusted net income of $6 million. Capital expenditures were $338.8 million, inclusive of plugging and abandonment. Free cash flow (before changes in working capital) was $134.5 million.