GC019 - Talos Energy Offshore

Company Overview

Talos Energy Inc. is a technically driven, independent exploration and production company listed on the New York Stock Exchange (NYSE: TALO). The company is focused on safely and efficiently maximizing long-term value through its operations in the United States Gulf Coast, the Gulf of Mexico, and offshore Mexico. Talos is one of the largest independent producers in the Gulf of Mexico, leveraging decades of technical and offshore operational expertise.

Zama Oil Field Project

Location and Geology

The Zama oil field is located in Block 7 of the Sureste Basin, off the shore of Mexico, in the Gulf of Mexico. The field is situated in shallow offshore waters at a water depth of approximately 165 meters. The Sureste Basin is a proven hydrocarbon province, including the Saline, Campeche-Sigsbee, and Villahermosa uplift basins, with deposits ranging from the late-Triassic to Holocene ages.

Discovery and Appraisal

The Zama field was discovered by the Zama-1 exploration well in July 2017, which was the first exploration well drilled by the private sector in Mexico. The well encountered an oil-bearing interval of 1,100 feet (335 meters) with between 558 feet and 656 feet (170 meters and 200 meters) of net oil pay. Following the discovery, a three-well appraisal program was completed in June 2019, which included the Zama-2 and Zama-3 wells. These appraisal wells confirmed the lateral continuity of the reservoir and defined the resource potential.

Ownership and Partners

Pemex serves as the operator of the Zama field with a 50.43% working interest. The other partners include Talos Energy with 17.35%, Wintershall Dea with 19.83%, and Harbour Energy with 12.39%.

Development Plan

The Zama field is planned to be developed with two production platforms, Zama-A and Zama-B, along with 46 development wells (29 oil-producing wells and the remaining as water injectors). Two 68-kilometer-long pipelines will be installed to transport oil to new onshore facilities at the Dos Bocas Maritime Terminal in Paraiso, Tabasco. The project involves an estimated investment of $4.5 billion, with an additional $4.5 billion for operating expenses and field abandonment costs. The final investment decision is expected in 2024, with production starting in December 2025 and peak production capacity of up to 180,000 barrels of oil and 70.35 million cubic feet of gas per day anticipated by 2029.

Other Offshore Projects and Acquisitions

EnVen Energy Acquisition

In September 2022, Talos Energy announced the acquisition of EnVen Energy Corporation for $1.1 billion. This transaction added high-margin, oil-weighted assets in the deepwater U.S. Gulf of Mexico, expanding Talos's operational scale and improving its financial profile. The deal included 43.8 million Talos shares, $212.5 million in cash, and the assumption of EnVen's net debt.

QuarterNorth Energy Acquisition

In January 2024, Talos Energy confirmed a $1.29 billion deal to acquire QuarterNorth Energy Inc. This acquisition will increase Talos's daily production by about 30,000 barrels of oil equivalent, add 69 million barrels in proved reserves, and enhance the company's financial metrics and cash flow. The deal is expected to close by the end of the first quarter of 2024 and will add valuable deepwater assets, including interests in several productive fields such as the Katmai field in the Green Canyon area.

Strategic Focus and Operations

Oil-Weighted and Infrastructure-Focused Strategy

Talos Energy's strategy is centered around oil-weighted assets and a focus on infrastructure. The company emphasizes short-cycle offshore drilling inventory, which helps in minimizing potential dry-hole exploration costs and maximizing value through efficient operations.

Environmental and Social Responsibility

Talos Energy operates with a strong focus on environmental responsibility, safety, community engagement, good governance, and strong ethics. The company is involved in carbon capture and sequestration (CCS) initiatives along the U.S. Gulf Coast and Gulf of Mexico, aiming to reduce industrial emissions and contribute to a more sustainable energy future.

Financial and Operational Performance

The acquisitions and development projects are expected to improve Talos Energy's financial metrics, including increased free cash flow, reduced debt, and enhanced operational margins. The company aims to accelerate shareholder value creation through logical, in-basin expansion and strategic asset management.

In summary, Talos Energy's offshore oil projects, particularly the Zama oil field, represent significant investments in the Gulf of Mexico and offshore Mexico, aligning with the company's strategy of focusing on oil-weighted assets, infrastructure, and sustainable operations.