GC039 - Quarternorth Energy

Location

The GC039 - Quarternorth Energy Oil and Gas Field is located in the Federal Offshore area of the United States, specifically in the Gulf of Mexico. The exact coordinates are 27.924, -89.962 (WGS 84).

Operator and Ownership

As of 2024, the field is operated by Talos Energy Inc., following the acquisition of QuarterNorth Energy Inc. for $1.29 billion. QuarterNorth Energy was the previous operator and owner of the field.

Production and Reserves

• The field produced approximately 2.71 million barrels of oil per year and 173.85 million cubic meters of gas per year in 2022.
• With the acquisition by Talos Energy, the field is expected to contribute to an average daily production of about 30,000 barrels of oil equivalent (boe) for the full year 2024, with approximately 75% of this production being oil.
• The acquisition adds proved reserves of around 69 million barrels of oil equivalent (MMboe), valued at $1.7 billion.

Fields and Assets

QuarterNorth Energy's assets, now part of Talos Energy, include several major fields in the Gulf of Mexico:

• Katmai Field: Located in the Green Canyon area, where QuarterNorth holds a 50% working interest. The field is producing an estimated combined 27,000 boe/d from two early-life wells and is expected to produce over 34,000 boe/d gross on average with minimal decline over the next several years.
• Big Bend, Galapagos, Genovesa, and Gunflint Fields: These fields are recognized for their robust production records, minimal decline rates, and potential for future development.

Production Characteristics

• The assets are approximately 95% operated and 95% located in deepwater, which provides a favorable base decline profile and attractive future development opportunities.
• The production is characterized as high-margin, low-decline output with low reinvestment rate requirements to sustain production. This setup is conducive to long-term, high free cash flow generation.

Financial and Strategic Impact

• The acquisition is immediately accretive to Talos Energy's key financial metrics, including cash flow and shareholder value. It is expected to improve Talos's base decline rate by approximately 20%, providing increased production stability and lower reinvestment rates.
• The deal includes significant reserves upside beyond current production and brings a high-quality inventory of drilling opportunities that will enhance Talos's existing projects.
• Talos Energy expects to save around $50 million annually from this deal due to cost reductions in operations and administration, with these savings expected to start showing in 2024 and reach their full potential by the end of the year.

Future Development

• The acquisition includes future development opportunities in 2024 and 2025, particularly in the Katmai field with planned upgrades and new wells.
• The transaction aligns with Talos Energy's overall strategy of leveraging existing infrastructure and complementary acreage to accelerate shareholder value creation.