MC607 - Quarternorth Energy

Company Overview

QuarterNorth Energy Inc. is a privately-held U.S. Gulf of Mexico exploration and production company.

Ownership and Fields: QuarterNorth has ownership in several prolific offshore fields in the U.S. Gulf of Mexico. The assets include six major fields, with approximately 95% of the assets being operated and 95% located in deepwater.
Specific Fields:
- Katmai Field: Located in the Green Canyon region, this field is producing an estimated combined 27 MBoe/d gross from two early-life wells. It is expected to produce over 34 MBoe/d gross on average with minimal decline over the next several years, based on a successful field development plan including two future well locations and a facilities upgrade project in early 2025.
- Big Bend, Galapagos, Genovesa, and Gunflint Fields: These fields have strong production histories with nominal declines and future development potential.

Production: QuarterNorth's average daily production for the full year 2024 is estimated at approximately 30 MBoe/d, with 75% of the production being oil. This includes planned downtime.
Reserves and Development Opportunities: The assets bring significant reserves upside beyond current production from both producing probable zones and near-term development opportunities in 2024 and 2025. There is also a high-quality inventory of drilling opportunities that will enhance Talos's existing inventory.

Acquisition Details: Talos Energy acquired QuarterNorth Energy for $1.29 billion. The transaction is immediately accretive to Talos shareholders on key financial metrics and is expected to accelerate the de-leveraging of Talos's balance sheet.
Synergies: The addition of QuarterNorth's assets will increase Talos's operational breadth and production profile, enhance margins and cash flow, and capture meaningful operating synergies. The transaction also reduces Talos's average asset retirement obligation (ARO) per barrel of oil equivalent (Boe) of reserves and production.

Development Plans: The Katmai field development plan includes two future well locations and a facilities upgrade project in early 2025. This is expected to maintain high production levels with minimal decline.
Financial Position: The expected financing structure of the transaction accelerates de-leveraging, improves the credit profile, and positions Talos to consider additional capital return initiatives following deleveraging in the near term.