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Talos Energy Provides an update on liquidity and recent transactions as well as announces first quarter 2015 operational results

 

Houston, June 16, 2015 – Talos Energy LLC ("Talos” or the "Company”) is providing an update on its current liquidity position and recent transactions as well as announcing first quarter 2015 operational results.

LIQUIDITY AND RECENT TRANSACTIONS

As of March 31, 2015, our available liquidity (cash plus available capacity under the Company’s senior reserve-based revolving credit facility) was $130.4 million.  During the period subsequent to March 31, 2015 through June 16, 2015, transactions that affect our current liquidity position include the following:

- The lenders under our senior reserve-based revolving credit facility (the "Bank Credit Facility”) completed their regular semi-annual redetermination of the borrowing base effective May 6, 2015, which resulted in an amendment to the Bank Credit Facility increasing the borrowing base from $475 million to $525 million and adding one additional lending institution.  The next redetermination of the borrowing base is scheduled for October 2015.   

- In April 2015, we received an equity contribution from our financial sponsors, Apollo and Riverstone, primarily to fund the acquisition of an additional 25% working interest in our Motormouth discovery from Deep Gulf Energy III, LLC ("DGE”) on April 8, 2015 (the "DGE Acquisition”) and to partially fund the extinguishment of the $55 million senior reserve-based revolving credit facility assumed in the Company’s acquisition of all the issued and outstanding membership interests of Gulf Coast Resources, LLC ("GCER” and the "GCER Bank Credit Facility”) on March 31, 2015 (the "GCER Acquisition”).  The extinguishment of the GCER Bank Credit Facility occurred on May 6, 2015.

- In April 2015, our sureties released $135.2 million in performance bonds and the associated $43.7 million of letters of credit posted as collateral for our Bureau Ocean Energy Management bonding requirements. This release reduces our total outstanding performance bonds to $206.0 million and the associated letters of credit issued under our Bank Credit Facility to $4.1 million as of June 16, 2015.

- In April and May 2015, we borrowed $95 million under the Bank Credit facility to partially fund the $55 million extinguishment of the GCER Bank Credit Facility assumed in the GCER Acquisition and for general corporate purposes.

- On March 31, 2015 and April 8, 2015, the Company closed the GCER Acquisition and DGE Acquisition, respectively, for preliminary combined consideration of approximately $93.5 million, inclusive of the assumption of $55.0 million in debt.  The two transactions combined added approximately 9.6 MMBoe of proved reserves and 16.1 MMBoe of proved plus probable reserves. In the GCER Acquisition, we purchased the issued and outstanding membership interests of GCER with oil and natural gas assets located primarily in the Gulf of Mexico Shelf and lower Gulf Coast areas. This transaction has a number of synergies with our existing project areas, a high impact development project in South Louisiana that has logged in excess of 200 feet of pay and an inventory of additional development, exploitation and exploration drilling opportunities that are highly complementary to our operating strengths in these areas. 

In the DGE Acquisition, we acquired an additional 25% working interest in our Motormouth discovery located in the Phoenix field from DGE in exchange for $38.5 million in cash, the assumption of asset retirement obligations and an additional 10% working interest in our Tornado exploration prospect. This transaction increased our net working interest in the Motormouth discovery to 85% and reduced our net working interest in the Tornado prospect to 50%. 

OPERATIONAL RESULTS

Net daily production during the first quarter of 2015 averaged 22.1 MBoe per day, compared with net daily production of 16.0 MBoe per day in the first quarter of 2014.  Production increased during the first quarter of 2015 as a result of production from our 2014 drilling program and acquisitions closed in 2014 partially offset by planned third party downtime in our Phoenix field.  The Phoenix field experienced 25 days of scheduled third party downtime during the first quarter of 2015 due to upgrades to Helix Energy Solutions Group, Inc.’s ("Helix”) Helix Producer I power management system, which is an integral part of the dynamic positioning system on the vessel.  The United States Coast Guard required the owner of the vessel, Helix, to perform these upgrades in 2015.  Production re-commenced from the Phoenix field on March 30, 2015.  Estimated deferred production during the first quarter of 2015 was approximately 2.6 MBoe per day.

Despite the 25 days of third party downtime in the Phoenix field during the first quarter of 2015, production in 2015 is expected to be 27.5 to 29.0 MBoe per day, an anticipated increase of 23% to 30% from 2014. Production growth is expected to be driven by increases in the Gulf of Mexico Developed Deepwater for 2015 as compared to 2014 as a result of production from our 2014 Motormouth and Veronica discoveries, incremental production added through our announced transactions and related drilling opportunities in the second through fourth quarters of 2015. Our total production volumes increased to 27.2 MBoe per day in April 2015 with the return of production from the Phoenix field.

In our Developed Deepwater operations, the Green Canyon Block 237 T-6 well (Motormouth) in the Phoenix field commenced production in April 2015 at a rate of approximately 2,250 Boe per day gross from the B-3 sand (85% working interest).  We will test the B-4 sand during June 2015.  Additionally, we anticipate production from the Green Canyon Block 236 T-7 well (Veronica) to commence in June 2015 (85% working interest).

In our Gulf of Mexico Shelf and lower Gulf Coast operations, we logged over 250 feet of true vertical depth pay from three pay sands in our East Cameron 346 proved undeveloped well (100% working interest).  We anticipate production from the East Cameron 346 well to commence during the second quarter of 2015. Additionally, our high impact development project in South Louisiana, acquired in the GCER Acquisition, was recompleted and came online in May 2015 at a rate greater than 30 MMcfe per day gross (32.5% working interest).

MANAGEMENT COMMENTARY

Tim Duncan, Talos’s President and Chief Executive Officer, stated, "We are very proud of our accomplishments year to date, including adding to our asset base with two important bolt-on transactions.  Our increased borrowing base in a distressed commodity price environment is a result of our ability to efficiently add production and proved reserves both organically and through acquisitions.”

"Our success to date in the Phoenix asset will extend the life of the field with high deliverability projects for years to come.  Obviously, our top priority in this commodity environment is to maintain our liquidity position while scaling our capital expenditure budget to stay inside our expected 2015 EBITDA.  Additionally, we are working to aggressively drive down our operating and capital costs to improve margins and returns in the current commodity environment.  In our 2015 budget, we are focused not only on bringing on production during the first half of the year from the high impact discoveries we made in the Phoenix field in 2014, but also converting a shallow water PUD and other shallow water recompletions and asset management opportunities.  In the fourth quarter we anticipate drilling the Tornado prospect, which is one of the most exciting drilling prospects in our portfolio.”

"The increase in our borrowing base, as well as the equity contributed by our sponsors, re-affirms our commitment to investing in our highest returning assets as well as third party assets in our basin that have visible rate growth and reserve upside.  We are grateful to have support from two of the most successful private equity investors in the energy sector and a strong lending group that supports our Company and strategy.”

ABOUT TALOS ENERGY LLC

Talos is a technically driven independent exploration and production company focused on the exploration, development and acquisition of oil and natural gas properties in the Gulf of Mexico Shelf and Developed Deepwater.  The Company’s website is located at www.talosenergyllc.com.

FORWARD-LOOKING STATEMENT

The information in this press release includes "forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact included in this press release, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development, production, gathering and sale of oil, natural gas and NGLs. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures, and the other risks described in "Item 1A, Risk Factors” in the Company’s 2014 Annual Report.

Should one or more of the risks or uncertainties described in the Company’s 2014 Annual Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in the Company’s 2014 Annual Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.  Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release.


 





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