Talos Energy, Inc.

Good day, ladies and gentlemen, and welcome to your Talos Energy first quarter 2021 earnings call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Sergio Myworm. Sir, the floor is yours.

Thank you, operator. Good morning everyone and welcome to our first quarter 2021 earnings conference call. Joining me today to discuss our results are Tim Duncan, President and Chief Executive Officer, and Shane Young, Executive Vice President and Chief Financial Officer. Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in yesterday's press release and in our Form 10-Q for the quarter ending March 31, 2021, filed with the SEC yesterday. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures was included in yesterday's press release, which was filed with the SEC, and which is also available on our website at talisenergy.com. And now, I'd like to turn the call over to Tim.

Thank you, Sergio. I'll first address some key highlights of the quarter. In the first quarter, Talis had its highest quarterly production in the history of the company. We also generated significant free cash flow after accounting for the interest expense and hedge losses and announced a high-impact deepwater exploration discovery at Puma West. As a testament to the quality of our assets and our cost-reduction efforts, TALIS also recorded significant unhedged EBITDA and netbacks in the quarter, in addition to exiting the quarter with ample liquidity. So it was a great quarter. Production averaged 66.1 thousand barrels of oil equivalent for the quarter, which is 68% oil and 76% total liquids. This production rate includes the impact of planned downtime at our Pompano facility and some unplanned downtime related to significant winter storms. Yet, it's the highest quarterly average production rate in our company's history. We recorded adjusted EBITDA of approximately $137 million, which includes the impact of $48 million of realized hedge losses. Actual adjusted EBITDA net back to the company was approximately $23 per BOE. However, excluding the impact of hedge losses, it was over $31 per BOE. with an unhedged adjusted EBITDA margin of 69%, which is one of our highest ever. We believe this metric is a better indication of what our assets and cost structure exiting 2020 can deliver, particularly considering the complex nature of our operations. And due to the oil-weighted nature of our assets and the legacy hedge contracts rolling off, we expect this trend to continue. Capital expenditures for the quarter total $71 million, inclusive of plugging and abandonment activities. And after accounting for interest expense, the company generated over $31 million of free cash flow, providing a highly attractive free cash flow yield at our current market capitalization. On the operational front, we had several key developments in the first quarter of 2021 that set us on a solid path for the year. We had success in several capital projects, continuing to advance the Zama unitization and development planning, and completed multiple capital markets transactions to bolster the balance sheet, which I'll let Shane address in his comments. In the last month, we announced a major discovery from our Puma West high-impact exploration project, where we found high-quality oil pay and attractive rock and fluid properties, and a high-impact exploration discovery in the deepwater Gulf of Mexico. We preserved the well as a keeper so that as co-owners consider the appraisal plan, decisions could be made quickly post-appraisal to accelerate first production in the future. There are several prolific geological and producing analogs and facilities in the area, Should the partnership decide to employ a tieback strategy post-appraisal? Puma West was drilled in a primary term exploration lease that TALIS initially owned with 100% working interest. TALIS reprocessed the seismic data in the area, identified the prospect, and permitted the well. The company then brought BP and Chevron into this successful venture. The initial well was drilled to 23,000 feet to test middle myosin targets below a large salt body. Though proximity to prolific discovered analogs always made the geological possibilities in this area encouraging, it was our own work on the proprietary reprocessing and re-imaging of the available seismic that allowed us to have the confidence to drill the prospect and attract world-class explorers such as BP who now owns 50% and is the operator and Chevron who is also a 25% partner. It's also important to note that we have ownership in over 17,000 acres on the discovery lease and the surrounding leases, so there's running room depending on the results of the appraisal. We're excited about the specific project here and the attractive technical and commercial merits, but also for the confidence that it provides in our seismic reprocessing efforts across the other parts of our exploration portfolio. We're going to use the momentum of our reprocessing interpretation success at Puma West to accelerate the value of our broader exploration portfolio specifically in our Green Canyon and Mississippi Canyon core areas. We believe we are uniquely positioned to leverage the available capacity of our major production facilities, not only in the development and exploitation projects, but also as part of this exploration effort over the next several years. One of the key benefits of our basin is that it offers unique opportunities to unlock material new resources through successful exploration. Most of these are in a subsea operating environment using existing production infrastructure with few emissions relative to the enormous benefit of supplying additional oil to local U.S. markets along the Gulf Coast to meet growing demand. We think this is a win-win for shareholders, regulators, and consumers, and it's what makes the U.S. Gulf of Mexico so important in the broader energy discussion. Moving to our infrastructure-led platforming program on our Green Canyon 18 facility, we concluded a multi-well drilling program, successfully bringing online four new completions. including those from our kaleidoscope and token wells. These new completions at Green Canyon 18 added net production between 7,500 and 8,000 barrels equivalent a day and significantly lowered our operating cost per barrel in the asset. After leaving Green Canyon 18, the platform rig will be mobilized to our Pompano platform, where we'll begin another multi-well infrastructure-led development program. This program will run the remainder of this year and into 2022 with several low-risk recompletions, development and exploitation projects planned. The platform rig mobilization will start in the second quarter and is expected to be completed by mid-third quarter. In the second quarter of 2021, in addition to the planned downtime at Pompano to install the platform rig, we expect to shut in the facility to tie in the third-party praline discovery well. Despite the short-term production impact of this planned downtime, The production handling fees and associated cash flows we expect over the long haul from this well is significant to TALIS and consistent with our strategy of hosting third-party production to utilize the spare capacity of our facilities. I should note that we continue to obtain permits for operational activities in the ordinary course, consistent with the timing we saw in previous administrations. We have not experienced any delays from our operations, nor do we expect any regulatory delays related to our work program going forward. In Mexico, we are continuing to work to finalize unitization of Zama. Mexico's Ministry of Energy approved the discussions continuing to advance beyond the previously established March 2021 deadline, and we're hopeful we can conclude unitization in the near term. A final unitization agreement will address operatorship, participating interest splits, and the mechanisms to redetermine those splits in the future as production and reservoir data becomes available. The Block 7 partners are working with the PEMEX team to advance the Zama development plan, so we do not lose any momentum while we finalize unitization. We intend to reach firm agreement on all key issues before any public announcements are made by TALIS partners or PEMEX. With that, I'll turn the call over to Shane to discuss further details of the quarter.