Talos Energy, Inc.

Good day and welcome to the TELUS fourth quarter 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Sergio Meinwerth. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to our fourth quarter 2021 earnings conference call. Joining me today to discuss our results are Tim Duncan, President and Chief Executive Officer, Shane Young, Executive Vice President and Chief Financial Officer, and Robin Fielder, Executive Vice President, Low Carbon Strategy and Chief Sustainability 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-K for the Year, ending December 31st, 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 earnings press release, which was filed with the SEC, and which is also available on our website at talusenergy.com. And now, I'd like to turn the call over to Tim.

Thank you, Sergio. I'll first discuss our results from the fourth quarter of 2021. We delivered a strong operational and financial performance to conclude 2021, starting with achieving another record quarterly production milestone of 68.7 thousand barrels of oil equivalent per day. Our production is favorably oil-weighted for the current commodity environment at almost 70% oil and 75% total liquids. Our margins were very strong. We generated adjusted EBITDA per barrel of oil equivalent of over $30, or over $46, when adjusting for the cash hedge losses in the quarter, which demonstrates the benefit of our strategy of adding new, high-margin, oil-weighted production through TALUS-owned, largely fixed-cost infrastructure. Lastly, we generated very strong $93 million of free cash flow in the quarter. For the full year 2021, we also delivered record production of 64.4 thousand barrels of oil equivalent per day for the year despite third quarter downtime associated with Hurricane Ida, an annual increase of approximately 18% over 2020. This led to adjusted EBITDA of over $600 million and free cash flow of approximately $135 million. This strong performance allowed us to significantly reduce our leverage ratio and increase liquidity throughout the year, and Shane will provide those details shortly. Operationally, our team had an outstanding year that goes beyond their efforts on production and cost control alone, recording zero lost time safety incidents in 2021 and continuing to drive down recordables from already strong levels amongst our offshore peers. For the third consecutive year, we recorded zero hydrocarbon releases of more than one barrel offshore and further reduced our GHG intensity, putting us ahead of schedule to achieve our 30% reduction target by 2025 from our 2018 baseline, and on track to meet our stretch goal of a 40% reduction. Turning to our carbon capture business, as a reminder of our entry into this attractive business opportunity, Taos conducted an in-depth review in late 2020 and early 2021 on how we can best utilize our skill set to contribute to the energy transition into decarbonization. Our expertise with conventional geology combined with our operational capabilities made carbon capture sequestration a natural fit. We rapidly formed a team and very quickly we achieved success, being named the operator of the state of Texas' first offshore carbon sequestration site, or the GLO site, just offshore of Jefferson County. Since that milestone, we've accelerated progress and we've quickly established a strong portfolio of both physical projects as well as alliance and partnerships across the value chain. In the fourth quarter and subsequently in the early weeks of 2022, we also made significant strides with our carbon capture business and announcing a technical alliance with Technip FNC, our first point source project, and then our next regional hub project. The Technip alliance will accelerate front-end engineering design, or FEED, processes during project development phase across our CCS portfolio moving forward. It's going to save us significant time and money. The project with Freeport LNG, one of the largest LNG export facilities in the world, We'll develop a custom point source solution to capture, transport, and sequester CO2 emissions on-site at the facility along the Texas Gulf Coast. This will be one of the first commercial dedicated sequestration projects along the Gulf Coast and a model for decarbonizing an important source of global energy. And then most recently, we announced a Riverbend CCS project in collaboration with Enlink Midstream. which is the first CCS project along the Gulf Coast to offer an integrated transport and sequestration solution to potential customers. Due to the outstanding geology, including a 3,000-foot saline aquifer column and a large surface acreage footprint, the project holds significant capacity of over 500 million metric tons, and it's coupled with InLink's over 4,000 miles of pipe that are connected to a large customer base of industrial emitters. It's one of the largest announced projects to date, and the first with a fully integrated midstream and sequestration solution combined. The River Bend project is strategically located along the Mississippi River corridor between Baton Rouge and New Orleans, one of the highest industrial emissions regions in the United States. It provides a huge addressable market. We look forward to advancing this project in the coming months, and we've already begun engaging with potential customers. In our last call, we were confident we would continue to build out a portfolio of CCS projects and become a visible market leader. We're thrilled with the progress we've made and are continuing to pursue a variety of business development opportunities across the Gulf Coast while advancing key milestones in our current projects. To further drive that business, we proactively added a new key executive from our team to lead our CCS efforts as well as our broad sustainability efforts across the company. Robin Fielder brings a diverse background of technical and commercial expertise ranging from infield engineering roles to most recently the CEO of two publicly traded midstream companies. So I think she's going to do a tremendous job building our CCS business and positioning us as a sustainability leader. Robin is joining us on the call this morning. It's available for Q&A at the conclusion of our prepared remarks. Turning back to our upstream business with year-end reserves, we concluded the year with 162 million barrels equivalent of approved reserves, which was approximately 84% approved developed and 69% oil. This reserve base held a PV10 value of approximately $3.9 billion at year-end, utilizing SEC prices of $66.55 per barrel and $3.60 per MMBTU. At a price sensitivity of $80 per barrel, more reflective of today's commodity environment, our approved reserves carry a PV10 of over $4.9 billion. These reserve figures are fully audited and include all P&A associated with those properties in the report. Importantly, We hold an additional 60 million barrels of probable reserves with a PV10 at SEC prices of $1.4 billion. Our reserve base is very solid, and we see significant unrecognized fundamental value that we aim to unlock in the future. With that, I'll turn it over to Shane to address some of the financial details of the quarter and the full year, as well as an update on our 2022 operational and financial guidance. I'll then conclude with more details on our 2022 capital program and some closing remarks.