Talos Energy, Inc.

Good morning and welcome to the Telos Energy first quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. 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 Myworm, Vice President of Finance, Investor Relations, and Treasurer. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to our first quarter of 2022 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-Q for the quarter ending March 31, 2022, 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. Good morning, everyone, and thank you for joining our earnings call today. As we enter 2022, we had several specific goals for the year. First, we wanted to lower our debt metric to approximately one times, which would be the lowest since going public in 2018. Second, we wanted to reintroduce high impact drilling projects into our portfolio and organically grow our reserve base. Third, we wanted to continue to build out our growing carbon capture business. And finally, we wanted to continue to actively pursue accretive M&A deals. After four months into the year with a strong first quarter result and with exciting and tangible milestones still in front of us, I'm confident we're well positioned to achieve all our goals in 2022. At Talos, we're building what we think the energy company of the future should look like, one that balances the continued responsible growth of our upstream business to meet the world's needs, as well as the increasing mandate to reduce our industrial carbon footprint. We are delivering on both of those imperatives, and I'm truly excited to discuss the first quarter and the future of Talos. In the first quarter, Talos generated $414 million in revenue, and coupled with lower-than-expected operating costs, we generated $208 million in adjusted EBITDA. inclusive of hedge losses and 77 cents of adjusted earnings per share. With a lighter capital investment program in the first quarter, Taos generated over $92 million of free cash flow in the first quarter alone, allowing the company to continue its debt reduction trend and stay on track to reaching our first goal, getting to a one-times leverage target by year-end or sooner. Shane will spend more time talking about the details of the quarter, including our successful spring borrowing-based redetermination that provides increased borrowing capacity and liquidity. On the operational side, our platform rig program is progressing well at Pompano, with approximately 2.4 thousand barrels equivalent per day of added average production in March. We recently spud the Seville exploitation well and look forward to results from that well and at least one additional well from the platform rig later in the year. As we prepare to initiate our open water drilling program in the second half of 2022, we seized an opportunity to extend our rig contract with three additional consecutive well slots, which will now take the contract into 2023 with six straight planned wells. These additional wells were already expected to be in the 2023 capital program, and in executing them consecutively, we expect to realize significant operational synergies and lower overall cost. More importantly, The extended rig contract assures that in the following 12 months, we can have a balanced portfolio of operated subsidy projects. Some projects are lower-risk subsidy tiebacks, while others are more impactful, such as our Lime Rock, Venice, and Rigolese prospects. Each of these are tieback candidates to either our RAMPAL or Pompano facilities. Each of these prospects are targeting 10 to 30 million barrels equivalent gross, and each are a one-well subsea tieback that could deliver a gross initial production rate between 6,000 and 10,000 barrels equivalent per day per well. We expect them to be online between late 2023 and throughout 2024, depending on each project's timing. Working interest levels are expected to be approximately 50% to 60% per project. Delivery of this rig is currently scheduled for early in the third quarter, though it may accelerate into the second quarter, depending on the timing and the results of ongoing rig operations by the operator that is currently using the rig. On the non-operated portfolio, we expect to participate in three deepwater non-op wells, all subsea tiebacks to existing infrastructure, with working interest ranging between 10 and 25%. Amongst these projects, is the appraisal of our 2021 Puma West discovery, which is set to spud in the second half of 2022. Moving on to Mexico, Zama remains an important catalyst for the company. Following the receipt of the final unitization resolution from Mexico's Ministry of Energy, Taos continues to have constructive dialogue with PIMEX on how we can move this project towards FID in the most commercially attractive way. We've mentioned in the past that we believe Zama is a valuable project in the company's portfolio, and we will continue our effort to make sure the value of Zama is unlocked for our shareholders. On the carbon capture and sequestration part of the business, it was an exciting quarter for the Talos Low Carbon Solutions team. Our rapidly growing CCS business has had numerous key milestones announced that highlight the speed, the commerciality, and the innovative thinking that our team is bringing to bear and what that new vertical can look like for Talos. In February, we announced two separate projects. The first, Riverbend CCS, is a 26,000-acre sequestration site with exceptional rock properties that can store over 500 million metric tons of CO2 and is centrally located between Baton Rouge and New Orleans, Louisiana. Talos has partnered with InLink Midstream on the project as an equity partner. providing access to the company's footprint of over 4,000 miles of transportation infrastructure in the region, much of it connected as the last mile into numerous industrial sites in the area. Following River Bend, we separately announced our Coastal Bend project with the Port of Corpus Christi and Howard Energy Partners. We will be working with the Port Authority as the landowner and Howard as the preferred midstream infrastructure provider in the area to develop another CCS as a service offering, to industrial partners along the Port of Corpus Christi, a major export hub and an ideal CCS project setting due to its highly concentrated industrial footprint, in-place transportation infrastructure, and solid geology available on-site on port-owned lands. We look forward to advancing both river bend and coastal bend this year with pre-feed work as well as stratigraphic characterization wells ahead of Class VI EPA permit application submissions. while continuing to maintain discussions with local industrial partners in each market. Lastly, this week we announced an expansion of our Bayou Bend project in Jefferson County, Texas, with a preliminary agreement to bring Chevron into an expanded joint venture with the current partners Talos and Carpenter. This transaction will include a consideration of cash and a capital carry that will cover Talos' costs through FID, which includes feed studies, a stratigraphic well test, activities related to Class 6 permitting, and ultimately final project approval. TALIS will remain the operator of the project, and it is our belief that Chevron's reputation and commitment to investing in CCS-related projects will help kickstart this important hub. This is a major development that speaks to the tangible success that TALIS has achieved over the past year in its CCS initiatives. We look forward to collaborating with Chevron in the coming months and years to make Bayou Bend the premier CCS solution in the Beaumont-Port Arthur industrial region of Southeast Texas. Robin and I are happy to take questions on any of these developments. While I talk about low-carbon initiatives, it's worth mentioning as a follow-up from our annual ESG report published in the fourth quarter of 2021, our operations team finalized our 2021 emissions intensity data. We saw a 9% decrease in emissions intensities from 2020 and a 27% decrease from our 2018 baseline, putting us well on our way to achieving a 40% reduction stretch goal by 2025. In addition to the emissions we are reducing in our upstream business, the amount of emissions we expect to capture just from our current CCS portfolio alone is significant. Once fully online, we estimate that our four announced CCS projects will be capturing more than 50 times TALIS' 2021 upstream Scope 1 emissions. Finally, on the M&A front, we've continued to actively evaluate a number of business development opportunities that are being patient in identifying the best opportunities for TALIS' shareholders. We remain committed to seeking out transactions that are a good fit for our skill sets and strategies, are creative to our shareholders, and preserve or improve our strong credit position. With those key updates on the progress of our 2022 goals, I'll turn it over to Shane to address some of the financial details of the quarter.