Talos Energy, Inc.

Good morning, and welcome to the Talos Energy third quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need any 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 a question, please press star, then two. Please note that this event is being recorded today. I would now like to turn the conference over to Sergio Myworm, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to our third quarter 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 10Q for the quarter ending September 30th, 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 call today. As we discussed in our second quarter earnings call, we knew we were going to have substantial planned downtime in the third quarter with the HB1 dry dock and the Shell Odyssey pipeline maintenance. But despite these planned production outages, We surpassed our internal expectations for the quarter by controlling our operating costs, allowing us to generate substantial free cash flow in the quarter and to continue to rapidly deliver our balance sheet. Over the last six quarters, TALIS has repaid approximately $450 million of its debt, which equates to approximately $5.40 per share outstanding in debt repaid over the period. In the third quarter alone, TALIS paid back $140 million in our credit facility. This is another record-breaking quarter on the balance sheet front for TALIS. Our leverage metric is now at 0.8 times, the lowest level in the company's history, and Talus's liquidity is now more than $800 million, the highest in the company's history. We continue to generate and cultivate several catalysts to make our business unique, which include a robust organic drilling inventory, growth in our carbon capture and sequestration business, and the pursuit of accretive M&A opportunities. On the drilling side, we kicked off our deepwater drilling campaign in the third quarter, and which is expected to continue into 2023 and which exposes TALIS to significant additional organic resource upside. If successful, these opportunities could represent tens, if not hundreds, of millions of barrels of oil equivalent of additional resources on a gross basis. Because most of these projects are not currently in our reserve report, they could add significant growth to our approved reserves and add multiple years of reserve replacement, which makes for exciting times in the months ahead. It should be noted that most of the prospects we expect to drill in the coming months were generated in-house by our very talented team of geoscientists. These leases are typically acquired in M&A transactions or through federal lease sales, and our initial ownership levels are usually very high, often 100% working interest. After applying our seismic reprocessing techniques to better define the project's potential, we then look to farm them down to a TALIS ownership level that fits our capital allocation strategy. I think the fact that we were able to attract such sophisticated partners for these projects, who include BP, Chevron, Oxy, Echo Patrol, and Walter Oil & Gas, among others, speaks to the quality of these opportunities. Another major catalyst that we continue to be excited about is our Talus Low Carbon Solutions business, focused on carbon capture and sequestration. In this business, we are primarily focused on four parallel priorities. Working with our industrial partners to secure long-term contracts for the transportation and sequestration of their CO2, securing additional storage capacity, strengthening existing partnerships and forging new ones, and finally, advancing the engineering and feed work in our existing portfolio of projects. Since the Inflation Reduction Act was passed into law, we have seen a renewed enthusiasm by industrial emitters and a heightened commitment to moving forward with their decarbonization goals. We believe several of these work streams will lead to positive milestones by year-end, and I'm extremely confident that our CCS business will be a significant contributor to Thales' earnings and cash flow in the coming years. Lastly, we believe that acquisition opportunities are also a key catalyst for us as a logical acquirer. In late September, we announced the strategic acquisition of Inven Energy, a private Gulf of Mexico operator for $1.1 billion, through a combination of stock and cash consideration. We are very excited about the industrial logic of owning these assets, which consist of deep-water, oil-weighted production through operated infrastructure across the basin. We expect the transaction will bring significant additional scale, including approximately 24,000 barrels equivalent a day to 2022 estimated production, and approximately 78 million barrels equivalent of proved plus probable reserves, as well as increased asset diversity, reducing fill level concentration, and doubling our operated deep water facility footprint. The transaction is financially attractive to TALIS shareholders as well, It is expected to be accretive to 2023 free cash flow per share and to be immediately deleveraging to our already strong balance sheet. Lastly, the acquisition improves our GHG intensity metric and will be a catalyst to declassify our board of directors and enhance its independence to better align with shareholder interests going forward. We are convinced that this transaction checks all the boxes that investors expect from M&A deals. The overwhelmingly positive feedback we receive from shareholders and our stock performance since the announcement reinforces that belief. As an update on the regulatory process to close the transaction, we received overwhelming support from Talos note holders in obtaining consent to bring Inven's assets and bonds into the Talos credit profile at the closing of the transaction. Having all assets on one balance sheet allows us to speed up and maximize the capture of the synergies we expect to achieve. After the expiration of the Hart-Scott-Rodino review window, last week we filed our Form S-4, our registration statement with the SEC. Depending on the potential SEC review timelines, we expect to close the transaction in either December or January. I'll briefly address the third quarter and provide key operational updates before turning the call over to Shane to walk us through the quarter in detail. The production for the quarter was 53,000 barrels of oil equivalent per day, which is 67% oil and 75% liquids. This is inclusive of the planned dry dock maintenance for our HP1 floating production unit and the planned maintenance of the Shell's Odyssey pipeline system in Mississippi Canyon. The combination of these two planned downtime activities resulted in production deferrals of approximately 8,000 barrels of oil equivalent per day for the quarter. In the third quarter, we experienced very strong loop currents in our production operations and drilling operations, specifically in the Green Canyon area of the Deepwater Gulf of Mexico. These loop currents only affect dynamically positioned vessels, since those vessels rely on their own thrusters to maintain their position, while moored and fixed platforms are not impacted by these currents. Because floating production units like the HP-1 and deepwater drilling rigs are dynamically positioned, they are impacted by loop currents. Stress created by constant loop currents caused several extended shut-ins on the HP-1 in the third quarter. This production intermittency in the Phoenix field related to the loop currents resulted in an additional 1,000 barrels of OLA close-up per day for the quarter of unplanned deferred production. The loop currents continue to impact production from the HP-1 in the first few weeks of the fourth quarter as well, although conditions have recently improved and currently running as expected. On the drilling operations front, we took possession of our deepwater rig, the Sea Drill Savon, Louisiana, in August. The first operation was an uphole recompletion in our bullet project. After very encouraging completion results of the targeted zone, we encountered operational difficulties associated with similar loop currents in the area. We decided to temporarily suspend operations on that project and move the rig from the Green Canyon area to the Mississippi Canyon area. We plan to return to the re-completion project in the first quarter of 2023 to finalize the work and bring the well online. Our drilling campaign in the Mississippi Canyon area started with our Lime Rock prospect near our operated Ram Pal facility. Lime Rock will be followed by our Venice project, also by our Ram Pal facility. We will then wrap up the bullet re-completion before starting our Rig-A-Lease prospect, which, if successful, could be tied back to our Pompano facility. In each of these new drill exploitation projects, we have secured joint venture partners. TALIS will participate at a 60% working interest in each, and each of these projects could deliver 5,000 to 15,000 barrels of oil equipment per day gross within 12 to 18 months of achieving a successful result. We have additional options with the rig, and we're finalizing the planning for our 2023 capital program. We are confident this exciting rig program will lay a solid foundation of production growth and additional organic reserve growth in 2023 and 2024. Beyond our operated rig program, we're also participating in a number of interesting non-operated exploration projects. We spud the appraisal well for our Puma West project in the Green Canyon in October and anticipate those results in early 2023. Additionally, we completed a multi-block cross-assignment trade with Oxy, covering over 46,000 acres and the Green Canyon and Walker Ridge areas and expect to drill a high-impact subsalt myosin prospect called pancheron on that acreage in early 2023. We highlighted some attributes of that project in our Analyst Day presentation back in May under the project name Camellia, but we hope to share more details on that project as part of our 2023 guidance, which we intend to roll out at the closing of our infant transactions. In summary, it was a busy quarter and the team has managed through the downtime challenges by focusing on operational execution while continuing to use our excess free cash flow to put our balance sheet in the healthiest position it has ever been. Now we are well positioned to focus on key catalysts as we close out the year, an exciting deep water drilling program and closing and integrating and a very attractive M&A transaction and the continued development of our carbon capture and sequestration portfolio. With that, I'll turn the call over to Shane to address some additional details for the quarter.