Talos Energy, Inc.

Hello and welcome to the Talos Energy third quarter 2023 earnings conference 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 touchtone phone. Please note this event is being recorded. I would like now to turn the conference over to Sergio Maiwurm, Chief Financial Officer and Senior Vice President. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to our third quarter 2023 earnings conference call. Joining me today to discuss our results are Tim Duncan, President and Chief Executive Officer, and Robin Fielder, Executive Vice President, Low Carbon Strategy, and Chief Sustainability Officer. Before we start, I'd like to remind you that our remarks 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 our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q filed with the SEC. Forward-looking statements 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 GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in yesterday's press release, filed with the SEC, and available on our website. And now, I'd like to turn the call over to Tim.

Thank you, Sergio, and welcome everyone to our call. We appreciate you listening in. I'll plan to briefly cover some of the key operational highlights of the quarter and then turn it over to Sergio for final commentary ahead of Q&A. During the third quarter, we were pleased with our advancements on several aspects of our business. We continue to advance our LimeRock and Venice discoveries toward first production. We closed our previously announced Zama transaction in Mexico with Grupo Carzo. We reached a new milestone with our first EPA class six permit application and filed our second EPA class six permit application for two additional wells. So quite a bit was accomplished since our last call and we're excited about the direction of our business. On the drilling and completions capital program, we're in the process of completing the venison lime rock wells before bringing them online in early 2024. Additionally, we are drilling another development well from our lobster platform, which is successful could bring incremental production late in 2023 and help contribute to production growth in 2024. Beyond our operator rig program, we are also participating in several interesting non-operated projects with our partners in the basin. The Marmalard Well, operated by Murphy, found pay and was successful over this past weekend. We expect production to commence in the first quarter of 2024. The Oddjob Subsea Pump Project, operated by Cosmos, continues to progress and remains on track to be in service by mid-2024. Lastly, the Claiborne No. 1 well, operated by Beacon, is scheduled for a rig intervention in the fourth quarter of 2023 to reinstate production in early 2024. The third quarter is typically a quarter impacted by weather-related events, and even with a quiet hurricane season, loop currents unfortunately impacted our production and drilling operations during the quarter. requiring intermittent shut-ins of the HB1 and associated infrastructure in the Phoenix and tornado fields. The impact of these loop currents caused a deferral of approximately 2.4 thousand barrels of oil equivalent per day for the quarter in the Phoenix field, or 0.8 thousand barrels of oil equivalent per day for the full year of 2023. The issues have since abated and production from the field is back online. The Claiborne non-operated well was also shut in during the quarter, contributing to an additional 1.2,000 barrels of oil equivalent per day of downtime in the quarter. As we mentioned, the operator hopes to reinstate production in the coming months, so we should expect this downtime in the fourth quarter as well. Even with this downtime, as Sergio will discuss, the oil-weighted nature of our assets allowed us to maintain extremely competitive margins, and with several key wells being restored or added in the near term, we are looking forward to a strong exit of 2023 and an exciting start to 2024. On the exploration front, Talos and Repsol signed a joint venture agreement to reprocess seismic data over 400,000 acres, of which close to 100,000 acres is controlled by Talos in a prolific area in deepwater Gulf of Mexico. We hope to develop an inventory of prospects to drill over the next few years that could be tied back to Talos' infrastructure. This is an important development that we hope will generate significant value over time. In Mexico, we are excited about our partnership with Grupo Carzo, a conglomerate publicly listed in Mexico. In late September, we closed a previously announced sale of a 49.9% minority equity stake in our Talos, Mexico subsidiary, which holds a 17.4% working interest in Zomp for approximately $75 million in cash at closing, with an additional $50 million due upon first production for an aggregate price of $125 million. The deal established a baseline valuation for Talos, Mexico of approximately $250 million, while preserving significant upside to Talos' remaining 50.1%. We expect Taos's strong operational track record, combined with Carso's critical local presence and global commercial reputation, will enable us to further advance Zama toward FID and First Oil. We are working hard to progress towards FID following completion and final review of the engineering design work, or FEED, securing project financing and final approvals. We have always understood the importance this project has for local stakeholders in Mexico, and we are optimistic about the incremental value this project will create for our shareholders. Turning to our TALIS low-carbon solutions business, we are pleased that our first EPA Class 6 permit application, submitted in August for our Harvest Spin CCS project, where TALIS owns a 60% interest, received administrative completeness status in October. This first step of the EPA's permitting process determines that the permit application contains all the required information. The next step is the technical review. Also in October, TLCS filed its second Class VI permit application for two additional wells at its Harvest Bend CCS project. TLCS aims to file additional Class VI permit applications in 2024 for its Bayou Bend CCS, Harvest Bend CCS, and Coastal Bend CCS projects. Our first TELUS-operated offshore stratigraphic well at Bayou Bend is expected to spud during the fourth quarter of 2023. As previously announced, The Bayou Bend Partnership also expects to drill a Chevron-operated onshore stratigraphic well in the first half of 2024. We also welcomed Equinor to the Bayou Bend Partnership following its purchase of a 25% interest from Carbonvert, a transaction that further underwrites the quality of our carbon storage portfolio in southeast Texas. We are pleased with the news by the Department of Energy that they will invest up to $1.2 billion in a regional hydrogen hub in Texas. with the investment expected to be matched by key partners. This announcement outlines the benefits unique to the U.S. Gulf Coast and an expected and unprecedented growth in blue hydrogen production from the region, which will require permanent CO2 sequestration. Bayou Bend is in an advantage position to help bring this sequestration ambition to reality. We are continuing to explore capital raise for TLCS. We will continue to update the market as that process advances. While that is ongoing, we believe the operational execution in the carbon storage portfolio will help create long-term value for shareholders and enhance the marketing process. Lastly, on the M&A front, we will continue to actively evaluate business development opportunities that fit our skill sets and strategies, are created to our shareholders, and preserve or improve our strong credit position. This spans tactical business development, bolt-on opportunities, and larger strategic transactions. In summary, it was a busy quarter. and we're pleased with the advancements we have made driving shareholder value creation in both our upstream and low-carbon solutions businesses. In addition, by focusing on operational execution, we successfully managed through the production and operation challenges associated with loop currents while continuing to use the excess free cash flow plus the proceeds secured in a partial sale of Mexico to keep our balance sheet in a healthy position. With these key updates in our 2023 plans and goals, I will turn the call over to Sergio to address our financial details for the third quarter.