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Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<ul><li>Talos is trading at 2.3x and 2.1x our FY25 and FY26 adjusted EBITDA estimates, respectively, and at a 2025 free cash flow yield of 21%.</li><li>Our updated FY25 adjusted EBITDA estimate is $1.1 billion using average production of 93.4 Mboe/d (69% oil).</li><li>The midpoint of management’s FY25 production guidance is 92.5 Mboe/d (69% oil).</li></ul>

Talos is trading at 2.3x and 2.1x our FY25 and FY26 adjusted EBITDA estimates, respectively, and at a 2025 free cash flow yield of 21%.Our updated FY25 adjusted EBITDA estimate is $1.1 billion using average production of 93.4 Mboe/d (69% oil).The midpoint of management’s FY25 production guidance is 92.5 Mboe/d (69% oil).

Talos Energy Inc: Estimate Update; High Impact Exploration on Horizon

<ul><li>Talos’ current ~$2.5 billion enterprise value (EV) reflects a 23% discount to the ~$3.2 billion PV-10 of company’s year-end 2024 proved developed reserves using flat prices of $65/bbl for oil and $3/MMBtu for natural gas.</li><li>Total proved reserves at year-end were 194 MMBoe (74% oil/81% liquids). Estimated probable reserves at year-end 2024 were 125.3 MMBoe, having a PV-10 on the same flat pricing of ~$2.7 billion.</li><li>On a proved plus probable basis, the discount widens to 58%. Under SEC pricing ($76.32/bbl and $2.13/MMBtu), the discount was 41% for total proved and 66% for proved plus probable.</li></ul>

Talos’ current ~$2.5 billion enterprise value (EV) reflects a 23% discount to the ~$3.2 billion PV-10 of company’s year-end 2024 proved developed reserves using flat prices of $65/bbl for oil and $3/MMBtu for natural gas.Total proved reserves at year-end were 194 MMBoe (74% oil/81% liquids). Estimated probable reserves at year-end 2024 were 125.3 MMBoe, having a PV-10 on the same flat pricing of ~$2.7 billion.On a proved plus probable basis, the discount widens to 58%. Under SEC pricing ($76.32/bbl and $2.13/MMBtu), the discount was 41% for total proved and 66% for proved plus probable.

Talos Energy Inc: Valuation Discount/Estimate Update

<ul><li>The Katmai West #2 appraisal well is expected to commence production toward the end of 2Q25.</li><li>Gross deliverability from the well, which encountered more than 400 feet of gross hydrocarbon pay in the primary reservoir objective, is estimated to be ~15-20 MBOE/d.</li><li>Performance from the Katmai West #1 well, together with the results from this well, has nearly doubled the estimated proved reserve ultimate recovery to ~50 million BOE (gross) and supports Talos’ total estimated resource potential of ~100 MMBOE (gross).</li></ul>

The Katmai West #2 appraisal well is expected to commence production toward the end of 2Q25.Gross deliverability from the well, which encountered more than 400 feet of gross hydrocarbon pay in the primary reservoir objective, is estimated to be ~15-20 MBOE/d.Performance from the Katmai West #1 well, together with the results from this well, has nearly doubled the estimated proved reserve ultimate recovery to ~50 million BOE (gross) and supports Talos’ total estimated resource potential of ~100 MMBOE (gross).

Talos Energy Inc. - Estimate Update; Testing High-Impact Prospects in 1H25

<ul><li>We are adjusting our 3Q24 estimates to reflect the impact of Hurricane Francine and actual NYMEX oil &amp; gas reference prices. Francine made landfall on September 11, 2024, as a Category 2 storm in Terrebonne Parish, Louisiana, about 30 miles south of Morgan City. The storm’s path through the central Gulf of Mexico resulted in industry-with temporary production shut-ins.</li><li>We are lowering our 3Q24 production estimate to 94 MBOE/d from 96 MBOE/d. Talos’s FY24 production guidance (August 7, 2024) was 89-95 MBOE/d. 2Q24 production averaged 95.5 MBOE/d and reflected a full-quarter contribution from the assets acquired in the QuarterNorth acquisition, which closed in 1Q24.</li></ul>

We are adjusting our 3Q24 estimates to reflect the impact of Hurricane Francine and actual NYMEX oil &amp; gas reference prices. Francine made landfall on September 11, 2024, as a Category 2 storm in Terrebonne Parish, Louisiana, about 30 miles south of Morgan City. The storm’s path through the central Gulf of Mexico resulted in industry-with temporary production shut-ins.We are lowering our 3Q24 production estimate to 94 MBOE/d from 96 MBOE/d. Talos’s FY24 production guidance (August 7, 2024) was 89-95 MBOE/d. 2Q24 production averaged 95.5 MBOE/d and reflected a full-quarter contribution from the assets acquired in the QuarterNorth acquisition, which closed in 1Q24.

Talos Energy Inc. - 3Q24 Hurricane Housekeeping and Upcoming Drilling Schedule...

<ul><li>We are updating our estimates to reflect actual 2Q24 NYMEX reference prices of $80.66/bbl for oil and $2.32/MMBtu for natural gas.</li><li>We have also increased our 2Q24 lease operating cost estimate to reflect workover activity and bumped our DD&amp;A estimate.</li><li>Talos’s latest guidance and our updated estimates are outlined in Figures 1 – 4.</li></ul>

We are updating our estimates to reflect actual 2Q24 NYMEX reference prices of $80.66/bbl for oil and $2.32/MMBtu for natural gas.We have also increased our 2Q24 lease operating cost estimate to reflect workover activity and bumped our DD&amp;A estimate.Talos’s latest guidance and our updated estimates are outlined in Figures 1 – 4.

Talos Energy Inc. - Estimate Update/Stepping Up to the Plate

United States

Talos Energy Inc. operates as an oil and gas company. The Company engages in exploration, development, and production of oil and natural gas properties. Talos Energy serves customers worldwide.

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Talos Energy Inc (TALO US)

Talos Energy Inc: Estimate Update; High Impact Exploration on Horizon

Talos is trading at 2.3x and 2.1x our FY25 and FY26 adjusted EBITDA estimates, respectively, and at a 2025 free cash flow yield of 21%.

Water Tower Research

Talos Energy Inc: Valuation Discount/Estimate Update

On a proved plus probable basis, the discount widens to 58%. Under SEC pricing ($76.32/bbl and $2.13/MMBtu), the discount was 41% for total proved...

Water Tower Research

Talos Energy Inc. - Estimate Update; Testing High-Impact Prospects in 1H25

Gross deliverability from the well, which encountered more than 400 feet of gross hydrocarbon pay in the primary reservoir objective, is estimated...

Water Tower Research

Talos Energy Inc. - 3Q24 Hurricane Housekeeping and Upcoming Drilling Schedule...

We are adjusting our 3Q24 estimates to reflect the impact of Hurricane Francine and actual NYMEX oil & gas reference prices.

Water Tower Research

Talos Energy Inc. - Estimate Update/Stepping Up to the Plate

We are updating our estimates to reflect actual 2Q24 NYMEX reference prices of $80.66/bbl for oil and $2.32/MMBtu for natural gas.

Water Tower Research

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