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TALOS ENERGY INC. (TALO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered fifth consecutive quarter of record production at 100.9 MBoe/d, driving Adjusted EBITDA of $363.0M and Adjusted Free Cash Flow of $194.5M; management reiterated full-year 2025 guidance and introduced Q2 production guidance of 92–96 MBoe/d .
  • Results versus Street: Revenue beat ($513.1M vs $498.3M consensus) and Primary EPS beat ($0.06 vs -$0.10 consensus); GAAP diluted EPS was -$0.05 due to derivative fair value losses and interest expense, while normalized EPS printed positively . Estimates from S&P Global*.
  • Capital return and balance sheet: Board raised buyback authorization to $200M; ~2.3M shares repurchased in March for $22.0M; liquidity stood at ~$960.2M with Net Debt/LTM Adjusted EBITDA of 0.8x .
  • Near-term catalysts: First oil from Sunspear and Katmai West #2 expected late Q2; Daenerys high-impact exploration to spud late Q2 with results mid-to-late Q3; hedging (~42% of remaining 2025 oil at >$72/bbl floors) supports FCF resilience even at ~$40 oil .
  • Management tone: New CEO emphasized programmatic buybacks and strong FCF through the cycle; CFO transition announced after the quarter with guidance reaffirmed—watch for execution and strategic update in coming weeks .

What Went Well and What Went Wrong

What Went Well

  • Record production and strong cash generation: 100.9 MBoe/d, Adjusted EBITDA $363.0M, Adjusted FCF $194.5M; “record EBITDA ... and record free cash flow of $195 million” (rounded) .
  • Project execution on near-term growth: Sunspear completions finished; Katmai West #2 completions underway; both expected online late Q2; Daenerys spudding late Q2 .
  • Balance sheet and hedges: Liquidity ~$960.2M, Net Debt/LTM Adjusted EBITDA 0.8x; hedge book with ~$120M mark-to-market as of Apr 30 enhances cash stability .

What Went Wrong

  • GAAP net loss and EPS: Reported net loss of $9.9M and diluted EPS of -$0.05, driven by derivative fair value loss ($15.9M) and interest expense ($40.9M), offset by strong operating metrics .
  • Near-term production dip expected: Q2 guidance 92–96 MBoe/d reflects planned maintenance and tie-in downtime (Brutus, Tarantula, Prince, third-party pipelines), increasing operational simultaneity risk .
  • Cost environment mixed: LOE per Boe rose versus Q4 (seasonality and activity mix), while management flagged only early signs of rig market softness; LOE $14.08/Boe in Q1 vs $12.14/Boe in Q4 .

Financial Results

Quarterly Performance vs Prior Periods

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$429.9 $509.3 $485.2 $513.1
GAAP Diluted EPS ($USD)-$0.71 $0.49 -$0.36 -$0.05
Adjusted EBITDA ($USD Millions)$257.7 $324.4 $361.8 $363.0
Adjusted EBITDA per Boe ($USD)$36.91 $36.54 $39.84 $39.98

Notes: Press release and 8-K provide reconciliations and definitions of non-GAAP measures .

Revenue and EPS vs Wall Street Consensus

MetricQ3 2024Q4 2024Q1 2025
Revenue Actual ($USD Millions)$509.3 $485.2 $513.1
Revenue Consensus ($USD Millions)$502.2*$488.9*$498.3*
ResultBeat*Miss*Beat*
Primary EPS Actual ($USD)-0.14 0.08 0.06
Primary EPS Consensus ($USD)-0.063*-0.059*-0.096*
ResultMiss*Beat*Beat*

Values retrieved from S&P Global*.

Operating Cost and Pricing KPIs (Q1 2025)

KPIQ1 2025
Production (MBoe/d)100.9 (68% oil, 78% liquids)
Oil (MBbl/d)68.3
Natural Gas (MMcf/d)135.7
NGL (MBbl/d)10.0
Avg realized price ($/Boe)$56.50
LOE ($MM) / $/Boe$127.8 / $14.08
Adjusted G&A ($MM) / $/Boe$30.3 / $3.34
Capex ($MM)$117.6
Net cash from operations ($MM)$268.2
Adjusted Free Cash Flow ($MM)$194.5
Cash ($MM) / Total Debt ($MM)$203.0 / $1,250.0

Segment Production Mix (Q1 2025)

SegmentMBoe/d% Oil% Liquids% Operated
Deepwater89.0 70% 80% 82%
Shelf & Gulf Coast11.9 54% 61% 78%
Total100.9 68% 78% 81%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Avg Daily Production (MBoe/d)Q2 2025—92.0–96.0 (67% oil) New
Avg Daily Production (MBoe/d)FY 202590.0–95.0 90.0–95.0 Maintained
Oil (MMBbl)FY 202522.7–24.0 22.7–24.0 Maintained
Natural Gas (Bcf)FY 202541.9–44.3 41.9–44.3 Maintained
NGL (MMBbl)FY 20253.1–3.3 3.1–3.3 Maintained
Capex ($MM)FY 2025$500–$540 $500–$540 Maintained
G&A ($MM)FY 2025$120–$130 $120–$130 Maintained
P&A / Decom ($MM)FY 2025$100–$120 $100–$120 Maintained
Interest Expense ($MM)FY 2025$155–$165 $155–$165 Maintained
Share Repurchase AuthorizationOngoingIncreased remaining authorization to ~$178M (3/31/25) ; ~$157.5M remaining (9/30/24) Authorization raised to $200M Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2, Q-1)Current Period (Q1 2025)Trend
Programmatic buybacksYTD 2024 repurchased ~4.0M shares; ~$157.5M remaining under plan Authorization raised to $200M; up to 50% of annual FCF for buybacks Accelerating capital return
Production & maintenance planningQ1 2025 est. 99–101 MBoe/d; FY 2025 90–95 MBoe/d with downtime assumptions Q2 guidance 92–96 MBoe/d; planned turnarounds/tie-ins detailed Temporary dip then ramp
Hedge strategyDetailed hedge book in prior quarters ~42% of remaining 2025 oil hedged at >$72; $120M MTM value Supports FCF resilience
Cost/LOEQ4 LOE $12.14/Boe Q1 LOE $14.08/Boe; focus on efficiency; early signs of service softness Mixed; monitoring softness
Rig market & West VelaHigh activity program outlined Potential to lock lower rates amid softness; contract through Daenerys Optionality improving
M&A / liquidity optionalityStrategy and acquisitions highlighted (EnVen, QuarterNorth) Liquidity enables opportunistic M&A/debt buybacks; no comment on specific deals Positioned to act
Mexico/ZamaAdditional sale of Talos Mexico stake; contingent consideration expected Content with partnership; potential investment decision later in year Progressing
Tariffs/OCTG—Minimal tariff exposure; OCTG largely preordered into 2026 Risk mitigated
Weather risk—Conservative hurricane downtime baked into outlook Neutral to cautious

Management Commentary

  • “Our fifth consecutive quarter of record production, achieving approximately 101 MBoe/d... accompanied by strong Adjusted EBITDA and Adjusted Free Cash Flow” — Paul Goodfellow, CEO .
  • “We expect to allocate up to 50% of our annual free cash flow to share buybacks... Board increased our share repurchase authorization to $200 million” .
  • “Projects are expected to be economic on average at approximately $35 per barrel of oil... confidence remains strong despite lower commodity prices” — Sergio Maiworm, CFO .
  • “Completion operations [Sunspear/Katmai West #2] are on track for late second quarter first production” .
  • “Leverage ratio of 0.8x... $203 million in cash... liquidity approximately $960 million” .

Q&A Highlights

  • Buyback timing and cadence: Programmatic approach with up to 50% annual FCF; can execute outside blackout windows .
  • Balance sheet and debt strategy: Comfortable leverage; may opportunistically repurchase bonds if attractive discounts available .
  • Cost environment: Early indications of service/rig market softness; focus on total project cost and efficiency .
  • Production guidance mechanics: Weather (hurricanes/loop currents) and planned maintenance drive Q2 range; conservative assumptions embedded .
  • Project timing in guidance: Sunspear and Katmai West #2 modeled at mid-range timing and rates within Q2 guide; actual outcomes may vary .
  • Tariffs/OCTG: Minimal exposure given preordered tubulars through 2026 .

Estimates Context

  • Q1 2025 beat: Revenue $513.1M vs $498.3M consensus; Primary EPS $0.06 vs -$0.10 consensus (normalized), driven by record production and robust netbacks; GAAP diluted EPS -$0.05 impacted by derivative fair value loss ($15.9M) and interest expense ($40.9M) . Estimates from S&P Global*.
  • Trailing quarters: Q4 2024 Primary EPS beat (0.08 vs -0.06) with revenue slightly below consensus; Q3 2024 Primary EPS miss (-0.14 vs -0.06) despite revenue beat, reflecting hedge and non-GAAP adjustments . Estimates from S&P Global*.
  • Implication: Street likely revises up near-term normalized EPS on stable netbacks and project ramp in late Q2; GAAP EPS sensitivity remains to derivative fair value and interest expense .

Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Near-term setup: Expect temporary production dip in Q2 from maintenance/tie-ins, followed by ramp as Sunspear and Katmai West #2 come online late Q2; trading catalysts tied to first oil timing and rates .
  • Capital return: Buyback authorization at $200M and intent to allocate up to 50% of annual FCF to repurchases provide incremental support for the equity; execution cadence matters .
  • Resilience: Hedge coverage (42% of remaining 2025 oil at >$72/bbl floors; $120M MTM) and breakevens ($35/bbl for upcoming projects) underpin FCF durability even at lower oil prices .
  • Balance sheet optionality: Liquidity ~$960M and Net Debt/LTM Adjusted EBITDA 0.8x enable opportunistic actions (M&A, bond buybacks); monitor CFO transition and forthcoming strategy update .
  • Costs and services: LOE rose Q/Q; early service market softness could improve costs—watch rig rate developments (West Vela) and LOE trajectory through planned work .
  • Macro sensitivities: Hurricane season and third-party downtime embedded conservatively; upside if weather is milder than modeled .
  • Strategic exploration: Daenerys results mid-to-late Q3 could be a swing factor (100–300 MMBoe potential); Ewing Bank 953 and Monument add medium-term growth visibility .

Additional notes and reconciliations, including non-GAAP definitions (Adjusted EBITDA, Adjusted Net Income, Adjusted FCF), are provided in the 8-K and earnings release .

Discrepancy cross-check: Management referenced “record free cash flow of $195 million” (rounded) on the call vs $194.5M in release/8-K; difference is rounding only .