Talos (TALO) Q1 2026 Earnings Call Transcript

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DATE

Wednesday, May 6, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Paul Goodfellow
• Chief Financial Officer — Zachary Dailey

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TAKEAWAYS

• Adjusted EBITDA -- $293 million generated during the quarter, resulting from operational execution and capital discipline.
• Adjusted Free Cash Flow -- $113 million for the quarter, attributed to high-margin production and ongoing cost control.
• Total Oil Production -- Approximately 64,000 barrels per day, at the high end of guidance.
• Total Oil Equivalent Production -- Approximately 89,000 barrels per day, just exceeding first-quarter guidance.
• Lease Operating Expenses -- $16 per barrel of oil equivalent, maintaining the 2025 full-year average.
• Exploration and Development Capital -- Just under $120 million invested, supporting active drilling and completion programs.
• Reinvestment Rate -- Approximately 41%, underscoring capital efficiency in project execution.
• Return of Capital to Shareholders -- $38 million, constituting 34% of adjusted free cash flow, allocated through share repurchases.
• Share Count Reduction -- 7% decrease in outstanding shares since return of capital program initiation in 2025, with approximately $135 million spent on repurchases.
• Liquidity Position -- Over $1 billion in total liquidity; cash on hand increased and net debt declined sequentially.
• Credit Facility Extension -- Facility maturities extended to 2030, eliminating near-term maturity risk.
• Unit Operating Cost Advantage -- 2025 operating costs were approximately 30% lower on average than offshore peer group, supporting top-decile EBITDA margins.
• Optimal Performance Plan Progress -- More than 40% of the 2026 $100 million savings target achieved, with additional cost efficiencies ongoing.
• Development Breakevens -- 2026 projects have breakevens in the $30s and $40s per barrel, with a corporate free cash flow breakeven in the low-$50 WTI range.
• Hedging Activity -- Initiated 2027 oil hedges during the Iran War, with a focus on preserving future free cash flow and meeting credit facility requirements.
• Product Mix and Pricing Realizations -- Approximately two-thirds of oil production is sour crude, with observed uplift in Gulf Coast sour differentials from April, expected to benefit Q2 realizations.
• Q2 2026 Production Guidance -- Oil production anticipated between 63 thousand and 67 thousand barrels per day; total production guided at 88 thousand to 92 thousand barrels of oil equivalent per day.
• Major Project Updates -- Genovese remediation on track for midyear return; Daenerys appraisal well scheduled to spud later in Q2, with results expected by year-end.
• Lease Sale and Exploration Inventory -- Eight prospects identified across 11 new offshore leases, representing over 300 million barrels of gross unrisked resource potential in Miocene and Wilcox plays.

SUMMARY

Talos Energy (TALO 5.41%) management announced stable strategic direction, emphasizing that the capital allocation framework, including returns to shareholders and disciplined reinvestment, remains unchanged regardless of commodity price volatility. The company confirmed no adjustments to 2026 full-year guidance and highlighted continued focus on cost leadership to sustain high margins and portfolio competitiveness. The balance sheet was further fortified by sequential net debt reduction, a $1 billion liquidity position, and long-dated credit maturity. Management stated its intention to prioritize investments with low breakeven thresholds and characterized the current asset portfolio as positioned for resilience in volatile markets.

• Zachary Dailey said, "we have lots of flexibility in our balance sheet and our capital structure right now to support the strategy that we have laid out to the market and go out and execute the plan."
• Paul Goodfellow reiterated that investment "needs to make Talos Energy Inc. better and not bigger" and that "our strategy does not change" even in potentially higher price scenarios.
• The optimal performance plan was described as ongoing, with management expressing a "high degree of confidence in delivering that $100 million" in efficiency gains by the end of the year.
• The approach to returning capital via buybacks will remain flexible, with management targeting "up to 50% of annual free cash flow to shareholders" as part of the ongoing capital-allocation framework.
• Project-selection criteria were described as driven by cycle-resilient economics, with continued seismic investments to mature new offshore opportunities for potential development post-2027.

INDUSTRY GLOSSARY

• Miocene: A geologic epoch leveraged for hydrocarbon exploration in the Gulf of Mexico due to its prolific oil and gas reservoirs.
• Wilcox: A major deepwater Gulf of Mexico oil and gas play, characterized by complex stratigraphy and sizable resource potential.
• Sour Crude: Crude oil containing a high amount of sulfur, typically commanding pricing differentials versus sweet crude grades.
• P&A (Plug and Abandonment): The process of safely decommissioning wells at the end of their productive life and restoring the environment.

Full Conference Call Transcript

Paul Goodfellow: Thanks, Clay, and good morning to everyone joining us on the call today. To start, I want to thank our employees for their hard work, dedication, and unwavering commitment to safety and environmental stewardship in delivering the results Zachary and I have the privilege of discussing today, especially during these dynamic times. Before turning to our results, I would like to briefly provide some context on the current energy market. Recent geopolitical tensions have reminded global markets of a couple of fundamental truths. Energy security is not guaranteed, and reliable and affordable hydrocarbons remain essential to meeting the world's energy needs.

We believe Talos Energy Inc., as part of the vibrant U.S. energy industry, plays a clear and increasingly important role in delivering reliable Gulf of America oil that the world requires. Our strategy is designed to build Talos Energy Inc. into a leading pure play offshore E&P company by delivering high-margin production through disciplined execution, a resilient cost structure, and building a long-lived portfolio that creates durable value across the cycle. Today, I would like to focus on three key takeaways from our results, where outstanding execution across the business drove another quarter of strong financial outcomes, generating adjusted free cash flow of $113 million on production of approximately 89 thousand barrels of oil equivalent per day.

First, our disciplined operational performance remains a foundation of our financial results. During the first quarter, we delivered oil production of approximately 64 thousand barrels per day and total production of approximately 89 thousand barrels of oil equivalent per day, which just exceeded first quarter guidance. This outperformance was driven by strong new well productivity at Cardona, continued solid base performance, and high facility uptime. I am extremely proud of our team and want to recognize their tireless focus on operational excellence and identifying opportunities to maximize value across our asset base. This mindset is core to pillar one of our strategy and ultimately leads into pillar two by driving production and profitability.

My second key takeaway is that execution is off to a strong start in what is an active drilling and completion year for Talos Energy Inc. In addition to efficient execution and strong performance at Cardona, we drilled and completed the CPN well in quarter one, with first production on track for the third quarter. Execution at CPN was best in class, highlighted by the fact that the well was completed with zero completion-related nonproductive time, an outstanding achievement and a testament to the high-performance team here at Talos Energy Inc. The plan for remediation work to begin on the Genovese well is on track for quarter two with a return to production midyear, slightly ahead of schedule.

Lastly, on the execution front, drilling is underway at the Monument project operated by Beacon Offshore, with first oil on track by late 2026. Our relentless focus on improving the business every day has strengthened our position as a low-cost E&P operator in the Gulf of America while also delivering top-decile EBITDA margins across the sector. Over the last three years, as industry cost structures in the Gulf of America have increased, Talos Energy Inc.'s proactive cost management and production growth have resulted in a reduction in unit operating costs. In fact, for 2025, which is the most recent available full-year dataset, our operating costs were approximately 30% lower on average than the offshore peer group.

Our advantaged cost structure combined with our oil-weighted production drives top-decile EBITDA margins in the E&P sector. My third and final key takeaway is that we continued this trend of low cost and high margins into the first quarter. Total company lease operating expenses were approximately $16 per barrel of oil equivalent in quarter one, which was in line with our 2025 average. It has also been an impressive start to the year for our optimal performance plan, with greater than 40% of the 2026 target already achieved. These results are broad-based, with free cash flow enhancements driven by operating cost reductions, margin improvement, and capital efficiency, which spans operations, development, and P&A activities.

We expect to build on the outstanding first quarter performance and carry that momentum forward into the second quarter. We expect to spud the Daenerys appraisal well later in the second quarter. The primary objectives are to test the northern portion of the prospect and further evaluate reservoir and fluid properties. The well has been designed to penetrate multiple prospective intervals, with optionality to accommodate future sidetracks, enabling further appraisal and development. We are ready to start execution as soon as the rig returns from the current operator's well. We expect to have the well drilled and evaluated by the end of the year.

Exploration is a core element of our strategy falling under pillar three: building a long-lived, scaled portfolio that supports sustainable growth. To deepen our exploration inventory for the future, we have been proactive with recent seismic investments, giving Talos Energy Inc. the most advanced reprocessed data across our core areas. This approach to leveraging modern technology enabled a successful December 2025 lease sale, with all 11 leases now awarded. The eight identified prospects among those leases, several of which span multiple blocks, represent more than 300 million barrels of gross unrisked resource potential across amplitude-supported Miocene and Wilcox opportunities.

While the work is underway, and is still early, our objective is to advance these prospects toward drill-ready status, allowing them to compete for capital in 2027. For me, the bottom line is simple: a strong execution quarter delivered solid financial outcomes. With that, I will turn it over to Zachary to walk through our first quarter financial results along with the full-year and second quarter guidance. Thanks, Paul. I will focus my remarks this morning on our first quarter financial performance.

Zachary Dailey: Which was underpinned by the strong operational execution Paul just discussed and our unchanged, disciplined capital allocation framework. I will also touch on our latest hedging activity before wrapping up with guidance and then opening it up for Q&A. Starting with the quarter, we invested just under $120 million of exploration and development capital and delivered oil production at the high end of our guidance range, with total oil equivalent production exceeding guidance. This strong execution across the business translated into $293 million of adjusted EBITDA and $113 million of adjusted free cash flow.

Importantly, these results were achieved at a low reinvestment rate of approximately 41%, reflecting the capital efficiency of our development program and our ability to convert consistent operating performance into strong financial outcomes. While we expect the macro and commodity price environment to remain volatile, Talos Energy Inc. has the financial strength and flexibility to execute on our strategic priorities across a range of commodity price scenarios. Our 2026 plan features development projects with breakevens in the $30s and $40s, with a corporate free cash flow breakeven in the low-$50 WTI range. And although oil prices have moved higher since the Iran war began, our capital allocation priorities and our 2026 budget remain unchanged.

We will continue to allocate capital in a disciplined, balanced, and focused manner, guided by the framework that underpins execution across all three of our strategic pillars. This consistency is especially important during periods of volatility, and we believe adherence to our capital allocation framework positions Talos Energy Inc. to deliver strong financial outcomes and long-term value creation through the cycle. As a reminder, our capital allocation framework calls for returning up to 50% of annual free cash flow to shareholders, and the first quarter represented another quarter of consistent execution on this front. We returned $38 million, or 34% of adjusted free cash flow, to shareholders through share repurchases.

Since announcing our return of capital framework in 2025, Talos Energy Inc. has returned approximately $135 million to shareholders through repurchases, resulting in an approximately 7% reduction in our outstanding share count. Turning to the balance sheet, our liquidity remains strong and leverage is low, resulting in financial strength that underpins our ability to execute across all three of our strategic pillars. During the first quarter, cash on hand increased while net debt declined sequentially, further enhancing our financial position. In addition to approximately $1 billion of liquidity, we have no near-term debt maturities and have recently extended our credit facility, which now matures in 2030.

Together, our balance sheet strength provides flexibility to invest in the business through the cycle, return capital to shareholders, and advance both our development and exploration priorities while maintaining financial discipline. Now let me share a few thoughts on hedging and provide an update on our recent activity. The end of the first quarter was marked by elevated oil price volatility, driven by geopolitical developments and broader macroeconomic uncertainty. In that environment, we remain disciplined and selectively opportunistic, acting consistently within our established hedging framework to support free cash flow while preserving upside.

While we added some 2026 oil hedges at the beginning of the Iran war, our primary focus during the quarter was to begin layering in required oil hedges for early 2027, a time period in which Talos Energy Inc. was unhedged before the war began. These initial positions were added to establish protection around future free cash flow, maintain exposure to additional upside, and satisfy credit facility requirements. We view this early positioning in 2027 as prudent and well timed given the current level of market volatility and uncertainty in longer-dated oil prices.

It is also worth highlighting that approximately two-thirds of our oil is sour and that we benefit from a balanced oil marketing portfolio with access to multiple physical crude pricing benchmarks. Beginning with April pricing, we saw strength in a number of Gulf Coast sours relative to historical levels, which, all else equal, should support near-term price realizations. Overall, our hedging activity during the quarter reflects a measured and steady approach, using periods of volatility to strengthen cash flow resilience and reinforce our ability to execute consistently across the cycle. For the forward outlook, all of our full-year 2026 operational and financial guidance ranges we released in late February remain unchanged.

For the second quarter, we expect oil production to be in the range of 63 thousand to 67 thousand barrels of oil per day and total production to be in the range of 88 thousand to 92 thousand barrels of oil equivalent per day. Additional details describing our guidance can be found in our presentation, which is available on our website. In closing, the business is off to a very solid start to the year. With a clearly defined strategy, an advantaged cost structure, and top-decile margins, we have the financial strength and flexibility to execute on our strategic priorities while remaining anchored to our disciplined capital allocation framework. With that, we will open the line for Q&A.

Operator: Thank you. In a moment, we will open the call to questions. The company requests that all callers limit each turn to two questions from each analyst, one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. It may be necessary to pick up your handset before pressing the star keys. One moment, please. Your first question comes from Greta Drefke with Goldman Sachs. Please go ahead.

Greta Drefke: I was wondering if you could just update us with your latest thoughts around how different uses of free cash flow compete across holding cash on the balance sheet, leaning into share repurchases like you did this past quarter, or potential M&A here?

Paul Goodfellow: Yes, thanks, Greta. Good morning. Look, I would say nothing changes. We have a very clear framework in terms of how we think about capital allocation that we have been working within over the last year, where we have seen prices rise and decline during that timeframe. That is really focused on investing in the business, making sure we maintain the strength of the balance sheet, absolutely returning cash to shareholders, but also giving ourselves the opportunity to invest in the future of the business to make sure that we have length in the portfolio. We have said that investment needs to make Talos Energy Inc. better and not bigger, and so it is not investment for investment's sake.

In the same way as you see us investing in projects in 2026 and going into 2027 that have low breakevens and high returns and can deal with the volatility that we see in the macro, that is how we look for that fourth component as well. We will balance that as we go through 2026 and 2027, with no change to the overall framework in which we are thinking and operating and planning.

Greta Drefke: And then just for my second question, on the longer-term outlook: if we are in a higher-for-longer oil price environment, albeit very volatile, as you are thinking about organic growth opportunities like you mentioned, is Talos Energy Inc. considering leaning into any incremental organic growth projects in 2027 or 2028 to potentially turn economic given where the oil forward curve is today relative to a few months ago?

Paul Goodfellow: I would reiterate what we spoke about before, which is we look for projects that have low breakevens, and Zachary mentioned that in the comments. We are not going to chase an oil curve. We will look for projects that have resilience through the cycle. As we mentioned, we were very successful in the first lease sale that was held in 2025. All of those leases, the 11 leases, have now been awarded to us, and we are working those diligently to allow the majority of those to compete for capital in 2027, but that is normal course. It is not in reaction to where the price is today.

If you look at the shape of the curve, it is still incredibly backwardated. Yes, the long end is slightly higher than where it was pre the Iran war, but it is nothing that would fundamentally change our view on how we invest in projects and the thresholds that we have for those projects to be considered to compete for capital.

Operator: Thank you very much.

Paul Goodfellow: Thank you.

Operator: Thank you. The next question comes from Analyst with BMO. Please go ahead.

Analyst: This is Ajay Bhukshani on for Phil. Thanks for taking our question. As we think about the upcoming appraisal well at Daenerys, you do a good job of listing out the objectives, but what are some of the key risks here? And assuming you accomplish these objectives, how does this inform your resource potential estimates, or is further appraisal needed to really dial this in?

Paul Goodfellow: Thank you. The reason that we are drilling the appraisal well at Daenerys is to try and derisk the range of uncertainties that we have. The clear risks, as there are with any exploration or appraisal well, are whether the main objectives we are looking for are present, do we see the reservoir characteristics that we are looking for, do we see the fluid characteristics that we are looking for, and how does that all then get folded into the overall resource size and estimate and quality that can inform the next steps.

Clearly, there are always mechanical risks when you are drilling deep subsalt wells such as this, but we are incredibly fortunate at Talos Energy Inc. to have one of the best drilling and completion teams in the industry. They have demonstrated that time and time again with what they have done on the first Daenerys well, on Sunspear, on Cardona, and CPN. We plan accordingly, really thinking about the risks and how we mitigate those. Outside the mechanical risks, it really is looking at derisking the reservoir and fluid properties and characteristics. From that point, we will make the determination of what further appraisal, if any, is needed.

It depends on where those results come in, which, as we have mentioned, we expect to spud that well once we get the rig back from the current operator in the second quarter, with results, all being well, available before the end of the year. We will clearly be able to update you then.

Analyst: Very helpful. Thank you. And for my next question, can you just talk about what you have been seeing on crude differentials through 2Q so far? There is a strong global bid for waterborne medium sour barrels. Also, what is the typical breakdown as far as barrels and key price hubs for Talos Energy Inc.?

Zachary Dailey: Ajay, this is Zachary. I appreciate the question. The diffs that we have experienced in April and May have been positive to HLS. About two-thirds of our crude is sour, with a little bit higher sulfur content than a sweet barrel, so they price at Mars, Poseidon, and Southern Green Canyon. We have seen an uplift in those sour diffs in the first part of the second quarter. All else equal, that should help realizations in Q2. Hope that helps.

Analyst: Thanks, very helpful, and congrats on the good quarter.

Zachary Dailey: Thank you.

Operator: The next question comes from Analyst with Pickering Energy Partners. Please go ahead.

Analyst: Hey, good morning. Thanks for taking our questions. It does seem like the oil market might be going through a structural shift that could result in a higher mid-cycle price. Under that context, how does the Talos Energy Inc. business strategy change, if at all, in a higher pricing scenario? And if it does not change, what levers can you pull to capitalize on higher prices?

Paul Goodfellow: Thanks, Michael. I think it does not change. We have a very robust strategy in terms of the three pillars that we are driving against. We have a disciplined capital allocation framework in which we will look at how to deploy capital, and that is where our focus will remain. We are laser-focused on improving our business each and every day, driving continuous improvements, and we have continued to see evidence of that through the first quarter. We are equally focused on the second and third pillars in terms of driving production profitability and building a longer-lived, scaled portfolio. There is a lot of activity going on in those spaces.

Until something gets to the finish line, it is difficult for us to talk about that. Bottom line is that our strategy does not change. If anything, potential structural changes through the cycle reinforce the strategy that we have and the need for the capital discipline that we are driving.

Zachary Dailey: I might just add to what Paul said. To your second point on how you capitalize on higher oil prices: we expect to be 73% oil in 2026, which drives those top-decile margins that we are very proud of. Similar to the prior question, strong differentials are a near-term benefit with the sour crude we produce.

Analyst: I appreciate the context. One related area we are trying to understand is how these oil prices affect the offshore rig market. With the West Bella contract rolling and with the upcoming Daenerys appraisal as well as other prospects, presumably Talos Energy Inc. has been active in this market recently. Paul, I would be curious to hear your views in the high-spec drillship market. Are you seeing a tightening? Do you feel that there is enough availability? And maybe you could offer your opinion on how leading-edge dayrates in the Gulf have evolved over the last twelve months.

Paul Goodfellow: Thanks. The trends we are seeing are the trends that were suggested six to nine months ago, which was some potential capacity in 2026, but the market tightening in 2027. I think that is what you are actually seeing, maybe a slight acceleration of that tightening given what has happened in oil prices over the last two months. It is also important to remember that, for deepwater projects and deepwater wells, the cycle time is much longer from decision to having the well online. I still think for operators like ourselves there is a degree of caution in terms of making sure the projects that we move forward with have low breakeven prices.

We have been in the market with a tender for deepwater rig activity in 2027. We have had a number of high-spec rigs bid into that, and we will be making our decision in the coming weeks and months as to which rig or rigs we take on in 2027 and beyond. We are looking at our needs beyond just the very near term and starting to think more strategically about deepwater rig needs. It is also important that we have the ability to intervene quickly on wells should they have a problem, such as the Genovese well that we identified at the back end of last year.

Leveraging technology and using an intervention vessel platform to do intervention work versus only relying on the high-spec rigs gives us another degree of flexibility as we think about the type of vessel and therefore the cost of the vessel to do the work that we need to do. In fact, that is one of the reasons why the Genovese well is on or slightly ahead of plan at the moment, because of our ability to execute that work off an intervention vessel versus a high-spec rig. I hope that gives you some color.

Analyst: That is great. Thanks for your time.

Paul Goodfellow: Thank you.

Operator: The next question comes from Timothy A. Rezvan with KeyBanc Capital Markets. Please go ahead.

Timothy A. Rezvan: Good morning, folks. Thank you for taking our questions. First one, maybe this is for Zachary. On the balance sheet, Talos Energy Inc. has $1.25 billion of second-lien notes out there. The company is in much better financial health than when those were issued. They are trading above par, and some are callable now, and I know the call steps down in 2027. Just curious where that is on your radar screen this year. And maybe for Paul, is that part of that $100 million cash flow uplift, getting those refinanced? Thanks.

Zachary Dailey: Thanks for the question, Tim. Good morning. You pretty much nailed the state of affairs on the ’29s. It is front and center on our minds. The high-yield market is very tight, and it is a good place to be for companies like Talos Energy Inc. I would say we have lots of flexibility in our balance sheet and our capital structure right now to support the strategy that we have laid out to the market and go out and execute the plan. I do not want to get into too many specifics, but suffice it to say that it is definitely front and center and we are in a good spot.

Paul Goodfellow: The simple answer to the second part of your question, Tim, is any refinancing benefit we would get is not considered in the $100 million of additional free cash flow. That is centered around the operational, capital, and supply chain efficiency world in terms of the execution of the plan today. But as Zachary said, the actions we will take around those bonds are very much front and center in our thinking at this point in time.

Timothy A. Rezvan: Appreciate the details. As a follow-up, also on the capital allocation theme, Talos Energy Inc. has repurchased shares for five straight quarters. It seems to be a consistent part of your use of free cash flow, but we also, going into today at least, have shares pushing two-year highs. Should we think of that as maybe you toggle that up or down, but you expect that to be a consistent part of the program, greater than zero but opportunistic? Just trying to understand how you think about repurchase intensity with shares back at ’16.

Paul Goodfellow: We think about it within the framework that we laid out. We have said we are investing in the business today, we are going to maintain the strength of the balance sheet, we are going to look for accretive opportunities to support and build the business, and we are going to return capital to shareholders through share buybacks. It is a balance of those four. That is what you have seen us do over the last four quarters, and thank you for the recognition of that in terms of the consistency of executing against the strategy that we have.

That is how you will see us think about it going forward, not only in this quarter, but the quarters to come.

Zachary Dailey: Tim, Paul is exactly right. I will just add that in Q1 it was about 34% of free cash flow allocated to repurchases. Within the financial framework that we want to stay consistent to, we have the flexibility of up to 50%. At any one point in time, we will be toggling in that range. As we highlighted in the prepared remarks, we have reduced the outstanding share count by about 7% over the last twelve months since the strategy was rolled out. We do want to stay consistent, but we do have flexibility within that framework.

Timothy A. Rezvan: That is all I had.

Zachary Dailey: Thanks, Tim.

Operator: Thank you. The next question comes from Paul Diamond with Citigroup. Please go ahead.

Paul Diamond: Thank you. Good morning, all. Thanks for taking the call. Just a quick one on Katmai/Tarantula. I know that there was some recent debottlenecking there. Looking at it longer term, do you see there continuing to be capital going out beyond, you know, I know it is flatlining through 2027, but going out beyond that?

Paul Goodfellow: Thanks, Paul. The Katmai field is doing incredibly well. The operations team there continues to focus on safe, efficient operations and maximizing throughput. That is what we have seen as we have gone through the first quarter of this year, a continuation of what we were doing in 2025. We have said there are a number of opportunities around the Katmai field—Katmai North as well as some of the leases that we acquired in the last lease sale. As we think about maturing those, we will also consider what further debottlenecking or expansion of that facility is needed. For where we are today, we see that nice plateau, and that is where we will sit.

The next level of expansion would be looping of the pipeline, which would give us additional capacity. To do that, we would want to have additional volumes coming in from near-field wells. Those are the wells the team is maturing at the moment to compete for capital in 2027.

Paul Diamond: Makes perfect sense. Just a bit of housekeeping on the optimal performance plan. You talked about $100 million in savings, with about 40% achieved. How should we think about the vector of that plan? Does the low-hanging fruit come first and the rest is somewhat linear, or is it more chunky? What is the timeline on completion?

Paul Goodfellow: Great question. The plan is a continuation of what we laid out last year. We set an interim target, which the teams did incredibly well to exceed in 2025, and there is an element of those that recur from 2025 to 2026. There is some lumpiness as it comes through. I would think of the vector overall as, between where we are now and the $100 million at the end of the year, we have a high degree of confidence in delivering that $100 million, and we will be looking for ways to exceed it. We are not changing that target at this point in time.

Zachary Dailey: I would just add that the real prize here is instilling a culture of continuous improvement, which has been a cornerstone of Talos Energy Inc. for a long time, but now with a bit more framework and structure. That will continue well into the future.

Operator: The next question comes from Michael Stephen Scialla with Stephens. Please go ahead.

Michael Stephen Scialla: Good morning, guys. It looks like you will have some growth heading into 2027 with Monument coming online at the end of the year. I realize there is a lot of variability and unpredictability with your business, but can you say if you are anticipating year-over-year growth next year, barring a collapse in 2027 oil prices, or is it too early to go out that far?

Paul Goodfellow: In simple terms, it is too early to go out that far. There is a lot of uncertainty in terms of the work that we have to do this year still. The Monument project has started and, with our partner Beacon Offshore as the operator, operations so far are going well, but there is a long way between now and actually getting production from those wells. There is a range of uncertainty, although the area in which Monument sits is a prolific area if you think about the Shenandoah hub, which is where it will tie back to.

We also have a fairly significant redevelopment program at Brutus coming through in the second half of the year that we are getting ready to start up now, and other activities as well. We are investing this year in good-quality, low-breakeven projects that give us stability for the future, but it is too early to put a number on a vector relative to where we are in 2026.

Michael Stephen Scialla: Understood. Could you talk more about the 11 new leases that you got in the lease sale that you said unlock eight new prospects? It looks like some of that is in the Wilcox and that inventory is expanded. Maybe your thoughts on the confidence in that play and what you are seeing with those new leases?

Paul Goodfellow: You are right. We were successful in getting 11 leases where we have identified eight prospects, and some of those span a number of blocks. We focused them around two key areas for us—around the Katmai area and around the Daenerys location. We focused them on plays where we have deep skills, including amplitude-supported Miocene, Wilcox, and some in the Paleogene. We are now going through the seismic work. We preinvested in seismic so that we could mature those prospects and have them compete for capital in 2027. We are focused specifically in the Wilcox in a proven part of the play where we see opportunities with tieback potential, but also with upside to be standalone and hub class.

Those are some of the criteria that we looked at the leases through, and we will continue to look at opportunities in future lease sales. The preinvestment in really advanced, reprocessed proprietary seismic around those key areas and fairways is important.

Operator: The next question comes from Nathaniel Pendleton with Texas Capital. Please go ahead.

Nathaniel Pendleton: Good morning. Congrats on the strong results. You just mentioned the Brutus wells. Can you talk about the potential you see for similar recompletion activity across your portfolio? And how do those types of opportunities compete for capital when you are looking at potentially doing a dedicated drilling program as you look out to 2027–2028?

Paul Goodfellow: What we are doing at Brutus is really bread and butter for Talos Energy Inc., which is our ability to take these mid- to late-life assets, identify opportunities that have maybe been overlooked, and then execute those very efficiently and effectively to maintain the volumes and throughputs of those hosts. This is the second or third incarnation of redevelopment that we have done at Brutus, and we have had similar activities at other hubs. It is important that we have high-quality seismic over those locations, so we can look at near-field opportunities from an infrastructure point of view. They need to compete in terms of breakevens and returns relative to other opportunities that we have in the portfolio.

It is also important that we are balancing the focus on larger-scale opportunities in the exploration phase with high-quality development that can maintain the high oil component of the portfolio that we are delivering at the moment—north of 70% oil cut. The Brutus program specifically will be targeting more oil opportunities than gas. In fact, some of the wellbores it will use are wells that have been gas wells coming to the end of their life, and we will use those wellbores to add additional oil into the portfolio.

Nathaniel Pendleton: Got it. Appreciate the detail there. As my follow-up, I wanted to zoom out and discuss M&A. Can you talk about the opportunity you see in the Gulf of America in smaller asset-level acquisitions versus corporate M&A potential? And do you have any interest in shallow-water assets versus deepwater?

Paul Goodfellow: Our focus is to become a leading pure play offshore E&P player. From a Gulf Shelf perspective, we have a large legacy position, and we will continue to operate and execute those as efficiently and effectively as we can through to end of life, being a responsible operator as we take those through to abandonment and decommissioning when the time is right. In terms of asset-level opportunities, there has been a history of asset activity within the Gulf of America. We would expect that to continue to some degree.

What has happened over the last two months post the Iran war run-up in prices has created a bit of a bump in the road in terms of how buyers and sellers think about price points. I think we are getting to a new norm and an understanding of how to deal with that. There will be a continual degree of opportunities that come forward, maybe not at a super high level, as current incumbents look to optimize their full portfolios as any company, including ourselves, would do.

Operator: The next question comes from Phu Pham with Roth Capital. Please go ahead.

Phu Pham: Hi. Good morning, everyone. My first question is about the cost savings. You executed $72 million in 2025, and the company expects to realize in total $100 million in 2026. The slide shows you have executed greater than 40% of the 2026 target. Is that 40% of the $100 million in total for 2026? Can you quantify that a little bit?

Paul Goodfellow: Thanks, Phu. The $100 million for 2026 was a new $100 million starting at zero. We have executed just above 40% of that $100 million. The $72 million was the number in 2025 attributable to activities in 2025. Some of the solutions we put in place are repeatable, and we would expect to see those continue into 2026, but the target we set for 2026 was a new $100 million target and that was built into our plan.

Phu Pham: That is very helpful. My second question is about the Genovese well. Can you provide an update? I think originally we expected to bring it back in the third quarter 2026, but now it is midyear. Can you provide more exact timing for the wells?

Paul Goodfellow: The team has done a great job of procuring all the equipment that is needed, including the insert safety valve, which is now here in the Gulf with us; working with the operator to make sure we have access to the control system of the well; and accessing a platform in terms of an intervention vessel. We are working toward execution. I cannot be more specific than midyear because there is still uncertainty in terms of when we actually get the vessel and the exact date we can go onto the well, working with the operator.

As is the culture of Talos Energy Inc., the team has worked incredibly hard to look at every lever we can pull to get that as early as we can while still executing it efficiently. Our prime driver is to execute efficiently to get that well back online, which at the moment we see slightly ahead of the third quarter target that we gave when we first shared the Genovese update last quarter.

Phu Pham: Alright. Thank you.

Paul Goodfellow: Thank you.

Operator: The next question comes from Noel Augustus Parks with Tuohy Brothers. Please go ahead.

Noel Augustus Parks: Hi. Good morning. I was wondering about exploration in the industry. We have heard so much, especially over the last couple quarters, about onshore exhaustion and more capital heading out to deepwater globally. With exploration drilling starting to get rolling more and more, it is nowhere near its past peaks. Is there anything that you see in the Gulf that you think is particularly exciting to the point where you could be enticed to maybe take a non-op role in someone else's exploratory prospect? Is the quality of what is out there something you are excited about or more routine?

Paul Goodfellow: The first thing I would say is if we were not excited about the opportunities, we would not have taken the 11 leases that we did in the first big lease sale in December 2025. We have had a strategy of not just looking for exploration, but looking for exploration opportunities that can raise the volume picture that we have. As I have said in the past, in that first lease round we now have access to some 300 million barrels of gross unrisked volume opportunity, and the individual opportunity size has gone up by roughly 50% relative to what we had prior to that. Clearly, we prefer to be an operator.

We think we have great skills in operating, but if partnering opportunities are out there, we will look at those if it is the right type of subsurface opportunity that fits our skills. Our continued investment in seismic is another point—if we were not excited by the opportunity set and potential, we would not be investing in high-quality, state-of-the-art, reprocessed proprietary seismic that allows us to develop those opportunities. Clearly, we are happy to be a non-operator with the right operator, as you see with the Monument development that we are doing now.

Noel Augustus Parks: Fair enough. A general macro question: when we look at the volatility we have had in oil prices in the last couple months, from your long experience, any thoughts on the 2027 strip and whether there is a big leg up ahead or whether we have seen about as much as it is going to do unless there is a huge swing one way or the other?

Paul Goodfellow: The only thing that we focus on at Talos Energy Inc. is making sure that our unit development costs, drilling costs, and lifting costs are as low as they can be and that we do that as safely and efficiently as we can. Regardless of where strip goes, we know that we have a robust set of opportunities that we can execute against. We will not get caught up in trying to have our decision quality driven by what we think a strip price may or may not be.

Operator: We have reached the end of the question and answer session. I will now turn the call over to Paul Goodfellow for closing remarks. Please go ahead.

Paul Goodfellow: Thank you, and thank you all for joining today and for your continued interest in Talos Energy Inc. To close, the current geopolitical landscape reinforces our belief that the world will continue to need reliable and affordable oil supply to meet rising global demand well into the future. We believe that Talos Energy Inc. is well positioned as a low-cost, high-margin oil producer, executing a well-defined strategy to become a leading pure play offshore E&P company and play a meaningful role in meeting that opportunity. Thank you all.

Operator: This concludes today's conference, and you may now disconnect your lines. Thank you all for your participation.