Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Note 14 — Segment Information From January 1, 2024 through March 18, 2024, the Company’s operations were managed through two operating segments: (i) Upstream Segment and (ii) CCS Segment. The CCS Segment was divested in March 2024. The Upstream Segment was the Company’s only reportable segment. The QuarterNorth Acquisition did not change the Company’s reportable segment determinations and is included in the Upstream Segment. Currently, the Company’s CODM is the Interim Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire company. A reportable segment is an operating segment that meets materiality thresholds. The 10% tests, as prescribed by the segment reporting accounting guidance, are based on the reported measures of revenue, profit, and assets that are used by the CODM to assess performance and allocate resources. The profit or loss metric used to evaluate segment performance is Adjusted EBITDA, which is defined by the Company as net income (loss) plus interest expense; income tax expense (benefit); depreciation, depletion, and amortization; accretion expense; non-cash write-down of oil and natural gas properties; transaction and other (income) expenses; decommissioning obligations; the net change in the fair value of derivatives (mark to market effect, net of cash settlements and premiums related to these derivatives); (gain) loss on debt extinguishment; non-cash write-down of other well equipment; and non-cash equity-based compensation expense. Corporate general and administrative expense includes certain shared costs such as finance, accounting, tax, human resources, information technology and legal costs that are not directly attributable to each operating segment. A portion of these expenses are allocated based on the percentage of employees dedicated to each operating segment. The remaining expenses are included in the reconciliation of reportable segment Adjusted EBITDA to consolidated pre-tax net income (loss) as an unallocated corporate general and administrative expense. Segment accounting policies are the same as those described in Note 2 – Summary of Significant Accounting Policies included in the accompanying Notes to Consolidated Financial Statements in the 2023 Annual Report. The Company’s CODM does not review assets by segment as part of the financial information provided and therefore, no asset information is provided in the table below. The following table presents selected segment information for the periods indicated (in thousands):
(1) The CCS Segment is included in the “All Other” category. The CCS Segment was an emerging business in the start-up phase of operations and the business did not generate any revenues. The CCS Segment’s business activities were conducted through both wholly owned subsidiaries and equity method investments with industry partners. CCS equity method investments was a business strategy that enabled us to achieve favorable economies of scale relative to the level of investment and business risk assumed. Reconciliations The following table presents the reconciliation of Adjusted EBITDA to the Company’s consolidated totals (in thousands):
(1) For the three months ended September 30, 2024, transaction expenses include $4.7 million in severance expense related to the departure of the Company’s former President and Chief Executive Officer as discussed in Note 9 — Employee Benefits Plans and Share-Based Compensation. For the nine months ended September 30, 2024, transaction expenses include $38.8 million in costs related to the QuarterNorth Acquisition, inclusive of $22.3 million in severance expense, and $8.4 million in costs related to the TLCS Divestiture, inclusive of a net $2.9 million in severance expense. For the three and nine months ended September 30, 2023, transaction expenses included $1.5 million and $39.4 million, respectively, in costs related to the EnVen Acquisition, inclusive of $0.9 million and $24.9 million, respectively, in severance expense. See further discussion in Note 2 — Acquisitions and Divestitures and Note 9 — Employee Benefits Plans and Share-Based Compensation. Other income (expense) includes other miscellaneous income and expenses that the Company does not view as a meaningful indicator of its operating performance. For the three and nine months ended September 30, 2024, it includes a gain of $13.5 million and $100.4 million related to the TLCS Divestiture, respectively. See further discussion in Note 2 — Acquisitions and Divestitures. Additionally, for the three and nine months ended September 30, 2024, it includes a gain of $7.0 million and $9.5 million, respectively, related to an increase in fair value of a service credit acquired via the QuarterNorth Acquisition. For the three and nine months ended September 30, 2023, the amount includes a $66.2 million gain related to the deconsolidation of Talos Mexico. For the nine months ended September 30, 2023, the amount includes a gain on the funding of the capital carry of the Company’s investment in Bayou Bend by Chevron U.S.A. Inc. (“Chevron”) of $8.6 million. (2) Estimated decommissioning obligations were a result of working interest partners or counterparties of divestiture transactions that were unable to perform the required abandonment obligations due to bankruptcy or insolvency. See Note 13 — Commitments and Contingencies for additional information on decommissioning obligations. (3) The adjustments for the derivative fair value (gains) losses and net cash receipts (payments) on settled commodity derivative instruments have the effect of adjusting net loss for changes in the fair value of derivative instruments, which are recognized at the end of each accounting period because we do not designate commodity derivative instruments as accounting hedges. This results in reflecting commodity derivative gains and losses within Adjusted EBITDA on a realized basis during the period the derivatives settled. The following table presents the reconciliation of Segment Expenditures to the Company’s consolidated totals (in thousands):
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