EX-99.1 2 d734228dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

EXCERPTS FROM THE PRELIMINARY OFFERING MEMORANDUM,

DATED JANUARY 23, 2024

As used in this Exhibit 99.1, the terms “we,” “us” and “our” refer to Talos Energy Inc. and its consolidated subsidiaries, and not to QuarterNorth and its subsidiaries, unless context suggests otherwise. The term “QuarterNorth” refers to QuarterNorth Energy Inc., and the term “QuarterNorth Acquisition” refers to the transactions contemplated by the definitive agreement that we entered into on January 13, 2024 to acquire QuarterNorth. The term “EnVen Acquisition” refers to the business combination whereby, among other things, EnVen Energy Corporation merged with and into Talos Production Inc., with Talos Production Inc. surviving the merger.

Our Competitive Strengths

Oil-Weighted, Predominantly Operated Production Base. Our reserves and production are primarily oil-weighted, and we operate approximately 75% of our production for the quarter ended September 30, 2023. For the quarter ended September 30, 2023, our production was approximately 76% oil.

Non-GAAP Financial Measures

 

QuarterNorth Historical (in thousands)    Three Months Ended
September 30, 2023		  

Net income (loss)

    $ 29,968  

Interest expense

      3,574  

Income tax expense (benefit)

      7,430  

Depreciation, depletion and amortization

      56,343  

Accretion expense

      127  
  

 

 

  

EBITDA

      97,442  

Write-down of oil and natural gas properties

      —    

Transaction and other (income) expense(1)

      (2,774 ) 

Decommissioning obligations

      —    

Derivative fair value (gain) loss(2)

      67,347  

Net cash received (paid) on settled derivative instruments(2)

      (8,896 ) 

(Gain) loss on debt extinguishment

      —    

Non-cash write-down of other well equipment inventory

      —    

Non-cash equity-based compensation expense

      —    
  

 

 

  

Adjusted EBITDA

    $ 153,119  
  

 

 

  

 

(1)

Other income (expense) includes restructuring expenses, cost saving initiatives and other miscellaneous income and expenses that we do not view as a meaningful indicator of our operating performance. For the three months ended September 30, 2023, transaction expenses include $3.3 million in costs related to the QuarterNorth Acquisition incurred by QuarterNorth.

(2)

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 an unrealized basis during the period the derivatives settled.

Summary Reserve and Operating Data

The following tables summarize our historical and pro forma production and operating data for the periods ended on the dates indicated below.

 

     Historical      Pro Forma(1)  
     Year Ended
December 31,		     Nine Months Ended
September 30,		      Year
Ended
December 31,		      Nine Months
Ended
September 30,		  
   2022      2021      2020     2023     2022      2022      2023  

Production Volumes:

                   

Oil (MBbl)

      14,561        16,159        13,665       13,358       11,020        29,169        19,870  

Natural gas (MMcf)

      32,215        32,795        28,652       19,769       24,746        49,825        29,237  

NGLs (MBbl)

      1,793        1,875        1,559       1,318       1,372        2,787        1,872  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Total production volume (MBoe)

      21,723        23,500        19,999       17,971       16,516        40,261        26,615  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Average Net Daily Production Volumes:

                   

Oil (MBbl/d)

      39.9        44.3        37.3       48.9       40.4        79.9        72.8  

Natural gas (MMcf/d)

      88.3        89.8        78.3       72.4       90.6        136.5        107.1  

NGLs (MBbl/d)

      4.9        5.1        4.3       4.8       5.0        7.6        6.9  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Total average net daily (MBoe/d)

      59.5        64.4        54.7       65.8       60.5        110.3        97.5  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Average Sales Price (excluding commodity derivatives)(2):

                   

Oil ($/Bbl)

      93.75        65.86        37.09       74.49       97.89        93.15        75.08  

Natural gas ($/Mcf)

      7.06        3.98        1.87       2.70       7.34        7.18        2.75  

NGLs ($/Bbl)

      33.20        26.54        9.90       18.56       35.88        35.89        20.71  

Average realized price ($/Boe)

      76.05        52.96        28.80       59.70       79.30        78.86        60.53  

Revenues (in thousands):

                   

Oil

    $ 1,365,148      $ 1,064,161      $ 506,788     $ 995,081     $ 1,078,800      $ 2,717,174      $ 1,491,839  

Natural gas

      227,306        130,616        53,714       53,383       181,747        357,700        80,304  

NGLs

      59,526        49,763        15,434       24,463       49,232        100,018        38,764  

Other

      —          —          —         —         —          22,787        18,005  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Total revenue

    $ 1,651,980      $ 1,244,540      $ 575,936     $ 1,072,927     $ 1,309,779      $ 3,197,679      $ 1,628,912  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Operating Expenses (in thousands):

                   

Lease operating expense

    $ 308,092      $ 283,601      $ 246,564     $ 286,075     $ 229,156        566,920      $ 426,360  

Production taxes

      3,488        3,363        1,054       1,813       2,670        3,488        1,813  

Depreciation, depletion and amortization

      414,630        395,994        364,346       480,476       295,174        917,825        656,339  

Write-down of oil and natural gas properties

      —          18,123        267,916       —         —          —          —    

Accretion expense

      55,995        58,129        49,741       63,430       42,400        95,470        74,732  

General and administrative expense

      99,754        78,677        79,175       121,257       70,742        221,676        190,732  

Other operating (income) expense

      33,902        32,037        (11,550 )      (55,172 )      12,142        40,728        (43,744 ) 
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

Total operating expenses

    $ 915,861      $ 869,924      $ 997,246     $ 897,879     $ 652,284      $ 1,846,107      $ 1,306,232  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

  

 

(1)

The summary pro forma production and operating data gives effect to the EnVen Acquisition and the QuarterNorth Acquisition as if they had been completed on January 1, 2022.

(2)

Average realized prices are net of certain gathering, transportation, quality differentials and other costs.

QuarterNorth Historical    Three Months Ended
September 30, 2023		  

Production Volumes:

   

Oil (MBbl)

      2,213  

Natural gas (MMcf)

      3,344  

NGLs (MBbl)

      194  
  

 

 

  

Total production volume (MBoe)

      2,874  
  

 

 

  

Average Net Daily Production Volumes:

   

Oil (MBbl/d)

      23.1  

Natural gas (MMcf/d)

      36.3  

NGLs (MBbl/d)

      2.1  
  

 

 

  

Total average net daily (MBoe/d)

      31.2  
  

 

 

  

Average Sales Price (excluding commodity derivatives)(1):

   

Oil ($/Bbl)

      83.86  

Natural gas ($/Mcf)

      2.95  

NGLs ($/Bbl)

      26.46  

Average realized price ($/Boe)

      67.17  

Revenues (in thousands):

   

Oil

    $ 178,041  

Natural gas

      9,859  

NGLs

      5,134  

Turkey revenue

      63,179  

Other

      7,815  
  

 

 

  

Total revenue

    $ 264,028  
  

 

 

  

Operating Expenses (in thousands):

   

Lease operating expense

    $ 38,750  

Decommissioning cost of goods sold

      40,544  

Depreciation, depletion and amortization

      56,343  

Accretion expense

      127  

General and administrative expense

      11,810  

Insurance expense

      5,585  

Other operating (income) expense

      8,593  
  

 

 

  

Total operating expenses

    $ 161,752  
  

 

 

  

 

(1)

Average realized prices are net of certain gathering, transportation, quality differentials and other costs.

Capitalization

As of September 30, 2023 and December 31, 2023, QuarterNorth had long-term debt of $185.0 million and $85.0 million, respectively, and cash on hand of $387.7 million and $394.0 million, respectively.