Talos Lowers Projected Capital Spend by $170MM
Talos Energy Inc. has tweaked its 2020 financial guidance to include $170 million in projected capital spend. The reductions are incremental to the $170 million already identified. With these changes, Talos expects to generate free cash flow in 2020, after capital expenditures and interest expense, in the mid-$20's per barrel average WTI prices for the balance of the year.
Production sales volumes for 2020 are expected to be 23.3 – 24.6 million barrels of oil equivalent which represents an average daily production of 63.7 – 67.1 thousand barrels of oil equivalent per day, or about a 3.1 MBoe/d (less than 5%) reduction from the original 2020 full-year guidance.
As of March 23, Talos had 11.9 million barrels of oil hedged for 2020, representing 70% of the mid-point of guided oil volumes, at a weighted average WTI price of $51.53 per barrel.
"I believe Talos is well positioned to successfully navigate the current environment,” President and Chief Executive Officer Timothy S. Duncan said in a written statement. “We have taken immediate and decisive steps to defer certain investments and this updated guidance delivers continued free cash flow generation in a volatile commodity market environment while maintaining abundant collateral value and access to substantial liquidity. We expect to continue to invest in our infrastructure-led short-cycled developments while staying focused on moving Zama forward towards a final investment decision. We believe our 2020 updated capital program will be self-funded in the mid-$20's per barrel of WTI."
Duncan added, "Talos's updated 2020 capital expenditures guidance represents approximately a 34% reduction from the 2019 investments in the same asset base, pro forma for the acquisition we closed in February, while maintaining our focus on safety, meeting our P&A obligations and continuing investments in asset management projects. The projects we will retain for the year are those previously committed to, and those that will bolster the stability of our asset base by lowering our lifting costs structure on a per barrel basis."
"We entered this crisis with a track record of consistently generating free cash flow, approximately $600 million of liquidity and low leverage, so I firmly believe Talos will not only weather this storm, but will be positioned to be nimble and opportunistic when the market has recovered."
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