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Talos Energy (TALO) Releases Update on Zama Appraisal Program

Zacks Equity Research
Baker Hughes' (BHGE) better-than-expected earnings in first-quarter 2019 are backed by higher order volume in the Subsea Production Systems business.
Baker Hughes' (BHGE) better-than-expected earnings in first-quarter 2019 are backed by higher order volume in the Subsea Production Systems business.

Talos Energy Inc. TALO released an additional update on the Zama appraisal program in Block 7, located in the offshore region of Mexico's prolific Sureste Basin.

Talos Energy is the operator of the block along with other partners that include Sierra Oil & Gas — a company of DEA Deutsche Erdoel AG — and Premier Oil Plc.

The consortium had proposed to appraise three penetrations in the block to better identify the resource potential of the Zama discovery. The Zama-2 ST1 appraisal well represents the second of three appraisals. The well is built on the success of the first appraisal penetration (Zama-2),

The aim of the Zama-2 ST1 well was to analyze the northern limits of the reservoir, purchase a whole core to gather comprehensive rock properties and conduct well test in several perforated intervals. The Zama-2 ST1 well appraisal, drilled 589 feet (180 meters) updip of the Zama-2 well and located about 1.4 miles (2.1 kilometers) north of Zama-1 exploration well, generated outstanding results.

The coring operations have enabled the consortium to collect vital rock samples that projected exceptional rock properties with similarity to world-class reservoirs in the Gulf of Mexico. The consortium’s expectations of outstanding productivity were met when the production rate from two zones totaled 7,900 barrels of oil equivalent per day (Boe/d) in a very simple rate-restricted test.

Also, the tests established the wells’ geologic model of well-connected reservoirs, which will facilitate high ultimate oil recovery for the consortium. Considering water depth of about 550 feet (168 meters), Talos Energy believes that a combination of fixed platforms, dry trees and short-cycle development wells will capitalize on both capital efficiency and optionality. This will relate to how many total wells and completions per well will be essential to maximize recovery.

Also, the company expects to attain peak production rate in the range of 150,000-175,000 Boe/d is attainable on the confirmed deliverability of the perforated intervals.

The well test operation was concluded about five days ahead of schedule and more than 30% below budget.

The Zama-3 appraisal well is intended to be drilled in the next stage of the appraisal program. It will be located to the south of the original Zama-1 exploration well. The appraisal will enable the consortium to ascertain in the outlining of the reservoir continuity and quality of the field. The appraisal operation comprises the collection of an additional core to better comprehend reservoir geology.

Zacks Rank & Key Picks

Currently, Talos Energy carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are Antero Resources Corporation AR, CrossAmerica Partners L.P. CAPL and SEACOR Holdings, Inc CKH. While Antero Resources and CrossAmerica Partners sport a Zacks Rank #1 (Strong Buy), SEACOR Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources is an independent explorer, primarily engaged in the acquisition and development of natural gas, natural gas liquids as well as oil resources in the Appalachian Basin. The company’s earnings beat the Zacks Consensus Estimate in two of the last four quarters.

CrossAmerica Partners is involved in the wholesale distribution of motor fuels, comprising gasoline and diesel fuel. The partnership delivered an average positive earnings surprise of 452.2% in the last four quarters.

SEACOR Holdings is a diversified holding company, mainly focused on domestic and international transportation, logistics as well as risk management consultancy. The bottom line for 2019 is expected to inch up 1.7% year over year. The company delivered an average positive earnings surprise of 20.5% in the trailing four quarters.

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