Talos Energy Inc. TALO has released operational and capital budget guidance for 2019.
In 2019, Talos estimates total production sales volumes in the range of 19.5-20.4 million barrels of oil equivalent (MMBoe) or an average daily production of 53-56 thousand barrels of oil equivalent per day (Mboe/d). The projected figure is higher than the company’s 2018 estimates of 49-53 MBoe/d. The 2019 production guidance includes the extended shut-in of the Phoenix complex due to the scheduled HP-1 dry dock.
Capital expenditures for 2019 are expected in the range of $465-$485 million and are likely to be funded through cash flow from operations.
During 2019, the company expects to work on four U.S. Gulf of Mexico deepwater projects. All these projects utilize nearby infrastructure, including the hook-up of the recently successful Tornado 3 well. Additionally, drilling and the potential hook-up of three additional impactful projects in the Green Canyon core area are scheduled for 2019. The well is anticipated to be commissioned by early second-quarter 2019, with an estimated gross production rate of 10-15 MBoe/d. Talos, the operator of Green Canyon block has a working interest of 65%, while Kosmos Energy owns the remaining 35%.
The Boris 3 well, to be drilled by Noble Don Taylor rig, is projected to be commissioned in the second quarter with an expected gross production rate of 3-5 MBoe/d. Talos owns 100% working interest as the operator.
The company-operated Zama oil discovery will be appraised in 2019 and four additional exploration tests will be conducted in offshore Mexico. Talos will focus on low-risk development and exploitation of four US Gulf of Mexico shallow water drilling projects with expected short turnaround from drilling to first oil.
The company anticipates lease operating expenses in the range of $195-$205 million, while general and administrative expenses are projected in the band of $60-$65 million. The company expects to lower its plug & abandonment cost to about half of 2018 guided levels.
Talos had employed the Ensco 75 rig throughout 2018, which is intended to continue working through 2019. The rig will operate on a series of lower risk projects that tie into operated infrastructure. Currently, the rig is drilling the East Cameron 345/359 project, which is estimated to reach a total depth of about 13,150 feet by the end of the first quarter of 2019. The well is being drilled from the Talos operated East Cameron 345 platform. If successful, the well will generate near-term production growth.
On Jan 11, 2019, Talos purchased about 9.6% non-operated working interest in the Gunflint producing asset for $29.6 million from Samson Offshore Mapleleaf, LLC. Located in the company's Mississippi Canyon core area, Gunflint had an average production of about 1.5-1.8 MBoe/d for October and November of 2018. As of Nov 30, 2018, Gunflint’s asset had proved reserves of 2.2 MMBoe (about 80% proved developed).
Talos has hedged about 9.1 million barrel (MMBbl) of 2019 oil volumes at an average price of about $55.40/bbl. All hedged oil volumes are fixed swaps. Natural gas volumes of about 14.9 billion cubic feet (Bcf) have been hedged at an average price of about $2.91/Mcf. These volumes comprise about 11.8 Bcf of fixed swaps at an average price of $2.88/Mcf and about 3.1 Bcf of collars at an average floor price of $3.00/Mcf and an average ceiling price of $3.96/Mcf.
Zacks Rank & Stocks to Consider
Talos currently carries a Zacks Rank #5 (Strong Sell).
A few better-ranked players in the energy space are NextEra Energy Partners L.P. NEP, Shell Midstream Partners, L.P SHLX and Unit Corporation UNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Based in Juno Beach, Florida, NextEra Energy Partners was formed by NextEra Energy, Inc in 2014 to acquire, manage and own contracted clean energy projects with stable long-term cash flows. The partnership delivered average positive earnings surprise of 99.1% in the last four quarters.
Headquartered in Houston, TX, Shell Midstream Partners owns, operates, develops and acquires pipelines as well as other midstream assets. The company is expected to witness year-over-year earnings growth of 18.7% in 2018.
Unit Corp is a diversified energy company. The company generated average positive surprise of 21.2% in the trailing four quarters.
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