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Talos Sells Stake in GoM Block to BP, Buys ExxonMobil Blocks

Zacks Equity Research

Talos Energy Inc. TALO recently struck two separate upstream deals with BP p.l.c. BP and Exxon Mobil Corporation XOM. These deals appertain to U.S. Gulf of Mexico (GoM) exploration opportunities. The deals are targeted to expand Talos Energy’s footprint in offshore prospects, while reducing associated costs. However, the financial terms of the deals are yet to be disclosed.

BP Deal Details

Talos Energy divested a 75% stake in the Puma West prospect to BP, while retaining the remaining 25%. BP is now expected to drill the initial well at the site with Seadrill West Auriga ultra-deepwater drillship before October-end. The prospect has many similarities with BP’s nearby Mad Dog field. While the Mad Dog has produced more than 230 million barrels of oil equivalent (BOE) since the commencement of operation, Mad Dog Phase 2 development is currently under construction. The second phase at the site is expected to add 140,000 barrels of oil per day of output. Notably, BP is the top producer in the U.S. GoM.

The latest move, which provides tie-back opportunities, enables Talos Energy to reduce expenses at the Green Canyon Block 821. Furthermore, BP’s experience in the GOM is expected to maximize the efficiency of operations at the Puma West prospect. Talos Energy expects the project, which was not even scheduled in its original drilling program of this year, to commence operations within the next month.

Acquisition of ExxonMobil’s Prospect

Talos Energy acquired 100% stake in the Hershey prospect from the largest publicly-traded energy company. This made it the operator of Green Canyon Blocks 326, 327, 370 and 371. Talos Energy estimates total resources in the acquired 23,000 gross acres in the band of 100-300 million BOE. The prospect has tie-back options with the company’s Green Canyon facilities. Notably, the distance of the prospect from its Phoenix complex is not more than 10 miles.

Markedly, in early-2019, Talos Energy bought ExxonMobil’s Antrim prospect in the prolific GoM. The recent deal, without any well commitment, further boosts Talos Energy’s footprint in the oil-weighted region, located south of New Orleans. The move also favors ExxonMobil’s ongoing $15-billion divestment program, as the company is focusing on prolific upstream prospects globally, given a number of major projects coming online over the next few years.

Price Performance

Talos Energy has gained 40.1% year to date against the 13.2% decline of the industry it belongs to.

 

 

Zacks Rank & Stock to Consider

Currently, Talos Energy has a Zacks Rank #3 (Hold). A better-ranked player in the energy space is National Oilwell Varco, Inc. NOV, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

National Oilwell’s 2019 earnings per share are expected to rise 137.5% year over year.

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