Talos Energy Q1 2026 Earnings Call - Record Free Cash Flow and Disciplined Capital Returns

Operator: Good morning, ladies and gentlemen, and welcome to the Talos Energy first quarter 2026 earnings call conference. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Wednesday, May 6, 2026. I would now like to turn the conference over to Clay Jeansonne. Please go ahead.

Clay Jeansonne, Investor Relations, Talos Energy: Thank you, operator. Good morning, everyone, and welcome to our first quarter 2026 earnings conference call. Joining me today to discuss our results are Paul Goodfellow, President and Chief Executive Officer, and Zach Daly, Executive Vice President and Chief Financial Officer. For our prepared remarks, please refer to our first quarter 2026 earnings presentation that is available on the Talos website under the Investor Relations section for a more detailed look at our results and operations. Before we start, I’d like to remind you that our remarks will include forward-looking statements subject to various cautionary statements identified in our presentation and earnings release. Actual results may differ materially from those contemplated by the company. Factors that could cause these results to differ materially are set forth in yesterday’s press release and our Form 10-K for the period ending December 31st, 2025, filed with the SEC.

Forward-looking statements are based on assumptions as of today. We undertake no obligations to update these statements as a result of new information or future events. During this call, we may present GAAP and non-GAAP financial measures. A reconciliation of certain non-GAAP to GAAP measures is included in yesterday’s press release, which was furnished with our Form 8-K filed with the SEC and is available on our website. Now I’d like to turn the call over to Paul.

Clay Jeansonne, Investor Relations, Talos Energy0: Thanks, Kyle. Good morning to everyone joining us on the call today. To start, I want to thank our employees for their hard work, dedication, and unwavering commitment to safety and environmental stewardship in delivering the results Zach and I have the privilege of discussing today, especially during these dynamic times. Before turning to our results, I’d like to briefly provide some context on the current energy market. Recent geopolitical tensions have reminded global markets of a couple of fundamental truths. Energy security is not guaranteed, and reliable and affordable hydrocarbons remain essential to meeting the world’s energy needs. We believe Talos Energy, as part of the vibrant U.S. energy industry, plays a clear and increasingly important role in delivering reliable Gulf of Mexico oil that the world requires.

Our strategy is designed to build Talos into a leading pure-play offshore E&P company by delivering high-margin production through disciplined execution, a resilient cost structure, and building a long-lived portfolio that creates durable value across the cycle. Today, I’d like to focus on 3 key takeaways from our results, where outstanding execution across the business drove another quarter of strong financial outcomes, generating adjusted free cash flow of $113 million on production of approximately 89,000 barrels oil equivalent per day. First, our disciplined operational performance remains the foundation of our financial results. During the first quarter, we delivered oil production of approximately 64,000 barrels per day and total production of approximately 89,000 barrels oil equivalent per day, which just exceeded first quarter guidance. This outperformance was driven by strong new well productivity at Cardona, continued solid base performance, and high facility uptime.

I’m extremely proud of our team and want to recognize their tireless focus on operational excellence and identifying opportunities to maximize value across our asset base. This mindset is core to pillar one of our strategy and ultimately leads into pillar two by driving production and profitability. My second key takeaway is that execution is off to a strong start in what is an active drilling and completion year for Talos. In addition to efficient execution and strong performance at Cardona, we drilled and completed the CPN well in quarter one with first production on track for the third quarter. Execution at CPN was best in class, highlighted by the fact that the well was completed with zero completion-related non-productive time, an outstanding achievement and a testament to the high-performance team here at Talos.

The plan for remediation work to begin on the Genovesa well is on track for quarter 2, with a return to production mid-year, slightly ahead of schedule. Lastly, on the execution front, drilling is underway at the Monument project operated by Beacon Offshore, with first oil on track by late 2026. Our relentless focus on improving the business every day has strengthened our position as a low-cost E&P operator in the Gulf of Mexico, while also delivering top-decile EBITDA margins across the sector. Over the last 3 years, as industry cost structures in the Gulf of Mexico have increased, Talos’ proactive cost management and production growth have resulted in a reduction in unit operating costs. In fact, for 2025, which is the most recent available full-year data set, our operating costs were approximately 30% lower on average than the offshore peer group.

Our advantage cost structure, combined with our oil-weighted production, drives top-decile EBITDA margins in the E&P sector. My third and final key takeaway is that we continued this trend of low costs and high margins into the first quarter. Total company lease operating expenses were approximately $16 per barrel of oil equivalent in Q1, which was in line with our 2025 average. It’s also been an impressive start to the year for our Optimal Performance Plan, with greater than 40% of the 2026 target already achieved. These results are broad-based with free cash flow enhancements driven by operating cost reductions, margin improvement, and capital efficiency, which spans operations, development, and P&A activities. We expect to build on the outstanding first quarter performance and carry that momentum forward into the second quarter. We expect to spud the Daenerys appraisal well later the second quarter.

The primary objectives are to test the northern portion of the prospect and further evaluate reservoir and fluid properties. The well has been designed to penetrate multiple prospective intervals with optionality to accommodate future sidetracks, enabling further appraisal and development. We are ready to start execution as soon as the rig returns from the current operator’s well. We expect to have the well drilled and evaluated by the end of the year. Exploration is a core element of our strategy falling under pillar 3, building a long-lived scale portfolio that supports sustainable growth. To deepen our exploration inventory for the future, we’ve been proactive with recent seismic investments, giving Talos the most advanced reprocessed data across our core areas. This approach to leveraging modern technology enabled a successful December 2025 Lease Sale, with all 11 leases now awarded.

The 8 identified prospects among those leases, several of which span multiple blocks, represent more than 300 million barrels of gross and risk resource potential across amplitude-supported Miocene and Wilcox opportunities. While the work is underway and is still early, our objective is to advance these prospects towards drill status, allowing them to compete for capital in 2027. For me, the bottom line is simple. A strong execution quarter delivered solid financial outcomes. With that, I’ll turn it over to Zach to walk through our first quarter financial results along with the full year and second quarter guidance.

Clay Jeansonne, Investor Relations, Talos Energy2: Thanks, Paul. I’ll focus my remarks this morning on our first quarter financial performance, which was underpinned by the strong operational execution Paul just discussed and our unchanged disciplined capital allocation framework. I’ll also touch on our latest hedging activity before wrapping up with guidance and then opening it up for Q&A. Starting with the quarter, we invested just under $120 million of exploration and development capital and delivered oil production at the high end of our guidance range, with total oil equivalent production exceeding guidance. This strong execution across the business translated into $293 million of adjusted EBITDA and $113 million of adjusted free cash flow.

Importantly, these results were achieved at a low reinvestment rate of approximately 41%, reflecting the capital efficiency of our development program and our ability to convert consistent operating performance into strong financial outcomes. While we expect the macro and commodity price environment to remain volatile, Talos has the financial strength and flexibility to execute on our strategic priorities across a range of commodity price scenarios. Our 2026 plan features development projects with breakevens in the 30s and 40s, with a corporate free cash flow breakeven in the low $50 WTI range. Although oil prices have moved higher since the Iran war began, our capital allocation priorities and our 2026 budget remain unchanged. We will continue to allocate capital in a disciplined, balanced, and focused manner, guided by the framework that underpins execution across all three of our strategic pillars.

This consistency is especially important during periods of volatility, we believe adherence to our capital allocation framework positions Talos to deliver strong financial outcomes and long-term value creation through the cycle. As a reminder, our capital allocation framework calls for returning up to 50% of annual free cash flow to shareholders, the first quarter represented another quarter of consistent execution on this front. We returned $38 million or 34% of adjusted free cash flow to shareholders through share repurchases. Since announcing our return of capital framework in the second quarter of 2025, Talos has returned approximately $135 million to shareholders through repurchases, resulting in an approximately 7% reduction in our outstanding share count.

Turning to the balance sheet, our liquidity remains strong and leverage is low, resulting in financial strength that underpins our ability to execute across all three of our strategic pillars. During the first quarter, cash on hand increased while net debt declined sequentially, further enhancing our financial position. In addition to approximately $1 billion of liquidity, we have no near-term debt maturities and have recently extended our credit facility, which now matures in 2030. Together, our balance sheet strength provides flexibility to invest in the business through the cycle, return capital to shareholders, and advance both our development and exploration priorities while maintaining financial discipline. Now let me share a few thoughts on hedging and provide an update on our recent activity. The end of the first quarter was marked by elevated oil price volatility driven by geopolitical developments and broader macroeconomic uncertainty.

In that environment, we remain disciplined and selectively opportunistic, acting consistently within our established hedging framework to support free cash flow while preserving upside. We added some 2026 oil hedges at the beginning of the Iran war, our primary focus during the quarter was to begin layering in required oil hedges for early 2027, a time period in which Talos was unhedged before the war began. These initial positions were added to establish protection around future free cash flow, maintain exposure to additional upside, and satisfy credit facility requirements. We view this early positioning in 2027 as prudent and well-timed, given the current level of market volatility and uncertainty in longer-dated oil prices. It’s also worth highlighting that approximately two-thirds of our oil production is sour and that we benefit from a balanced oil marketing portfolio with access to multiple physical crude pricing benchmarks.

Beginning with April pricing, we saw strength in a number of Gulf Coast sour grades relative to historical levels, which all else equal, should support near-term price realizations. Overall, our hedging activity during the quarter reflects a measured and steady approach using periods of volatility to strengthen cash flow resilience and reinforce our ability to execute consistently across the cycle. For the forward outlook, all of our full year 2026 operational and financial guidance ranges we released in late February remain unchanged. For the second quarter, we expect oil production to be in the range of 63,000-67,000 barrels of oil per day and total production to be in the range of 88,000-92,000 barrels of oil equivalent per day. Additional details describing our guidance can be found in our presentation, which is available on our website.

In closing, the business is off to a very solid start to the year. With a clearly defined strategy, an advantaged cost structure, and top decile margins, we have the financial strength and flexibility to execute on our strategic priorities while remaining anchored to our disciplined capital allocation framework. With that, we will open the line for Q&A.

Operator: Thank you. Your first question comes from Greta Drefke with Goldman Sachs. Please go ahead.

Greta Drefke, Analyst, Goldman Sachs: Good morning, all. Thank you for taking my questions. I was wondering if you could just update us with your latest thoughts around how different uses of free cash flow compete across holding cash on the balance sheet, leaning into share repurchases like you did this past quarter, or potential M&A here.

Clay Jeansonne, Investor Relations, Talos Energy0: Thanks, Greta. Good morning. Look, I’d say nothing changes. We have a very clear sort of framework in terms of how we think about capital allocation that we’ve been working within over the last year, where we’ve seen sort of prices rise and decline during that timeframe. That really is sort of focused on, you know, investing in the business, making sure we remain sort of or keep the strength of the balance sheet. Absolutely returning, you know, cash to shareholders, but also giving ourselves the opportunity to sort of invest in the future of the business to make sure that we have, you know, length in the portfolio. When we’ve said that that investment needs to actually make Talos better and not bigger, so it’s not investment for investment’s sake.

Actually, in the same way as you see us investing in sort of projects in 2026 and going into 2027 that have low breakevens and high returns and can deal with the volatility that we see in the macro, that’s how we sort of look for that sort of fourth component as well. We’ll balance that as we go through 2026 and 2027 with no change to the overall framework in which we are thinking and operating and planning.

Greta Drefke, Analyst, Goldman Sachs: Great. Thank you. Just for my second question, I was just wondering if just on the longer term outlook, and if we are in a higher for longer oil price environment, albeit very volatile. As you’re thinking about organic growth opportunities like you mentioned, is Talos considering leaning into any incremental organic growth projects in 2027 or 2028 to have potentially turned economic, given where the oil forward curve is even today relative to a few months ago?

Clay Jeansonne, Investor Relations, Talos Energy0: I’d just probably reiterate what we sort of spoken about before, which is we actually look for projects that have low breakevens, and Zach sort of mentioned that in the comments. We’ll look for projects that have resilience through the cycle. Now, as we mentioned, I think in the last quarter’s call, we were very successful in the first lease sale that was held at the end of 2025. All of those leases, the 11 leases, have now been awarded to us, and we are working those diligently to allow some of those, the majority of those, to compete for capital in 2027. That’s just sort of normal course. It’s not in reaction to where the price is today.

If you look at the shape of the curve, you know, it’s still incredibly backwardated. Yes, the, you know, the long end is sort of slightly higher than where it was pre the Iran war, but it is nothing that would make us sort of fundamentally change our view on how we invest in projects and the thresholds that we have for those projects to be considered to compete for capital, Greta.

Greta Drefke, Analyst, Goldman Sachs: Thank you very much.

Clay Jeansonne, Investor Relations, Talos Energy0: Thank you.

Operator: Thank you. The next question comes from Phillip Jungwirth with BMO. Please go ahead.

Speaker 0: Hey, guys. This is Ajay Bakshani on for Phil. Thanks for taking our question. As we think about the upcoming appraisal well at Daenerys, you do a good job of listing out the objectives, but what are some of the key risks here? Assuming you accomplish these objectives, how does this inform your resource potential estimates, or is further appraisal needed to really dial this in?

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah, thank you. I mean, look, you know, the reason that we’re drilling the appraisal well at Daenerys is to try and de-risk the range of uncertainties that we have. You know, the sort of clearest risk as there is with any exploration or appraisal well is, are the main objectives that we’re looking for present? You know, do we see the reservoir characteristics that we’re looking for? Do we see the fluid characteristics that we’re looking for? How does that all then get folded into the overall resource size and estimate and quality that can then sort of inform the next steps? Now, clearly, there are always, you know, mechanical risks when you’re drilling deep subsalt wells such as this.

You know, we’re incredibly fortunate at Talos to have, I think, one of the best drilling and completion teams in the industry. I think they’ve sort of demonstrated that time and time again with what they’ve done on the first Daenerys well, on Sunspear, on Cardona, on CPN. We plan, you know, accordingly. We’re really thinking about the risks and how do we mitigate those. Really outside the mechanical risks of the well, then it really is looking at de-risking the reservoir and fluid properties and characteristics. From that point, we’ll then make the determination of what further appraisal, if any, is needed, dependent on where those results come in, which as we’ve mentioned, we expect to be spudding that well once we get the rig back from the current operator in second quarter.

We saw results, all being well available before the end of the year that we’ll clearly be able to update you and colleagues on then.

Speaker 0: Very helpful. Thank you. For my next question, can you just talk about what you’ve been seeing on crude differentials through 2Q so far as there’s a strong global bid for waterborne medium sour barrels? Also just on that, what’s the typical breakdown as far as barrels and key price ups for Talos?

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah. Let me pass that over to Zach.

Clay Jeansonne, Investor Relations, Talos Energy2: Yeah. Ajay, this is Zach. I appreciate the question. The diffs that we’ve experienced in April and May have been positive to HLS. About two-thirds of our crude is sour and with a little bit higher sulfur content than a sweet barrel. They price at Mars, Poseidon and Southern Green Canyon. We have seen an uplift in those sour diffs in the first part of the second quarter. All else equal, that should help realizations in Q2. Yep. Hope that helps.

Speaker 0: Thanks, guys. Very helpful and congrats on the good quarter.

Clay Jeansonne, Investor Relations, Talos Energy0: Thank you.

Clay Jeansonne, Investor Relations, Talos Energy2: Thank you.

Operator: Thank you. The next question comes from Michael Furrow with Pickering Energy Partners. Please go ahead.

Michael Furrow, Analyst, Pickering Energy Partners: Hey, good morning. Thanks for taking our questions. Look, this might not be the best morning for it, but it does seem like the oil market might be going through a structural shift that could result in a higher mid-cycle price. Under that context, how does the Talos business strategy change, if at all, in a higher pricing scenario? If it doesn’t change, what levers can you pull to capitalize on higher prices?

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah, thanks, Michael. I mean, I think, you know, it doesn’t change. You know, we have a very robust sort of strategy in terms of the 3 pillars that we’re driving against. We have a disciplined capital allocation framework in which we’ll look at how to deploy capital within that. That’s where our focus will remain. Clearly, you know, we’re laser-driven in terms of improving our business each and every day, driving continuous improvement. I think we’ve continued to see, you know, evidence and examples of that through the 1st quarter. You know, we’re equally focused in terms of the 2nd and 3rd pillars, in terms of driving production and profitability and building a longer live scale portfolio.

Whilst there’s a lot of activity going on in those spaces, I’d say there’s an equal amount of activity going on there as there is in the sort of continuous improvement space. You know, clearly, until something gets to the finish line, then difficult for us to talk about that. I think bottom line is that, you know, our strategy doesn’t change. Especially when we sort of look at, as you mentioned, sort of slight structural changes potentially through the cycle. I think if anything, it sort of reinforces the strategy that we have and the need for the capital discipline that we are driving.

Clay Jeansonne, Investor Relations, Talos Energy2: Michael, I might just add to what Paul said, you know, to your second point, how do you capitalize on higher oil prices? I mean, for us, as you know, we expect to be 73% oil in 2026, which, you know, drives those top decile margins that we’re very proud of. Similar to the prior question, strong differentials are a kind of a near-term benefit.

With the sour crude we produce.

Michael Furrow, Analyst, Pickering Energy Partners: I appreciate the context. One related area we’re trying to understand is how these oil pricings affect the offshore rig market. With the West Vela contract rolling and with the upcoming Daenerys appraisal as well as other prospects. Presumably Talos has been active in this market recently. Paul, I’d be curious to hear your views on the high-spec drillship market. Are you seeing a tightening? Do you feel that there’s enough availability? And maybe you could offer your opinion on how leading-edge day rates in the Gulf have, you know, evolved over the last 12 months.

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah, thanks. I mean, I think the trends we’re seeing, you know, are the trends that were maybe suggested 6, 9 months ago, which was some potential capacity in 2026. The market tightening in 2027. I think that is what you’re actually seeing, maybe a slight acceleration of that tightening given what’s happened in oil prices over the last 2 months. I think it’s also important to remember though, of course, as we think about deepwater projects and deepwater wells, the cycle time is much longer from sort of decision to actually having the well online. I still think for operators like ourselves, there’s a degree of sort of caution, as I’ve mentioned, in terms of making sure the projects that we do go forward with have low break-even prices.

We have been in the market for with a tender for deepwater rig activity in 2027. We’ve had a number of high-spec rigs sort of bid into that, and we’ll, you know, be making our decision in the coming sort of weeks and months as to which rig or rigs we sort of take on in 27 and beyond. You know, we are sort of looking at our needs beyond just the very near term, and starting to think maybe a little bit more sort of strategically about our deepwater rig needs.

I think it’s also important that, you know, one thing that we’ve spent a fair amount of time working on here is recognizing that we also need the ability to intervene quickly on wells should they have a problem, such as the Genovesa well that we identified at the back end of last year. So, you know, sort of leveraging technology and how can we use intervention vessel platforms to do that intervention type work versus only relying on the high-spec rigs, I think gives us another degree of flexibility as we think about the type of vessel, and therefore the sort of price of the vessel to do the work that we need to do.

In fact, you know, that’s one of the reasons why, you know, the Genovesa well is sort of on or slightly ahead of plan at the moment is because of our ability to execute that well-offered intervention vessel versus a high-spec rig. I hope that gives you some color, Michael.

Michael Furrow, Analyst, Pickering Energy Partners: No, that’s great. Thanks for your time.

Clay Jeansonne, Investor Relations, Talos Energy0: Thank you.

Operator: Thank you. The next question comes from Rezvan with KeyBanc Capital Markets. Please go ahead.

Clay Jeansonne, Investor Relations, Talos Energy1: Good morning, folks. Thank you for taking our questions. First one, maybe this is for Zach on the balance sheet. You know, Talos has one and a quarter billion of second lien notes out there. You know, the company’s in, you know, much better financial health than when those were issued. They’re trading above par and, you know, some are callable now, and I know the call stepped down in 2027. Just curious kind of where that is on your radar screen this year. Maybe for Paul, is that sort of a part of that $100 million cash flow uplift, getting those refinanced? Thanks.

Clay Jeansonne, Investor Relations, Talos Energy2: Thanks for the question, Tim. Good morning. You pretty much nailed the state of affairs on the 29s. Yeah, I mean, it’s front and center on our minds. The notes are trading as you’d expect, very well. The high-yield market is very tight, and it’s a good place to be for companies like Talos. I would say, you know, we have lots of flexibility in our balance sheet and our capital structure right now to support the strategy that we’ve laid out to the market and go out and execute the plan. I don’t want to get into too many specifics, but just suffice it to say that it’s definitely front and center and we’re in a good spot.

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah, simple answer to the second part of your question, Tim, is, you know, any sort of refinancing benefit we would get is not considered in the $100 million of additional free cash flow. That’s very much sort of centered around the operational capital supply chain efficiency world in terms of the execution of the plan today. As Zach said, the actions it will take around those bonds is very much sort of front and center in our thinking at this point in time.

Clay Jeansonne, Investor Relations, Talos Energy1: Okay. Okay. The market’s wide open, so that’s why we’re asking right now. Appreciate the details. As a follow-up also on the capital allocation theme, you know, Talos has repurchased shares for five straight quarters. It seems to be sort of a consistent part of the, you know, of your use of free cash flow. We also, you know, going into today, at least, shares pushing, you know, two-year highs. I don’t know if it’s for Paul Goodfellow or Zachary B. Dailey, but should we think of that as maybe you toggle that up or down, but you expect that to be kind of a consistent part of the program, you know, as in like a greater than zero, but you’ll be opportunistic?

Just trying to understand how you think about repurchase intensity with shares, you know, back at $16. Thanks.

Clay Jeansonne, Investor Relations, Talos Energy0: No, thanks. I mean, look, we think about it within the framework that we’ve laid out. You know, we’ve sort of said we’re going to invest in the business today. We’re going to maintain strength of the balance sheet. We’re going to, you know, look for these sort of accretive opportunities to support and build the business, and we’re going to sort of return capital to shareholders through share buybacks. It’s a balance of those four, and that is what you’ve seen us do over the last four quarters. Thank you for the recognition of that in terms of the consistency of executing against the strategy that we have. That’s how you’ll see us think about it going forward, not only in this quarter but the quarters to come.

Clay Jeansonne, Investor Relations, Talos Energy2: Yeah. Tim, Paul’s exactly right. I’ll just add on to that in Q1, you know, it was about 34% of free cash flow allocated to repurchases. Within the financial framework that we wanna stay consistent to, we do have the flexibility of up to 50%. At any one point in time, we’ll be toggling in that range. You know, as we kind of highlighted in the prepared remarks, we’ve reduced the outstanding share count by about 7% over the last, you know, 12 months since the strategy was rolled out to the street. We do wanna stay consistent, but do have flexibility within that framework.

Clay Jeansonne, Investor Relations, Talos Energy1: Thanks. Thank you. Talk ahead.

Clay Jeansonne, Investor Relations, Talos Energy2: Thanks, Tim.

Clay Jeansonne, Investor Relations, Talos Energy0: Thanks, Tim.

Operator: Thank you. The next question comes from Paul Diamond with Citigroup. Please go ahead.

Paul Diamond, Analyst, Citigroup: Thank you. Good morning, all. Thanks for taking the call. Just a quick one on Katmai Tarantula. I know that there was some recent debottlenecking there, and I guess looking at it longer term, I guess, how do you see competing for capital, like, going out beyond? You know, I know it’s flatlining through 2027, but going out beyond that.

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah. Thanks, Paul. Look, the Katmai field is doing incredibly well. The operations team there, you know, continue to focus on safe, efficient operations and really sort of maximizing the throughput, and that’s what we’ve seen as we’ve gone through the first quarter of this year into a continuation of what we were doing in 2025. I think what we’ve said is, look, there are a number of opportunities around the Katmai field, and so Katmai North, as well as some of the leases that we acquired in the last lease sale. As we sort of think about maturing those, we’ll also think about that then in the light of what further debottlenecking or expansion of that facility is actually needed.

For where we are today, we sort of see that nice plateau, and that’s where we will sit. I think the next level of expansion would be actually a looping of the pipeline that would sort of give us additional capacity. To do that, we would want to have additional volumes coming in from near field wells. Those are the wells that, you know, the team are maturing at the moment to compete for capital in 2027.

Paul Diamond, Analyst, Citigroup: Got it. Makes perfect sense. Then just a bit of housekeeping on the Optimal Performance Plan. You know, they talked about $100 million in savings, gotten about 40% there. I guess, how should we think about the vector of that plan? Is it You know, does the low-hanging fruit come first and the rest should be somewhat linear, or is it more, I guess, chunky? I guess, what’s the timeline on those, you know, on the completion there?

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah, great question. I mean, look, the plan, of course, is a continuation of what we laid out last year. We sort of set an interim target, which the teams did incredibly well to exceed last year. There’s an element of those that sort of recur from 2025 to 2026. There is some sort of lumpiness in terms of as it comes through. I would think of sort of the vector overall as, sort of, you know, between where we are now and a delta of $100 million at the end of the year. We have a reasonable degree or a high degree of confidence in sort of delivering that $100 million, and we’ll be looking to ways to exceed it. We’re not changing that sort of target at this point in time, Paul.

Clay Jeansonne, Investor Relations, Talos Energy2: Paul, I’d just add on to that, you know, the real prize here is instilling a culture of continuous improvement, which really has been a cornerstone of Talos for a long time, but really putting kind of a framework and a little bit of structure into it. That will continue. I would expect that vector of that mindset and that culture to continue well into the future.

Paul Diamond, Analyst, Citigroup: Got it. Understood. Appreciate the clarity. I’ll leave it there.

Clay Jeansonne, Investor Relations, Talos Energy0: Thanks, Paul.

Operator: Thank you. The next question comes from Michael Scialla with Stephens. Please go ahead.

Michael Scialla, Analyst, Stephens: Morning, guys. Looks like you’ll have some growth heading into 2027 with Monument coming online at the end of the year. Realize there’s a lot of variability and unpredictability with your business, can you say if you’re anticipating year-over-year growth next year, say, barring a collapse in 2027 oil prices, or is it too early to go out that far?

Clay Jeansonne, Investor Relations, Talos Energy0: Hey, Michael. In simple terms, it’s sort of too early to go out that far. There’s a lot of uncertainty in terms of, you know, the work that we have to do this year still. As you say, the Monument project has started and, you know, with our partner, Beacon Offshore, that are the operator, so far the operations are going well, but there’s a long way between now and actually getting production from those wells. There’s a range of uncertainty. Although clearly the area in which Monument sits is a sort of prolific area, if you think about the Shenandoah Hub, which is where it will tie back to.

We also have, you know, a fairly significant redevelopment program at Brutus coming through in the second half of the year that we’re sort of getting ready to start up now and other activities as well. I think, you know, we’re investing this year in good quality, low break-even projects, excuse me, that sort of give us that stability for the future, but it is too early to sort of put a, you know, sort of a number on a vector relative to where we are in 2026.

Michael Scialla, Analyst, Stephens: Understood. I want to see if you could talk more about the 11 new leases that you got in the lease sale. You said that came with or it kind of unlocks eight new prospects. Looks like some of that is in the Wilcox. That inventory’s expanded. Maybe your thoughts on the confidence in that play and what you’re seeing with those new leases.

Clay Jeansonne, Investor Relations, Talos Energy0: Yes, you’re right. We were successful in getting 11 leases where we’ve identified 8 prospects. Some of those span, you know, a number of blocks. We sort of focus them around key areas for us, so around the Katmai area, around the Daenerys location. We sort of focus them on plays where we have sort of deep skills and so some amplitude supported, some in the Wilcox, some in the Paleogene. You know, and we’re now going through the work of sort of the seismic. We’ve pre-invested in sort of seismic such that we could actually mature those prospects and have them compete for capital in 2027. You know, we are focused specifically in the Wilcox.

These are a proven part of the play where we see those opportunities, one, having sort of tieback potential, but also having an upside to be standalone and hub class. That’s really sort of some of the criteria that we look to sort of the leases through. We’ll continue to look at opportunities in future lease sales. What I think is important, though, is the pre-investment of, you know, really advanced sort of seismic that we’ve done around those key areas and key fairways where our focus is.

Michael Scialla, Analyst, Stephens: Sounds good. Thank you, Paul.

Clay Jeansonne, Investor Relations, Talos Energy0: Thank you, Michael.

Operator: Thank you. The next question comes from Nate Pendleton with Texas Capital. Please go ahead.

Nate Pendleton, Analyst, Texas Capital: Morning. Congrats on the strong results.

Clay Jeansonne, Investor Relations, Talos Energy0: Thank you, Nate.

Nate Pendleton, Analyst, Texas Capital: You just mentioned the Brutus Of course. You just mentioned the Brutus wells. Can you talk about the potential you see for similar recompletion activity across your portfolio? Maybe also how those types of opportunities compete for capital when you’re looking at potentially doing a dedicated drilling program as you look out 2027, 2028.

Clay Jeansonne, Investor Relations, Talos Energy0: Yes, I think, you know, what we’re doing at Brutus is really, you know, bread and butter for Talos, which is our ability to take these mid to late life assets, identify opportunities that have maybe been overlooked, and then execute those, you know, very efficiently and effectively to maintain, you know, the volumes and the throughputs of those hosts. I think this is the second or third incarnation of redevelopment that we’ve done at Brutus, and we’ve had sort of similar activities, but similar activities with other hubs. It’s important to know that, again, going back to the seismic issue, the fact we have high-quality seismic over those locations, sort of the near field from an infrastructure point of view, also allows us to look at opportunities.

You’re right, Nate, that they need to compete in terms of the type of breakevens and returns relative to, you know, other opportunities that we have in the portfolio. It’s also important that we’re sort of balancing, you know, that focus on maybe larger scale opportunities in the exploration phase with sort of high-quality development that can maintain the high oil component of the portfolio that we’re, you know, sort of delivering at the moment, sort of north of 70% oil cut. The Brutus program specifically will be targeting more oil opportunities than gas. In fact, some of the wellbores that it will use are wells that have been gas wells that are, you know, coming to the end of their life, and we’ll use those wellbores now to go and add additional oil into the portfolio.

Nate Pendleton, Analyst, Texas Capital: Yeah, I appreciate the detail there. As my follow-up, I want to zoom out and kind of discuss M&A for a second. Can you talk about the opportunity you see in the Gulf of Mexico in smaller asset level acquisitions versus corporate M&A potential? If you have any interest in shallow water assets versus deepwater.

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah. Look, I mean, our focus is to become a leading pure play sort of offshore E&P player. From a Gulf shelf perspective, we have a large legacy position and we’ll continue to operate and execute those as efficiently and as effectively as we can through to end of life, being a responsible operator and sort of taking those through to abandonment and decommissioning when the time is right for that. In terms of sort of asset level opportunities, clearly, you know, there has been a history of asset activity within the Gulf of Mexico. You know, we’d expect that to continue to some degree.

Clearly, what has happened over the last two months post the Iran war, sort of run-up in prices has created a bit of a bump in the road in terms of how buyers and sellers sort of think about that from a price point of view. I do think we’re sort of getting to a sort of new norm of an understanding of how to sort of deal with that. You know, I think there’ll be, you know, a continual degree of opportunities that come forward. Maybe not as a super high level as current incumbents look to optimize their portfolios as any company, including ourselves, would do, Nate.

Nate Pendleton, Analyst, Texas Capital: Got it. Thank you, Paul.

Clay Jeansonne, Investor Relations, Talos Energy0: Thank you.

Operator: Thank you. The next question comes from Leo Mariani with ROTH Capital Partners. Please go ahead.

Leo Mariani, Analyst, ROTH Capital Partners: Hi. Good morning, everyone. My first question is about the cost savings. We know that you guys executed $72 million in 2025, and the company expect to realize in total $100 million in 2026. It’s in the slide that you guys have executed greater than 40% of the 2026 target. Is that, like, 20, 40% of the $28 million left of the $100 million in totals for 2026? Can you, like, quantify that a little bit?

Clay Jeansonne, Investor Relations, Talos Energy0: Thanks, Leo Mariani. Look, the $100 million for 2026 was a new $100 million starting at zero. We’ve executed just above 40% of that $100 million. $72 was a number in 2025 that was, you know, attributable to the activities in 2025. Some of the solutions that we put in place are repeatable, and we’d expect to be able to see those continue into 2026. The target we set for 2026 was a new $100 million target, and that was built into our plan.

Leo Mariani, Analyst, ROTH Capital Partners: That’s very helpful. My second question is about the Genovesa wells. Can you provide a little bit update on that? I think originally we expect to bring it back on third quarter 2026, but now it’s mid-year. Can you provide more, like, exact timing for the wells?

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah. Look, the team has done a great job of procuring all the equipment that’s needed in terms of the insert safety valve, which is now here and over in the Gulf with us of working with the operator to make sure we can have access to the control system of the well and then to access, you know, a platform in terms of an intervention vessel. We’re sort of working now towards the execution of that. I mean, I can’t be any more specific than sort of mid-year because there’s still an awful lot of uncertainty in terms of when we actually get the vessel, when the actual date is that we can go onto the well in terms of working with the operator.

Again, as is the culture of Talos, you know, the team has worked incredibly hard to look at every lever that we can pull to get that as early as we can while still executing it incredibly, efficiently and safely. That is, you know, our prime driver is to make sure that we execute efficiently to get that well back online, which at the moment we see slightly ahead of that sort of third quarter target that we gave when we first shared the generation update last quarter.

Leo Mariani, Analyst, ROTH Capital Partners: All right. Thank you.

Clay Jeansonne, Investor Relations, Talos Energy0: Thank you, Leo Mariani. Thank you.

Operator: Thank you. The next question comes from Noel Parks with Tuohy Brothers. Please go ahead.

Noel Parks, Analyst, Tuohy Brothers: Hi. Good morning.

Clay Jeansonne, Investor Relations, Talos Energy0: Good morning.

Noel Parks, Analyst, Tuohy Brothers: You know, I was wondering a bit about exploration in the industry, and we’ve heard so much, I guess especially over the last couple quarters, about, you know, onshore exhaustion, more capital heading out to the deepwater, globally. I, with sort of exploration drilling starting to get rolling more and more, because it’s, I guess, nowhere near its past peaks, is there anything that you see in the Gulf that you think is particularly exciting to the point where you could be enticed to maybe take a non-op role in someone else’s exploratory prospect? Just kinda wondering if the quality of what’s out there is something you’re excited about or just more sort of routine.

Clay Jeansonne, Investor Relations, Talos Energy0: No, thanks, Noel. I mean, look, the first thing I would say is if we weren’t excited about the opportunities, we wouldn’t have taken the 11 leases that we did in the first Big Beautiful Lease Sale 1 in December.

Noel Parks, Analyst, Tuohy Brothers: Sure

Clay Jeansonne, Investor Relations, Talos Energy0: You know, we’ve had a strategy of not just sort of looking for exploration, but to look for exploration opportunities that can that can raise, if you like, the volume picture that we have. You know, I think as I’ve said in the past, that first sort of lease round, we have now access to some 300 million barrels of gross and risk volume opportunity, but also the individual opportunity size has sort of gone up by roughly 50% relative to what we had prior to that. Now, clearly, you know, we prefer to be an operator. We think we have great skills in operating. But if, you know, partnering opportunities are out there, we will clearly look at those if it was the right type of subsurface opportunity that sort of fits our skills.

I think the other point that I’d make, that I raised slightly earlier is our investment, our continued investment in seismic. If we weren’t sort of excited by the opportunity set or the opportunity potential here, then we, you know, would not be investing in high-quality, sort of state-of-the-art reprocessed proprietary seismic that then allows us to actually go look for and develop those opportunities.

Noel Parks, Analyst, Tuohy Brothers: Great. Thanks.

Clay Jeansonne, Investor Relations, Talos Energy0: Clearly we are, you know, happy to be a non-operator with the right operator, as you see with the monument development that we are doing now.

Noel Parks, Analyst, Tuohy Brothers: Sure. Fair enough. Again, just sort of a general macro question. When we look at the volatility we’ve had in oil prices, you know, in the last couple of months, I just wonder, you know, just from your long experience, if you have any thoughts on the 2027 strip and sort of your gut on whether there’s a big leg up ahead for us there or whether we’ve seen about as much as it’s gonna do unless, you know, there’s a huge swing in, you know, world events one way or the other.

Clay Jeansonne, Investor Relations, Talos Energy0: Yeah. You know, Noel, the only thing that we focus on here at Talos is making sure that our unit development costs, drilling costs, our lifting costs are as low as they can be, and that we do that as safely and efficiently as we can be. That regardless of where the strip goes, you know, we know that we have a robust set of opportunities that we can then go execute against. You know, we will not get sort of caught up in trying to have our decision quality driven by what we think a strip price may or may not be.

Noel Parks, Analyst, Tuohy Brothers: Okay. Thanks a lot.

Clay Jeansonne, Investor Relations, Talos Energy0: Thank you, Noel.

Operator: Thank you. We have reached the end of the question and answer session. I will now turn the call over to Paul Goodfellow for closing remarks. Please go ahead.

Clay Jeansonne, Investor Relations, Talos Energy0: Thank you, Angelina. Thank you all for joining today and for your continued interest in Talos. To close, the current geopolitical landscape reinforces our belief that the world will continue to need reliable and affordable oil supply to meet rising global demand well into the future. As I’ve said, you know, we believe that Talos is well-positioned as a low-cost, high-margin oil producer, executing a well-defined strategy to become a leading pure play offshore E&P company and play a meaningful role in meeting that opportunity. Thank you all.

Operator: Thank you. This concludes today’s conference, and you may now disconnect your lines. Thank you all for your participation.