Talos Energy Inc.

Talos reported second-quarter adjusted EBITDA of approximately $402 million and record adjusted free cash flow of approximately $232 million, driven by production above guidance and stronger crude oil realizations versus WTI. Oil production averaged approximately 69,000 barrels per day and total production averaged nearly 94,000 BOE per day, both above expectations. Full-year 2026 stand-alone guidance was raised to 64,000-68,000 barrels of oil per day and 87,000-91,000 BOE per day; third-quarter guidance is 61,000-65,000 barrels per day of oil and 81,000-85,000 BOE per day. Management said the updated outlook excludes the pending Gulf of America acquisition and includes the impact of the closed shelf divestment. Cash on hand ended at approximately $578 million, total liquidity at approximately $1.2 billion, and leverage at 0.5x.

Paul Goodfellow framed the quarter as evidence that Talos’s base business is getting stronger while the company expands its strategic options. He emphasized disciplined execution, noting operational uptime improvements, production optimization, and the ability to create incremental value from projects like Genovesa and Cardona. He also tied the Mexico, Honduras and Na Kika-related moves to the company’s three-pillar strategy, saying they extend resource life, improve portfolio quality and keep the company on track to become a leading pureplay offshore E&P.

Zach Dailey highlighted record adjusted free cash flow of approximately $232 million and adjusted EBITDA of approximately $402 million for the quarter. He pointed to stronger cash and liquidity, with cash on hand of about $578 million, total liquidity of about $1.2 billion and leverage down to 0.5x. He also described the financing actions as enhancing flexibility: Talos issued $800 million of new 8% senior notes due 2034, redeemed $625 million of 9% notes due 2029, and increased its borrowing base from $700 million to $850 million upon closing of the acquisition. He said the company still expects pro forma year-end 2027 leverage below 1x and remains committed to returning up to 50% of annual free cash flow through repurchases while funding high-return projects.

Analysts focused on the strategic logic of the Mexico and Honduras entry, with management saying both are low-upfront-cost ways to add development upside and long-term exploration optionality; Honduras was described as a 4 million-acre position with a proven oil system, while Block 29 in Mexico was framed as a development-led opportunity anchored by the on-block discoveries Polok and Chinwol. Questions also centered on the Gulf of America bolt-on and Coulomb, with management saying Coulomb could compete for capital in 2027 because it is already under their leasehold and fits Talos’s short-cycle tieback model. Analysts asked about capital allocation and buybacks; management said repurchases were paused by the M&A blackout but expects to be back in the market, while keeping leverage under 1x and balancing shareholder returns with selective accretive growth. There were also questions about West Vela rig timing, where management said arrival is notionally around midyear 2027 and pricing was held relatively close to prior levels.