Talos Energy Announces Divestiture of Talos Low Carbon Solutions Subsidiary to TotalEnergies

Rhea-AI Summary

Talos Energy Inc. announced the sale of its subsidiary, Talos Low Carbon Solutions , to TotalEnergies E&P USA, Inc. for $125 million, totaling approximately $148 million. The sale includes three carbon capture and sequestration projects along the U.S. Gulf Coast. Talos plans to use the proceeds to repay borrowings and for general corporate purposes. The transaction allows Talos to focus on its core Upstream business and explore strategic opportunities.

Positive

• Sale of subsidiary for $125 million, totaling $148 million
• Proceeds to repay borrowings and for general corporate purposes
• Focus on core Upstream business and explore strategic opportunities
• Strong market interest and financial return for shareholders

Negative

• None.

Insights

Financial Analyst

The divestiture of Talos Low Carbon Solutions LLC by Talos Energy to TotalEnergies for a total consideration of around $148 million represents a strategic realignment for Talos. The move to offload the carbon capture and sequestration (CCS) segment indicates a sharpened focus on their core Upstream business, which involves exploration and production of oil and gas. This transaction not only provides immediate liquidity but also reduces leverage by allowing for the repayment of borrowings under Talos's credit facility.

From a financial perspective, the deal's structure, which includes potential additional cash payments based on the achievement of certain milestones, suggests a performance-based earnout that could benefit Talos's financial position in the future. Moreover, the immediate use of proceeds to repay debt enhances Talos's balance sheet and potentially improves financial ratios, which could be favorably viewed by investors and credit rating agencies.

Energy Sector Analyst

The sale of Talos's CCS business to a global leader like TotalEnergies underscores the competitive nature of the energy sector's transition towards low-carbon technologies. CCS is an emerging field that is critical for reducing greenhouse gas emissions, particularly in industries that are difficult to decarbonize. The transfer of expertise and projects, such as Bayou Bend, Harvest Bend and Coastal Bend, to TotalEnergies may accelerate the development and commercialization of CCS solutions.

For stakeholders in the energy industry, this transaction highlights the importance of strategic partnerships and divestitures in optimizing portfolio and focusing on core competencies. Talos's decision to sell its CCS subsidiary could be indicative of a trend where smaller energy firms may lack the scale or capital to compete in the low-carbon space, thus choosing to divest these assets to larger players with more resources.

Sustainability Analyst

The transaction between Talos and TotalEnergies has implications for the sustainability landscape within the energy sector. Talos's choice to divest its CCS operations, despite the growing emphasis on decarbonization, suggests a strategic pivot towards strengthening its traditional oil and gas operations. While this may yield short-term financial benefits, it raises questions about Talos's long-term sustainability strategy and commitment to the energy transition.

On the other hand, TotalEnergies' acquisition of TLCS could enhance its position as a leader in CCS, a technology pivotal for meeting global climate targets. This move aligns with broader industry trends where major energy corporations are diversifying their portfolios to include cleaner technologies, thereby balancing profitability with environmental responsibility.

HOUSTON, March 18, 2024 /PRNewswire/ -- Talos Energy Inc. ("Talos") (NYSE: TALO) today announced that it has entered into an agreement for the sale of its wholly owned subsidiary, Talos Low Carbon Solutions LLC ("TLCS"), to TotalEnergies E&P USA, Inc. ("TotalEnergies") for a purchase price of $125 million plus customary reimbursements, adjustments and retention of cash, combined totaling approximately $148 million. The transaction was based on an effective date of January 1, 2024 and will close later today. Talos intends to use the proceeds from the sale to immediately repay borrowings under its credit facility and for general corporate purposes.

The sale includes Talos's entire carbon capture and sequestration ("CCS") business, including its three projects along the U.S. Gulf Coast: Bayou Bend CCS LLC, Harvest Bend CCS LLC ("Harvest Bend") and Coastal Bend CCS LLC ("Coastal Bend"). Talos may realize additional future cash payments upon achievement of certain milestones at the Harvest Bend or Coastal Bend projects or upon a subsequent sale of these projects by TotalEnergies. Robin Fielder, Talos Executive Vice President, Low Carbon Strategy and Chief Sustainability Officer, will continue to serve in her role for a transition period before leaving Talos to pursue other opportunities.

Talos President and Chief Executive Officer Timothy S. Duncan stated: "Since TLCS's inception, we have successfully applied our energy expertise as an early mover aimed at developing decarbonization solutions along the U.S. Gulf Coast. Strong market interest during our capital raise provided the strategic option to fully monetize the business to TotalEnergies, an established global leader in CCS development. Robin and our entire CCS team did an outstanding job crystallizing value for Talos shareholders for a strong financial return. The transaction will further enable Talos to prioritize cash flow generation and optimal capital allocation in our core Upstream business. We are also continuing to explore business development and strategic M&A opportunities."

Morgan Stanley & Co. LLC served as financial advisor to Talos and Latham & Watkins LLP served as legal advisor to Talos.

ABOUT TALOS ENERGY

Talos Energy (NYSE: TALO) is a technically driven, innovative, independent energy company focused on maximizing long-term value through its Upstream Exploration & Production business in the United States Gulf of Mexico and offshore Mexico. We leverage decades of technical and offshore operational expertise to acquire, explore, and produce assets in key geological trends while maintaining a focus on safe and efficient operations, environmental responsibility and community impact. For more information, visit www.talosenergy.com.

INVESTOR RELATIONS CONTACT

investor@talosenergy.com

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This communication may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact included in this communication, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this communication, the words "will," "could," "believe," "anticipate," "intend," "estimate," "expect," "project," "forecast," "may," "objective," "plan" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, potential adverse reactions or competitive responses to our acquisitions, dispositions and other transactions; changes in market conditions affecting the oil and gas industry or long-term oil and gas price levels; political or regulatory developments; reservoir performance; the outcome of future exploration efforts; timely completion of development projects; technical or operating factors; the uncertainty inherent in projecting ultimate recoverable resources and future rates of production and cash flows and access to capital; and the other risks discussed in our Annual Report on Form 10-K for the year ended December 31, 2023. Should one or more of the risks or uncertainties described herein occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this communication.

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SOURCE Talos Energy

FAQ

What is the purchase price of Talos Low Carbon Solutions by TotalEnergies?

The purchase price is $125 million, totaling approximately $148 million.

What will Talos do with the proceeds from the sale?

Talos plans to use the proceeds to repay borrowings under its credit facility and for general corporate purposes.

Who will continue to serve in their role for a transition period after the sale?

Robin Fielder, Talos Executive Vice President, Low Carbon Strategy and Chief Sustainability Officer, will continue to serve in her role for a transition period.

Which projects are included in the sale of Talos's carbon capture and sequestration business?

The sale includes Bayou Bend CCS , Harvest Bend CCS , and Coastal Bend CCS along the U.S. Gulf Coast.

Who served as financial advisor to Talos in the transaction?

Morgan Stanley & Co. served as financial advisor to Talos.

What strategic opportunities is Talos planning to explore after the sale?

Talos is continuing to explore business development and strategic M&A opportunities.

What is the role of TotalEnergies in the transaction?

TotalEnergies E&P USA, Inc. purchased Talos Low Carbon Solutions from Talos.

Who is the President and Chief Executive Officer of Talos?

Timothy S. Duncan is the President and Chief Executive Officer of Talos.