Talos Energy NYSE: TALO reported record adjusted free cash flow in the second quarter of 2026 as production exceeded guidance, while the offshore exploration and production company raised its full-year standalone production outlook and outlined progress on acquisitions, development projects and international expansion.
President and Chief Executive Officer Paul Goodfellow said oil production averaged about 69,000 barrels per day during the quarter, while total production averaged nearly 94,000 barrels of oil equivalent per day. Both figures exceeded the company’s guidance expectations. Goodfellow said production optimization efforts, higher operational uptime and continued outperformance from the Cardona well supported the results.
“The second quarter was characterized by solid execution across our base business,” Goodfellow said, adding that Talos had achieved more than two-thirds of its 2026 target under its Optimal Performance Plan during the first half of the year.
Cash Flow, Guidance and Balance Sheet
Executive Vice President and Chief Financial Officer Zach Dailey said Talos generated approximately $402 million of adjusted EBITDA and a record approximately $232 million of adjusted free cash flow in the second quarter. The results were driven by production above guidance and crude-oil realizations that were stronger relative to WTI, he said.
The company increased its full-year 2026 standalone guidance to:
- 64,000 to 68,000 barrels of oil per day
- 87,000 to 91,000 barrels of oil equivalent per day
The updated outlook excludes Talos’ pending Gulf of America bolt-on acquisition and includes the impact of a non-core, gas-weighted shelf divestment that closed early in the third quarter. Dailey said the base business was performing well enough to more than offset the production effect of the divestiture.
For the third quarter, Talos expects oil production of 61,000 to 65,000 barrels per day and total production of 81,000 to 85,000 BOE per day, also excluding the pending bolt-on transaction. The company expects to provide updated guidance after the acquisition closes, which it anticipates will occur later in the third quarter.
Cash on hand rose to about $578 million at the end of the second quarter, while total liquidity reached about $1.2 billion and the leverage ratio declined to 0.5 times, Dailey said.
Talos issued $800 million of 8% senior notes due 2034. The proceeds were used to redeem its $625 million of 9% notes due 2029 and fund a portion of the pending acquisition. The company also secured $150 million in incremental commitments from its bank group, increasing its credit-facility borrowing base to $850 million from $700 million upon the acquisition’s closing.
Dailey said Talos continues to expect pro forma year-end 2027 leverage below one times, in line with its long-term target. The company’s shareholder-return framework remains unchanged, with up to 50% of annual free cash flow targeted for share repurchases. Talos did not repurchase shares during the second quarter because of an acquisition-related corporate blackout period. Since announcing the framework in the second quarter of 2025, the company has returned about $135 million through buybacks and reduced its share count by about 7%.
Gulf of Mexico Operations and Pending Bolt-On
Goodfellow highlighted the completion of the Genovesa workover, which returned the well to production ahead of schedule late in the second quarter and performed in line with expectations. During planning, Talos identified additional work that could support future access to a secondary zone, he said.
The company’s drilling and completion program has operated with approximately 50% lower nonproductive time than the Gulf of Mexico basin average year to date, according to Goodfellow.
At Monument, the first development well has been drilled and the operator is moving to the second well. Talos expects production from the project near the end of the year. The company also expects the first Brutus well to spud in the third quarter following rig reactivation activities. Its Daenerys appraisal program has begun, with results from the first appraisal well expected before year-end.
Talos contracted the West Vela rig for 12 months, with options beyond that term. Executive Vice President of Exploration and Development Bill Langin said the company expects to receive the rig around the middle of 2027, depending on the rig’s current operations. He said Talos kept pricing relatively close to previous levels by leveraging its existing relationship with Seadrill. Follow-on activity at Daenerys could be included in the rig program, although the contract is not dependent on that project alone.
On its pending Gulf of America acquisition, Goodfellow said BP elected not to exercise its preferential right. Talos will operate the Coulomb field and become a partner in the Na Kika platform and associated fields. The acquired assets produced approximately 18,000 BOE per day in the second quarter, according to Goodfellow, and are expected to be accretive to Talos’ average oil cut, unit operating expense and EBITDA margin.
Talos is evaluating an operated Coulomb drilling opportunity that could compete for capital in 2027. Goodfellow said the company aims to apply its strategy of pursuing lower-unit-cost, short-cycle tiebacks around acquired infrastructure.
Mexico and Honduras Expansion
Talos also discussed its offshore Mexico farm-in and newly established offshore Honduras acreage position. In Mexico’s Block 29, the company and Repsol are the sole partners. The development-led opportunity is anchored by the existing Polok and Chinwol oil discoveries, and Talos is working toward submission of a field development plan to CNOOC and a targeted final investment decision in 2027.
Langin said the Block 29 partners are preparing for a potential exploration well late next year. The company sees the project as a Miocene-sand development opportunity similar to producing intervals on the U.S. side of the Gulf of Mexico. Talos said it has sufficiently high-quality seismic data and does not expect to add to its seismic inventory in the near term.
Goodfellow said the discoveries are entirely within the block, distinguishing the project from Talos’ Zama experience, where unitization resulted from a discovery extending onto a Pemex block.
In Honduras, Talos holds about 4 million acres of deepwater acreage and plans to begin the area’s first 3D seismic program in the second half of 2026. Langin said the company sees four to five exploration plays and expects to obtain an environmental permit to drill by year-end. Once received, the permit would start a two-year clock, giving Talos time to evaluate seismic results and decide whether to drill.
Goodfellow said Talos will continue to prioritize disciplined execution, investment in its base business, balance-sheet strength and shareholder returns while evaluating selective growth opportunities across its offshore portfolio.
About Talos Energy (NYSE:TALO)
Talos Energy Inc is an independent oil and gas exploration and production company headquartered in Houston, Texas. Founded in 2012 by industry veterans Tim Duncan and Jeremy Rights, the firm completed its initial public offering in 2021 and trades on the New York Stock Exchange under the ticker symbol TALO. The company's core operations focus on the acquisition, exploration, development and production of offshore hydrocarbon reserves, with a primary emphasis on the U.S. Gulf of Mexico basin.
Talos Energy's asset portfolio spans deepwater and shelf opportunities in the Gulf of Mexico, where it holds interests in several producing fields and exploration blocks.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
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