Talos Energy NYSE: TALO raised its full-year 2026 production guidance after third-quarter output exceeded expectations, as strong performance from existing operations and a recently closed offshore acquisition supported adjusted free cash flow of $186 million.
The company produced approximately 69,000 barrels of oil per day and 92,000 barrels of oil equivalent per day during the quarter, both above guidance. President and CEO Paul Goodfellow attributed the results to strong base operations, the absence of storm-related downtime and an initial contribution from assets acquired on Sept. 22.
Even after adjusting for weather and excluding the acquired assets, production was at the high end of guidance, Goodfellow said on the Nov. 4 earnings call. Talos also said it reached its full-year $100 million Optimal Performance Plan target by the end of the third quarter.
Production Outlook Rises Despite Hurricane Impact
Talos raised its 2026 production outlook to 68,000 to 70,000 barrels of oil per day and 92,500 to 94,500 barrels of oil equivalent per day. At the midpoint, oil production guidance is approximately 8% above the company’s original outlook, Executive Vice President and CFO Zach Dailey said.
The forecast includes the acquisition, a completed divestment of non-core, gas-weighted shelf assets and the fourth-quarter impact of Hurricane Isaias. Goodfellow said the storm reduced production by approximately 7,000 barrels of oil equivalent per day during the quarter, within the weather allowance in the company’s annual plan. Talos evacuated offshore personnel and shut in production ahead of the storm; it found no facility damage after crews returned, he said.
Third-quarter adjusted EBITDA was approximately $406 million. Dailey said oil realizations averaged approximately $1.60 per barrel above West Texas Intermediate prices, while lease operating expenses were $16.74 per barrel of oil equivalent.
Talos lowered the midpoint of its capital expenditure guidance while raising its outlook for plugging and abandonment spending, leaving combined capital and abandonment spending unchanged from original guidance. Goodfellow cited strong execution in operated projects and the timing of some non-operated projects, including Monument, for the capital forecast. He said efficient completion of abandonment work allowed additional activity to be pulled into the fourth quarter.
Acquisition Adds Offshore Assets
Talos closed its Gulf of America acquisition alongside partner Ridgewood for a final net cash purchase price of $420 million. The transaction added a 50% working interest and operatorship in the Coulomb field, along with a 25% non-operated interest in the BP-operated Na Kika platform and four associated fields.
Goodfellow said Talos has identified development and exploration opportunities around the acquired infrastructure. A Coulomb development well is expected to compete for capital in 2027.
The company ended the quarter with approximately $410 million in cash, an undrawn credit facility and approximately $1.1 billion in liquidity. Its leverage ratio was 0.6 times, and Dailey said Talos expects year-end 2027 leverage to remain well below one times.
Talos repurchased 1.4 million shares for approximately $24 million during the third quarter. Dailey said the company’s capital allocation framework remains unchanged: it expects to return up to 50% of annual free cash flow to shareholders through repurchases while also investing in projects, maintaining balance sheet strength and pursuing selective acquisitions. Approximately $176 million remains under its repurchase authorization.
Development Projects Advance
Talos brought its CPN well online in September, and Goodfellow said it was performing in line with expectations. At Brutus, the company expanded its development program from four wells to five and expects first oil beginning in the second quarter of 2027, with production phased in through the fourth quarter.
At Monument, the first development well encountered approximately 250 feet of net oil pay, in line with pre-drill expectations. A second well began drilling in September, and first oil is now expected in the first quarter of 2027. Goodfellow said the company’s view of the project’s economics was unchanged.
The Daenerys appraisal well encountered oil pay in multiple sands, but Talos said further work is needed to assess the reservoir and fluid properties. A sidetrack is planned for 2027, and the company is evaluating development options ranging from a tieback to existing infrastructure to a standalone host.
Asked about timing, Goodfellow said first oil at Daenerys in 2029 was “highly unlikely,” though not impossible under a tieback solution. The company also expects to drill a nearby exploration prospect in late 2027 or early 2028 that could potentially be co-developed with Daenerys if successful.
In Mexico, Talos is working toward a 2027 final investment decision at Zama and with Repsol toward a decision on Block 29 in the second half of 2027. The Block 29 farm-in remains subject to regulatory approval. Talos expects to provide its full 2027 outlook in February.
About Talos Energy (NYSE:TALO)
Talos Energy Inc is an independent energy company focused on the exploration, development and production of oil and natural gas. The company's upstream operations are concentrated in the U.S. Gulf of Mexico, where it holds interests in offshore properties and produces crude oil, natural gas and natural gas liquids.
In addition to its traditional exploration and production activities, Talos has pursued carbon management opportunities through the development of carbon capture and storage projects along the U.S.
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