Talos Energy (NYSE:TALO) executives highlighted what they described as a transformational 2025, pointing to higher production, improved capital efficiency, and lower operating costs that helped drive free cash flow and share repurchases despite weaker commodity prices. Management also outlined a 2026 program centered on offshore development and appraisal activity, with a larger capital budget and production guidance reflecting planned downtime and a temporary shut-in at the Genovesa well.
2025 operational execution and cost initiatives
President and CEO Paul Goodfellow opened the call by emphasizing safety and environmental performance, stating the company had no serious injuries in 2025 and a spill rate “significantly below industry averages.” He characterized 2025 as the start of a “transformation journey,” supported by a revamped strategy and a new leadership team.
Goodfellow also said Talos’ unit operating costs in 2025 were on average 30% lower than the offshore peer group average, which he said contributed to “top decile EBITDA margins across the sector” for the year.
Production growth projects and the Katmai/Tarantula complex
Under the second strategic pillar—growing production and profitability—Goodfellow cited first production at Sunspear and Katmai West #2. He said Katmai production flows through three subsea completions tied back to the Talos-owned Tarantula facility, and that Katmai West #1 ranks among the top 10 producing wells in the Gulf of America.
Tarantula’s gross processing capacity was expanded in mid-2025 to 35,000 barrels of oil equivalent per day to handle higher volumes, and recent debottlenecking efforts increased throughput to about 38,000 boe/d with what management described as minimal capital outlay. In Q&A, Goodfellow said he did not expect further near-term optimization gains at Tarantula, calling the opportunity set largely exhausted, and said future expansion would likely be more capital intensive and could require pipeline expansion depending on additional drilling outcomes.
Goodfellow said Talos expects Katmai field production to remain “essentially flat throughout 2027,” and that the company’s overall base decline rate is in the “mid to high teens.” He also pointed to the Katmai North prospect as potential exploration upside, noting ongoing work with new seismic data and the company’s acquisition of nearby blocks in a recent lease sale.
Portfolio expansion, Daenerys appraisal, and lease sale additions
Under its third strategic pillar—building a long-lived scale portfolio—Talos discussed the Daenerys discovery, which Goodfellow called a potential significant addition to the resource base. He said appraisal activities are scheduled to begin in the second quarter of 2026 and that the appraisal well is planned to spud late in the second quarter. In response to an analyst question, Goodfellow said the well would likely be drilled and evaluated toward the end of the third quarter and into the start of the fourth quarter, with weather risk a potential factor given summer operations in the Gulf.
Goodfellow also discussed Talos being named the apparent high bidder on 11 new leases in the December “Big Beautiful Lease Sale,” with eight awarded to date, totaling about $15 million. He said the leases surround Daenerys and add positions in the Neptune and Katmai areas. He said the company added eight prospects with more than 300 million barrels of gross, unrisked resource potential across Miocene and Wilcox opportunities, which he described as roughly two times the company’s current proved reserve base.
In Q&A, Goodfellow said Talos generally expects about plus or minus a year from lease award to having an opportunity ready to compete for a drill schedule, and said the company expects to bring those opportunities forward as part of building its 2027 capital plan.
Financial results, capital returns, and balance sheet
EVP and CFO Zach Dailey said Talos invested about $500 million of exploration and development capital in 2025 and produced an average of 95,000 boe/d, generating about $1.2 billion in adjusted EBITDA and $418 million of adjusted free cash flow. He said the company’s capital allocation framework calls for returning up to 50% of annual free cash flow to shareholders, and that since introducing the framework in Q2 2025, Talos has returned about 44% of adjusted free cash flow via share repurchases. Dailey said the company reduced its outstanding share count by about 7% during 2025.
For the fourth quarter, Dailey reported average production of 89,000 boe/d, including 65,000 barrels of oil per day. He said volumes were impacted by approximately 3,000 boe/d due to the shut-in of the Genovesa well following a failure of a surface-controlled subsurface safety valve. Talos expects Genovesa to return to production in the third quarter of 2026.
Dailey said Talos ended 2025 with leverage of 0.7x and about $1 billion of total liquidity, with no near-term maturities. He also said the company recently extended its credit facility to 2030 and reaffirmed a $700 million borrowing base.
On reserves, Dailey said proved reserves were 175 million boe (about 75% oil) with proved PV-10 of about $3.2 billion at year-end SEC pricing. He also cited estimated probable reserves of 103 million barrels, adding about $2.3 billion of PV-10, or roughly $5.5 billion in 2P value at year-end SEC prices. Talos’ trailing three-year reserve replacement ratio was about 140% of production. The company recorded a $170 million non-cash impairment in the fourth quarter related to the SEC full cost ceiling test.
2026 guidance: Capex, production, hedges, and key projects
For 2026, Talos guided to capital expenditures (excluding plugging and abandonment) of $500 million to $550 million, with about 60% directed to operated projects and 40% to non-operated spending, with non-operated activity elevated by the Beacon-operated Monument project. Talos also expects $100 million to $130 million of P&A spending, similar to 2025.
Production guidance for 2026 is 85,000 to 90,000 boe/d and 62,000 to 66,000 barrels of oil per day, with oil expected to average about 73% of total volumes (a couple of percentage points higher year-over-year). Dailey said planned maintenance is expected to reduce annual production by about 6,000 boe/d, including an annual impact of about 2,000 boe/d related to Genovesa being shut in for the first half. He also said the company included a 4,000 boe/d contingency for weather and unplanned downtime.
Dailey added that when normalizing for weather and deferred Genovesa production, 2026 oil guidance would have been higher year-over-year, and he expects the year-end 2026 exit rate to exceed the year-end 2025 exit rate due to project timing and Genovesa’s return.
Key 2026 operational items discussed included:
- Cardona: drilled in late 2025 under budget and ahead of schedule; production started in early 2026 flowing to the Pompano facility.
- CPN: drilled ahead of schedule; first production expected in the second half of 2026.
- Brutus rig reactivation program: first of four wells scheduled to begin drilling in Q2 2026; three wells expected online by year-end with the fourth in early 2027.
- Monument (Beacon-operated): Beacon plans to mobilize a rig in early March and drill two wells back-to-back, with both wells expected completed in 2026 and first oil targeted by year-end; development planned as a subsea tieback to the Shenandoah facility with firm committed capacity of 20,000 barrels of oil per day.
- Daenerys appraisal well: planned spud late in Q2 2026, with results expected in the second half of 2026.
On hedging, Dailey said Talos has hedged about 29,000 barrels of oil per day in the first quarter of 2026 with a floor around $63 per barrel, representing about 47% of expected first-quarter oil volumes at the midpoint of guidance. For full-year 2026, he said the company has hedged roughly 23,000 barrels of oil per day, about 36% of expected annual oil volumes at the midpoint, with floors above $61 per barrel.
In closing comments, management reiterated its three-pillar strategy and said it intends to remain guided by its disciplined capital allocation framework while executing 2026 plans.
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.
