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The call conveyed a predominantly positive tone driven by strong Q1 execution: production slightly above guidance, robust adjusted EBITDA ($293M) and free cash flow ($113M), low unit costs (~$16/boe and ~30% below peers in 2025), disciplined capital allocation (repurchases, ~7% share count reduction), healthy liquidity (~$1B) and clear project pipeline (CPN, Daenerys, Monument, Brutus). Management acknowledged risks—commodity and geopolitical volatility, exploration/appraisal and rig market uncertainties, timing on Genovese, and outstanding second‑lien notes—but positioned the company as financially flexible with hedging and a focus on low‑breakeven projects. Overall, the positive operational and financial highlights materially outweigh the identified lowlights.
Management said full‑year 2026 guidance is unchanged and gave Q2 production targets of 63–67k bbl/d oil and 88–92k boe/d total (Q1 was ~64k bbl/d oil and ~89k boe/d), noting Q1 adjusted EBITDA of $293M and adjusted free cash flow of $113M on ~ $120M of E&D capex and a ~41% reinvestment rate; LOE was ~ $16/boe in Q1 (in line with 2025), 2026 oil mix is ~73%, >40% of a $100M 2026 cost‑saving target has been achieved, development breakevens sit in the $30s–$40s with corporate FCF breakeven in the low‑$50s WTI, liquidity is ~ $1B with the credit facility extended to 2030, the company returned $38M (34% of Q1 adj FCF) via repurchases (≈$135M returned since 2025, ~7% fewer shares), added selective 2026 hedges and initial 2027 protection (about two‑thirds of production is sour), and project timing includes Daenerys spud later in Q2 with results by year‑end, Genovese remediation and midyear return, and Monument first oil on track late 2026.
Adjusted EBITDA of $293 million and adjusted free cash flow of $113 million in Q1 2026, achieved at a low reinvestment rate of ~41%. Invested just under $120 million of exploration and development capital in the quarter.
Total production ~89k boe/d (oil production ~64k bbl/d), which slightly exceeded Q1 guidance. Strong new-well productivity at Cardona, CPN drilled and completed in Q1 with first production on track for Q3, and Genovese remediation on track to return to production midyear (slightly ahead of prior schedule).
Company lease operating expenses ~ $16/boe in Q1 (in line with 2025 average). For 2025, operating costs were ~30% lower on average than the offshore peer group, supporting top‑decile EBITDA margins. Company expects ~73% oil mix in 2026, enhancing margin profile.
Returned $38 million in Q1 (34% of adjusted free cash flow) via share repurchases. Since initiating the capital return framework in 2025, repurchases total ~ $135 million, resulting in ~7% reduction in outstanding share count.
Approximately $1 billion of liquidity, sequential decline in net debt and increased cash on hand. Credit facility maturity extended to 2030 and no near-term debt maturities, providing flexibility to execute the plan.
Active drilling and development: Daenerys appraisal targeted to spud later in Q2 with evaluation by year-end; Monument drilling underway with first oil on track by late 2026; Brutus redevelopment and other near-field activity underway. Successful December 2025 lease sale: all 11 leases awarded, identifying eight prospects representing >300 million barrels gross unrisked resource potential.
Optimal performance plan: >40% of the $100 million 2026 target already achieved (i.e., >$40 million realized to date). Management expresses confidence in meeting the $100 million target by year-end and aims to embed a continuous improvement culture.
Selective hedging activity added (including layering protection into early 2027) consistent with the hedging framework to support free cash flow resilience. Approximately two‑thirds of produced oil is sour; April pricing showed strength in Gulf Coast sour differentials, which should support near-term realizations.
Good morning, ladies and gentlemen, and welcome to the Talos Energy Inc. First Quarter 2026 Earnings Call Conference. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, 05/06/2026. I would now like to turn the conference over to Clay P. Jeansonne. Please go ahead.
Thank you, operator. Good morning, everyone, and welcome to our first quarter 2026 earnings conference call. Joining me today to discuss our results are Paul Goodfellow, President and Chief Executive Officer, and Zachary Dailey, Executive Vice President and Chief Financial Officer. For our prepared remarks, please refer to our first quarter 2026 earnings presentation that is available on the Talos Energy Inc. website under the Investor section for a more detailed look at our results and operations. Before we start, I would like to remind you that our remarks will include forward-looking statements subject to various cautionary statements identified in our presentation and earnings release. Actual results may differ materially from those contemplated by the company. Factors that could cause these results to differ materially are set forth in yesterday's press release and our Form 10-Ks for the period ending 12/31/2025 filed with the SEC.
Forward-looking statements are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we may present GAAP and non-GAAP financial measures. A reconciliation of certain non-GAAP to GAAP measures is included in yester...