UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Trading Symbol(s) |
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Name of Each Exchange on Which Registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of July 31, 2024, the registrant had
TABLE OF CONTENTS
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Item 1. |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity |
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Note 1 — Organization, Nature of Business and Basis of Presentation |
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Note 9 — Employee Benefits Plans and Share-Based Compensation |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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2
GLOSSARY
The following are abbreviations and definitions of certain terms used in this document, which are commonly used in the oil and natural gas industry:
Barrel or Bbl — One stock tank barrel, or 42 United States gallons liquid volume.
Boe — One barrel of oil equivalent determined using the ratio of six Mcf of natural gas to one barrel of crude oil or condensate.
BOEM — Bureau of Ocean Energy Management.
BSEE — Bureau of Safety and Environmental Enforcement.
Boepd — Barrels of oil equivalent per day.
Btu — British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water one degree Fahrenheit.
CCS — Carbon capture and sequestration.
CO2 — Carbon dioxide.
Completion — The installation of permanent equipment for the production of oil or natural gas.
Deepwater — Water depths of more than 600 feet.
Field — An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature or stratigraphic condition.
GAAP — Accounting principles generally accepted in the United States of America.
MBbls — One thousand barrels of crude oil or other liquid hydrocarbons.
MBblpd — One thousand barrels of crude oil or other liquid hydrocarbons per day.
MBoe — One thousand barrels of oil equivalent.
MBoepd — One thousand barrels of oil equivalent per day.
Mcf — One thousand cubic feet of natural gas.
Mcfpd — One thousand cubic feet of natural gas per day.
MMBoe — One million barrels of oil equivalent.
MMBtu — One million British thermal units.
MMcf — One million cubic feet of natural gas.
MMcfpd — One million cubic feet of natural gas per day.
NGL — Natural gas liquid. Hydrocarbons which can be extracted from wet natural gas and become liquid under various combinations of increasing pressure and lower temperature. NGLs consist primarily of ethane, propane, butane and natural gasoline.
NYMEX — The New York Mercantile Exchange.
NYMEX Henry Hub — Henry Hub is the major exchange for pricing natural gas futures on the New York Mercantile Exchange. It is frequently referred to as the Henry Hub index.
OPEC — Organization of Petroleum Exporting Countries.
Proved reserves — Proved reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
Proved undeveloped reserves — In general, proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. The SEC provides a complete definition of undeveloped oil and gas reserves in Rule 4-10(a)(31) of Regulation S-X.
SEC — The U.S. Securities and Exchange Commission.
3
SEC pricing — The unweighted average first-day-of-the-month commodity price for crude oil or natural gas for each month within the 12-month period prior to the end of the reporting period, adjusted by lease for market differentials (quality, transportation, fees, energy content, and regional price differentials). The SEC provides a complete definition of prices in “Modernization of Oil and Gas Reporting” (Final Rule, Release Nos. 33-8995; 34-59192).
Shelf — Water depths of up to 600 feet.
Working interest — The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and a share of production.
WTI or West Texas Intermediate — A light crude oil produced in the United States with an American Petroleum Institute gravity of approximately 38-40 and the sulfur content is approximately 0.3%.
4
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The information in this Quarterly Report on Form 10-Q (this “Quarterly Report”) includes “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 (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report, 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 Quarterly Report, 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. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. Forward-looking statements may include statements about:
5
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, commodity price volatility; global demand for oil and natural gas; the ability or willingness of OPEC and other state-controlled oil companies (“OPEC Plus”) to set and maintain oil production levels and the impact of any such actions; the lack of a resolution to the war in Ukraine and increasing hostilities in the Middle East, and their impact on commodity markets; the impact of any pandemic, and governmental measures related thereto; lack of transportation and storage capacity as a result of oversupply, government and regulations; the effect of a possible U.S. government shutdown and resulting impact on economic conditions and delays in regulatory and permitting approvals; lack of availability of drilling and production equipment and services; adverse weather events, including tropical storms, hurricanes, winter storms and loop currents; cybersecurity threats; sustained inflation and the impact of central bank policy in response thereto; environmental risks; failure to find, acquire or gain access to other discoveries and prospects or to successfully develop and produce from our current discoveries and prospects; geologic risk; drilling and other operating risks; well control risk; regulatory changes, including the impact of financial assurance requirements; the uncertainty inherent in estimating reserves and in projecting future rates of production; cash flow and access to capital; the timing of development expenditures; potential adverse reactions or competitive responses to our acquisitions and other transactions; the possibility that the anticipated benefits of our acquisitions are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of acquired assets and operations; and the other risks discussed in Part I, Item 1A. “Risk Factors” of Talos Energy Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”).
Reserve engineering is a process of estimating underground accumulations of oil, natural gas and NGLs that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify upward or downward revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil, natural gas and NGLs that are ultimately recovered.
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 Quarterly Report 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 Quarterly Report.
6
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
TALOS ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
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June 30, 2024 |
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December 31, 2023 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable: |
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Trade, net |
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Joint interest, net |
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Other, net |
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Assets from price risk management activities |
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Prepaid assets |
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Other current assets |
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Total current assets |
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Property and equipment: |
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Proved properties |
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Unproved properties, not subject to amortization |
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Other property and equipment |
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Total property and equipment |
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Accumulated depreciation, depletion and amortization |
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( |
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( |
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Total property and equipment, net |
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Other long-term assets: |
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Restricted cash |
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Assets from price risk management activities |
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Equity method investments |
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Other well equipment |
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Notes receivable, net |
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Operating lease assets |
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Other assets |
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Total assets |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERSʼ EQUITY |
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Current liabilities: |
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Accounts payable |
$ |
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$ |
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Accrued liabilities |
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Accrued royalties |
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Current portion of long-term debt |
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Current portion of asset retirement obligations |
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Liabilities from price risk management activities |
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Accrued interest payable |
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Current portion of operating lease liabilities |
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Other current liabilities |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt |
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Asset retirement obligations |
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Liabilities from price risk management activities |
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Operating lease liabilities |
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Other long-term liabilities |
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Total liabilities |
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(Note 13) |
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Stockholdersʼ equity: |
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Preferred stock; $ |
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Common stock; $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Treasury stock, at cost; |
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( |
) |
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( |
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Total stockholdersʼ equity |
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Total liabilities and stockholdersʼ equity |
$ |
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$ |
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See accompanying notes.
7
TALOS ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenues: |
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Oil |
$ |
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$ |
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$ |
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$ |
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Natural gas |
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NGL |
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Total revenues |
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Operating expenses: |
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Lease operating expense |
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Production taxes |
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Depreciation, depletion and amortization |
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Accretion expense |
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General and administrative expense |
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Other operating (income) expense |
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( |
) |
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( |
) |
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( |
) |
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Total operating expenses |
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Operating income (expense) |
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Interest expense |
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( |
) |
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( |
) |
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( |
) |
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( |
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Price risk management activities income (expense) |
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( |
) |
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Equity method investment income (expense) |
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( |
) |
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( |
) |
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( |
) |
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Other income (expense) |
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( |
) |
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Net income (loss) before income taxes |
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( |
) |
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Income tax benefit (expense) |
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( |
) |
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Net income (loss) |
$ |
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$ |
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$ |
( |
) |
$ |
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Net income (loss) per common share: |
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Basic |
$ |
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$ |
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$ |
( |
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$ |
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Diluted |
$ |
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$ |
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$ |
( |
) |
$ |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes.
8
TALOS ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
|
Common Stock |
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Additional |
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Accumulated |
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Treasury Stock |
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Total |
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Shares Issued |
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Par Value |
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Capital |
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Deficit |
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Shares |
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Amount |
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Equity |
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Balance at March 31, 2023 |
|
|
$ |
|
$ |
|
$ |
( |
) |
|
|
$ |
( |
) |
$ |
|
|||||
Equity-based compensation |
|
— |
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— |
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— |
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— |
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— |
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Purchase of treasury stock |
|
— |
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— |
|
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— |
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— |
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( |
) |
|
( |
) |
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Net income (loss) |
|
— |
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— |
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|
— |
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|
|
— |
|
|
— |
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||
Balance at June 30, 2023 |
|
|
$ |
|
$ |
|
$ |
( |
) |
|
|
$ |
( |
) |
$ |
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|||||
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|||||||
Balance at March 31, 2024 |
|
|
$ |
|
$ |
|
$ |
( |
) |
|
|
$ |
( |
) |
$ |
|
|||||
Equity-based compensation |
|
— |
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— |
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— |
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— |
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— |
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Equity-based compensation tax withholdings |
|
— |
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|
— |
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|
( |
) |
|
— |
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|
— |
|
|
— |
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|
( |
) |
Equity-based compensation stock issuances |
|
|
|
— |
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|
— |
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— |
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— |
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|
— |
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— |
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Purchase of treasury stock |
|
— |
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|
— |
|
|
— |
|
|
— |
|
|
|
|
( |
) |
|
( |
) |
|
Net income (loss) |
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
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||
Balance at June 30, 2024 |
|
|
$ |
|
$ |
|
$ |
( |
) |
|
|
$ |
( |
) |
$ |
|
|||||
|
Common Stock |
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Additional |
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Accumulated |
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Treasury Stock |
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Total |
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|||||||||||
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Shares Issued |
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Par Value |
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Capital |
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Deficit |
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Shares |
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Amount |
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Equity |
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|||||||
Balance at December 31, 2022 |
|
|
$ |
|
$ |
|
$ |
( |
) |
|
— |
|
$ |
— |
|
$ |
|
||||
Equity-based compensation |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
$ |
|
||
Equity-based compensation tax withholdings |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
$ |
( |
) |
Equity-based compensation stock issuances |
|
|
|
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
$ |
— |
|
||
Issuance of common stock for acquisitions (Note 2) |
|
|
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|
|
|
|
— |
|
|
— |
|
|
— |
|
$ |
|
||||
Purchase of treasury stock |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
( |
) |
$ |
( |
) |
|
Net income (loss) |
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
$ |
|
||
Balance at June 30, 2023 |
|
|
$ |
|
$ |
|
$ |
( |
) |
|
|
$ |
( |
) |
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|||||||
Balance at December 31, 2023 |
|
|
$ |
|
$ |
|
$ |
( |
) |
|
|
$ |
( |
) |
$ |
|
|||||
Equity-based compensation |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
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||
Equity-based compensation tax withholdings |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
Equity-based compensation stock issuances |
|
|
|
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||
Issuance of common stock for acquisitions (Note 2) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
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|
||||
Issuance of common stock |
|
|
|
|
|
|
|
— |
|
|
— |
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|
— |
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|
||||
Purchase of treasury stock |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
( |
) |
|
( |
) |
|
Net income (loss) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Balance at June 30, 2024 |
|
|
$ |
|
$ |
|
$ |
( |
) |
|
|
$ |
( |
) |
$ |
|
|||||
See accompanying notes.
9
TALOS ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
Six Months Ended June 30, |
|
||||
|
2024 |
|
2023 |
|
||
Cash flows from operating activities: |
|
|
|
|
||
Net income (loss) |
$ |
( |
) |
$ |
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
||
Depreciation, depletion, amortization and accretion expense |
|
|
|
|
||
Amortization of deferred financing costs and original issue discount |
|
|
|
|
||
Equity-based compensation expense |
|
|
|
|
||
Price risk management activities (income) expense |
|
|
|
( |
) |
|
Net cash received (paid) on settled derivative instruments |
|
( |
) |
|
( |
) |
Equity method investment (income) expense |
|
|
|
( |
) |
|
Loss (gain) on extinguishment of debt |
|
|
|
|
||
Settlement of asset retirement obligations |
|
( |
) |
|
( |
) |
Loss (gain) on sale of assets |
|
( |
) |
|
|
|
Loss (gain) on sale of business |
|
( |
) |
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
||
Accounts receivable |
|
|
|
|
||
Other current assets |
|
( |
) |
|
( |
) |
Accounts payable |
|
( |
) |
|
( |
) |
Other current liabilities |
|
|
|
( |
) |
|
Other non-current assets and liabilities, net |
|
( |
) |
|
( |
) |
Net cash provided by (used in) operating activities |
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
||
Exploration, development and other capital expenditures |
|
( |
) |
|
( |
) |
Cash acquired in excess of payments for acquisitions |
|
|
|
|
||
Payments for acquisitions, net of cash acquired |
|
( |
) |
|
|
|
Proceeds from (cash paid for) sale of property and equipment, net |
|
|
|
( |
) |
|
Contributions to equity method investees |
|
( |
) |
|
( |
) |
Investment in intangible assets |
|
|
|
( |
) |
|
Proceeds from sales of businesses |
|
|
|
|
||
Net cash provided by (used in) investing activities |
|
( |
) |
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
||
Issuance of common stock |
|
|
|
|
||
Issuance of senior notes |
|
|
|
|
||
Redemption of senior notes |
|
( |
) |
|
( |
) |
Proceeds from Bank Credit Facility |
|
|
|
|
||
Repayment of Bank Credit Facility |
|
( |
) |
|
( |
) |
Deferred financing costs |
|
( |
) |
|
( |
) |
Other deferred payments |
|
( |
) |
|
( |
) |
Payments of finance lease |
|
( |
) |
|
( |
) |
Purchase of treasury stock |
|
( |
) |
|
( |
) |
Employee stock awards tax withholdings |
|
( |
) |
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
||
|
|
|
|
|
||
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
|
|
||
Cash, cash equivalents and restricted cash: |
|
|
|
|
||
Balance, beginning of period |
|
|
|
|
||
Balance, end of period |
$ |
|
$ |
|
||
|
|
|
|
|
||
Supplemental non-cash transactions: |
|
|
|
|
||
Capital expenditures included in accounts payable and accrued liabilities |
$ |
|
$ |
|
||
Supplemental cash flow information: |
|
|
|
|
||
Interest paid, net of amounts capitalized |
$ |
|
$ |
|
||
See accompanying notes.
10
TALOS ENERGY INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Organization, Nature of Business and Basis of Presentation
Organization and Nature of Business
Talos Energy Inc. (the “Parent Company”) is a Delaware corporation originally incorporated on
The Parent Company (including its subsidiaries, collectively “Talos” or the “Company”) is a technically driven independent exploration and production company focused on safely and efficiently maximizing long-term value through its operations, currently in the United States (“U.S.”) and offshore Mexico. The Company leverages decades of technical and offshore operational expertise towards the acquisition, exploration and development of assets in key geological trends that are present in many offshore basins around the world.
Basis of Presentation and Consolidation
The Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and disclosures normally included in complete financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, these financial statements include all adjustments, which unless otherwise disclosed, are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, cash flows and changes in equity for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year. The unaudited financial statements and related notes included in this Quarterly Report should be read in conjunction with the Company’s audited Consolidated Financial Statements and accompanying notes included in the 2023 Annual Report.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Segments
From January 1, 2024 through March 18, 2024, the Company had
Summary of Significant Accounting Policies
The Company has provided a discussion of its significant accounting policies, estimates and judgments in Note 2 – Summary of Significant Accounting Policies included in the accompanying Notes to Consolidated Financial Statements in the 2023 Annual Report. The Company has not changed any of its significant accounting policies from those described in our 2023 Annual Report.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of the amount of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):
|
June 30, 2024 |
|
December 31, 2023 |
|
||
Cash and cash equivalents |
$ |
|
$ |
|
||
Restricted cash included in Other long-term assets |
|
|
|
|
||
Total cash, cash equivalent and restricted cash |
$ |
|
$ |
|
||
11
Note 2 — Acquisitions and Divestitures
Acquisitions — Business Combinations
Acquisitions qualifying as business combinations are accounted for under the acquisition method of accounting, which requires, among other items, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.
QuarterNorth Acquisition — On
The following table summarizes the purchase price (in thousands except share and per share data):
Shares of Talos common stock |
|
|
|
Talos common stock price(1) |
$ |
|
|
Common stock value |
$ |
|
|
|
|
|
|
Cash consideration |
$ |
|
|
|
|
|
|
Total purchase price(2) |
$ |
|
|
The following table presents the latest preliminary allocation of the purchase price to the assets acquired and liabilities assumed, based on their fair values on March 4, 2024 (in thousands):
Cash and cash equivalents |
$ |
|
|
Other current assets |
|
|
|
Property and equipment |
|
|
|
Other long-term assets |
|
|
|
Current liabilities: |
|
|
|
Current portion of asset retirement obligations |
|
( |
) |
Other current liabilities |
|
( |
) |
Long-term liabilities: |
|
|
|
Asset retirement obligations |
|
( |
) |
Deferred tax liabilities |
|
( |
) |
Other long-term liabilities |
|
( |
) |
Allocated purchase price |
$ |
|
|
The fair values determined for accounts receivable, accounts payable and other current assets and most current liabilities were generally equivalent to the carrying value due to their short-term nature.
The fair value of proved oil and natural gas properties as of the acquisition date is based on estimated proved oil, natural gas and NGL reserves and related discounted future net cash flows incorporating market participant assumptions. Significant inputs to the valuation include estimates of future production volumes, future operating, development and plugging and abandonment costs, future commodity prices, and a weighted average cost of capital discount rate. When estimating the fair value of proved and unproved properties, additional risk adjustments were applied to proved developed non-producing, proved undeveloped and probable reserves to reflect the relative uncertainty of each reserve class. These inputs are classified as Level 3 unobservable inputs, including the underlying commodity price assumptions which are based on the three-year NYMEX forward strip prices, escalated for inflation thereafter, and adjusted for price differentials.
The fair value of asset retirement obligations is determined by calculating the present value of estimated future cash flows related to the liabilities. The Company utilizes several assumptions, including a credit-adjusted risk-free interest rate, estimated costs of decommissioning services, estimated timing of when the work will be performed and a projected inflation rate.
The fair values of derivative instruments were estimated using a third-party industry standard pricing model which considers various inputs such as quoted forward commodity prices, discount rates, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant data.
12
The Company is still finalizing the fair value analysis related to the oil and natural gas properties, other well equipment, asset retirement obligations assumed, certain contingent liabilities and deferred tax liabilities arising from the assets acquired and liabilities assumed. The preliminary purchase price allocation will be subject to further refinement as the Company continues to refine its estimates and assumptions based on further information available at the acquisition date. These refinements may result in material changes to the estimated fair value of assets acquired and liabilities assumed. The Company anticipates finalizing the determination of fair values by December 31, 2024.
The Company incurred approximately $
The following table presents revenue and net income attributable to the QuarterNorth Acquisition for the three months ended June 30, 2024 and the period from March 4, 2024 to June 30, 2024:
|
Three Months Ended June 30, 2024 |
|
Six Months Ended June 30, 2024 |
|
||
Revenue |
$ |
|
$ |
|
||
Net income (loss) |
$ |
|
$ |
|
||
Pro Forma Financial Information (Unaudited) —
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
Revenue |
$ |
|
$ |
|
$ |
|
$ |
|
||||
Net income (loss) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||
Basic net income (loss) per common share |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||
Diluted net income (loss) per common share |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||
EnVen Acquisition — On
The Company incurred approximately $
13
The following table presents revenue and net income (loss) attributable to the EnVen Acquisition for the three months ended June 30, 2023 and the period from February 13, 2023 to June 30, 2023 (in thousands):
|
Three Months Ended June 30, 2023 |
|
Six Months Ended June 30, 2023 |
|
||
Revenue |
$ |
|
$ |
|
||
Net income (loss) |
$ |
|
$ |
|
||
Pro Forma Financial Information (Unaudited) —
|
Three Months Ended June 30, 2023 |
|
Six Months Ended June 30, 2023 |
|
||
Revenue |
$ |
|
$ |
|
||
Net income (loss) |
$ |
|
$ |
|
||
Basic net income (loss) per common share |
$ |
|
$ |
|
||
Diluted net income (loss) per common share |
$ |
|
$ |
|
||
Divestiture
Talos Low Carbon Solutions Divestiture — On
The Company incurred approximately $