Good morning. I'm Jeff Robertson, Managing Director with Water Tower Research. It's a pleasure to welcome for our fireside chat today, Tim Duncan, who is one of the founders, President, CEO of Talos Energy. Before we get started with our discussion, I'd just like to mention that we may have some forward-looking statements this morning in our talk. I will refer viewers to Talos' corporate presentation, page two, dated February 28 2022 for the company's latest disclosures around forward-looking statements. With a little bit of housekeeping out of the way, I'd like to get started and welcome, Tim. Thanks for joining us today. Yeah, Jeff, thanks for having us. It's great to be here. You know, look, we love the format. It's a chance for not just institutional investors, retail investors, even our employees to sit in and listen to the conversation. We're really looking forward to it. To your point earlier, certainly, we'd encourage people to go out and grab that corporate presentation, and we'll refer to it, you know, when it makes sense, as we get into our discussion. Talos has been built as or is an offshore-focused exploration and development company. The company pursues both acquisitions and exploration development projects in the U.S. shelf, the U.S. deep water, and has a world-class discovery in Mexico. Tim, if we could just start and lay the backdrop. You've had a lot of success at different platforms. Yeah. in the Gulf of Mexico. What is it about the Gulf of Mexico that you think offers good return opportunities? Maybe is there anything about those return opportunities that investors may not fully understand? Well, look, you know, I've been in the Gulf my whole career, so 27 years. You know, I think when you do that, there's an intimacy on how things can work and how you can build a strategy around a basin. Really for us, what I think makes the Gulf so attractive is it's an enormous geological column of conventional rock. You know, the model obviously had changed over the last 10 years. We understand that. We actually, you know, certainly has nothing to do with the unconventional model. We get the strategy, and there's a lot of really interesting unconventional plays. But for us and our expertise and our background, we really like that big conventional geological column, and we like the rock properties and how that delivers initial flow rates, how that you can manage declines in our views a little better in conventional geology. The trick in conventional geology is having a strategy that really helps you understand how to explore and exploit those resources over time using better technology. We like the column, we like the rock, and then we like the infrastructure. I mean, when you think about the Gulf of Mexico, it's the second biggest producing basin in the U.S., and it has a tremendous amount of infrastructure. How do you take advantage of the infrastructure in place and the geology and accelerating technology to build a sustainable company? We think it's still possible. It's different than how you do it in some of the onshore plays, and so we have to continue to explain that. But I think in somewhere for an investor in being different, there's an opportunity, and that's what we're always trying to show. Of course, as we expand this business going forward, and we can talk a little bit later in the call about CCS, it opens up that opportunity as well because effectively that's a conventional geology opportunity. When it comes to geology, you mentioned unconventional plays. On the onshore, the shale plays obviously were unlocked by innovations in Right. ...stimulations, horizontal drilling, but more importantly, stimulation techniques. Offshore, you rely a lot on geophysics. Can you talk about just how geophysical technology advances and geophysical processing advances have maybe changed the way you look for opportunities in the Gulf and opened up new plays? Yeah. Look, technology, it doesn't matter what business somebody follows, you know, whether that's unconventional sands or rocks in the domestic U.S. It can be medical technology. You know, technology changes the dynamics of how industries move forward, and offshore it's no different. The key technology that we're talking about here is we explore in a big geological column. A well that we might have drilled 20 years ago at 12,000 feet, now we're exploring at 20,000 feet. We might be exploring at 25,000 feet. We'll probably talk about Puma West later. That's at 23,000, 24,000 feet. You have to be able to image. What you do in geophysics is you're trying to image the rock and hopefully image the fluids that are inside that rock, again, because you have good rock properties. Some of that depends on sediment velocities. You're trying to understand what's happening at a deeper depth in the geological column, and you need to be able to shoot seismic in a certain way to go image a target at 25,000 feet-26,000 feet and really understand the various sediments in the geological column. Sand, shale, salt is its own sediment with its own velocities. You can image something and ultimately mitigate your geological and operational risk. That takes a lot of computing speed. So there's that Moore's Law that, you know, computing speed can double every couple years. There's a lot of iterations, and there's a lot of algorithms, a lot of science, and a lot of math. If you hang in there and you let that technology develop, you're gonna get a better view of the geology over time, and that opens up new plays in the Gulf of Mexico. That's why you're constantly hearing about mature plays being redeveloped, when we'll certainly do that in our capital program, and then frontier plays continually being developed by the majors typically, and then as independents, we follow behind that, as we've gone on in the history of the Gulf of Mexico. We think that's very exciting, and we think if you manage that technology well, you can manage your risk well, and it's still a place where you can have good sustainable returns and sustainable investment and free cash flow generation. We're big on that. You also have some subsea technologies, different topic than the geophysics, but a lot of advancement so you can have a subsea well a little further away than where we thought about subsea wells, again, 10 years ago, 15 years ago. Does Talos push the envelope on reprocessing your geophysical data datasets to look for new opportunities or just reprocess the data in a way that highlights different aspects of the traps you're looking for? You know, look, I mean, I don't wanna say we push the envelope more than others. I mean, you give this, you know, some of the friends that we have that they're with the majors, BP is a great example, certainly Chevron. BP has been very visible, very public about how they think about reprocessing and pushing the data. We certainly don't wanna take credit where others are as well. I would tell you, for a company our size and an independent, we are unbelievably rigorous and committed to the process of trying to make sure we understand the geological risk we may be taking, how to manage that, and how to use geophysics to understand not just what we're doing, but what other people are doing in the region. We have over 90 million acres of seismic to complement a 1.3 million acre, you know, portfolio. We wanna be able to see everything. As we narrow down where we're focusing our investments, we'll continue to iterate the seismic locally as we get better well control, really understand against sediment velocity. This is just about, hey, how do we better allocate capital across a spectrum of risk and reward, whether that's development risk, which is obviously not very risky, or we wanna step out into an exploration risk and think about where that fits in our capital program. Much of that is based on our understanding of where we think the reward profile is, and a lot of that just gets down to internal processes on how you think about drilling costs and geophysical technology and things of that nature. You have to be committed to the rigor, and you have to be committed to the tech, or you're just gonna take risks that you probably shouldn't take. I think we've always been committed for an independent company our size. Several years ago, Talos bought Stone Energy, who had a producing assets on the shelf and a deepwater prospect inventory. Right. Can you talk about how the shelf and deepwater complement each other, if they do, in terms of cash flow profiles and opportunity sets? Well, look, they're a little different, you know, from an opportunity set. Obviously, shallow water is a little more mature. You know, from a geological setting, everything you studied in shallow water then just gets extended into deepwater from a geological process in a depositional environment. There's always knowledge to be gained, you know, when you're kinda connecting what's going on in the shallow water area and then to a little deeper area we call the flex trend, and ultimately into deepwater, and then into super deepwater. That Stone deal, you know, what we liked about that is we had a presence in the central Gulf of Mexico. We had a small presence, but not a material presence in the eastern Gulf of Mexico, which is an oily part of the Gulf of Mexico, particularly in deepwater in an area we call Mississippi Canyon. The Stone deal, you know, built us a footprint there that we've then expanded on, and it might be one of our biggest producing areas now. The legacy of that area, and if you can think about that visually south of the river and think about all the sediments that kinda come out of the river over time, over geological time, you can see how, you know, things were discovered in shallow water, and then those plays just extended into deeper water and deeper water. Again, as you go deeper, you have to have the right technology from a subsea tieback perspective, from an imaging perspective to really understand how you can connect. You know, our heritage was in shallow water. I mean, as a younger company, as you mentioned my background, this is the third company I've been lucky enough to build with a lot of really smart people. Talos has been around actually 10 years this month. Our heritage was shallow water gas, if we go back 15 years ago. It went into deepwater oil, and all of that is just connecting the dots in terms of how the basin was developed and where the basin goes from here. Tim, you talked about your background in some of the other platforms you've been involved in. Can you talk a little bit more detail about just how you think about building a sustainable E&P business in the Gulf of Mexico? Yeah. Look, I mean, you know, there's a lot of strategies that have been deployed in the Gulf. I've been, you know, visible and a part of some of those. You know, there's been exploration-only strategies. "Look, all we're gonna do is think about you know, drilling exploration wells, hopefully having a discovery. Maybe that's new construction. Maybe I have to hook it up somewhere else." Look, it's a strategy that absolutely can work, but you gotta have certain ingredients on when you spend the money and the cost of goods environment in which you spend the money, and then when you get that revenue or what's the commodity environment when you get that revenue. If everything you do is exploration, and there's new construction, and you have to wait five to seven years, what you hoped you had could be broken depending on the commodity environment, the cost of goods environment, and when you get first oil. The explore only, the just let's just get out here and only drill wells and explore, which some private, even public companies have done, can work, and it can also not work. The other strategy people deploy is, "I just wanna aggregate assets. All we're gonna do is buy assets, and hopefully, I can buy them cheap, and I'm gonna do development only. I'm not gonna think about exploiting or exploring. I just wanna keep cycling up assets." That's interesting, and you can buy assets potentially at a lower cost. If you're not exploring, if you're not thinking about new volumes into those assets you aggregated, then you're just managing potentially plugging obligations. We have found over the years, the right strategy is you're doing M&A, and you're doing the asset management around those mergers and acquisitions, but you have to have a component of drilling and exploration. That's the best complement of use of infrastructure and frankly, use of what the Gulf of Mexico has to offer on the geology we talked about earlier. We've refined our model over the years as an M&A, as a means to an end to better allocate capital and exploit and explore the basin that we think can give so much if you do it the right way. If we back up, is it really Talos' geophysical and geology understanding of the basin which really is the competitive advantage that underpins both acquisition evaluation and basically puts you on par with the majors when it comes to originating prospects? You know, we think so. I think if we do it well and we can build that credibility, then I think it's also what's interesting about that. Look, you know, we'll talk probably about Zama. That was. Zama was the discovery of the year on the planet. You know, I mean, that's. Look, it's, you know, sometimes it's difficult. We'll talk about navigating the government, but obviously that provided us a lot of credibility to discover something like that in an area that had been underexplored from a conventional geology perspective, from a Middle Miocene perspective, over some time period. That gave us some credibility. Obviously, drilling a project like Puma West with BP and Chevron, I think provides additional credibility, and we're very proud of that. If we do that right, that also makes us, in my view, a very interesting counterparty to either private companies thinking about how they exit or the majors thinking about how they monetize their portfolio. We wanna be able to build trust not only in how we manage our balance sheet, not only in how we think about risk, but ultimately how we think about reinvestment in technology. We wanna be a counterparty people can look to and say, "Hey, look, they're potentially a natural consolidator. They do that the right way." It's certainly something that we think if we have success in the drill bit, success in how we develop assets and how we operate assets, it provides that. We touched on Stone, and you talked about consolidation, and Talos has done several acquisitions, not just Stone over the years. As you said, you can acquire opportunities through acquisitions. You can also acquire prospects by going to the lease sale to the extent the government holds lease sales. Mm-hmm. Acquiring acreage that way. How do you, when you look at acquisitions, what are you really looking for in terms of facilities and further upside development opportunities to have an acquisition make sense? Yeah. Well, a couple things. One, just quickly on that lease sale comment, 'cause, you know, for a listener trying to understand kinda what's happening right now, yeah, there's been a suspension of some lease sales. We've got a lot of acreage. We've got over 700,000 acres of primary term acreage, so we can build out our inventory. I think lease sales will come back. I mean, look, it's required by law in the Outer Continental Shelf Lands Act, and I do think you're gonna see ultimately lease sales come back, and they're important. They're a big part of how this basin has developed. When we do M&A, what's nice about the Gulf, and I think, you know, as investors think about why they should look at us as a company, even though we're again, a little different in the Gulf of Mexico, is that there are not a lot of buyers when there are sellers. I mean, again, there was a mass exodus into the onshore plays. In the Gulf of Mexico, 50% of the production is still produced by three major operators in BP, Chevron, and Shell. Then you've got a bunch of independents. Of course, you still have the Amerada Hess and the Murphys and those folks, and then you've got independents like ourselves. What we're trying to do is because of that dynamic, we can most generally buy all the assets and generate all the economics we think we need to underwrite a transaction inside the proved reserves. If you think about the acreage that could come in a transaction, particularly if it's an entity deal, most of the time that acreage is not part of the pricing, and the underwritten aspects of the transaction. When you get onshore, that acreage is always part of that process. We think that generates a low entry cost on the M&A side that then allows you to really pull in that upside on capital allocation in addition to what you just did on the transaction side. You know, to give you just an idea, we bought an asset right around the time we closed Stone. It was the Ram Powell asset. It was an old Shell asset, 6,500 barrels a day. We did a little asset management work and got it up to 8,000-9,000 barrels a day. We've also hosted other people's projects, so we host their third-party production. We get a fee for that. None of that's baked into the acquisition cost. That's upside. Now this year we're gonna drill two or three prospects within 15 miles of that facility. Obviously, you know, we're gonna be able to utilize that facility and all that upside that rolls through isn't baked into the transaction. You can see these layers of value that you can get through your M&A process. Again, you start with proved reserves, you transact around that, everything else you do is upside. I find that really, really interesting. Going back quickly to that comment around our primary term acreage. Over the last nine years of going to lease sales in the federal government, we've probably spent less than $50 million. You think about that on an annual basis, that's not a lot of money with 700,000 acres of primary term acreage. It's because the vast majority of that acreage we got through our M&A processes, not the lease sale, and the value of that acreage wasn't baked into the economics of those transactions. That's a differentiator for offshore that might be a little different than onshore. Can you talk a little bit about just the state of the acquisition market in the Gulf of Mexico, maybe on the shelf and also deepwater? Well, look, it's not too dissimilar to what you would expect in a changing commodity environment. You know, it's. You can have a seller thinking about last year when oil was coming back out of the $55 range and then the $60 range, and they might be saying, "You know what? It would be an interesting time to think about monetizing an asset," that they had been thinking about maybe for the last several years. That could be a private company, it could be public assets, whatever they are, held by the majors. Then all of a sudden, oil rips to $80-$85 and, you know, you kinda feel good about holding onto that for another year or so. You know, it's never a surprise when you have this dynamic between a bid-ask spread when oil prices are moving around, which is gonna underpin the transaction. You have to be more creative. You have to think about potentially using equity, if it makes sense to use equity, having earn-outs and different types of structures in these deals. You know, there wasn't as robust action in the M&A market offshore last year as previous years. I think hopefully you'll see a little more this year and going forward, but there's that period when you have, you know, big swings in the commodity environment where things can slow down a little bit and people rethink the idea of selling and they hold on a little longer. We understand that dynamic. I mean, we have to do the deal that makes sense, that's accretive for our shareholders. We're just as happy executing our drilling program and growing organically in the near term while we wait for the right M&A deal to kinda show up and make sense for us. You know, you can't. Again, that goes back, Jeff, to the earlier comment. You know, we don't wanna have a drill-only strategy forever, and we don't wanna have a M&A strategy, and that's all we do. We've gotta be comfortable playing both sides of that business development spectrum so that we're patient and we're mindful, and we do the right deals. But look, hopefully things clear up a little bit this year and we're back and focused on potentially some M&A transactions. People, I think when many people think about M&A, they think about buying a producing property or something along those lines. In the Gulf of Mexico, where prospects, especially deepwater prospects Yeah ... can be very expensive, there's also a prospect market, either for Talos-originated prospects, where you want to find partners to take some of the risk exposure and other people doing the same thing. Can you talk a little bit about the prospect market? Yeah ...how that is today? Well, yeah. No, it's kind of interesting. When people do go to lease sales, and again, we were even the fifth most active bidder in deepwater in the last lease sale. I don't wanna understate just how important lease sales are. If folks go to lease sales and they go pick up a 5,000-acre tract or about 5,700, depending on where it is in the Gulf of Mexico tract, at 100%, and they put a little land position on a prospect together, maybe 15,000 acres, and they have it at 100%, now it's time to drill a well, and it could be a $50 million well. It could be a $60 million well. They may not wanna do that at 100%. There's a dynamic in the market around how to sell these prospects and how to participate in those, and we're always looking. Now, what's different a little bit for us is when we talked about that seismic, typically, when we look at outside deals, we might find partners for the deals we know we're gonna operate, and so we have several of those this year, and we're pulling partners into those. We might wanna look at what other people are trying to execute with their rig programs. One big key function for us is we wanna be able to replicate it with our seismic. We wanna be able to regenerate that prospect as if we owned it ourselves, as opposed to just taking, you know, again, whatever we see in a data room or things like that. There are times where we are interested, and then we can, when we regenerate it, maybe we're not ultimately gonna take that, and we're deferring to our portfolio. Everything's around opportunity costs. You know, when are lease explorations? What has more time? What can I regenerate in my process? When any external process has to go through the same rigor as our internal process. If we can do that, we can look at, you know, taking other people's deals. It is an active market, and it's an active market because the cost to lease is different than the cost to execute and drill, and that changes the dynamics of what some companies might wanna participate in or where they lay off and spread some of that risk. It's interesting. I think it's actually what makes the basin fun, is you get to see so many different things and participate in such a big geographical and geological area. The other question, Jeff, going back to M&A, but it's also when we do M&A, why we think about these facilities. Because again, if I can own a facility that a major put in that has 50,000 barrels a day capacity, but it's producing eight, then there's 42 available, if you will, for things in a 25 to 30-mile radius can get run through that facility. You know, again, we use our facilities as part of that business development negotiation as well. When it comes to facilities, and you all have two core areas, you mentioned Mississippi Canyon, but you also have Green Canyon. Should people think about facilities as essentially a hub and spoke type model, where if you make a new discovery and bring incremental production across the platform, that incremental production, because you have excess capacity on the platform, essentially has very, very little operating costs? Yeah. I mean, again, when we underwrite a facility, it's part of a broader field. A major might have put that facility in. They might have spent over $1 billion to put something in. It might have had 50,000-60,000 barrels a day 15 years ago. It's producing 6,000-7,000 barrels a day. You can see that excess capacity. Then it's got fixed costs associated to that. When you think about how that helps you allocate capital, it's not just the excess capacity, it's also the infrastructure that's in place. Does it have subsea systems in place where if I drill a well five miles away, I can utilize that? It's savings on new prospect generation. It's savings on both the capital. Maybe I can save capital costs because I can utilize risers, subsea systems, umbilicals, things of that nature. It's saving you operating costs because, again, I've got so much of that operating cost in place and that infrastructure in place, labor in place, chemicals in place, that I can save that. I've got a high-margin barrel flowing through a fixed cost structure. Why does all that matter? Because it lowers the breakevens if you think about a return hurdle on the prospects. It lets us go look for. We don't have to elephant hunt. We can look for things that are lower risk, a little bit smaller, but still very impactful, some of these subsea wells. You'll see this in our capital program this year. These are, you know, 10 million-15 million barrel targets. The wells can produce 7,000-10,000 barrels a day if they're successful, and they're just single well subsea tie-backs. I don't have to go chase the 100 million-barrel project that ultimately needs new construction. It's a smaller project, you know, lower risk, but utilizes the infrastructure I already have. That's a portfolio we'd love to execute all day long. That leads me to the next topic I'd like to talk about. We've alluded to the nature of short-term or short cycle type projects and also long cycle projects where an exploration or a discovery is made, and then a lot of planning goes into what type of facilities, and it could take several years to- Right ... bring something onto production. When you think about Talos and the size company you are, how do you think about the right mix of long cycle, short cycle projects and the risk reward that goes into both of those? Yeah. Well, look, I mean, I think what's important for us is we're not overweighted on one versus the other, you know, unless there's a really meaningful reason to be. You know, when you were in the pandemic and you saw the commodity price drop in half or, you know, we all remember a couple months where it got unbelievably weird, you know, when we're thinking about our capital program, we had some protective hedges, so we were in a good spot with our hedges. They can work against you, as they do in the near term here, but they were working for us during the pandemic. We had to focus our program on things that could come online quickly. We focused in our Green Canyon area. We put a platform rig physically on top of one of our platforms, and we drilled things that were in those lease positions right away, so they could hook up and come online within three months. That's very fast for offshore. Most of those are lower risk, and you're not gonna build something sustainable by just doing smaller, lower risk things. You've got a basin that can deliver high impact things, and you wanna participate in some of those high impact opportunities. Those take more time. If you think about what we're doing this year, we're doing exploitation subsea tieback projects, generally in the Mississippi Canyon area, that can flow through some of our facilities over there. They're gonna take anywhere between 12, 18, maybe as long as 24 months to come online. The credit's in a great spot, the commodity environment's constructive. This would be the time to go execute on some of those, where we can have a little bit of patience and then enjoy how high impact those can be, but they may not come online till later in 2023 or 2024. What we need is a large acreage position, and we need a mix of portfolio opportunities that hit those different spectrum of timing and risk reward so that we can cycle through what makes sense based on corporate objectives, the commodity environment we're in, where we think or what we might wanna do from a balance sheet perspective, and all that gets into the timing of that. Our job is, the team's job, and they do a great job, is to create projects that can match either of those time frames or inventory requirements. Let's touch a little bit on Zama. You mentioned it earlier. Talos discovered. We participated in the first ever lease sale, offshore offering. Yeah The government of Mexico held in, I think, 2015. Made the Zama discovery in 2017, then followed it with an appraisal process. Where's the update on that? I know you put out a press release just a couple of weeks back. Right about the unitization process, can you also just update from here, what are the next steps to reach an FID sometime in 2023? Yeah. You know, so, yeah, you gave the history exactly right, Jeff. You know, we made that discovery. It was the first ever offshore private sector exploration well in the history of the country. It turned around and we discovered it, we appraised it, we had a third-party independent review and the contingent resource of close to 750 million barrels equivalent. That's in 550 feet of water, so just kinda let that sink in. It's a relatively shallow water, fixed structures, and a huge discovery, and something we're very proud of. Now, you know, again, I think as most of the listeners know, it was big enough that the resource went beyond our block into the lease next door to the east, and the lease holder next door was Pemex. That happens in multiple jurisdictions. That can happen in the Gulf, and the guy next door can be a Chevron, a BP, a Total, whomever. You need to unitize that. You're trying to pull that into one development, which is in the best interest of conserving the resource and getting it developed in an efficient way. That unitization process, you know, is a negotiation, and if you get stuck, then there's an arbitration and, you know, other ways to kinda clear through all that. We went through that negotiation with Pemex. We couldn't get to a final conclusion. That kicked it to the government, which is something they created in terms of rules around unitization and the unitization framework. That was with the last administration, but now, you know, in the current administration, they had a desire to wanna see Pemex be the operator there. Look, we disagree with that. Certainly, they're capable, but because we had so much expertise in the field, obviously, we wanted to see that through and fulfill the promise of what we were trying to do as an operator ourselves. It took a while for the government to finally come to a final view of a unit resolution, and that's what we cleansed out, and they still would like to see Pemex as the operator there. Some of the equity values will get settled through that unit resolution, and that's what we talked about. I think what we're trying to do now is work with not only Pemex, but our partners, to make sure we have the right development plan. Obviously, again, as the operator of our block on the western side of the discovery, we came up with all the development plans. They all went through some FEED studies, things of that nature. We now have to pull the partnership together. What happens in the unit resolution is at least there's clarity on the partnership. We can sit down in a room and really focus on next steps, engineering design, getting close to FEED, and you're seeing that effort amongst the group. We'll continue to try to support that. I think it's, you know, what we want is to have a partnership where everyone's got a seat at the table, everyone's got a voice. We come up with the best plan, it's the most profitable plan, it's a plan that potentially can be financed, and this project can move forward. You do have, from that announcement, a lot more of a working environment among the partners. We're meeting more regularly, and we're trying to get this thing to FID early next year. That's the goal. Then I think, you know, we'll see where we go from there. You know, look, we're proud of what we've done. I think it's something that is in our portfolio. There's gonna be various options on how we monetize that, but our focus right now is getting a development plan and getting this thing to FID early next year. The company has been involved in Mexico. Are there other international basins, Tim, that you think, based on your experience in the Gulf of Mexico, you could explore? Yeah. Well, look, I mean, what's interesting about the Mexican side of the Gulf of Mexico, although the Gulf of Mexico, to be sure, it's a different jurisdiction. The geology isn't the same. I mean, the geology in the eastern side of the Mexican Gulf of Mexico is certainly different than the geology in the central side of the Mexican Gulf of Mexico, which is where we were exploring in the Sureste Basin. You know, I think it showed us and it showed the market that we're capable of going into different jurisdiction and not only having success, frankly, being a leader in those jurisdictions. You know, the question we ask ourselves all the time is, you know, if there are other areas that match our operating skill set, our geological and geophysical skill set, you know, should we think about that if there's really robust opportunities? I think we have. Look, we were in some bidding processes in Latin America last year, some things we looked at in West Africa. You know, nothing that went across the finish line, but we're trying to make sure we're smarter about that. I think, you know, we're not folks that are just dogmatic about, "I can only do one thing." I mean, you know, again, what do we know well? We know conventional geology well, we know offshore operations very well. We have a legacy along the Gulf Coast and some onshore operations. We can manage that, and so we just have to be, I think. You know what you're good at, know what your skills are. If we're just talking about different jurisdictions, we can study and navigate jurisdictional risk. But does it make sense operationally? Does it make sense from an economic perspective? Can we do some good and add some value? If we think we can do that, and we can enter those projects in a low cost way, we'll think about it. You know, but we're not gonna rush to it. But I do think it's something we're trying to be open-minded to as we think about where we go from here in the future, down the line. Let's drill down a little bit on the 2022 capital program that you laid out at the end of February. Talos' plan to spend about $450 million-$480 million both operated and non-operated. Right activities. You mentioned earlier the pandemic, and I think Talos and most other companies in the industry were just concentrated on preservation for several months in 2020 and cash flow generation in 2021. Now that commodity prices are back where they are, the balance sheet's in better shape. How did you think about designing the 2022 capital program in terms of near term, long term production reserve upside type exposures? Yeah. Well, look, I mean, you're absolutely right. I mean, when we started this company 10 years ago, I don't know what the number of E&P bankruptcies were, but there. I think it's greater than 250, and it's probably a shocking number. We've built this company both on the private side and ultimately public through the reverse merger of Stone, through multiple commodity crises. We've been very proud of that. Our leverage debt was about 1.2%, 1.3%. Before the pandemic, we wanted to get under 1x by the end of the year, and we've talked about that. Last year, admittedly, no one knew exactly how quickly prices would run, and we needed to continue to protect the balance sheet, bring that leverage debt down, and really make sure we were protecting the credit. We did that in how we allocated capital last year. We knew we had some low-risk things we could tap into that would come online. Now, as we exited last year, and last year was a record-breaking year for us on a bunch of different fronts, in free cash flow generation, production, even our health, safety and environmental stats. The team is just dialed in, and we really love that about how hard our employees are working. As we looked at this year, knowing we were in a better constructive commodity environment, knowing the type of year we had last year, I think we decided, look, how do we pull in some of these subsea tieback projects that we might not do in a time where we were trying to recover from a pandemic, but we certainly wanna create more alpha in the stock, really build out the equity story. A couple of things that we think can do that are reinstituting some of these subsea tieback projects. We're still gonna have a good chunk of low-risk things to go do, but we wanted to pull in some of these more high impact subsea tieback projects. We wanna build out this CCS vertical that we've been building and that we initiated last year, and get some of those projects executed, which we think are a really interesting part of our story. You know, those two things are really the difference between last year's capital program and this year's capital program. More investment in some of the high-impact things that have been in our portfolio, and then building out the CCS and having some investment around trying to get the project execution on those projects. We think when we look at what that does for us, by the end of this year, going into 2023, 2024, I think it's just a really interesting story, and it just speaks to perseverance and resiliency on how we made it through the pandemic and really, you know, moved the company forward on the other side. I think you mentioned earlier in our discussion some of the productions from the platform activity that could be tied in a couple of months. Yeah. Should we think about the production profile this year as starting to see some of that in the third, maybe the third and fourth quarters and then more impactful maybe in 2023? Well, yeah, that's right. I mean, it's just the nature of that. That platform rig that I told you we used in the Green Canyon area last year. By the way, I mean, just an example of that was an asset called Green Canyon 18. It was initially put in by Exxon. I think when we bought that several years ago, it might be producing 1,800 barrels a day gross on a facility that could handle about 20,000-25,000 barrels a day. You know, we studied it, we reevaluated all the old Exxon wells, and then we did that campaign last year, and it added 10,000 barrels equivalent a day on that facility, the most production it had seen in 20-something years. It's a great story. Now, that platform rig moved to our Pompano facility. It's an old BP asset. We picked it up through the Stone merger, and it's gonna go try to redevelop some reservoirs around that, you know, leased acreage around Pompano. Some of those are fairly quick hits, and we can see some impact in the second quarter. Then some of those are gonna take a little while. We could see the impact in the third, fourth quarter and then into next year. It's just, you know, you drill it, you complete it, pipe a little piping and you know, and it produces. It's a quick turnaround. It's a smaller portion of our budget compared to last year in Green Canyon. The other parts of our budget, which we're drilling subsea tieback wells 10 miles, 15 miles away from Pompano and Ram Powell. Those can get drilled this year, but again, it may take 12-15 months to get those online, so that'll be later 2023 and 2024. Let's talk a little bit about Puma West. The exploration wasn't completely. Yeah. The exploration program was not completely dormant in 2021. No. You all developed a prospect, partnered with BP and Chevron. I believe that goes back to your geophysical data set. Or Puma West was tied into some very, very prolific nearby discoveries that Mad Dog in particular, that I think BP had made. Can you just talk about how you came to partner with them? Also, I think you have an appraisal well planned for Puma West at some point in the second half of this year. Can you talk a little bit about the upside of the timeline? Yeah. For Puma West? Right. Look, that's a really neat, fun story. I mean, it's just a really neat, fun story. That's an acreage position that we picked up, again, in the Stone merger, not really priced into the transaction. We've talked about that. This Mad Dog area is really BP's, one of BP's premier assets, and certainly one of the best assets in the Gulf of Mexico. They've published all this in technical journals. It's about a 4 billion barrel in place area there. There's two huge facilities. Each has a capacity of 150,000 barrels a day. 300,000 barrels a day of capacity and production around this Mad Dog area in Green Canyon for BP. Now, while they were developing that, exploring that, appraising that, they drilled all around the area, and they drilled a well to the western side of that over 10 years ago. They kinda got into salt and never really got out of salt. People were really trying to understand, you know, that salt-sediment relationship. Ultimately, that lease rolled back into the lease sale, and the folks at Stone picked up that lease, and it sat there for eight years or so. We did the Stone transaction. We really thought that was an interesting lease position, so we started reprocessing the data. We knew BP was reprocessing data as they were looking around the Gulf of Mexico and revisiting investments from 10 years ago, 15 years ago, trying to really understand salt dynamics, what's happening below salt. As we finished our reprocessing, we thought, "You know, I think we can see the prospect here." We thought, "Let's permit it. Let's see where the BPs and the Chevrons of the world are. We know that they've got an effort." As we communicated with those guys, it became clear that, "Hey, look, we might be onto something on our reprocessing complementing the work they had done." We all decided to form a partnership and give it a shot and drill a well. We announced the discovery well last year, something we're very happy about, and then we're gonna go try to appraise that this year. Now, what's interesting is we left that discovery well as a keeper. It was great well planning on BP's side. We have a keeper well. We can reenter that and complete it, and so that when we appraise in the appraisal well, if we're successful there, we can take both of those wells and tie them back to some facilities to the north. There's several facilities in the area within 15 miles unrelated to the Mad Dog facilities, just other facilities that we can use, as a way to kind of make this a quicker development, from a subsea perspective. You know, there's a lot going on, but it's just a great example of continuing to pound the technology. It's exactly what we talked about earlier. If you're patient, you can start to re-image these things over time, really understand sediment velocity, do reprocessing and new shoots. You can revisit some things that you knew you were in the right geological setting. You just needed to better understand exactly, you know, where the right spot to drill was, and that's what happened in Puma West and we were able to have a discovery well last year. You know, there's still more to do. We need to appraise it, but I think we're hopeful on what that could be. Does the discovery and what you've learned from the discovery and how it tied into your seismic, does that de-risk other prospects, in the area or, you know, on Talos acreage? Yeah. Well, I mean, again, if you kind of look at a map, we've got over 17,000 acres around Puma West. Typically, in a lot of these discoveries, you can have multiple fault blocks and things of that nature. We need to see, you know, kind of what we appraise and tie all that data in and say, "Look, what does it do around that acreage position?" If you go north for us, heading towards the Phoenix field, and again, there's maps on our presentation, there's an acreage position we have kind of in between where Phoenix is and where Puma West is, where there's some more subsalt Miocene plays that we're interested in, and we've built a lease position around there. BP's been a leasing partner of ours. We'll see where that goes. I mean, again, there's work to do to get the data. What does that teach us? What, how does that apply? More reprocessing. There's a process when you're doing offshore exploration. That's why, look, when we're doing these types of wells, we're gonna participate at a lower working interest, say 25%, than we're doing those exploitation subsea wells in the Mississippi Canyon, where we may participate at 50%, 60%. That's just us, you know, kinda understanding how to allocate risk. We don't wanna not have this in our portfolio. I mean, it could be very impactful wells. Some of these wells in the Mad Dog area can produce, you know, anywhere between 10,000 and 20,000 barrels equivalent a day. Yeah, look, some success here could unlock some potential we have also in other areas in the Green Canyon area. We're excited to see what happens. Very good. Let's pivot a little bit and talk about what's over your, I guess it's over your left shoulder, carbon capture and sequestration. That's this one, right? Talos has built a, and we talked, touched on it very early, the decades-long experience in geology and geophysics and understanding the pore space in the Gulf Coast. Can you talk or help people understand just how that. I mean, geology is geology. Right. to a large degree. How are you all leveraging your experience in the CCS world and the CCS opportunities on the Gulf Coast that you've secured? Yeah. Well, look, I think when we really got into this, I think as ESG was a topic that was in all of the certainly all public companies' minds, we started building these committees internally. You can give some credit to our COO, Bob Abendschein, who really said, "Hey, Tim, I've got an idea. Let's build out these committees where, you know, we reach out to employees and say, 'Hey, do you wanna sit on one of these different ESG committees?'" It could have been diversity inclusion. It could have been, "Hey, how do we think about renewables offshore, wind or whatever?" We had all these different topics, and we looked at everything. I mean, we actually thought about, "Hey, we're good at construction. We're good at new, you know, project management offshore. Should we think about wind? Look, it doesn't blow as hard in the Gulf, and the electricity is pretty cheap. We moved away from that. Where else can we transfer our skill set in things that the market cares about, that we care about, you know, and frankly, where a lot of capital is going on some of these low carbon initiatives. Then the topic came up around CCS. Look, how does that work? What are we talking about? As we dug in, we realized, my goodness, we can transfer the skill set. You know, previous companies, as I told you, shallow water heritage into the Gulf Coast. A lot of times when you're studying the geology, the geology doesn't know if it's 20 miles inland or 20 miles offshore. We knew all of that in our previous companies. We'd worked with state regulators, we'd worked with private landowners along the Texas and Louisiana Gulf Coast. We really started asking ourselves, is this an area where we could actually play and be competitive? Sometimes when that happens, you need a process that forces you to really think about it. That process in the middle of last year was the Texas General Land Office deciding, "Hey, look, we wanna see if we can pull in requests for proposals and bids around what they were designating, again, the Texas General Land Office, the first ever offshore dedicated sequestration site." That's the one that we now call Bayou Bend. No, excuse me. I'm gonna have to give my one. Yeah, Bayou Bend, right off the coast of Beaumont and Port Arthur. The interesting thing about that is we had the seismic. We had all the seismic from our seismic library. Heck, I drilled some dry holes in that area. It's called High Island state waters. We could model what a plume could look like. We understood the geology, and we really forced ourselves to put together what we thought would be a creative and thoughtful bid around sequestration to the state of Texas. Out of 12 bids, we were the prevailing bidder. Once that happened, we were like, "Look, we're in this now. I mean, let's really figure this out. We don't wanna have one project. How do we build a portfolio of three, four, five of these projects, no different than a portfolio that we're building offshore?" We dedicated a team to it, dedicated resources, brought in, as you can imagine, you know, some good geologists, you know, some of our guys you'd think about chemical engineering and offshore subsea tiebacks, but how does that all relate to the systems around, you know, what we're doing on the, on the transportation side for CO2? We brought in some of our production guys and one of our corporate development guys, land guys. Really thought about how do we build out a separate vertical. Ultimately, we brought in a new executive, Robin Fielder, who is a CEO of two different midstream public entities in Noble Midstream and Western Gas. That's part of the value chain, is transportation around CO2. We've thrown ourselves at this. We wanna be early mover. We wanna put these projects together. It just goes back down to just it's geology. If an emitter or an industrial partner is gonna take the CO2 waste and pull it out of their combustion or pre-combustion processes, you've got to transport it and put it into the ground. That part is project management and geology. It's our expertise, and there's no reason we can't be a leader in this and a participant in this over the long term. Look, we think that's the right play for us going forward. We don't wanna just be an oil and gas company. We wanna really pull in integrated solutions, and it's a solution people care about deeply. I think it's a great process for us. Is it fair to say that Talos's experience operating pretty complex offshore facilities and reservoirs and then working with midstream partners to bring production from offshore, onshore, and get it into market? Right. This is very, very analogous to what you're doing or how you're setting up the CCS business? I mean, there's no doubt. Well, look, one of the reasons the industrial complex is so visible along the Gulf Coast is because it's taking all the oil and gas product offshore, and it's sticking it into name your different industrial processes, whether those are refineries, petrochemical plants, ultimately utility plants, ammonia plants, whatever that is, that the source of oil and gas for the last 70 years offshore has provided to the Gulf Coast community to make the products that we use and need every day. That's how we got here. It just so happens that now, as we're thinking about the climate, as we're thinking about how do we improve emissions broadly going forward, those are places where we can think about emissions improvement and think about carbon capture. To make it work, you need the right geology. That's what's so interesting, is we just happen to be sitting on the perfect geology piece for permanent CO2 sequestration in an industrial complex that happens to be the Gulf Coast of the United States. It's just, you know, these things come together. The question is, for a smaller company, are we gonna wait to see the technological leaders that certainly the majors are and the role they play, which is very important, or can we jump out and lead? Look, totally different, but that's what we did in offshore Mexico. After we were the first private contract, everybody was there after us. After a while, Shell actually had more acreage in offshore Mexico than the U.S. Gulf of Mexico. Everyone was there after we jumped in in offshore Mexico. We've jumped into CCS and grabbing these storage sites that ultimately, we hope will host emissions, and we'll put those away and create permanent sequestration. We've thrown ourselves into that, and we think that creating a leadership position will help that industry make. Then again, you'll see these partnerships evolve. Tim, you mentioned that Texas General Land Office lease down near Beaumont, but you also have agreement with Freeport LNG. Right. agreement with the Port of Corpus Christi Right. an agreement with EnLink to pursue opportunities on the industrial corridor along the west of the Mississippi River. Can you talk about? Some of those are point sources in Freeport, and some could become hub and spoke type models. Yeah. Can you talk about the projects and just what is the solution that Talos is hoping to offer emitters to solve their CO2 sequestration challenge? Yeah. Well, look, you know, when we did the Beaumont lease, we realized, you know, look, we still have work to do. I mean, it's a great sequestration site, but we still need to connect the emitter to the midstream and the transportation. In order to do all that's one thing our team's focused on this year. But again, that was fine. It came out of a process that was managed by the State of Texas, and we were trying to fit what we're trying to do in that process. Once we started thinking more broadly about how to build the business, we started thinking about other areas where we could go directly to a landowner, maybe directly to a midstream company and say, "Hey, look, here's an area where you have clearly active emissions. There's an addressable market, if you will. We think we can put together a land position and a store. Would you like to partner with us on the transportation side?" That delivers a product. Again, this is a customer-facing business where we can go to the emitter and say, "We've got the site, we've got the infrastructure company." Again, that's an example, River Bend with EnLink, or you move over to Corpus Christi and a private midstream company called Howard Energy. We can provide a better solution quicker to the emitter. Because I think what the emitter cares about, to your other part of your question is, "Hey, if I'm gonna make this capital investment and capture CO2 and capture this waste, if you will, I need to know you're gonna be ready when I'm ready to take custody of that, transport it, and put it into the ground." You know, again, there'll be a fee related to that. You know, one thing that we think we deliver is, again, public company, so you can diligence us. We've never had financial distress. We move very quickly. We're very agile. I think we check those boxes. They're gonna want some indemnities around any risk of leakage. We can provide that and make that product in the insurance market. We do that all the time offshore. We think we fit that middle market where, you know, we can move quickly. You can see and expect that project execution. It's easy to diligence our expertise. We've got great partners. I think that's really what we're trying to provide. I think what surprised people, we're doing that in different areas across the Gulf Coast. Now, again, that's a hub model where you have multiple emitters into one infrastructure system into one storage. The point source model, which is pretty interesting, is where, as we talk to various emission sources, and we look at the geology that sits right inside their complex to the extent that they have enough land and enough geology, can we say, "Hey, look, there's not a lot of emissions in some of these areas." Freeport, frankly, really doesn't have a lot of emissions, but what emissions they do have, we can solve right on site. You know, we don't need as much midstream piping. We can do it right there on the land they have. Freeport LNG has a more decarbonized product that they can put into the marketplace. That's absolutely a win-win. Smaller projects, but one you can execute quicker and do it right on site. We would call that a point source, and then the other bigger projects we would call hubs. It's all solving the same common goal and ultimately the same business model. It's just different things in your portfolio, not too dissimilar to oil and gas, that can turn around at different time frames. Let's talk about the milestones that you hope to achieve in these projects this year. As you look to advance them, what are you trying to accomplish in 2022? Well, you know, look, we've ran so hard in 2021 trying to build out this portfolio, and we're still looking at new projects every day, to be sure. I mean, the team's running just as hard as it did last year. Now we've got to really start to execute on some of these things. You know, what's that execution looks like? Look, it's conversation with emitters. It's trying to figure out, you know, where the different sources can be, the distance to our sequestration space. It's about drilling some strat tests. We really gotta go grab that geology. You know, what's funny is if in some of these areas we were drilling for oil and gas at 14,000 feet, and I'm just making up a number, and the place you wanna sequester carbon is at 7,500 feet or 7,000 feet, we really weren't analyzing that on our way down to 14,000 feet. Now we gotta go back in these saline reservoirs and really grab the rocks, understand the rock properties, understand why it's gonna be such a good spot for sequestration. That's a diligence item that the emitters are gonna wanna know about, and so we need to work on that. That's an item that leads to these Class VI permits with the EPA, and we wanna get those permits rolling. Those are the priorities. Get the permits rolling, start knocking through some of the things that are part of the timeline, FID. Get the emitters in here and start working with that. That gets you to a final investment decision that gets these projects rolling. A lot of the team's working on both on the project execution side, and then again, new business development, where do we go from here with the business we're creating? Tim, I know we could probably spend a whole hour talking about CCS, if not more, with everything going on and how this business could unfold over the next couple of years. Right. Since we're kind of getting to the bottom of the hour, I'd like to wrap up and just talk a little bit about how you think about value. You've got a core E&P business, which has a cash flow profile of investing cash or investing capital, then getting the cash flow stream from the production. A CCS business, which I presume will be built around long-term contracts and a long-term cash flow stream. Can you talk about how you think about the value proposition that Talos could offer to investors combining the cash flow profiles of those two businesses? Well, look, I mean it. I think what's interesting about us is in, you know, coming out of the pandemic, investor focused. You had all-time lows in energy investment in the S&P 500 pre-pandemic. Some of that comes back after the pandemic. The focus is on, admittedly, and I understand it, large cap unconventionals, names that they can know and understand. When you're a small cap conventional, you know, you've got to peel that onion back a little bit. We understand that. We think that's one of the reasons we're dislocated and deeply undervalued, and we think that's an opportunity for a lot of investors. I would tell you, our free cash generation process isn't much different. We generated $135 million of free cash flow last year, and that was after hedges. Now we had a hedge book that needed to protect some of that going into, and coming out of a pandemic. Without the hedges, that would have popped up to almost $400 million of free cash flow generation on a $1 billion-dollar market cap. That's an extraordinary amount of unhedged yield, if you will. It just speaks to the health of our assets. What we think we offer is a good free cash flowing business, a management team that understands its strategies, executed it for years and decades, and done that in a very responsible way. We think we're unbelievably good stewards of what we're doing. I think we just had a kink there, Jeff. We think we're good stewards of what we're doing, and then we think we're on the forefront of rethinking oil and gas companies on not just doing the right thing and building out the oil and gas assets, but moving into low carbon investments and decarbonization with what we're doing on CCS, which we think is a tremendous balance of the story we're trying to create. Tim, I think we're about out of time. I think we are. Yeah. We got away pretty good, Jeff. Hopefully everyone caught the end of that. I really appreciate what you've done for us in hosting this. Hopefully the viewers got a lot out of it. Thank you very much, Tim. We appreciate you joining us today. You got it. Thanks.