Talos Energy Raises 2026 Production Guidance After Strong Q3 Output

Talos Energy Inc. (NYSE: TALO) increased its full-year 2026 production guidance after third-quarter output averaged 92,000 barrels of oil equivalent per day, supported by base-business performance and a Gulf of America bolt-on acquisition completed late in the period. The offshore producer also generated $406 million of adjusted EBITDA and $186 million of adjusted free cash flow before working-capital changes, while maintaining leverage at 0.6 times.

The company now expects 2026 production of 92,500 to 94,500 BOE per day, up from its original range of 85,000 to 90,000 BOE per day. Oil production guidance increased to 68,000 to 70,000 barrels per day from 62,000 to 66,000 barrels per day. The revised forecast incorporates the acquisition completed on Sept. 22, the non-core shelf divestment closed on July 15 and an estimated fourth-quarter reduction of about 7,000 BOE per day from Hurricane Isaias in early October.

Third-quarter oil production averaged 69,000 barrels per day and represented 75% of total output. Talos reported adjusted EBITDA attributable to the company of $406.1 million, or $48.26 per BOE. Excluding hedges, adjusted EBITDA was $435.9 million, equivalent to $51.80 per BOE. Cash operating costs benefited from a decline in operating expenses to $16.74 per BOE from $18.25 in the second quarter.

On a GAAP basis, Talos recorded a net loss attributable to the company of $81.2 million, or $0.49 per diluted share. Adjusted net income was $99.3 million, or $0.58 per diluted share, after adjustments that included derivative fair-value movements, cash settlements on derivatives, non-cash taxes and a loss on debt extinguishment.

Portfolio Expansion and Project Activity

Talos completed its Gulf of America bolt-on acquisition for a final net cash purchase price of $420 million while also completing the sale of non-core shelf assets. The acquired portfolio includes the operated Coulomb development opportunity, which the company expects to consider for capital allocation in 2027.

Several development projects advanced during the quarter. The operated CPN project achieved first oil in September, following first production from Cardona in January. Platform-rig operations also began on the Brutus program, where first oil is planned for 2027.

At Daenerys, an appraisal well reached a total vertical depth of 29,484 feet and encountered oil pay in multiple high-quality subsalt Miocene sands. Talos said reservoir and fluid samples are being tested as it evaluates development concepts ranging from a tieback to a standalone host. A sidetrack is planned for 2027 to further assess the discovery, followed by a separate exploration well in late 2027 or early 2028.

The non-operated Monument development remains underway after its fourth well was spud in early September. First oil is now expected in the first quarter of 2027, reflecting the operator’s rig redeployment after the third well. Monument has estimated gross 2P reserves of about 115 million BOE, with an anticipated initial gross production rate of 20,000 to 30,000 BOE per day.

Outside the U.S., Talos is progressing its Block 29 farm-in offshore Mexico toward a potential final investment decision in 2027. The development is anchored by the Polok and Chinwol discoveries and contains more than 200 million BOE of gross recoverable resources, according to the presentation. Closing remains subject to approval from Mexico’s SENER. The company also began a 3D seismic campaign offshore Honduras in October, covering a position of more than 4 million gross acres.

Spending, Balance Sheet and Shareholder Returns

Talos narrowed and reduced its 2026 capital expenditure forecast to $475 million to $525 million from $500 million to $550 million. However, projected plugging, abandonment and decommissioning spending increased to $135 million to $145 million from $100 million to $130 million. Guidance for cash operating expenses and workovers rose to $580 million to $600 million, while general and administrative expense guidance increased to $135 million to $145 million. Interest expense guidance was unchanged at $155 million to $165 million.

The company ended September with $410 million of cash, no borrowings under its credit facility and approximately $1.1 billion of liquidity. Net debt stood at about $1.01 billion. Talos refinanced its 9% notes due in 2029 with $800 million of new 8% notes carrying an eight-year term, leaving it with no scheduled debt maturities until 2030.

Talos returned $24 million to shareholders during the third quarter after resuming share repurchases. Year-to-date returns totaled approximately $62 million, while cumulative repurchases since the capital-return framework was announced in the second quarter of 2025 reached about $160 million. The company had $176 million remaining under its repurchase authorization and continued to target returns of up to 50% of annual free cash flow.

Management expects leverage to remain below 1.0 times at year-end 2027 based on a flat $70-per-barrel WTI assumption. That outlook depends on commodity prices, project execution and the performance of acquired and non-operated assets. Talos also identified hurricane exposure, drilling and geological uncertainty, infrastructure constraints, regulatory approvals, cost inflation and access to capital as material risks. Its Mexico and Honduras plans carry additional uncertainties related to government approvals, third-party operators, project financing and operations in foreign jurisdictions.