Talos Energy has reported operational and financial results for the second quarter of 2021.

Key Highlights:

• Generated a company-record quarterly production rate of 66.3 thousand barrels of oil equivalent per day ("MBoe/d") net (69% oil, 76% liquids).
• Launched a significant carbon capture and storage ("CCS") initiative through an exclusive U.S.-focused venture with Storegga Geotechnologies Ltd. ("Storegga"), an internationally recognized leader in CCS.
• Announced first production from the Tornado Attic well, exceeding expectations, and successful drilling of the Crown and Anchor development well.
• Extended the maturity of the Company's reserves-based lending facility from May 2022 to November 2024, or approximately three and a half years from the amendment.
• Liquidity of over $380 million at quarter-end pro forma for $75 million of additional commitments from DNB ASA ("DNB") to the credit facility. Talos repaid $65 million of credit facility borrowings during the quarter.
• Established long-term emissions reduction targets and further linked executive compensation to Environmental, Social and Governance ("ESG") performance.
• Reaffirmed 2021 operational and financial guidance originally released in March 2021.
• Net Loss of $125.8 million, inclusive of $186.6 million in commodity hedging losses, or $1.54 net loss per diluted share, and Adjusted Net Loss of $0.8 million, inclusive of $69.2 million of realized hedging losses, or $0.01 adjusted loss per diluted share.
• Adjusted EBITDA of $148.1 million, or $25/Boe. Adjusted EBITDA excluding hedges of $217.3 million, or $36/Boe.

President and Chief Executive Officer Timothy S. Duncan commented: "Our team's execution in the second quarter was exceptional. We had record production of over 66 MBoe/d for the second quarter in a row as well as very strong Adjusted EBITDA margins of over $36 per Boe, before the impact of hedges, which speaks to the strength of what our oil-weighted assets can deliver in the current commodity environment. The second quarter is typically our most capital intensive quarter as we take advantage of our best weather offshore, and the projects executed in the second quarter and early third quarter have laid the foundation for the second half of the year and plans for 2022. We recently announced the successful Tornado Attic well, which will add solid incremental production in the third quarter, and we look forward to starting our Pompano rig program in the coming weeks as well. We have re-affirmed our operational and financial guidance and expect meaningful free cash flow generation in the second half of the year."

Duncan continued: "More broadly, I also believe the second quarter provided a roadmap of our strategic direction as a company with a diversified approach in providing low cost energy with the lowest possible environmental impact. We want to responsibly grow our hydrocarbons business through thoughtful capital allocation of development projects and high impact exploration around our infrastructure, as well as continuing to look for strategic acquisition targets. However, even as we expand our asset base, we will continue to focus on producing the lowest possible emissions-equivalent barrels. Our carbon capture and storage joint venture with Storegga takes this commitment a step further and turns our focus toward lowering industrial emissions in the communities where we work and live. CCS is a rapidly-growing space that we believe will benefit from leveraging our experience with conventional geology to sequester carbon and a great avenue for us to also apply our offshore operations skill sets to participate in more diversified energy solutions."

RECENT DEVELOPMENTS AND OPERATIONS UPDATE

Storegga CCS Venture: Talos announced the establishment of an exclusive venture with Storegga to source, evaluate and develop CCS opportunities along the U.S. Gulf Coast and Gulf of Mexico. The venture combines the Company's offshore operational and sub-surface expertise with Storegga's leading end-to-end CCS project experience as the lead developer of the Acorn CCS and Acorn Hydrogen Projects in the United Kingdom. As one of the leading independent operators in the Gulf Coast and Gulf of Mexico, Talos's core skill set naturally complements CCS project requirements. With respect to CO2 injection and storage, specific well-aligned competencies include geology and geophysics, reservoir engineering, drilling and completion operational excellence, regulatory processes and inland water and offshore logistics. Talos and Storegga are actively exploring opportunities with identified counterparties along the value chain, including emitters, infrastructure providers and landowners, among others. The Company expects to provide commercial updates in the near future.

Tornado Attic: Successful drilling and first production was achieved from the Tornado Attic well. Production was brought online ahead of schedule and is currently flowing above initial rate expectations. The Company increased injection rates to over 30,000 barrels of water per day into the producing B-6 formation. Talos initiated the first-of-its-kind intra-well waterflood project in 2020 to source water from a large subsurface aquifer above the producing B-6 Sand, aiming to increase overall production and recovery efficiency through the existing subsea producing wells. Talos holds a 65.0% working interest in the Tornado field and is the operator with Kosmos Energy also holding a 35% working interest.

Crown and Anchor: The Crown and Anchor sidetrack well encountered approximately 50 feet of net true vertical depth ("TVD") oil pay and has moved to the completion phase. The well will produce through existing infrastructure requiring nominal additional tie-back costs, with first production targeted by late third quarter of 2021. Talos holds a 34% working interest in the project along with Beacon Offshore Energy as operator and Ridgewood Crown & Anchor LLC.

Credit Facility: The Company completed amendments to its credit facility to extend maturity from May 2022 to November 2024. The borrowing base of $950.0 million was unanimously approved by the lending syndicate of twelve leading commercial banks with $655.0 million of commitments. Subsequently, Talos added DNB to the credit facility, increasing commitments from $655.0 million to $730.0 million. Pro forma for the addition of DNB, liquidity as of June 30, 2021 was approximately $380.0 million. DNB has joined the Company's lending syndicate as a Joint Lead Arranger, Joint Bookrunner and Syndication Agent and is the thirteenth commercial bank in the credit facility.

Environmental, Social and Governance: Talos instituted greenhouse gas ("GHG") emissions reduction targets of 30% by 2025 from baseline 2018 levels and increased management's annual incentive plan ("AIP") ESG weighting to 20%. Production metrics were eliminated from the AIP and maximum category payouts were reduced from 200% of targets to 150%. The Company's second annual ESG report is expected to be released in the third quarter of 2021. The Company added Paula Glover to its Board of Directors (the "Board") and appointed her to the recently enhanced and re-named Safety, Sustainability and Corporate Responsibility Committee of the Board, which maintains oversight for sustainability and corporate responsibility matters. Ms. Glover is currently President of the Alliance to Save Energy, a Washington D.C.-based non-profit coalition focused on more productive energy use to achieve economic growth and a cleaner environment. She was previously President of the American Association of Blacks in Energy, an organization focused on African American and other minority input into energy policy, regulations and environmental issues. Her 25 years of energy experience as a thought leader advocating for community involvement on a range of energy issues will add impactful perspective to Talos's ESG reporting.

Zama: On May 21, 2021, Talos announced that a third-party engineering firm engaged to evaluate the initial tract participation between Block 7 partners and Petróleos Mexicanos ("Pemex") concluded that the Block 7 consortium holds 49.6% of the gross interest in Zama and Pemex holds 50.4%. Subsequently, on July 5, 2021, Talos announced that Mexico's Ministry of Energy ("SENER") had designated Pemex as the operator of the Zama unit. As previously stated, the Company remains committed to maximizing value for its shareholders and will explore all legal and strategic options to do so.

Production

Production in the second quarter of 2021 averaged 66.3 MBoe/d, a record high quarterly production rate for the Company exceeding the prior record from the first quarter of 2021. The second quarter production rate does not include any impact from the Tornado Attic and Crown and Anchor wells, which initiated or are expected to initiate production in the third quarter of 2021, respectively.

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