Talos Energy Inc. plans a 2020 capital expenditures budget of $520-$545 million, inclusive of plugging and abandonment. The capital program, inclusive of assets related to the expected Feb. 28 close of a deal to acquire affiliates of ILX Holdings, is expected to be similar in size, or smaller, than the 2019 Talos stand-alone capital program (OGJ Online, Dec. 11, 2019).
Talos expects to balance infrastructure-led short-cycle projects, such as the Bulleit completion and tieback and several near-field development and exploitation wells, with up to three high-impact exploration wells, including Puma West.
US drilling, completions
The company has allocated $280-$285 million to US drilling and completions. Of that, 40% will be spent on development. In 2Q, Talos Energy hit oil pay at the Talos-operated Bulleit prospect (50%) in the deepwater Gulf of Mexico. The company plans completion and tieback to the Green Canyton 18 platform, with first production expected in the third quarter of 2020.
For the Talos-operated Tornado water flood (65%), the company expects drilling of the Tornado 4 subsea injector well that includes two completions: one completion in a known regional aquifer above the Tornado producing sands and a second completion in the Tornado pay sand. This technique will allow for intra-well flow between the aquifer and the producing horizon, providing a natural source of water and reservoir energy to the Tornado 1 and Tornado 2 subsea wells. By accessing the regional aquifer, the intra-well water injection does not require any subsea or topside modifications. The water flood is expected to help arrest natural declines, add production and materially enhance ultimate recovery of the Tornado field within the broader Phoenix complex. Tornado 4 is expected to be drilled in the second quarter before the Bulleit completion and tieback operations. Tornado 4 should be completed at the end of the third quarter.
The company expects to spend 40% of its US D&C budget on exploitation. The company expects drilling two to three wells utilizing a platform rig at the Talos-owned Green Canyon 18 platform (OGJ Online, Sept. 5, 2018). The GC18 field, originally developed by ExxonMobil, has cumulatively produced over 100 MMboe since being brought online. The planned infill wells were identified by Talos as a result of the company’s initial round of seismic reprocessing within the field leases. The first well in the program is expected to spud at the end of the first quarter with first production planned for the third quarter of 2020.
Non-operated Gunflint #5 (9.6%) is expected to spud in this year’s second quarter, with drilling operations planned for 60 days. If successful, first oil is expected in 2021.Non-operated Claiborne #3 (25%) was spud in January and first production is expected at the end of the year’s second quarter. This project is part of the Transaction that Talos expects to close on February 28, 2020; therefore, the capex and production associated with the project will be reflected in Talos’s financials from Mar. 1 onwards.
The company expects to spend 20% of its US D&C budget on exploration. Plans are being developed to return to the non-operated Puma West prospect (25%) later this year with a slightly modified casing design to continue drilling the well through the main objectives in the Middle and Lower Miocene to a total true vertical depth of 25,200 ft below the seabed (OGJ Online, Sept. 19, 2019). The well was temporarily suspended in January.
Up to two additional high-impact projects are expected this year.
Offshore Mexico
Outside the US D&C budget, the company plans to spend another $15-20 million offshore Mexico. Activity includes the front-end engineering and design (FEED) work related to the Talos-operated Zama discovery on Block 7. Talos continues to progress the project closer towards a final investment decision (OGJ Online, Jan. 7, 2020). Additionally, the company is working on permits for a potential drilling campaign of additional exploration opportunities on the block 7 in 2021. Lastly, Talos is participating in additional geological and geophysical studies related to the company’s 2019 Xaxamani oil discovery on Block 31.
