Roth MKM analyst Leo Mariani, in a research report published on August 8, 2024, provided an update on Talos Energy Inc. (TALO:NYSE) following the company's second quarter 2024 financial results. The analyst maintained a Buy rating and raised the price target to US$16.00 from a previous target.
Mariani noted, "TALO reported 2Q24 CFPS of US$1.54 (excludes US$6.6mn of merger transaction costs), which was 9% above consensus of US$1.42 on higher oil production and better-realized prices."
The company's Q2 2024 production of 95,500 Boepd exceeded consensus estimates, with oil production of 69,300 Bopd being 3.6% above expectations. Mariani highlighted that Talos maintained its 2024 capital expenditure and production guidance.
Key points from the report include:
1. Increased synergy estimates for the QuarterNorth acquisition, from US$30 million to US$35 million in 2024 and from >US$55 million to >US$65 million in 2025+.
2. Acquisition of a 21.4% working interest in the Monument discovery for US$32 million, expected to begin production in late 2026.
3. Delays in drilling schedules for Katmai West #2, Daenerys, and Helms Deep projects.
Mariani raised his 2024 and 2025 CFPS estimates by 6% and 5%, respectively, citing "higher oil production and a larger than expected share buyback."
Talos Energy's strategic focus on improving its balance sheet, maintaining high oil production, and expanding through acquisitions demonstrates the company's commitment to growth and value creation for shareholders.
Roth MKM's valuation methodology for Talos Energy is based on a multiple of debt-adjusted cash flow (DACF). "Our US$16 price target on TALO shares is based on a 3.2x multiple of our 2025 DACF estimate, which is based on US$80 WTI oil and US$3.00 HH gas," Mariani explained.
With a Buy rating and a price target of US$16.00, representing a potential return of approximately 35% from the price at the time of the report of US$11.85, Roth MKM sees upside potential for Talos Energy.
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Disclosures for Roth MKM, Talos Energy Inc., August 8, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
The price target and rating history for Talos Energy, Inc. prior to February 1, 2023 reflect MKM's published opinion prior to the acquisition of MKM Partners, LLC by Roth Capital Partners, LLC.
Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has received compensation for investment banking services from Talos Energy, Inc..
Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has managed or co-managed a public offering for Talos Energy, Inc..
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2024. Member: FINRA/SIPC.
