Talos Energy $TALO Stock Testing Key Resistance After Dark Pool Trade

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Talos Energy $TALO tested key resistance on November 7, 2022. The stock is testing tough rectangle resistance, but a breakout would be extremely bullish.

Dark Pool Trade In Talos Energy $TALO Stock

A dark pool trade occurred in Talos Energy stock on October 25, 2022. The $9.1 million dark pool order @ $21.18 is impossible to determine if it was a buy or sell order as the stock currently trades close to that price more than a week later. Suffice to say, $21.18 is an important pivot level in $TALO stock.

Talos Enery stock chart on November 7, 2022, with dark pool trade shown with an orange bar.

Make sure to review this lesson on dark pool trading so that you understand the chart above.

Talos Energy Announces Third Quarter 2022 Operational and Financial Results

On November 2, 2022, Talos Energy announced its operational and financial results for the third quarter of 2022. Talos Energy reported Q3 EPS of 75c which met consensus estimates. The company reported Q3 revenue of $377.1M versus the consensus estimate of $309.4M. The company reported Q3 Production of 53,000 barrels of oil equivalent per day inclusive of the impact of approximately 9.1 MBoe/d of primarily planned maintenance downtime associated with regulatory dry-dock of the HP-1 facility.

CEO Timothy S. Duncan says: “We expect to close our acquisition of EnVen around year end. The transaction adds material scale to our business, both in terms of production and operated infrastructure, while also diversifying our production across a broader asset base. The Company will have an even stronger financial profile post-closing with high liquidity and low leverage, plus significant expected cost synergies to further improve margins going forward. Importantly, the transaction also improves our Scope 1 GHG Intensity profile while also acting as a catalyst to make important governance enhancements to our Board of Directors as well. In summary, we believe this is an excellent transaction for Talos.”

Talos Energy resumed with a Buy at Stifel

Nate Pendleton, a Stifel analyst, resumed coverage of Talos Energy on October 19, 2022 with a Buy rating and a $27 price target. Pendleton says that the company is a leader in the carbon capture use and storage sector, which is important for meeting climate targets and has a lot of growth potential. The analyst believes Talos is an undervalued exploration and production company with a differentiated exposure to major carbon capture and storage hubs.

Talos Energy Announces Strategic Acquisition of EnVen Energy

Talos Energy announced on September 22, 2022, the execution of definitive agreements to acquire EnVen Energy Corporation, a private operator in the deepwater Gulf of Mexico, for $1 billion. The strategic transaction will make Talos Gulf of Mexico operations more profitable and add to Talos shareholders 2023E Free Cash Flow per share.

The transaction is valued at $630 million, composed of 44 million Talos shares and $213 million in cash, plus the assumption of EnVens net debt upon closing, currently estimated at approximately $50 million at year-end 2022. After the deal, Talos shareholders will own about 66% of the new company, and EnVens shareholders will own the rest. The Board of Directors of both companies have agreed to the transaction. Closing is expected by year end 2022.

Key Transaction Highlights:

  • Adds ~24 thousand barrels of oil equivalent per day (“MBoe/d”) of production (>80% oil, >90% operated).
  • Increases production by 40% and gross acreage by 35%, significantly increasing operational scale and diversity.
  • Doubles Talos’s operated deepwater facility footprint, adding key infrastructure in existing Talos operating areas.
  • About $460 million of 2022E Adj. EBITDA (~$630 million unhedged) and ~$170 million of 2022E Free Cash Flow.
  • More than 13% accretive to Talos shareholders on 2023E Free Cash Flow per Share.
  • Implied enterprise value representing 2.4x 2022E hedged Adj. EBITDA (1.7x unhedged), a discount to Talos’s current metrics.
  • Immediately de-leveraging, with estimated year-end pro forma net debt ratio3 of less than 0.8x.
  • At least $30 million in expected annual run-rate synergies to be achieved in 2023.
  • Reduces Talos’s GHG Emissions Intensity with deepwater operating footprint.
  • Enhances Board of Directors with 7 fully independent directors plus Talos CEO.
  • Talos will introduce a proposal to eliminate its classified election structure such that all directors are elected annually.

Talos President and Chief Executive Officer Timothy S. Duncan commented: “This transaction adds significant scale and diversity to our business through logical, in-basin expansion with an excellent strategic fit. EnVen’s high-margin, oil-weighted assets in key deepwater regions, operated infrastructure and significant overlapping acreage footprint will enhance our ability to accelerate shareholder value creation. The acquisition is financially attractive, expanding our operating margins and increasing Free Cash Flow per Share while immediately improving our credit profile before accounting for significant expected cost synergies. The enhanced cash flow profile will provide us with increased capital allocation optionality, including additional high-impact subsea tie-back opportunities, opportunistic acquisitions, accelerating our low-carbon initiatives and positioning Talos for a potential shareholder return of capital program in the future. We are excited for the numerous benefits that this transaction provides and look forward to closing around year end.”

Chartmaster on what’s next for oil and energy stocks

Talos Energy $TALO Stock Technical Analysis

Talos Energy stock is in a technical strong uptrend. Long-term indicators suggest a continuation of the uptrend. The stock is testing rectangle resistance and a breakout above $22.50 would be extremely bullish.

Talos Energy stock chart on November 7, 2022, testing rectangle resistance chart pattern with a positive MACD and neutral money flow.
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