Talos Energy sees record liquidity level after two debt sales in Q4

By Devika Patel

Knoxville, Tenn., March 11 – Talos Energy Inc. has improved liquidity through debt offerings last quarter, and its position is now comparable to what it was before the Covid-19 pandemic and is the highest liquidity level in the company’s history.

“In the fourth quarter and early 2021, we opportunistically accessed the capital markets with proceeds used to refinance our old notes and significantly improve our liquidity position, which is now similar to what it was pre-pandemic today,” president and chief executive officer Timothy S. Duncan said on the company’s fourth quarter and year ended Jan. 31 earnings conference call on Thursday.

The capital markets transactions raised about $675 million, leading to the highest liquidity in the company’s history, and the leverage ratio is still relatively low at around 2.2x.

“In December 2020 and January 2021, we executed three capital markets transactions to retire our notes due in the first half of 2022 and to reduce our borrowings under our credit facility,” executive vice president and chief financial officer Shannon E. Young III said on the call.

“The company raised approximately $675 million in gross proceeds through these transactions.

“Our Jan. 31, 2021 balance sheet inclusive of the cumulative effect of these transactions generates a net debt to last 12 months’ EBITDA ratio of approximately 2.2x and liquidity of approximately $546 million, one of the highest liquidity levels in the company’s history.

“These transactions eliminated a material near-term maturity and provided Talos with substantial flexibility as we move into 2021.

“Currently, Talos is actively working on the spring borrowing base redetermination process and pursuing a maturity extension of that facility.

“We are confident that the company will continue to maintain robust liquidity and a healthy maturity profile enabling Talos to meet its operational and strategic objectives,” Young said.

Liquidity was $545.9 million as of Jan. 31.

On Dec. 14, 2020, subsidiary, Talos Production Inc., said it plans to fund the redemption of its outstanding 11% second-priority senior secured notes due 2022 with proceeds from its $400 million second-priority senior note offering.

The proceeds from the new notes will also fund any premiums, fees and expenses related to the redemption.

Any remaining proceeds will be used for general corporate purposes, which may include the repayment of a portion of the outstanding borrowings under the company’s reserves-based lending facility.

On Dec. 17, 2020, Talos Production priced an upsized $500 million issue of 12% five-year second-priority senior secured notes (B3/B+/B) at 91 to yield 14.583%.

The issue size increased from $400 million.

The coupon came on top of coupon talk. The issue price came in the middle of the 90 to 92 price talk. Coupon talk and price talk both had come on top of early guidance.

J.P. Morgan Securities LLC was the lead in a syndicate that also included Goldman Sachs & Co. LLC, Pareto, NatWest Markets Securities Inc., TD Securities (USA) LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, KeyBank Capital Markets Inc., UBS Securities LLC, Capital One Securities Inc. and Mizuho Securities USA Inc.

Proceeds were earmarked to redeem the Talos Production 11% second-priority senior secured notes due 2022, with any remaining proceeds to be used for general corporate purposes, which may include paying down the reserves-based lending facility.

On Jan. 11, Talos Production priced an upsized $150 million add-on to its 12% second priority senior secured notes due Jan. 15, 2026 at 97 in a drive-by.

The issue size increased from $100 million.

The issue price came at the rich end of the 96 to 97 price talk. Initial price talk was 95 to 96.

J.P. Morgan Securities LLC was the lead.

The Houston-based oil and gas company earmarked the proceeds to repay debt under its reserves-based lending facility.

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