TALOS ENERGY INC.

Previous wording

The following significant developments have occurred since the filing of our 2024 Annual Report.

Current wording

The following significant developments have occurred since the filing of our Quarterly Report on Form 10-Q for the period ended March 31, 2025.

Previous wording

QuarterNorth Acquisition —On March 4, 2024, we acquired QuarterNorth Energy Inc. (“QuarterNorth”), a private operator in the Deepwater U.S. Gulf of America (the “QuarterNorth Acquisition”). See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for more information.

Current wording

QuarterNorth Acquisition —On March 4, 2024, we acquired QuarterNorth Energy Inc. (“QuarterNorth”), a private operator in the Deepwater U.S. Gulf of America (the “QuarterNorth Acquisition”). See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for additional information.

Previous wording

During the period January 1, 2025 through March 31, 2025, the daily spot prices for NYMEX WTI crude oil ranged from a high of $80.73 per Bbl to a low of $66.31 per Bbl, and the daily spot prices for NYMEX Henry Hub natural gas ranged from a high of $9.86 per MMBtu to a low of $2.93 per MMBtu. The price the Company realizes on natural gas sales is based on the MMBtu content of such natural gas. We convert MMBtu sales volumes to Mcf volumes for reporting purposes using MMBtu per Mcf factors per third party natural gas processing plant statements. Although we cannot predict the occurrence of events that may affect future commodity prices or the degree to which these prices will be affected, the prices we realize for any commodity that we produce will generally approximate current market prices in the geographic region of production. We hedge a portion of our commodity price risk to mitigate the impact of price volatility on our business. See Part I, Item 1. “Financial Statements — Note 5 —Financial Instruments” for additional information regarding our commodity derivative positions as of March 31, 2025.

Current wording

During the period January 1, 2025 through June 30, 2025, the daily spot prices for NYMEX WTI crude oil ranged from a high of $80.73 per Bbl to a low of $58.50 per Bbl, and the daily spot prices for NYMEX Henry Hub natural gas ranged from a high of $9.86 per MMBtu to a low of $2.65 per MMBtu. The price the Company realizes on natural gas sales is based on the MMBtu content of such natural gas. We convert MMBtu sales volumes to Mcf volumes for reporting purposes using Btu per Mcf factors per third party natural gas processing plant statements. Although we cannot predict the occurrence of events that may affect future commodity prices or the degree to which these prices will be affected, the prices we realize for any commodity that we produce will generally approximate current market prices in the geographic region of production. We hedge a portion of our commodity price risk to mitigate the impact of price volatility on our business. See Part I, Item 1. “Financial Statements — Note 5 —Financial Instruments” for additional information regarding our commodity derivative positions as of June 30, 2025.

Previous wording

Impact of Prolonged Increases in Tariffs —We continue to monitor the rapid changes in global trade policies, including tariff increases, and the impact on our business while evaluating actions to mitigate the impact on our business, results of operations, and financial condition. Any prolonged increases in global tariffs could have a material impact on our financial condition and results of operations in fiscal year 2025 and beyond. The recent tariffs may increase inflation in the near term, lead to slower growth for the U.S. economy and increase the probability of a U.S. recession.

Current wording

Impact of Prolonged Increases in Tariffs —We continue to monitor the rapid changes in global trade policies, including tariff increases, and the impact on our business while evaluating actions to mitigate the impact on our business, results of operations, and financial condition. On April 2, 2025, President Donald Trump signed an executive order setting a 10% baseline tariff on imports, with higher rates for countries running trade surpluses with the U.S. By April 9, 2025, a follow-up order paused most of the higher reciprocal tariffs for 90 days. On July 7, 2025, President Trump extended the tariff modifications through August 1, 2025. Public statements from members of the Trump Administration and President Trump, himself, have indicated the negotiations are continuing with various foreign nations, although an extension of the tariff modification deadline beyond the August 1, 2025 deadline cannot be predicted with certainty at this time. Any prolonged increases in global tariffs could have a material impact on our financial condition and results of operations in fiscal year 2025 and beyond.

Previous wording

Impairment of Oil and Natural Gas Properties —Under the full cost method of accounting, the “ceiling test” under SEC rules and regulations specifies that evaluated and unevaluated properties’ capitalized costs, less accumulated amortization and related deferred income taxes (the “Full Cost Pool”), should be compared to a formulaic limitation (the “Ceiling”) each quarter on a country-by-country basis. If the Full Cost Pool exceeds the Ceiling, an impairment must be recorded. For the three months ended March 31, 2025 and 2024, we did not recognize an impairment based on the ceiling test computations. At March 31, 2025 our ceiling test computation was based on SEC pricing of $74.52 per Bbl of oil, $2.78 per Mcf of natural gas and $21.19 per Bbl of NGLs.

Current wording

Impairment of Oil and Natural Gas Properties —Under the full cost method of accounting, the “ceiling test” under SEC rules and regulations specifies that evaluated and unevaluated properties’ capitalized costs, less accumulated amortization and related deferred income taxes (the “Full Cost Pool”), should be compared to a formulaic limitation (the “Ceiling”) each quarter on a country-by-country basis. If the Full Cost Pool exceeds the Ceiling, an impairment must be recorded. As a result of the Company’s ceiling test computations, an impairment of its U.S. oil and natural gas properties was recorded during both the three and six months ended June 30, 2025 of $223.9 million. At June 30, 2025 our ceiling test computation was based on SEC pricing of $70.41 per Bbl of oil, $3.24 per Mcf of natural gas and $21.58 per Bbl of NGLs. No impairments were recorded during the three and six months ended June 30, 2024. See Part I, Item 1. “Financial Statements — Note 3 —Property, Plant and Equipment” for additional information.

Previous wording

If the unweighted average first-day-of-the-month commodity price for crude oil or natural gas for the period beginning April 1, 2024 and ending March 1, 2025 used in the determination of the SEC pricing was 10% lower, resulting in $67.01 per Bbl of oil, $2.53 per Mcf of natural gas and $19.16 per Bbl of NGLs, while all other factors remained constant, our oil and natural gas properties would have been impaired by approximately $610.0 million assuming all other factors remained constant.

Current wording

If the unweighted average first-day-of-the-month commodity price for crude oil or natural gas for the period beginning July 1, 2024 and ending June 1, 2025 used in the determination of the SEC pricing was 10% lower, resulting in $63.37 per Bbl of oil, $2.95 per Mcf of natural gas and $19.60 per Bbl of NGLs, while all other factors remained constant, our oil and natural gas properties would have been further impaired by approximately an additional $691.6 million assuming all other factors remained constant.

Previous wording

Update on Financial Assurance Rule— Effective June 29, 2024, BOEM adopted a final rule which significantly increases the amount of new supplemental financial assurance required from certain lessees and grant holders conducting operations on the Outer Continental Shelf (“OCS”). The final rule adopted a three-year phased compliance period to fully comply with BOEM’s supplemental financial assurance demands. The final rule was challenged in the U.S. District Court for the Western District of Louisiana (the “District Court”) by multiple oil and gas industry groups and the States of Mississippi, Louisiana and Texas and the District Court granted a stay of the litigation while the agency pursues efforts to suspend, revise, or rescind the final rule. The District Court’s order temporarily limits BOEM’s full implementation of the final rule by limiting BOEM’s ability to seek supplemental financial assurance to cases of sole liability properties and certain non-sole liability properties that are held by owners who are not financially strong, as described in the final rule, and that have no co-owners or predecessors who are financially strong.

Current wording

Update on Financial Assurance Rule— Effective June 29, 2024, BOEM adopted a final rule which significantly increases the amount of new supplemental financial assurance required from certain lessees and grant holders conducting operations on the Outer Continental Shelf (“OCS”). The final rule adopted a three-year phased compliance period to fully comply with BOEM’s supplemental financial assurance demands. The final rule was challenged in the U.S. District Court for the Western District of Louisiana (the “Western Louisiana District Court”) by multiple oil and gas industry groups and the States of Mississippi, Louisiana and Texas and the Western Louisiana District Court granted a stay of the litigation while the agency pursues efforts to suspend, revise, or rescind the final rule. The Western Louisiana District Court’s order temporarily limits BOEM’s full implementation of the final rule by limiting BOEM’s ability to seek supplemental financial assurance to cases of sole liability properties and certain non-sole liability properties that are held by owners who are not financially strong, as described in the final rule, and that have no co-owners or predecessors who are financially strong.

Previous wording

On May 2, 2025, the Department of the Interior (“DOI”) announced its intent to revise and develop a new rule that is consistent with the Trump Administration’s 2020 proposed rule on financial assurance. The specific substance and timing of a revised rule cannot be predicted at this time. However, we anticipate that the new revised rule will revert to BOEM’s decades-long policy of considering the financial strength of both co-owners and predecessors in title when determining whether supplemental financial assurance is required and reduce the credit rating required under the current final rule for financial assurance waivers. In light of these expectations, we anticipate the amount we would be required to bond under the revised rule would be significantly less than under the final rule.

Current wording

On May 2, 2025, the Department of the Interior (“DOI”) announced its intent to revise and develop a new rule that is consistent with the Trump Administration’s 2020 proposed rule on financial assurance. The specific substance and timing of a revised rule cannot be predicted at this time. However, we anticipate that the new revised rule will revert to BOEM’s decades-long policy of considering the financial strength of both co-owners and predecessors in title when determining whether supplemental financial assurance is required and may reduce the credit rating required under the current final rule for financial assurance waivers. In light of these expectations, we anticipate the amount we would be required to bond under the revised rule would be significantly less than under the final rule.

Previous wording

On January 20, 2025, President Trump issued an Executive Order revoking President Biden’s memoranda and the U.S. Secretary of the Interior subsequently issued an order directing the DOI to “take all actions available to expedite the leasing of the OCS for oil and gas exploration and production.” Both President Biden’s and President Trump’s actions described above with respect to OCSLA have been challenged in federal district courts and the future of both actions remains undecided. On April 18, 2025, the Secretary of the Interior directed BOEM to initiate steps to develop a new schedule for offshore oil and gas lease sales in the OCS, which, once finalized, will be the 11th National OCS Program replacing the current 2024-2029 National OCS Program that includes just three lease sales in the Gulf of America, the first of which is expected to be held by the end of 2025. We cannot determine when the 11th National OCS Program will be initiated, or how many lease sales will be scheduled.

Current wording

On January 20, 2025, President Trump issued an Executive Order revoking President Biden’s memoranda and the U.S. Secretary of the Interior subsequently issued an order directing the DOI to “take all actions available to expedite the leasing of the OCS for oil and gas exploration and production.” Both President Biden’s and President Trump’s actions described above with respect to OCSLA have been challenged in federal district courts and the future of both actions remains undecided. On April 18, 2025, the Secretary of the Interior directed BOEM to initiate steps to develop a new schedule for offshore oil and gas lease sales in the OCS, which, once finalized, will be the 11th National OCS Program replacing the current 2024-2029 National OCS Program that includes just three lease sales in the Gulf of America. On April 30, 2025, BOEM published a Federal Register notice requesting information and comments on the preparation of the 11 th National OCS Program. The comment period closed on June 16, 2025. We cannot determine when the 11th National OCS Program will be finalized, or how many lease sales will be scheduled.

Previous wording

Three Months Ended March 31, 2025 and 2024 Volumetric Analysis — Production volumes increased by 21.3 MBoepd to 100.9 MBoepd. The increase was primarily due to 22.8 MBoepd of production from the oil and natural gas assets acquired in the QuarterNorth Acquisition that closed in early March 2024 as well as 6.8 MBoepd of production from the recompletion of one of our operated Brutus wells, which commenced initial production in July 2024. Additionally, there was 2.0 MBoepd in deferred production resulting from third party infrastructure downtime primarily from our Lobster Field in the corresponding period in 2024. These increases were partially offset by a decrease of approximately 8.3 MBoepd due to well performance and natural production declines.

Current wording

Six Months Ended June 30, 2025 and 2024 Volumetric Analysis — Production volumes increased by 9.6 MBoepd to 97.1 MBoepd. The increase was primarily due to 11.3 MBoepd in production from the oil and natural gas assets acquired in the QuarterNorth Acquisition that closed in early March 2024. Additionally, production volumes increased 5.3 MBoepd from the recompletion of one of our operated Brutus wells, which commenced initial production in July 2024 as well as 2.4 MBoepd in deferred production resulting from third party downtime associated with the HP-1 dry dock in our Phoenix Field in the corresponding period in 2024. These increases were partially offset by a decrease of 8.6 MBoepd due to well performance and natural production declines as well as 2.5 MBoepd in deferred production resulting from maintenance and third party infrastructure downtime.

Previous wording

Three Months Ended March 31, 2025 and 2024 — Lease operating expense for the three months ended March 31, 2025 decreased by approximately $7.4 million, or 5%. This was primarily related to a $30.8 million decrease in workover expenses at the Phoenix Field and Garden Banks 506 Field compared to the same period in 2024. This was partially offset by a $16.9 million increase in direct lease operating expenses due to the QuarterNorth Acquisition that closed in late first quarter of 2024. Additionally, there was a $4.6 million decrease in production handling fees related to reimbursements for costs from certain third parties related to our historical operations.

Current wording

Six Months Ended June 30, 2025 and 2024 — Lease operating expense for the six months ended June 30, 2025 decreased by approximately $27.7 million, or 9%. This was due to a $36.8 million decrease in facility and workover expenses primarily related to the HP-1 and major well workover expenses at the Phoenix Field and the Garden Banks 506 Field compared to the same period in 2024. This was partially offset by a $10.7 million increase in direct lease operating expenses due to the QuarterNorth Acquisition that closed in late first quarter of 2024.

Previous wording

Three Months Ended March 31, 2025 and 2024 — Depreciation, depletion and amortization expense for the three months ended March 31, 2025 increased by approximately $65.1 million, or 30%. This increase was primarily driven by the increased production volumes of 21.3 MBoepd discussed above and to a lesser extent an increase of $1.14 per Boe, or 4% in the depletion rate on our proved oil and natural gas properties. See Part I, Item 1. “Financial Statements—Note 2—Acquisitions and Divestitures” for further discussion.

Current wording

Three Months Ended June 30, 2025 and 2024 — Depreciation, depletion and amortization (“DD&A”) expense for the three months ended June 30, 2025 increased by approximately $10.6 million, or 4%. This increase was primarily driven by an increase of $1.98 per Boe, or 7%, in the depletion rate on our proved oil and natural gas properties partially offset by a reduction in production volumes. The change in the DD&A rate between periods caused DD&A expense to increase by $16.8 million and decreased production volumes caused DD&A expense to decrease by $5.7 million.

Previous wording

Three Months Ended March 31, 2025 and 2024 —General and administrative expense for the three months ended March 31, 2025 decreased by approximately $35.2 million, or 50%. This decrease was primarily driven by Upstream Segment transaction costs, severance costs and additional general and administrative expenses incurred in 2024 relating to the QuarterNorth Acquisition of $30.7 million or $3.38 per Boe. Additionally, there was a decrease in the CCS Segment transaction costs, severance costs and expenses of $11.8 million due to the divestiture of our CCS business. See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for further discussion.

Current wording

Six Months Ended June 30, 2025 and 2024 — General and administrative expense for the six months ended June 30, 2025 decreased by approximately $44.0 million, or 37%. This decrease was primarily driven by Upstream Segment transaction costs, severance costs and additional general and administrative expenses incurred in 2024 relating to the QuarterNorth Acquisition of $42.7 million or $2.43 per Boe. Additionally, there was a decrease in the CCS Segment transaction costs, severance costs and expenses of $11.0 million due to the divestiture of our CCS business. See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for additional information. This decrease was partially offset by a $4.8 million increase in consulting fees. Additionally, there was an increase in non-cash equity-based compensation of $3.0 million compared to the same period in 2024. See Part I, Item 1. “Financial Statements — Note 9 —Employee Benefits Plans and Share-Based Compensation” for additional information.

Previous wording

Income Tax (Benefit) Expense — During the three months ended March 31, 2025, we recorded $0.1 million of income tax benefit compared to $21.6 million of income tax benefit during the three months ended March 31, 2024. The income tax benefit recorded during the three months ended March 31, 2025 is primarily due to current year activity offset by the impact from permanent differences. See additional information in Part I, Item 1. “Financial Statements — Note 10 —Income Taxes.”

Current wording

Income Tax (Benefit) Expense — During the three months ended June 30, 2025, we recorded $36.4 million of income tax benefit compared to $1.0 million of income tax benefit during the three months ended June 30, 2024. The income tax benefit recorded during the three months ended June 30, 2025 is primarily due to current year activity offset by the impact of recording a valuation allowance on our U.S. federal deferred tax assets. See additional information in Part I, Item 1. “Financial Statements — Note 10 —Income Taxes.”

Previous wording

Accretion Expense —During the three months ended March 31, 2025, we recorded $30.9 million of accretion expense compared to $26.9 million during the three months ended March 31, 2024. The change is primarily the result of a $3.1 million increase in accretion associated with the asset retirement obligations assumed as part of the QuarterNorth Acquisition in early March 2024. See Part I, Item 1. “Financial Statements—Note 2—Acquisitions and Divestitures.”

Current wording

Accretion Expense — During the six months ended June 30, 2025, we recorded $62.9 million of accretion expense compared to $57.6 million during the six months ended June 30, 2024. The change is primarily the result of a $3.4 million increase in accretion associated with the asset retirement obligations assumed as part the QuarterNorth Acquisition. See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures.”

Previous wording

Other Operating (Income) Expense — During the three months ended March 31, 2024, we recognized a gain of $86.9 million due to the sale of our wholly owned subsidiary, Talos Low Carbon Solutions LLC to TotalEnergies E&P USA, Inc. (the “TLCS Divestiture”). See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures.”

Current wording

Other Operating (Income) Expense —During the six months ended June 30, 2024, we recognized a gain of $86.9 million due to the sale of our wholly owned subsidiary, Talos Low Carbon Solutions LLC to TotalEnergies E&P USA, Inc. (the “TLCS Divestiture”). See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for additional information.

Previous wording

Interest Expense — During the three months ended March 31, 2025, we recorded $40.9 million of interest expense compared to $50.8 million during the three months ended March 31, 2024. The change is primarily due to a $5.1 million decrease in interest expense related to the Bank Credit Facility as a result of lower borrowings compared to the corresponding period in 2024. See Part I, Item 1. “Financial Statements — Note 7 —Debt” for more information. Additionally, there was a decrease of $4.9 million of fees associated with an unutilized bridge loan during the corresponding period in 2024. See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for more information.

Current wording

Interest Expense — During the six months ended June 30, 2025, we recorded $81.7 million of interest expense compared to $99.8 million during the six months ended June 30, 2024. The change is primarily due to a $12.3 million decrease in interest expense as a result of paying off all borrowings under our Bank Credit Facility balance prior to December 31, 2024. See Part I, Item 1. “Financial Statements — Note 7 —Debt” for additional information. Additionally, there was a decrease of $4.9 million of fees associated with an unutilized bridge loan during the corresponding period in 2024. See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for additional information.

Previous wording

Price Risk Management Activities — The expense of $15.9 million for the three months ended March 31, 2025 consists of $21.0 million in non-cash losses from the decrease in the fair value of our open derivative contracts and $5.2 million in cash settlement gains. The expense of $87.1 million for the three months ended March 31, 2024 consists of $83.6 million in non-cash losses from the decrease in the fair value of our open derivative contracts and $3.5 million in cash settlement losses.

Current wording

Price Risk Management Activities — The income of $71.0 million for the six months ended June 30, 2025 consists of $32.5 million in non-cash gains from the increase in the fair value of our open derivative contracts and $38.5 million in cash settlement gains. The expense of $84.8 million for the six months ended June 30, 2024 consists of $63.8 million in non-cash losses from the decrease in the fair value of our open derivative contracts and $21.0 million in cash settlement losses.

Previous wording

Equity Method Investment (Income) Expense — During the three months ended March 31, 2024, we recorded equity losses of $8.1 million primarily related to our CCS Segment.

Current wording

Equity Method Investment (Income) Expense — During the six months ended June 30, 2024, we recorded equity losses of $8.9 million primarily attributable to the CCS Segment offset by an $0.4 million equity method income attributable to the Upstream Segment.

Previous wording

Other (Income) Expense — During the three months ended March 31, 2025, we had $3.9 million of other income compared to $55.9 million in other expense for the three months ended March 31, 2024. The change is primarily a result of a $60.3 million loss on extinguishment of debt from the redemption of the 12.00% Second-Priority Senior Secured Notes due 2026 (the “12.00% Notes”) and 11.75% Senior Secured Second Lien Notes due 2026 (the “11.75% Notes”) during the three months ended March 31, 2024.

Current wording

Other (Income) Expense —During the six months ended June 30, 2024, we recorded a $60.3 million loss on extinguishment of debt in conjunction with the redemption of the 12.00% Second-Priority Senior Secured Notes due 2026 (the “12.00% Notes”) and 11.75% Senior Secured Second Lien Notes due 2026 (the “11.75% Notes”). See Part I, Item 1. “Financial Statements — Note 7 —Debt” for additional information.

Previous wording

Adjusted EBITDA — EBITDA plus non-cash write-down of oil and natural gas properties, transaction and other (income) expenses, decommissioning obligations, the net change in the fair value of derivatives (mark to market effect, net of cash settlements and premiums related to these derivatives), (gain) loss on debt extinguishment, non-cash write-down of other well equipment and non-cash equity-based compensation expense.

Current wording

Adjusted EBITDA — EBITDA plus non-cash impairment of oil and natural gas properties, transaction and other (income) expenses, decommissioning obligations, the net change in the fair value of derivatives (mark to market effect, net of cash settlements and premiums related to these derivatives), (gain) loss on debt extinguishment, non-cash impairment of other well equipment and non-cash equity-based compensation expense.

Previous wording

For the three months ended March 31, 2024, transaction expenses included $28.1 million in costs related to the QuarterNorth Acquisition, inclusive of $14.2 million in severance expense and $9.8 million in costs related to the TLCS Divestiture, inclusive of $3.7 million in severance expense. See further discussion in Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures.” Other income (expense) includes other miscellaneous income and expenses that we do not view as a meaningful indicator of our operating performance. For the three months ended March 31, 2024, the amount included a gain of $86.9 million related to the TLCS Divestiture. See further discussion in Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures.”

Current wording

For the three and six months ended June 30, 2024, transaction expenses included $9.3 million and $37.4 million, respectively, in costs related to the QuarterNorth Acquisition, inclusive of $8.1 million and $22.3 million, respectively, in severance expense. For the six months ended June 30, 2024, transaction expenses include $9.0 million in costs related to the TLCS Divestiture, inclusive of $3.7 million in severance expense. See further discussion in Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures.” Other income (expense) includes other miscellaneous income and expenses that we do not view as a meaningful indicator of our operating performance. For the six months ended June 30, 2024, the amount included a gain of $86.9 million related to the TLCS Divestiture. See further discussion in Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures.”

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Capital Expenditures —The following is a table of our capital expenditures, excluding acquisitions, for the three months ended March 31, 2025 (in thousands):

Current wording

Capital Expenditures —The following is a table of our capital expenditures, excluding acquisitions, for the six months ended June 30, 2025 (in thousands):

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Based on our current level of operations and available cash, we believe our cash flows from operations, combined with availability under the Bank Credit Facility, provide sufficient liquidity to fund the remaining portion of our 2025 capital spending program of $500.0 million to $540.0 million and plugging & abandonment and decommissioning obligations of $100.0 million to $120.0 million. However, our ability to (i) generate sufficient cash flows from operations, (ii) obtain future borrowings under the Bank Credit Facility, and (iii) repay or refinance any of our indebtedness on commercially reasonable terms or at all for any potential future acquisitions, joint ventures or other similar transactions, depends on various operating and economic conditions, many of which are beyond our control. To the extent possible, we have attempted to mitigate certain of these risks (e.g., by entering into oil and natural gas derivative contracts to reduce the financial impact of downward commodity price movements on a substantial portion of our anticipated production), but we could be required to take additional future actions on an opportunistic basis. To address further changes in the financial or commodity markets, future actions may include, without limitation, issuing debt, including secured debt, or issuing equity to directly or independently repurchase or refinance our outstanding indebtedness.

Current wording

Based on our current level of operations and available cash, we believe our cash flows from operations, combined with availability under the Bank Credit Facility, provide sufficient liquidity to fund the remaining portion of our 2025 capital spending program of $490.0 million to $530.0 million and plugging & abandonment and decommissioning obligations of $100.0 million to $120.0 million. However, our ability to (i) generate sufficient cash flows from operations, (ii) obtain future borrowings under the Bank Credit Facility, and (iii) repay or refinance any of our indebtedness on commercially reasonable terms or at all for any potential future acquisitions, joint ventures or other similar transactions, depends on various operating and economic conditions, many of which are beyond our control. To the extent possible, we have attempted to mitigate certain of these risks (e.g., by entering into oil and natural gas derivative contracts to reduce the financial impact of downward commodity price movements on a substantial portion of our anticipated production), but we could be required to take additional future actions on an opportunistic basis. To address further changes in the financial or commodity markets, future actions may include, without limitation, issuing debt, including secured debt, or issuing equity to directly or independently repurchase or refinance our outstanding indebtedness.

Previous wording

Share Repurchase Program —Since the Board initially approved a share repurchase program of $100.0 million on March 20, 2023, the Board has approved increases in share repurchase capacity of $150.0 million on July 22, 2024 and approximately $42.5 million on March 25, 2025, for a total aggregate repurchase capacity of approximately $292.5 million, with approximately $178.0 million remaining under the authorized program as of March 31, 2025. During the three months ended March 31, 2025, we repurchased approximately 2.3 million shares for $22.0 million exclusive of broker commissions. Since the inception of our share repurchase program in March 2023, we have repurchased an aggregate of 9.7 million shares under our authorized program for a total principal amount of $114.5 million. The share repurchase program has no set term limits. All repurchased shares are held in treasury.

Current wording

Share Repurchase Program —Since the Board initially approved a share repurchase program of $100.0 million on March 20, 2023, the Board has approved increases in share repurchase capacity of $150.0 million on July 22, 2024 and approximately $42.5 million on March 25, 2025, for a total aggregate repurchase capacity of approximately $292.5 million, with approximately $145.4 million remaining under the authorized program as of June 30, 2025. During the three and six months ended June 30, 2025, we repurchased approximately 3.8 million and 6.1 million shares for $32.6 million and $54.6 million, respectively, exclusive of broker commissions. Since the inception of our share repurchase program in March 2023, we have repurchased an aggregate of 13.5 million shares under our authorized program for a total principal amount of $147.1 million. The share repurchase program has no set term limits. All repurchased shares are held in treasury.

Previous wording

Operating Activities — Cash flows from operating activities changed $171.8 million in the three months ended March 31, 2025 compared to the corresponding period in 2024 primarily attributable to an increase from revenues and a decrease in lease operating expense of $90.5 million. We had a decrease from general and administrative expenses of $35.2 million primarily related to transaction costs for QuarterNorth Acquisition and the TLCS Divestiture. See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for additional information. There was also a decrease in settlements of asset retirement obligations of $18.2 million. Additionally, there were $5.2 million of net cash settlement receipts on derivative instruments during the three months ended March 31, 2025 compared to $3.5 million in net cash settlement payments during the corresponding period in 2024.

Current wording

Operating Activities — Cash flows from operating activities favorably changed $234.1 million in the six months ended June 30, 2025 compared to the corresponding period in 2024. Working capital at any specific point in time is subject to many variables, including commodity prices, production volumes, and the timing of cash receipts and payments. There was an $86.4 million increase due to changes in working capital accounts largely related to a $60.8 million inflow attributable to accounts receivable between the current period and the corresponding period in 2024 due to a reduction in joint interest receivables and lower commodity prices for trade receivables. There was a $59.5 million increase due to changes in derivative settlements. Net cash received on derivative instruments were $38.5 million during the six months ended June 30, 2025 compared to net cash paid on derivative instruments of $21.0 million during the corresponding period in 2024. Also contributing to the increase in cash flows between periods was a reduction in general and administrative expenses of $44.0 million primarily related to transaction costs for the QuarterNorth Acquisition and the TLCS Divestiture. See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for additional information. Additionally, there was a decrease in settlements of asset retirement obligations of $11.9 million.

Previous wording

Investing Activities — Cash used in investing activities changed $794.3 million in the three months ended March 31, 2025 compared to the corresponding period in 2024. This is primarily due to $916.0 million in cash paid for acquisitions, net of cash acquired, related to the QuarterNorth Acquisition offset by cash proceeds of $142.0 million received from the TLCS Divestiture during the corresponding period in 2024. See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for additional information on the QuarterNorth Acquisition and TLCS Divestiture. Additionally, capital expenditures decreased $17.1 million and contributions to equity method investees decreased of $17.5 million.

Current wording

Investing Activities — Cash used in investing activities changed $770.5 million in the six months ended June 30, 2025 compared to the corresponding period in 2024. This is primarily due to $916.0 million in cash paid for acquisitions, net of cash acquired, related to the QuarterNorth Acquisition offset by cash proceeds of $142.0 million received from the TLCS Divestiture during the corresponding period in 2024. See Part I, Item 1. “Financial Statements — Note 2 —Acquisitions and Divestitures” for additional information on the QuarterNorth Acquisition and TLCS Divestiture. Additionally, capital expenditures decreased $7.0 million.

Previous wording

Financing Activities —Cash flows related to financing activities changed $859.0 million in the three months ended March 31, 2025 compared to the corresponding period in 2024. During the three months ended March 31, 2025, we cash settled $17.3 million of our common stock repurchased through our share repurchase program. See subsection entitled “— Liquidity and Capital Resources — Share Repurchase Program” for additional information. During the three months ended March 31, 2024, the issuance of the Senior Notes in February 2024 generated $1,224.5 million after deferred financing costs. The net proceeds from the Senior Notes funded the $897.1 million redemption of the 12.00% Notes and the 11.75% Notes and partially funded the cash portion of the QuarterNorth Acquisition as discussed in our 2024 Annual Report. Additionally, on January 17, 2024, we entered into anunderwritten public offering of 34.5 million shares of our common stock, which generated net proceeds of $387.7 million after deducting underwriting discounts of $15.1 million and offering expenses of $0.8 million. The net proceeds from this equity offering partially funded the cash portion of the QuarterNorth Acquisition. Furthermore, the Bank Credit Facility had net borrowings of $125.0 million during the corresponding period in 2024.

Current wording

Financing Activities —Cash flows related to financing activities changed $760.1 million in the six months ended June 30, 2025 compared to the corresponding period in 2024. During the six months ended June 30, 2024, the issuance of the Senior Notes in February 2024 generated $1,222.6 million after deferred financing costs. The net proceeds from the Senior Notes funded the $897.1 million redemption of the 12.00% Notes and the 11.75% Notes and partially funded the cash portion of the QuarterNorth Acquisition as discussed in our 2024 Annual Report. Additionally, on January 17, 2024, we entered into anunderwritten public offering of 34.5 million shares of our common stock to partially fund the cash portion of the QuarterNorth Acquisition, which generated net proceeds of $387.7 million. During the six months ended June 30, 2025, we repurchased $54.7 million of our common stock through our share repurchase program compared to $39.3 million in the corresponding period in 2024. See subsection entitled “— Liquidity and Capital Resources — Share Repurchase Program” for additional information. Furthermore, the Bank Credit Facility had no activity during the six months ended June 30, 2025 compared to net borrowings of $25.0 million during the corresponding period in 2024. During the six months ended June 30, 2025, we had deferred payments of $10.2 million primarily related to our acquisition of a 21.4% non-operated working interest in the Monument Project. See Part I, Item 1. “Financial Statements— Note 2 —Acquisitions and Divestitures” for additional information.

Previous wording

9.000% Second-Priority Senior Secured Notes — due February 2029 —The 9.000% Second-Priority Senior Secured Notes due 2029 (the “9.000% Notes”) were issued pursuant to an indenture dated February 7, 2024, by and among the Company, Talos Production Inc. (the “Issuer”), the subsidiary guarantors party thereto (together with the Company, the “Guarantors”) and Wilmington Trust, National Association, as trustee and collateral agent. The 9.000% Notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The 9.000% Notes are secured on a second-priority senior secured basis by liens on substantially the same collateral as the collateral securing the Issuer’s existing first-priority obligations under its Bank Credit Facility. The 9.000% Notes rank equally in right of payment with all of the Issuer’s and the Guarantors’ existing and future senior obligations, are senior in right of payment to any obligations of the Issuer and the Guarantors future debt that is, by its term, expressly subordinated in right of payment to the 9.000% Notes and, to the extent of the value of the collateral, are effectively senior to all existing and future unsecured obligations of the Issuer and the Guarantors (other than the Company) and any future obligations of the Issuer and the Guarantors that are secured by the collateral on a junior-priority basis. The 9.000% Notes are effectively pari passu with all of the Issuer’s and the Guarantors’ existing and future obligations that are secured by the collateral on a second-priority basis including the 9.375% Notes (as defined below) and are effectively junior to any existing and future obligations of the Issuer and the Guarantors that are secured by the collateral on a senior-priority basis to the 9.000% Notes including indebtedness under the Bank Credit Facility. The 9.000% Notes mature on February 1, 2029 and have interest payable semi-annually each February 1 and August 1, commencing August 1, 2024. See Part I, Item 1. “Financial Statements — Note 7 —Debt” for more information.

Current wording

9.000% Second-Priority Senior Secured Notes — due February 2029 —The 9.000% Second-Priority Senior Secured Notes due 2029 (the “9.000% Notes”) were issued pursuant to an indenture dated February 7, 2024, by and among the Company, Talos Production Inc. (the “Issuer”), the subsidiary guarantors party thereto (together with the Company, the “Guarantors”) and Wilmington Trust, National Association, as trustee and collateral agent. The 9.000% Notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The 9.000% Notes are secured on a second-priority senior secured basis by liens on substantially the same collateral as the collateral securing the Issuer’s existing first-priority obligations under its Bank Credit Facility. The 9.000% Notes rank equally in right of payment with all of the Issuer’s and the Guarantors’ existing and future senior obligations, are senior in right of payment to any obligations of the Issuer and the Guarantors future debt that is, by its term, expressly subordinated in right of payment to the 9.000% Notes and, to the extent of the value of the collateral, are effectively senior to all existing and future unsecured obligations of the Issuer and the Guarantors (other than the Company) and any future obligations of the Issuer and the Guarantors that are secured by the collateral on a junior-priority basis. The 9.000% Notes are effectively pari passu with all of the Issuer’s and the Guarantors’ existing and future obligations that are secured by the collateral on a second-priority basis including the 9.375% Notes (as defined below) and are effectively junior to any existing and future obligations of the Issuer and the Guarantors that are secured by the collateral on a senior-priority basis to the 9.000% Notes including indebtedness under the Bank Credit Facility. The 9.000% Notes mature on February 1, 2029 and have interest payable semi-annually each February 1 and August 1, commencing August 1, 2024. See Part I, Item 1. “Financial Statements — Note 7 —Debt” for additional information.

Previous wording

9.375% Second-Priority Senior Secured Notes — due February 2031 —The 9.375% Second-Priority Senior Secured Notes due 2031 (the “9.375% Notes” and, together with the 9.000% Notes, the “Senior Notes”) were issued pursuant to an indenture dated February 7, 2024, by and among the Company, the Issuer, the Guarantors party thereto and Wilmington Trust, National Association, as trustee and collateral agent. The 9.375% Notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The 9.375% Notes are secured on a second-priority senior secured basis by liens on substantially the same collateral as the collateral securing the Issuer’s existing first-priority obligations under its Bank Credit Facility. The 9.375% Notes rank equally in right of payment with all of the Issuer’s and the Guarantors’ existing and future senior obligations, are senior in right of payment to any obligations of the Issuer and the Guarantors future debt that is, by its term, expressly subordinated in right of payment to the 9.375% Notes and, to the extent of the value of the collateral, are effectively senior to all existing and future unsecured obligations of the Issuer and the Guarantors (other than the Company) and any future obligations of the Issuer and the Guarantors that are secured by the collateral on a junior-priority basis. The 9.375% Notes are effectively pari passu with all of the Issuer’s and the Guarantors’ existing and future obligations that are secured by the collateral on a second-priority basis including the 9.000% Notes and are effectively junior to any existing and future obligations of the Issuer and the Guarantors that are secured by the collateral on a senior-priority basis to the 9.375% Notes including indebtedness under the Bank Credit Facility. The 9.375% Notes mature on February 1, 2031 and have interest payable semi-annually each February 1 and August 1, commencing August 1, 2024. See Part I, Item 1. “Financial Statements — Note 7 —Debt” for more information.

Current wording

9.375% Second-Priority Senior Secured Notes — due February 2031 —The 9.375% Second-Priority Senior Secured Notes due 2031 (the “9.375% Notes” and, together with the 9.000% Notes, the “Senior Notes”) were issued pursuant to an indenture dated February 7, 2024, by and among the Company, the Issuer, the Guarantors party thereto and Wilmington Trust, National Association, as trustee and collateral agent. The 9.375% Notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The 9.375% Notes are secured on a second-priority senior secured basis by liens on substantially the same collateral as the collateral securing the Issuer’s existing first-priority obligations under its Bank Credit Facility. The 9.375% Notes rank equally in right of payment with all of the Issuer’s and the Guarantors’ existing and future senior obligations, are senior in right of payment to any obligations of the Issuer and the Guarantors future debt that is, by its term, expressly subordinated in right of payment to the 9.375% Notes and, to the extent of the value of the collateral, are effectively senior to all existing and future unsecured obligations of the Issuer and the Guarantors (other than the Company) and any future obligations of the Issuer and the Guarantors that are secured by the collateral on a junior-priority basis. The 9.375% Notes are effectively pari passu with all of the Issuer’s and the Guarantors’ existing and future obligations that are secured by the collateral on a second-priority basis including the 9.000% Notes and are effectively junior to any existing and future obligations of the Issuer and the Guarantors that are secured by the collateral on a senior-priority basis to the 9.375% Notes including indebtedness under the Bank Credit Facility. The 9.375% Notes mature on February 1, 2031 and have interest payable semi-annually each February 1 and August 1, commencing August 1, 2024. See Part I, Item 1. “Financial Statements — Note 7 —Debt” for additional information.

Previous wording

Bank Credit Facility — matures March 2027 — We maintain a Bank Credit Facility with a syndicate of financial institutions (the “Bank Credit Facility”). The borrowing base is redetermined by the lenders at least semi-annually during the second quarter and fourth quarter of each year based on a proved reserves report that the Company delivers to the administrative agent of our Bank Credit Facility. See Part I, Item 1. “Financial Statements — Note 7 —Debt” for more information.

Current wording

Bank Credit Facility — matures March 2027 — We maintain Bank Credit Facility. The borrowing base is redetermined by the lenders at least semi-annually during the second quarter and fourth quarter of each year based on a proved reserves report that the Company delivers to the administrative agent of our Bank Credit Facility. As discussed above under “— Significant Developments,” both the borrowing base and commitments were reduced as part of the latest semi-annual redetermination process. See Part I, Item 1. “Financial Statements — Note 7 —Debt” for additional information.

Previous wording

We have various contractual obligations in the normal course of our operations. Some of these obligations may be reflected in our accompanying Condensed Consolidated Financial Statements, while other obligations, such as certain operating leases and capital commitments, are not reflected on our accompanying Condensed Consolidated Financial Statements. There have been no material changes to our contractual obligations since those reported in our 2024 Annual Report except for purchase obligations increased from $40.7 million to $85.1 million through 2026 primarily due to increased committed purchase orders to execute planned future drilling activities.

Current wording

We have various contractual obligations in the normal course of our operations. Some of these obligations may be reflected in our accompanying Condensed Consolidated Financial Statements, while other obligations, such as certain operating leases and capital commitments, are not reflected on our accompanying Condensed Consolidated Financial Statements. There have been no material changes to our contractual obligations since those reported in our 2024 Annual Report except for (i) purchase obligations increased from $40.7 million to $78.3 million through 2026 primarily due to increased committed purchase orders to execute planned future drilling activities and (ii) an executed vessel commitment that will result in an additional gross commitment of $42.9 million through 2026.