TALOS ENERGY INC.

Note 1 — Organization, Nature of Business and Basis of Presentation

Organization and Nature of Business

Talos Energy Inc. (the “Parent Company”) is a Delaware corporation originally incorporated on November 14, 2017. The Parent Company conducts all business operations through its operating subsidiaries, owns no operating assets and has no material operations, cash flows or liabilities independent of its subsidiaries. The Parent Company’s common stock is traded on The New York Stock Exchange under the ticker symbol “TALO.”

The Parent Company (including its subsidiaries, collectively “Talos” or the “Company”) is a technically driven, innovative independent energy company focused on maximizing long-term value through our oil and gas exploration and production (“Upstream”) business in the United States (“U.S.”) Gulf of America and offshore Mexico. The Company leverages decades of technical and offshore operational expertise to acquire, explore, and produce assets in key geological trends while maintaining a focus on safe and efficient operations, environmental responsibility and community impact.

Basis of Presentation and Consolidation

The Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and disclosures normally included in complete financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, these financial statements include all adjustments, which unless otherwise disclosed, are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, cash flows and changes in equity for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year. The unaudited financial statements and related notes included in this Quarterly Report should be read in conjunction with the Company’s audited Consolidated Financial Statements and accompanying notes included in the 2024 Annual Report.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Segments

From January 1, 2024 through March 18, 2024, the Company hadtwo operating segments: (i) exploration and production of oil, natural gas and NGLs (“Upstream Segment”) and (ii) CCS (“CCS Segment”). Both segments were reportable based on the Company’s measure of segment profit or loss for the year ended December 31, 2024. With the sale of the CCS business during 2024, the Company's Upstream Segment is currently the only reportable segment being managed on a consolidated basis. See additional information in Note 14 —Segment Information.

Summary of Significant Accounting Policies

The Company has provided a discussion of its significant accounting policies, estimates and judgments in Note 2 –Summary of Significant Accounting Policies included in the accompanying Notes to Consolidated Financial Statements in the 2024 Annual Report. The Company has not changed any of its significant accounting policies from those described in our 2024 Annual Report.

Recently Adopted Accounting Standards

Segment Reporting —In November 2023, the Financial Accounting Standards Board (“FASB”) issued an update to the required disclosures for segment reporting to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses that are regularly reported to the chief operating decision maker (“CODM”) and included within segment profit and loss. The disclosure guidance became effective for annual periods in 2024; became effective for interim periods in 2025; and was applied retrospectively for all prior periods presented in the financial statements. The enhanced segment disclosures are included in Note 14 —Segment Information. The Company determined that the measure of segment profit or loss closest to GAAP was net income (loss).

Recently Issued Accounting Standards Not Yet Adopted

Tax Disclosures —In December 2023, the FASB issued an update which expands disclosures in an entity’s income tax rate reconciliation table for specific categories and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The tabular rate reconciliation will require both percentages and dollars. Currently, there is an option to present the table in either percentages or dollars. The update is effective for annual periods beginning after December 15, 2024 on a prospective basis. However, retrospective application in all periods presented is permitted. Adoption will only impact the Company’s income tax disclosures with no impacts to results of operations, cash flows and financial condition.

Disaggregation of Income Statement Expenses —As disclosed in the Notes to Consolidated Financial Statements of the Company’s 2024 Annual Report, in November 2024, the FASB issued new disclosure guidance relating to the disaggregation of income statement expenses. The Company continues to evaluate the disclosure requirements, which is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of the amount of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):

Note 2 — Acquisitions and Divestitures

Acquisitions — Business Combinations

Acquisitions qualifying as business combinations are accounted for under the acquisition method of accounting, which requires, among other items, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.

QuarterNorth Acquisition —On March 4, 2024, the Company completed the acquisition of QuarterNorth Energy Inc. (“QuarterNorth”), a privately-held U.S. Gulf of America exploration and production company (the “QuarterNorth Acquisition,” and the merger agreement related thereto, the “QuarterNorth Merger Agreement”)for consideration consisting of (i) $1,247.4 million in cash and (ii)24.3 million shares of the Company’s common stock valued at $322.6 million. The cash payment was partially funded with a January 2024 underwritten public offering (the “January Equity Offering”) of 34.5 million shares of the Company’s common stock, borrowings under the Company's senior reserve-based revolving credit facility (the “Bank Credit Facility”), the 9.000% Second-Priority Senior Secured Notes due 2029 and 9.375% Second-Priority Senior Secured Notes due 2031 (together, the “Senior Notes”). The January Equity Offering generated net proceeds of $387.7 million after deducting underwriting discounts of $15.1 million and offering expenses of $0.8 million.

The Company incurred approximately $21.6 million of acquisition-related costs in connection with the QuarterNorth Acquisition exclusive of severance expense, of which $0.3 million and $19.1 million were recognized in thethree and six months ended June 30, 2024. These costs were reflected in “General and administrative expense” on the Condensed Consolidated Statements of Operations except for $4.9 million of fees associated with an unutilized bridge loan that was included in “Interest expense” on the Condensed Consolidated Statements of Operations during thesix months ended June 30, 2024. Additionally, the Company incurred $8.1 million and $22.3 million in severance expense in connection with the QuarterNorth Acquisition for thethree and six months ended June 30, 2024.

The following table presents revenue and net income attributable to the QuarterNorth Acquisition for thethree months ended June 30, 2024 and the period from March 4, 2024 to June 30, 2024:

Pro Forma Financial Information (Unaudited) —The following supplemental pro forma financial information (in thousands, except per common share amounts), presents the condensed consolidated results of operations for thethree and six months ended June 30, 2024 as if the QuarterNorth Acquisition had occurred on January 1, 2023. The unaudited pro forma information was derived from historical statements of operations of the Company and QuarterNorth adjusted to include (i) depletion expense applied to the adjusted basis of the oil and natural gas properties acquired, (ii) interest expense to reflect borrowings under the Bank Credit Facility and Senior Notes, (iii) general and administrative expense adjusted for transaction related costs incurred (including severance), (iv) weighted average basic and diluted shares of common stock outstanding from the issuance of 24.3 million shares of common stock as partial consideration for the QuarterNorth Acquisition and (v) weighted average basic and diluted shares of common stock outstanding from the issuance of 34.5 million shares of common stock from the January Equity Offering that partially funded the cash portion of the QuarterNorth Acquisition. Supplemental pro forma earnings for thethree and six months ended June 30, 2024 were adjusted to exclude $6.5 million and $31.5 million of general and administrative expenses. This information does not purport to be indicative of results of operations that would have occurred had the QuarterNorth Acquisition occurred on January 1, 2023, nor is such information indicative of any expected future results of operations.

Asset Acquisitions

Acquisitions accounted for as asset acquisitions require, among other items, the cost of the acquisition to be allocated to the assets acquired and liabilities assumed based on relative fair value basis.

Acquisition of Working Interest in Monument Oil Discovery —The Company executed two separate definitive agreements to acquire a collective 21.4% non-operated working interest in the Monument oil discovery (“Monument Project”) in the deepwater U.S. Gulf of America located on certain Walker Ridge lease blocks. Cash consideration totaling $20.2 million, after customary closing adjustments, was paid on the closing dates of July 31, 2024 and August 2, 2024 with $24.4 million of additional cash consideration paid periodically in installments beginning January 1, 2025 through April 1, 2026. The Company allocated $42.6 million to proved properties. The carrying amount for the deferred cash consideration of $13.6 million is included in “Other current liabilities” on the Condensed Consolidated Balance Sheets at June 30, 2025.

Acquisition of Incremental Working Interest in Monument Oil Discovery —On March 7, 2025, the Company completed the acquisition of an additional 8.3% non-operated working interest in the Monument Project for $14.8 million, substantially all of which was allocated to proved properties. An additional aggregate $6.3 million of contingent payments will be recognized upon the achievement of certain milestones defined in the agreement.

Subsequent Event —On July 22, 2025, the Company completed the acquisition of an additional 75.2% and 50% working interest in U.S. Gulf of America Mississippi Canyon blocks 108 and 110, respectively, for $33.7 million of cash paid at closing. The Company currently owns an interest in and operates these developed and producing blocks. As part of this acquisition of additional interests in Mississippi Canyon blocks 108 and 110, the Company also acquired an incremental 33.3% ownership in SP 49 Pipeline LLC.

Divestitures

Talos Low Carbon Solutions Divestiture —On March 18, 2024, the Company entered into a definitive agreement relating to and subsequently completed the sale of its wholly owned subsidiary, Talos Low Carbon Solutions LLC to TotalEnergies E&P USA, Inc. for a purchase price of $125.0 million plus customary reimbursements and adjustments, combined totaling approximately $142.0 million (the “TLCS Divestiture”). The TLCS Divestiture included the Company’s entire CCS business including its equity investments in three projects along the U.S. Gulf Coast: Bayou Bend CCS LLC, Harvest Bend CCS LLC, and Coastal Bend CCS LLC. During thesix months ended June 30, 2024, the Company recognized a gain of $86.9 million on the TLCS Divestiture, which is presented as “Other operating income (expense)” on the Condensed Consolidated Statements of Operations. As of June 30, 2025 and December 31, 2024, $11.5 million and $9.7 million of contingent payments are included in “Other current assets,” respectively, on the Condensed Consolidated Balance Sheets.

The Company incurred approximately $6.1 million of costs in connection with the TLCS Divestiture exclusive of severance expense, which was recognized during thesix months ended June 30, 2024 and reflected in “General and administrative expense” on the Condensed Consolidated Statements of Operations. Additionally, the Company incurred $3.7 million in severance expense in connection with the TLCS Divestiture for thesix months ended June 30, 2024.

Note 3 — Property, Plant and Equipment

Proved Properties

Capitalized oil and natural gas costs are limited to a ceiling based on the present value of future net revenues from proved reserves, computed using a discount factor of 10%, plus the lower of cost or estimated fair value of unproved oil and natural gas properties not being amortized less the related tax effects. The Company performs this ceiling test calculation each quarter utilizing SEC pricing. The Company’s ceiling test computations resulted in an impairment of its U.S. oil and natural gas properties during both the three and six months ended June 30, 2025 of $223.9 million. The non-cash impairment is reflected as “Impairment of oil and natural gas properties” on the Condensed Consolidated Statements of Operations and an increase to “Accumulated depreciation, depletion and amortization” on the Company’s Condensed Consolidated Balance Sheets. At June 30, 2025, the Company’s 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.

It is probable that another ceiling test impairment could be recorded in the near term should the 12-month average trailing commodity prices decline as compared to the commodity prices used in prior quarters.

Note 4 — Leases

The Company has operating leases principally for office space, drilling rigs, compressors and other equipment necessary to support the Company’s operations. Costs associated with the Company’s leases are either expensed or capitalized depending on how the underlying asset is utilized. Additionally, the Company has a finance lease and the right-of-use (“ROU”) asset was capitalized and included in proved property and is being depleted as part of the full cost pool.

The lease costs described below are presented on a gross basis and do not represent the Company’s net proportionate share of such amounts. A portion of these costs have been or may be billed to other working interest owners. The Company’s share of these costs is included in property and equipment, lease operating expense or general and administrative expense, as applicable. The components of lease costs were as follows (in thousands):

(1)

Operating lease costs reflect a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis.

(2)

Short-term lease costs are reported at gross amounts and primarily represent costs incurred for drilling rigs and well intervention vessels, most of which are short-term contracts not recognized as a ROU asset and lease liability on the Condensed Consolidated Balance Sheets. The short-term operating lease costs incurred during the periods presented are not necessarily indicative of the Company’s future short-term lease costs and obligations, as it routinely executes short-term contracts for the use of drilling rigs to support its drilling activities. Short-term lease costs for drilling rigs can vary significantly based on the timing of the drilling program. Market conditions can also contribute to the volatility and variability of short-term drilling rig lease costs.

(3)

Variable lease costs primarily represent differences between minimum payment obligations and actual operating charges incurred by the Company related to its long-term leases.

The present value of the fixed lease payments recorded as the Company’s ROU asset and lease liability, adjusted for initial direct costs and incentives were as follows (in thousands):

The table below presents the supplemental cash flow information related to leases (in thousands):

(1)

See QuarterNorth Acquisition in Note 2 —Acquisitions and Divestitures.

Note 5 — Financial Instruments

As of June 30, 2025 and December 31, 2024, the carrying amounts of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate their fair values because they are highly liquid or due to the short-term nature of these instruments.

Debt Instruments

The following table presents the carrying amounts, net of discount and deferred financing costs, and estimated fair values of the Company’s debt instruments (in thousands):

The carrying value of the Senior Notes are adjusted for discount and deferred financing costs. Fair value is estimated (representing a Level 1 fair value measurement) using quoted secondary market trading prices and, where such prices are not available, other observable (Level 2) inputs are used such as quoted prices for similar liabilities in the active markets.

Oil and Natural Gas Derivatives

The Company attempts to mitigate a portion of its commodity price risk and stabilize cash flows associated with sales of oil and natural gas production. The Company is currently utilizing oil and natural gas swaps and costless collars. Swaps are contracts where the Company either receives or pays depending on whether the oil or natural gas floating market price is above or below the contracted fixed price. Costless collars consist of a purchased put option and a sold call option with no net premiums paid to or received from counterparties. Typical collar contracts require payments by the Company if the NYMEX average closing price is above the ceiling price or payments to the Company if the NYMEX average closing price is below the floor price.

The following table presents the impact that derivatives, not designated as hedging instruments, had on its Condensed Consolidated Statements of Operations (in thousands):

The following tables reflect the contracted average daily volumes and weighted average prices under the terms of the Company's derivative contracts as of June 30, 2025:

The following tables provide additional information related to financial instruments measured at fair value on a recurring basis (in thousands):

Financial Statement Presentation

Derivatives are classified as either current or non-current assets or liabilities based on their anticipated settlement dates. Although the Company has master netting arrangements with its counterparties, the Company presents its derivative financial instruments on a gross basis in its Condensed Consolidated Balance Sheets. The following table presents the fair value of derivative financial instruments as well as the potential effect of netting arrangements on the Company's recognized derivative asset and liability amounts (in thousands):

Credit Risk

The Company is subject to the risk of loss on its financial instruments as a result of nonperformance by counterparties pursuant to the terms of their contractual obligations. The Company has entered into International Swaps and Derivative Association agreements with counterparties to mitigate this risk. The Company also maintains credit policies with regard to its counterparties to minimize overall credit risk. These policies require (i) the evaluation of potential counterparties’ financial condition to determine their credit worthiness; (ii) the regular monitoring of counterparties’ credit exposures; (iii) the use of contract language that affords the Company netting or set off opportunities to mitigate exposure risk; and (iv) potentially requiring counterparties to post cash collateral, parent guarantees, or letters of credit to minimize credit risk. The Company’s assets and liabilities from commodity price risk management activities at June 30, 2025 represent derivative instruments from eight counterparties; all of which are registered swap dealers that have an “investment grade” (minimum Standard & Poor’s rating of BBB- or better) credit rating, and are parties under the Company’s Bank Credit Facility. The Company enters into derivatives directly with these counterparties and, subject to the terms of the Company’s Bank Credit Facility, is not required to post collateral or other securities for credit risk in relation to the derivative activities. Had the Company’s counterparties failed to perform under existing commodity derivative contracts the maximum loss at June 30, 2025 would have been$56.2 million.

Note 6 — Equity Method Investments

The Company accounts for its investments in unconsolidated affiliates using the equity method of accounting. The Company's primary investment is Talos Energy Mexico 7, S. de R.L. de C.V (“Talos Mexico”). As of June 30, 2025 and December 31, 2024, the Company's ownership interest in Talos Mexico was 50.1% and the carrying amount of its investment was $111.7 million and $110.2 million, respectively. Talos Mexico is a variable interest entity and the Company's maximum exposure to loss as a result of its involvement with Talos Mexico is the carrying amount of its investment.

On December 16, 2024, the Company entered into an agreement to sell an additional 30.1% equity interest in Talos Mexico to Zamajal, S.A. de C.V. (“Zamajal”), a subsidiary of Grupo Carso, S.A.B. de C.V. (“Carso”), for $49.7 million in cash consideration with an additional $33.1 million contingent on first oil production from the Zama Field (the “Incremental Mexico Equity Sale”). The Incremental Mexico Equity Sale is expected to close during 2025 upon the satisfaction of customary closing conditions and the receipt of all regulatory approvals. After consummation of the Incremental Mexico Equity Sale, Talos Mexico, which currently holds a 17.4% interest in the Zama field, will be owned 20.0% by the Company and 80.0% by Zamajal. While the Company anticipates the Incremental Mexico Equity Sale will close in 2025, there can be no assurance that all of the conditions to closing, including obtaining necessary regulatory approvals, will be satisfied. See Note 12 — Related Party Transactions for additional information on Carso.

Note 7 — Debt

A summary of the detail comprising the Company’s debt and the related book values for the respective periods presented is as follows (in thousands):

(1)

As of June 30, 2025, the Company was in compliance with all debt covenants.

Bank Credit Facility

The Company maintains the Bank Credit Facility with a syndicate of financial institutions. 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 its Bank Credit Facility. As of June 30, 2025, the borrowing base and commitments were $925.0 million; however, the commitments were subject to an availability cap as discussed in the Company’s 2024 Annual Report.

Subsequent Event —On August 4, 2025, the Company entered into the Borrowing Base Redetermination Agreement and Twelfth Amendment to Credit Agreement (the “Twelfth Amendment”). The Twelfth Amendment, among other things, (i) decreased both the borrowing base and commitments to $700.0 million and (ii) removed the $50.0 million cap on the amount of unrestricted cash that may be deducted in the calculation of consolidated total debt (used to calculate the Consolidated Total Debt to EBITDAX ratio under the Bank Credit Facility) if, as of the applicable date of determination, each lender’s total exposure is $0.

Note 8 — Asset Retirement Obligations

The asset retirement obligations included in the Condensed Consolidated Balance Sheets in current and non-current liabilities, and the changes in that liability were as follows (in thousands):

At June 30, 2025, the Company has (1) restricted cash of$107.8 million held in escrow and (2) two notes receivable with an aggregated face value of $66.2 million to settle future asset retirement obligations. A discussion of these assets is included in the accompanying Notes to the Consolidated Financial Statements in the 2024 Annual Report.

Note 9 — Employee Benefits Plans and Share-Based Compensation

Long Term Incentive Plans

Restricted Stock Units (“RSUs”) —The following table summarizes RSU activity under the Amended and Restated Talos Energy Inc. 2021 Long Term Incentive Plan (the “A&R LTIP”):

Performance Share Units (“PSUs”) —The following table summarizes PSU activity under the A&R LTIP:

(1)

There were 783,861 PSUs granted that are eligible to vest based on continued employment and the relative annualized total shareholder return (“TSR”) of the Company as compared to a peer group over athree-year performance period, as modified by the Company’s absolute annualized TSR over the same performance period. The remaining PSUs granted are eligible to vest based on continued employment and the achievement of certain stock-price hurdles over athree-year performance period.

The following table summarizes the assumptions used in the Monte Carlo simulations to calculate the fair value of the TSR PSUs granted at the date indicated:

Share-based Compensation Costs

Share-based compensation costs associated with RSUs, PSUs and other awards are reflected as “General and administrative expense,” on the Condensed Consolidated Statements of Operations, net amounts capitalized to “Proved properties,” on the Condensed Consolidated Balance Sheets.

The following table presents the amount of costs expensed and capitalized (in thousands):

Note 10 — Income Taxes

The Company is a corporation that is subject to U.S. federal, state and local and non-U.S. income taxes.

For the three months ended June 30, 2025, the Company recognized an income tax benefit of$36.4 million for an effective tax rate of 16.4%. The Company’s effective tax rate is different than the U.S. federal statutory income tax rate of 21% primarily due to recording a valuation allowance on its U.S. federal deferred tax assets.

For the three months ended June 30, 2024, the Company recognized an income tax benefit of$1.0 million for an effective tax rate of -8.6%. The Company’s effective tax rate is different than the U.S. federal statutory income tax rate of 21% primarily due to a non-cash income tax benefit recognized in the Company’s state deferred tax liability.

For the six months ended June 30, 2025, the Company recognized an income tax benefit of$36.5 million for an effective tax rate of 15.7%. The Company’s effective tax rate is different than the U.S. federal statutory income tax rate of 21% primarily due to recording a valuation allowance on its U.S. federal deferred tax assets.

For the six months ended June 30, 2024, the Company recognized an income tax benefit of$22.6 million for an effective tax rate of 18.4%. The Company’s effective tax rate is different than the U.S. federal statutory income tax rate of 21% primarily due to permanent differences.

The Company evaluates and updates the estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and tax laws. Consequently, based upon the mix and timing of the Company’s actual earnings compared to annual projections, the effective tax rate may vary quarterly and may make quarterly comparisons not meaningful. The quarterly income tax provision is generally comprised of tax expense on income or benefit on loss at the most recent estimated annual effective tax rate. The tax effect of discrete items is recognized in the period in which they occur at the applicable statutory rate.

Deferred income tax assets and liabilities are recorded related to net operating losses and temporary differences between the book and tax basis of assets and liabilities expected to produce deductions and income in the future. The deferred tax asset estimates are subject to revision, either up or down, in future periods based on new facts or circumstances. The Company reduces deferred tax assets by a valuation allowance when, based on estimates, it is more likely than not that a portion of those assets will not be realized in a future period. In evaluating the Company’s valuation allowance, the Company considers cumulative losses, the reversal of existing temporary differences, the existence of taxable income in carryback years, tax optimization planning and future taxable income for each of its taxable jurisdictions. The Company assesses the realizability of its deferred tax assets quarterly, and changes to the Company’s assessment of its valuation allowance in future periods could materially impact its results of operations. For the three months ended June 30, 2025, the Company determined that it can no longer rely on forecasts of taxable income to support realizability of its deferred tax assets and recorded a valuation allowance of $20.0 million as a discrete, non-cash expense. The change in assessment is due to an accumulation of losses experienced in the most recent financial statement periods. The Company’s valuation allowance primarily relates to accruals for asset retirement obligations. A net deferred tax liability of $229.1 million and $266.6 million is included in “Other long-term liabilities” on the Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024, respectively.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA contains a broad range of changes to U.S. federal income tax laws and makes permanent or modifies certain provisions of the Tax Cuts and Jobs Act. The Company is currently evaluating the effects of the OBBBA on its effective tax rate and cash tax position, but the Company does not expect that the OBBBA will have a material impact on its financial statements. Because the OBBBA was signed into law after the close of the second quarter, its impacts are not included in the Company’s operating results for the three and six months ended June 30, 2025.

Note 11 — Income (Loss) Per Share

Basic earnings per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Except when the effect would be antidilutive, diluted earnings per common share includes the impact of RSUs and PSUs.

The following table presents the computation of the Company’s basic and diluted income (loss) per share were as follows (in thousands, except for the per share amounts):

Note 12 — Related Party Transactions

2022 Registration Rights Agreement

On September 21, 2022, the Company entered into a registration rights agreement (the “2022 Registration Rights Agreement”) with Adage Capital Partners, L.P. and affiliated entities of Bain Capital, LP, a discussion of which is included in the accompanying Notes to the Consolidated Financial Statements in the 2024 Annual Report. There have been no changes to the 2022 Registration Rights Agreement since the filing of the Company’s 2024 Annual Report.

Slim Family and Affiliates

Carlos Slim Helú, Carlos Slim Domit, Marco Antonio Slim Domit, Patrick Slim Domit, María Soumaya Slim Domit, Vanessa Paola Slim Domit and Johanna Monique Slim Domit (collectively, the “Slim Family”) are beneficiaries of a Mexican trust which in turn owns all of the outstanding voting securities of Control Empresarial de Capitales S.A. de C.V. (“Control Empresarial” together with the Slim Family, the “Slim Family Office”). Control Empresarial held approximately 24.9% of the Company’s outstanding shares of common stock as of June 30, 2025 based on SEC beneficial ownership reports filed by Control Empresarial.

On December 16, 2024, the Company entered into a cooperation agreement (“Cooperation Agreement”) with Control Empresarial, a discussion of which is included in the Notes to the Consolidated Financial Statements in the 2024 Annual Report. There have been no changes to the Cooperation Agreement since the filing of the Company’s 2024 Annual Report. The Cooperation Agreement expires December 16, 2025, but is subject to early termination upon the occurrence of certain events described in the Cooperation Agreement.

The Slim Family own a majority stake in Carso. Carso, through its subsidiary, has an ownership interest in Talos Mexico. See Note 6 –Equity Method Investments for additional information on Talos Mexico. The Company had a $2.7 million and $2.3 million receivable from Carso related to advisory services the Company provided in connection with the Lakach Deepwater natural gas field off Mexico’s southeastern coast near Veracruz as of June 30, 2025 and December 31, 2024, respectively. These amounts are reflected as “Other, net” within “Accounts Receivable” on the Condensed Consolidated Balance Sheets.

Equity Method Investments

The Company had a $1.2 million and $0.7 million related party receivable from Talos Mexico as of June 30, 2025 and December 31, 2024, respectively. These amounts are reflected as “Other, net” within “Accounts Receivable” on the Condensed Consolidated Balance Sheets.

Note 13 — Commitments and Contingencies

Performance Obligations

Regulations with respect to the Company’s operations govern, among other things, engineering and construction specifications for production facilities, safety procedures, plugging and abandonment of wells and removal of facilities in the U.S. Gulf of America.

As of June 30, 2025, the Company had secured performance bonds from third party sureties totaling$1.5 billion. The cost of securing these bonds is reflected as “Interest expense” on the Condensed Consolidated Statements of Operations. Additionally, as of June 30, 2025, the Company had secured letters of credit issued under its Bank Credit Facility totaling$42.8 million. Letters of credit that are outstanding reduce the available revolving credit commitments.

Firm Transportation Commitments

The Company has firm transportation agreements in place with pipeline carriers for future transportation of oil and gas production wherein the Company is obligated to transport minimum monthly volumes or pay for any deficiencies. As of June 30, 2025, the future minimum transportation payments under the Company’s commitments total approximately $47.6 million for years 2025 through 2030. Our production is currently expected to exceed the minimum monthly volume in the periods provided in the agreements.

Legal Proceedings and Other Contingencies

From time to time, the Company is involved in litigation, disputes related to our business, regulatory examinations and administrative proceedings primarily arising in the ordinary course of business in jurisdictions in which the Company does business. Although the outcome of these matters cannot be predicted with certainty, the Company’s management believes none of these matters, either individually or in the aggregate, would have a material effect upon the Company’s financial position; however, an unfavorable outcome could have a material adverse effect on the Company’s results from operations for a specific interim period or year.

Decommissioning Obligations

Decommissioning in the U.S. is governed by both federal and state laws and regulations. In federal waters, decommissioning is governed by federal laws and regulations, while decommissioning in state waters falls under state laws and regulations. Louisiana, Alabama and Mississippi state waters extend three nautical miles from their respective shorelines; however, Texas state waters extend approximately nine nautical miles from its shoreline. The Company, as a co-lessee or predecessor-in-interest in oil and natural gas leases located in the U.S. Gulf of America, is in the chain of title with unrelated third parties either directly or by virtue of divestiture of certain oil and natural gas assets previously owned and assigned by our subsidiaries. Certain counterparties in these divestiture transactions or third parties in existing leases have filed for bankruptcy protection or undergone associated reorganizations and may not be able to perform required abandonment obligations. Both federal and state laws and regulations could require the Company to assume such obligations. The Company reflects such costs as “Other operating (income) expense” on the Condensed Consolidated Statements of Operations.

The decommissioning obligations included are in the Condensed Consolidated Balance Sheets as “Other current liabilities” and “Other long-term liabilities”, and the changes in that liability were as follows (in thousands):

Although it is reasonably possible that the Company could receive state or federal decommissioning orders in the future or be notified of defaulting third parties in existing leases, the Company cannot predict with certainty, if, how or when such orders or notices will be resolved or estimate a possible loss or range of loss that may result from such orders. However, the Company could incur judgments, enter into settlements or revise its opinion regarding the outcome of certain notices or matters, and such developments could have a material adverse effect on its results of operations in the period in which the amounts are accrued and its cash flows in the period in which the amounts are paid.

QuarterNorth Registration Rights Agreement

In connection with the Company’s entry into the QuarterNorth Merger Agreement, on March 4, 2024, the Company entered into a registration rights agreement (the “QNE Registration Rights Agreement”) with certain stockholders of QuarterNorth (collectively, the “RRA Holders”). Pursuant to the QNE Registration Rights Agreement, the Company granted the RRA Holders certain demand, “piggy-back” and shelf registration rights with respect to the shares of the Company’s common stock received in connection with the QuarterNorth Acquisition, subject to certain customary thresholds and conditions. There have been no amendments to the QNE Registration Rights Agreement since the filing of the Company’s 2024 Annual Report.

Note 14 —Segment Information

The Company’s operations were managed throughtwo operating segments through March 18, 2024: (i) the Upstream Segment and (ii) the CCS Segment, both of which were reportable for the year ended December 31, 2024. The CCS Segment was divested in March 2024.

The CODM is an executive committee comprised of the President and Chief Executive Officer, General Counsel, Chief Financial Officer, and Head of Operations. Previously, the CODM was the executive management team comprised of the General Counsel, Chief Financial Officer, and Head of Operations, each of whom served as interim Co-President, managing the Office of the Interim Chief Executive Officer (the “Office of the Interim CEO”). The Office of the Interim CEO dissolved effective March 1, 2025 when the Company's President and Chief Executive Officer took office.

Prior to the divestment of the CCS Segment, corporate general and administrative expense included certain shared costs such as finance, accounting, tax, human resources, information technology and legal costs that were not directly attributable to each operating segment. These shared expenses were fully allocated to each operating segment. Segment accounting policies are the same as those described in Note 2 –Summary of Significant Accounting Policies included in the accompanying Notes to Consolidated Financial Statements in the 2024 Annual Report.

The Company’s CODM does not review assets by segment as part of the financial information provided and therefore, no asset information is provided in the table below.

(1)

Includes general and administrative expense less transaction expenses and equity-based compensation.

(2)

Primarily includes interest income and other miscellaneous operating income.

(1)

Includes general and administrative expense less transaction expenses and equity-based compensation.

(2)

Primarily includes interest income and other miscellaneous operating income.

(1)

The CCS Segment was an emerging business in the start-up phase of operations and the business didnot generate any revenues.

(2)

Includes general and administrative expense less transaction expenses and equity-based compensation. Corporate overhead allocated to the Upstream Segment was $20.1 million.

(3)

Primarily includes transaction expenses for the Upstream Segment and transaction expenses for the CCS Segment. Transaction expenses include severance expense, costs related to the QuarterNorth Acquisition and costs related to the TLCS Divestiture. See further discussion in Note 2 —Acquisition and Divestituresfor additional information.

(1)

The CCS Segment was an emerging business in the start-up phase of operations and the business didnot generate any revenues.

(2)

Includes general and administrative expense less transaction expenses and equity-based compensation. Corporate overhead allocated to the Upstream Segment and CCS Segment was $34.9 million and $0.4 million, respectively.

(3)

Primarily includes transaction expenses for the Upstream Segment and transaction expenses for the CCS Segment. Transaction expenses include severance expense, costs related to the QuarterNorth Acquisition and costs related to the TLCS Divestiture. See further discussion in Note 2 —Acquisition and Divestituresfor additional information.

(4)

See further discussion in Note 2 —Acquisitions and Divestitures for additional information.

Reconciliations

The following table presents the reconciliation of Segment Expenditures to the Company’s consolidated totals (in thousands):

Note 15 — Subsequent Events

Acquisition of Incremental Working Interest in Mississippi Canyon Blocks

See Note 2 — Acquisitions and Divestitures for additional information.

Bank Credit Facility Redetermination

See Note 7 —Debt for additional information.