Talos Energy (TALO) risk factors, FY2024 10-K

Risks Related to our Business and the Oil and Natural Gas Industry

1. 01Oil and natural gas prices are volatile. Stagnation or declines in commodity prices may adversely affect our financial condition and results of operations, cash flows, access to the capital markets and available borrowings under our Bank Credit Facility and our ability to grow
2. 02overall economic conditions worldwide
3. 03Future exploration and drilling results are uncertain and involve substantial costs
4. 04Our production, revenue and cash flow from operating activities are derived from assets that are concentrated in a single geographic region, making us vulnerable to risks associated with operating in one geographic area
5. 05Production periods or relatively short reserve lives for U.S. Gulf of America properties may subject us to higher reserve replacement needs and may impair our ability to reduce production during periods of low oil and natural gas prices
6. 06Global geopolitical tensions may create heightened volatility in oil, gas and NGL prices and could adversely affect our business, financial condition and results of operations
7. 07On February 24, 2022, Russian military forces invaded Ukraine. We expect the ongoing war to prolong disruptions in the region
8. 08blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on investments and access to capital markets and bans on various Russian imports
9. 09Any of the above-mentioned factors could affect our business, financial condition and results of operations
10. 10Recent and pending management changes could disrupt our operations and impair our ability to attract and retain key personnel
11. 11Our actual recovery of reserves may substantially differ from our proved reserve estimates
12. 12our actual operating costs in producing oil and natural gas
13. 13The marketability of our production depends mostly upon the availability, proximity and capacity of oil and natural gas gathering systems, pipelines and processing facilities
14. 14Inflationary issues and associated changes in monetary policy may result in increases to the cost of our goods, services and personnel, which in turn could cause our capital expenditures and operating costs to rise
15. 15We may be unable to provide the financial assurances in sufficient amounts or on reasonably acceptable terms to comply with regulatory requirements, or otherwise, in order to conduct our business in the OCS
16. 16Our business could be negatively affected by security threats, including cybersecurity threats, terrorist attacks and other disruptions
17. 17We may not be in a position to control the timing of development efforts, associated costs or the rate of production of the reserves from our non-operated properties
18. 18the timing and cost of P&A operations
19. 19drill more wells or build more facilities on a project than we can afford, whether on a cash basis or through financing, which may limit our participation in those projects or limit the percentage of our revenues from those projects
20. 20Hedging transactions may limit our potential gains
21. 21we are unable to market our production in a manner contemplated when entering into the hedge contract
22. 22Our operations may incur substantial liabilities to comply with environmental laws and regulations as well as legal requirements applicable to marine life and endangered and threatened species
23. 23Our ability to obtain permits and governmental approvals for our U.S. Gulf of America operations may be delayed by the court-mandated vacatur of the National Marine Fisheries Services’ Gulf of America Biological Opinion if NMFS is unable to publish a revised biological opinion by the vacatur date
24. 24Our oil and gas operations are subject to various international, foreign and U.S. federal, state and local governmental regulations that materially affect our operations
25. 25If we are forced to shut-in production, we will likely incur greater costs to bring the associated production back online, and will be unable to predict the production levels of such wells once brought back online
26. 26We may experience significant shut-ins and losses of production due to the effects of events outside of our control, including tropical storms, winter storms and hurricanes in the U.S. Gulf of America and in the shallow waters off the coast of Mexico and epidemics, outbreaks or other public health events
27. 27We are not insured against all of the operating risks to which our business is exposed
28. 28Our actual production could differ materially from our forecasts
29. 29We conduct exploration, development and production operations primarily on the deep Shelf and in the Deepwater of the Gulf of America, which present numerous risks
30. 30shortages or delays in the delivery of equipment
31. 31Competition within our industry may adversely affect our operations. Many of our competitors are larger and have more available financial resources
32. 32The loss of our larger customers could materially reduce our revenue and materially adversely affect our business, financial condition and results of operations
33. 33The loss of key personnel could adversely affect our ability to operate
34. 34We have entered into certain agreements which contain minimum volume commitments. Any failure by us to satisfy these commitments could lead to contractual penalties that could adversely affect our results of operations and financial position
35. 35Our future tax liabilities may be greater than expected if our net operating loss (“NOL”) and interest expense carryforwards are limited
36. 36Our Mexican operations are subject to certain offshore regulatory and environmental laws and regulations promulgated by Mexico
37. 37Three-dimensional seismic interpretation does not guarantee that hydrocarbons are present or if present, produce in economic quantities
38. 38We are subject to the U.S. Foreign Corrupt Practices Act and may be exposed to liabilities thereunder
39. 39Our operations are subject to various risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which oil and natural gas production may occur and reduce demand for the crude oil and natural gas that we produce
40. 40Any increased attention to environmental, social and governance matters may impact our business
41. 41We are upgrading our accounting system to a more recent version and, if this upgraded version proves ineffective or we experience difficulties with the migration, we may be unable to timely or accurately prepare financial reports
42. 42Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, could adversely affect our business, prospects, financial condition and operating results
43. 43We previously identified material weaknesses in our internal control over financial reporting that could have, had they not been remediated, resulted in material misstatements in our financial statements and caused us to fail to meet our reporting and financial obligations
44. 44Management, under the oversight of our Audit Committee, took steps to fully remediate the material weaknesses as described more fully in Part II, Item 9A. Controls and Procedures of this Annual Report

Risks Related to our Capital Structure and Ownership of our Common Stock

1. 45entering into transactions with affiliates
2. 46See Part IV, Item 15. Exhibits and Financial Statement Schedules — Note 8 — Debt for additional information on the issuance of the Senior Notes
3. 47As of February 19, 2025, Control Empresarial, an entity controlled by the family of Carlos Slim Helú (collectively, the “Slim Family”) beneficially owned and possessed voting power of approximately 24.2% of our outstanding common stock
4. 48Among other things, the Slim Family’s concentration of voting power could influence a sale of our company. This concentration of voting power could discourage a potential investor from seeking to acquire our common stock and, as a result, might harm the market price of our common stock
5. 49A financial crisis may impact our business and financial condition and may adversely impact our ability to obtain funding under our Bank Credit Facility or in the capital markets
6. 50We require substantial capital expenditures to conduct our operations and replace our production, and we may be unable to obtain needed financing on satisfactory terms necessary to fund our planned capital expenditures
7. 51our ability to borrow under our Bank Credit Facility
8. 52Our estimates of future asset retirement obligations may vary significantly from period to period and unanticipated decommissioning costs could materially adversely affect our current and future financial position and results of operations
9. 53We may not realize the anticipated benefits from our current assets and future acquisitions, and we may be unable to successfully integrate future acquisitions
10. 54incurring potential environmental or regulatory liabilities and title problems
11. 55Our current assets and future acquisitions expose us to potentially significant liabilities, including P&A liabilities
12. 56Resolution of litigation could materially affect our financial position and results of operations
13. 57The corporate opportunity provisions in our Second Amended and Restated Certificate of Incorporation could enable others to benefit from corporate opportunities that might not otherwise be available to us
14. 58These provisions create the possibility that a corporate opportunity that would otherwise be available to us may be used for the benefit of others
15. 59Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline
16. 60Actions of any activist stockholders or others could materially and adversely affect our business, results of operations and stock price