Advanced Drilling Technology Allows Talos Energy to Go Deeper

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How 70 years of Drilling Technology Progression allow for greater Exploration and Development

 

Over the span of the last 70 years there has been a progression in advanced drilling techniques, well control and geophysical technology that has brought about a definitive upsurge in exploration, development and exploitation activities in the sector. Utilizing these modern progressions Talos Energy has pared their extensive technical expertise us to find success in the Gulf of Mexico region. But what are these new technologies, and how have they helped E&P companies like Talos re-evaluate prior finds turning them into modern successes. Here is a look at some of those technological advances.

Renewed Seismic Analysis

Talos CEO, Tim Duncan described his company’s relationship with using renewed seismic analysis on aged assets. Duncan said, “What we try to do is take the seismic data, we reprocess it, we go back and alter the algorithm and try and make it the sharpest image as possible. The advancement in reprocess change as years go by. So, we can take seismic that is 5 or 10 years old, sharpen up the image, and that matters when you have salt dominated traps geographically offshore, to give you a picture of where salt ends and salt begins. We are doing that with assets that might have been discovered in the 90’s or the 80’s, but there hasn’t been a significant reinvestment in the asset in 10 or 15 years and then the operator moved on from the asset. We are trying to follow behind that using new technology.” It is the E&P companies use of such cutting-edge technologies on established assets that makes Talos future so bright.

 

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Directional Drilling

Traditionally, natural gas and oil wells were drilled downward, sometimes going several miles below ground. Directional drilling is the practice of drilling a well along a non-vertical path to a pre-determined target. Horizontal, multi-lateral, extended reach, and complex path drilling are all types of directional drilling. Since the 1970s, the use of directional drilling has expanded and advancement’s in mud motor lubrication, measurement-while-drilling (MWD) sensors and logging-while-drilling (LWD), and rotary steerable systems (RSS) have made it directional drilling one of the most efficient drilling technologies. Directional drilling allows oil and gas companies to generate less noise, reduce bi-product and waste, and reach larger reserves with smaller holes.

A current trend in drilling involves multi-well-pad drilling, more affectionately known as octopus technology. In the past decade octopus technology is has allowed single pad sights to simultaneously gain access to a number of buried wells. Traditional wells require a land site or pad for each well which only covers approximately 7 acres. With octopus technology, multiple single pads can handle multiple well drilling. This innovation allows single 7-acre pad to drill on over 2,000 acres of oil and natural gas reserves. Drilling is becoming cheaper and more productive with octopus technology.

Interpreting Algorithms

Integrated majors spend millions of dollars developing supercomputers that can determine where to drill next. Industry supercomputers analyze huge amounts of aggregate seismic data that are collected using sonic technology. Geologist can now see a 3D image of the reserves they explore before investing development resources. What’s more supercomputers are allowing E&P companies can also see how a reservoir is changing in real time. While Talos does keep an impressive seismic data library, the cost of maintaining some of these supercomputers is prohibitive. Talos does the next best thing by following the major’s who do have and utilize these predictive supercomputers.

Telematics in the Oil and Gas Industry

The internet of things has not missed the Energy and Production sector and the technology is only in it’s infancy stages. With the cost of connected sensors continue to fall they are becoming a necessity in modern development projects. SCADA telemetry is changing the way the companies execute exploration and maximizing operational productivity. Implementing machine-to-machine technology allows operators to manage and control assets remotely. Metering, monitoring and managing assets can be done much easier than previously imagined.

The leadership team at Talos firmly believes that the only way to truly represent an asset is through the use of technology. Talos embraces current drilling technology and looks forward to future developments in the science of oil and gas extraction.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This communication may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact included in this communication, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this communication, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures,  potential adverse reactions or changes to business or employee relationships resulting from the business combination between Talos Energy LLC and Stone Energy Corporation, competitive responses to such business combination, the possibility that the anticipated benefits of such business combination are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies, litigation relating to the business combination, and other factors that may affect our future results and business, generally, including those discussed under the heading “Risk Factors” in our final consent solicitation statement/prospectus, dated April 9, 2018, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act.

Reserve engineering is a process of estimating underground accumulations of oil, natural gas and NGLs that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil, natural gas and NGLs that are ultimately recovered.

Should one or more of these risks occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, to reflect events or circumstances after the date of this communication.

Free cash flow after debt service is a supplemental non-GAAP financial measure used by management and external users of the Company’s financial statements, such as industry analysts, investors, lenders and rating agencies.  The Company defines free cash flow after debt service as net cash from operations less capital expenditures, dividends and cash interest paid.

 

 

 

 

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