Good morning, and welcome to the Talos Energy Second Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Sergio Maiworm. Please go ahead.

Thank you, operator. Good morning everyone and welcome to our second quarter 2018 earnings conference call. Joining me today to discuss our results are Tim Duncan, President & Chief Executive Officer; and Michael Harding, Executive Vice President and Chief Financial Officer. Before we get started I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in yesterday's press release in our consent solicitation statement and perspectives that was filed with the SEC earlier this year on April 9. And in our quarterly reports on Form 10-Q for this quarter ended June 30, 2018 which we expect to file with the SEC subsequent to this call. Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events. During this call we may present both, GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures was included in yesterday's earnings press release which was filed with the SEC, and which is also available on our website at talosenergy.com. And now I'd like to turn the call over to Tim.

Thanks Sergio, and thank you everyone for joining our call. Certainly the second quarter was historic for Talos simply for the fact that we're having our first public earnings call following the completion of the Stone combination as we integrate two strong offshore portfolios and two talented groups of professionals. Just prior to closing the merger we helped negotiate an approved Stone's transaction of the Rampart field adding another core asset and giving the combined company more scale, diversity, and the ability to generate positive free cash flow after our capital program and current interest payments. As Sergio mentioned, this earnings release will be different than those we'll post in the future. You'll see two discussions; a GAAP discussion which focuses on Talos only through January through April, and then the combined assets from May and June and forward; and the pro forma discussions where we are focused on the legacy Talos and Stone assets as if they were combined for the full year. As a reference on a pro forma basis from these assets Talos and Stone has combined net daily production with 47,800 barrels equivalent a day for the full year in 2017. As previously announced by Stone at the time of the transaction, Rampart averaged 6,100 net barrels of oil equivalent a day for the full year of 2017, so that allows you to level set these assets. In all cases, GAAP and pro forma, for 2018 we only include the volumes of Rampart assets from May forward, so two months in the second quarter. All the assets will be fully accounted for in the third quarter moving on from there. I would encourage you as you have time to take a look at the Talos introductory corporate presentation we posted to our website shortly after we…

Thank you, Tim. Talos Energy continues to focus on bringing shareholder value as demonstrated in the financial results being reviewed on this call. As of June 30, 2018 our available liquidity was approximately $433 million, having reconstituted our RBO credit facility upon the close of the business combination with Stone Energy Corporation in May. The face value of this facility is $1 billion with an initial borrowing base of $600 million. We continue to have an active and consistent hedge program as a key financial strategy of the company, we have approximately 14 million barrels of oil and 9 Bcf of gas with an average floor price of $54 for oil and $3 for natural gas, and these go for the remainder of 2018 and 2019. These derivatives are primarily swapped in sort of floor to secure our ability to execute our capital expenditure plan, debt service and still allow for annualized free cash flow generation when forecasted out at current strip. Our capital structure has been strengthened after the business combination whereby we refinanced $397 million of second lien notes due May 2022 and our no call 1 [ph] to $102 million senior unsecured notes held by Apollo and Riverstone, funds were exchanged for common stock in the process. Our strong balance sheet, capital structure and free cash flow generation continued to set us apart and allow us to execute our growth strategy going forward. So now I'll turn to the financials for the quarter. The report is presented in accordance with the U.S. GAAP and as applied to interim financial statements and includes each subsidiary at the date of its inception. Talos Energy LLC was considered the accounting acquirer in the merger with Stone, therefore the historical financial and operating data of Talos Energy Inc. which covers periods…

[Operator Instructions]. Our first question will come from Marshall Carver with Heineken Energy Advisors. Please go ahead.

I see you maintained your guidance for the full year, could you give us some commentary on expected production by quarter would that be slight growth in 3Q and then again in 4Q or is there some hurricane related downtime you factored in the guidance how should we think about those things?

I think one of the reasons we didn't guide by the quarter yet are some of the things you saw on the second quarter where you know one thing you have to think about is you transition through pulling two companies and in particularly with [indiscernible] when you buy an asset of that size from a major typically the major in this case Shell as the operator will stay in for some transitional period as operator that may be 90 days before we jump in and so some of those expenses can be outside of our control not with respect to those expenses being necessary but how you plan and time out some of those expenses and so you know that was some of - what was in our minds and why we you know kind of decided to go and stick with a manual guidance. Now we are reaffirming that guidance and when we talked about recent development I think we talked about the activity in a Pompano area, that additive in the third quarter and fourth quarter with respect to the first half of the year. We talked about that UA [ph] bank well that we're completing as we speak and then that well will come online in the third quarter. So I think you're seeing the headwinds of integrating the assets in the second quarter. You're seeing some projects come online that should uplift production in the third and fourth quarter from the second quarter of 51.6 at the first half of the year 50.7, so I'm thinking you see the building blocks and while we're certainly comfortable reaffirming and feeling like we'll hit that guidance and we'll be in very good shape. I think we in terms of '19 one thing that I just kind of…

And one follow-up if you don't mind, you've made a couple of acquisitions this year, do you see additional opportunities for more acquisitions later this year or early next year or do you need some more time to digest what you just recently bought. How are you thinking about that?

I think one of the reasons we brought these companies together and why we think you know what we put together is so interesting is you know when you put the Talos Stone combination together and obviously with the Ram Powell asset that we just did you know you have created a company that has enough scale, a good balance sheet, a good liquidity position and to try to be flexible in what I would call a broader business development market so you can think about our business Marshall in kind of three areas. We have the business that we're running and the business that we are integrating and we're working very hard and diligently on that but then I've got a kind of a corporate development team that I keep kind of away from the entire day to day operation and their job is to really go look for three types of business development opportunities, asset transactions like Ram Powell, where you have infrastructure in my view when you own infrastructure in deep water you put an open for business sign on that thing and you're kind of putting a radius 25 miles to 30 miles around that infrastructure and looking for other business development opportunities that you can bring back to that infrastructure so we want a team that's always focused on asset related deals and then what I would call kind of stranded whether they're drilling locations or stranded discoveries. We're looking in the market for those all the time and then occasionally you'll see something like that what was announced yesterday that are entity based deals and we want to be aware of those who want to understand those. So the answer is yes you know we were hyper focused on the business, we are absolutely focused on the integration but we want to take advantage of what this business created and we've got a team that's focused on that every day.

Our next question comes from John White with Roth Capital. Please go ahead.

I really don't have a question I just wanted to say welcome to the public markets and congratulations on the merger. As you know I have followed your successful career in the private arena and now you're in - you're in my world and we're looking forward to staying in touch.

Well I appreciate it John, you know it's great to be on this first call. I sometimes think of a funny response but you're getting it very serious from here - me here today John but look you know we are here to make sure everybody understands what our core business is doing, we're going to be on the road, some conference you know Sergio will have that schedule up on the website. We would encourage everybody to look at that and seek us out at some of these conferences and contact Sergio and then John you among them. So you know thanks for the kind remarks.

Sergio has been great and we'll look forward to more one liners and humor on some of the future calls.

Our next question comes from [indiscernible]. Please go ahead.

I'm a relative newbie at your story so on a steep learning curve. Two questions, first one on your unitization agreements I just want to I mean obviously given what you've done these kind of historic for Mexico I'm just wondering whether that in itself is going to pose you challenges when you are going through this process to reach a unitization agreement which is amicable to all parties and what you see as challenges in that process, is this going to be in-line with international standards on volume metric basis or do you think that your counterpart is could also look at the reservoir quality and distribution and how importance appraisal program to that and my second question is on your hedging policies and I just want to understand how much of your hedging decision making is driven by your reserve base lending, your credit facilities and how much it's really just down to you trying to manage your exposure. Thank you.

Yes, let's do the last one first because I think we as a company and thanks for following us and welcome you know to the group you know as a company and this now spans a long time again I would again encourage you to go look at our corporate deck, our management team has been together the core members for some 18 years and we've managed through multiple commodity cycles and we try not to over guess the market, I think in our basin because the operators who are based in do have to manage some plugging obligations, you want to distance yourself from that capital outlay and provide room to make without you would obviously feel are more interesting investments that production and add to our core AV if we're going to have the available capital to do that we have to lock down our budget in some level and so our hedging starts there, our ability to continue to drive returns by making the right investments and having the free cash flow available to make those investments and sometimes when we're in a more bullish market some previous hedges can be out of the money but oftentimes those hedges we're able to preserve us during the downturns of the commodity cycle. So we try not to over guess it and we try to do the right thing. Certainly when you have some debt even though right now we've got you know very good leverage stats we do want to hedge to protect that obviously the RVL is part of that but it really comes down to the core of tenants of how do you want to run your business and how do you want to have free cash flow available to make the right capital allocation decisions…

Just a follow-up on, you also talked about two prospects mostly. Are there any - slide deck on these two catalyst is that something that we could especially get more information ahead of the drilling?

We haven't disclosed those yet on this call we won't I would tell you that you'll see some of that if you go to our corporate deck and you'll see some of you know at least some visual areas of where those prospects are on Block 2 and Block 7 so I think there's a little bit you can see there and if we get closer we'll probably put a little more information to let you take a deeper dive into that prospect to those prospects.

[Operator Instructions]. Our next question comes from Mark Wilson with Jefferies. Please go ahead.

Is there any update you can give on Pemex the first well on their site of Block 7 and then secondly just wondering why there wasn't any floor test as part of the appraisal plans? What kind of assurance you have got there?

Right, so let's clear that up they are absolutely we have flow test is part of our appraisal plan. We will do that likely the first well just to kind of talk about that quickly. The first well although it's going down dip to go test the oil water contact once we do that we will bring it back to the original surface location and drill a straight a hole where we will catch whole conventional cores and we'll do a flow test. So there is no question we want to understand flow assurance, we want to go get a lot more reservoir modeling efforts you know, get some hard rock in our hands that we can put into the labs and so now you're going to see the same type of appraisal you would expect to see on a discovery of this scale. Now we are benefiting from the fact that because we are in shallow water I do think you know there is potentially some diminishing returns on how much appraisal you need to do because of the economies of scale of being in this water depth but to be sure we want to make sure we get all the right information both on understanding the limits and understanding the flow assurance, flow capacity, getting more samples getting more physical rock so you can expect all of that in your appraisal planning and again we will continue to educate the market on what we're trying to do and as well our partners particularly Premier. Your first question remind me of your first question, I'm sorry.

If there is any update on--

You know certainly I mean we are intimately involved in what Pemex is doing, there are a couple of things that I think you know we understand with in terms of what Pemex is trying to do. If you go back and remember how this Pemex had this acreage in the first place and I think the nomenclature they use was around 0.5 there are different terminologies for the process of the federal government deciding what Pemex could retain unrelated to their producing reservoir outlines and so they had a series of blocks that they're able to retain that they essentially were primary term blocks and that with the expectation that they would go drill on these primary term tracks. The block that's next door to us is one of those primary term tracks that they've already gotten an extension on and they're in the extension period. What I think they're trying to do and again this is a better question for Pemex but I think I've read this in their public comments is find a rig that can do multiple things, not just test this project and so you know which is why and frankly in our perspective we've always been fine and never had a problem with this with Pemex testing their discovery on their side of the lease because they have an obligation to do something with that lease that goes back to the terminal lease itself. I know they're trying to do other things with a rig and that type of water depth and keep in mind this is a water depth where you have to take a deep water rig and anchor it so it's a little tricky, there's not as many rigs that can do the anchoring or the mooring. So there are several variables that I think Pemex is navigating that we don't have to navigate because we're focused on one specific operation. So you know again better question for them but I think that's most likely the answer.

And this will conclude our question and answer session. I would like to turn the conference back over to Timothy Duncan for any closing remarks.

I want to thank everybody for joining the call. We're very proud of where we are. We're excited about integrating the company still some work to do on the integration we remind you that most of the synergies we think will pull through by the end of the year but a lot of positive things and a lot of momentum as we go into the second half of the year certainly a ton of momentum as we go into 2019, continue to go to the website we will post where we are in conferences, we are looking forward to meeting many of you as you get yourself introduced to the story and we thank you today for your participation.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.