Talos Energy Inc. (TALO - Free Report) emerged among the top five bidders in the latest Gulf of Mexico lease sale held on Aug 15, 2018, by the Bureau of Ocean Energy Management ("BOEM").
Talos was the highest bidder for six deepwater and eight shallow water blocks, which were included in the 14 blocks it had bid for and achieved 100% success. These blocks are spread across a net acreage of about 75,000. The company will shell out a total of $5.3 million, post the formal receipt of these leases.
Of the sevendeepwater leases awarded to Talos, two will have a primary lease term of seven years and the others will have alease term of five years. The deepwater blocks will have a royalty rate of 18.75% and the shallow water leases will have 12.50%.
Talos has recognized eight prospects on these blocks and expects another two. However, only one of these recognized prospects can be tied back to production facilities owned or accessible by the company.
Although Talos expects to be awarded these leases, the BOEM reserves the right not to award some or all of the blocks based on their minimum bidding criteria. The outcome of these awards will be acknowledged in the upcoming months.
About the Gulf Lease
The recent auction that is estimated to have raked in $178 million in winning bids has nullified the rumor that drillers’ interest in the Gulf is waning. This belief spread during an auction held in March 2018 that was believed to be the largest in U.S. history but only raked in $125 million.
In the recent bid, Hess Corporation (HES) made the largest winning bid of $25.9 million for a deepwater block near BP plc's (BP) Na Kika platform. A total of 29 companies took part in the auction and the bid was made for acreage of about 800,000 in the Gulf.
Talos Energy has outperformed the industry in the past year. The company’s shares have gained 33.6% compared with the industry's 20% rise.
Zacks Rank & Stocks to Consider
Talos Energy currently carries a Zacks Rank #3 (Hold).
A few better-ranked players in the same sector are Petroleo Brasileiro S.A. (PBR - Free Report) , or Petrobras SA, Helix Energy Solutions Group, Inc (HLX - Free Report) and TC Pipelines, LP (TCP - Free Report) . All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Petrobras, is the largest integrated energy firm in Brazil and one of the largest in Latin America. It pulled off an average positive earnings surprise of 10.4% in the last four quarters.
Helix Energy offers specialty services to the offshore energy industry. The company delivered an average positive earnings surprise of 66.7% in the trailing four quarters.
TC Pipelines purchases, owns and actively participates in the management of U.S.-based natural gas pipelines and related assets. The company delivered an average positive earnings surprise of 3.7% in the last four quarters.
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