Two September deals by Talos Energy Inc. with BP Plc and Exxon Mobil Corp. highlight the level of trust the Houston-based independent oil and gas company has established as a U.S. Gulf of Mexico (GoM) operator.

In a farm-out agreement with BP, Talos traded 75% of its working interest in Green Canyon Block 821 while BP operates the Puma West project. The deal means Talos’ prospect will be within range of BP’s Argos platform, which will add production capacity of 140,000 barrels of oil equivalent per day by 2021. The agreement does not require Talos to promote or carry well costs, but the company will pay for its 25% working interest share in the wells’ cost.

Talos also acquired 100% working interests in Exxon Mobil’s Hershey prospect, located on Green Canyon Blocks 326, 327, 370 and 371. The deal requires no upfront money from Talos.

Both deals suggest that the major oil companies trust Talos’ judgment and skill, according to Mike Kelly, an analyst at Seaport Global Securities who said the “two savvy business developments” show Talos is capable of “hanging with the big dogs.”

The transactions tell “a lot about Talos’ capabilities and reputation in the GoM,” Kelly said in a Sept. 19 report. “These relationships could also prove massively beneficial moving forward.”

Talos also continues to target assets that can be developed and tied to existing infrastructure.

“The structure of the Exxon Mobil transaction is a prudent risk-adjusted way to gain exposure to a needle-moving exploration prospect,” Kelly said.

At Puma West, BP will initially spud a well before the end of October using the Seadrill West Auriga ultradeepwater drillship, Talos said. The prospect consists of sub-salt, Miocene target zones believed to be similar to the prolific Mad Dog field—less than 15 miles from the proposed well location.

Puma West locator map (Source: Talos Energy Inc.)
Puma West locator map (Source: Talos Energy Inc.)

The Puma West prospect was identified and permitted by Talos following seismic reprocessing efforts in the company's Green Canyon core area. Talos said it would work with BP to drill and evaluate the prospect, located in Talos-owned Green Canyon Block 821, in fourth-quarter 2019.

In the Exxon Mobil Hershey prospect, Talos will become the designated operator of Green Canyon Blocks 326, 327, 370 and 371, which constitute roughly 23,000 gross acres. Talos described the prospect as a large, sub-salt Miocene prospect with potential for several stacked horizons. Talos estimates oil-weighted, gross unrisked resources of up to 300 million barrels of oil equivalent. Hershey could be developed as a subsea tie-back to multiple Talos-controlled Green Canyon facilities or with new, dedicated infrastructure.

Hershey locator map (Source: Talos Energy Inc.)
Hershey locator map (Source: Talos Energy Inc.)

Tim Duncan, Talos’ president and CEO, said exploration of the Puma West prospect is a timely and material opportunity for the company.

“While not scheduled in our original 2019 drilling program, by moving quickly the company is able to work with a world-class operator in a potentially significant subsea tie-back project located on Talos acreage,” Duncan said. “We believe that coupling Talos’ initial prospect evaluation with BP’s known expertise in the region provides the best opportunity for success, and we look forward to initiating the project.”