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Talos Energy sells off low carbon arm to TotalEnergies in $148M deal

M&A moves

Talos Energy announced that it has entered into an agreement for the sale of its wholly owned subsidiary Talos Low Carbon Solutions to TotalEnergies. Photo via Getty Images

A Houston-based company is divesting its low-carbon subsidiary to TotalEnergies, which has its United States headquarters in Houston.

Talos Energy announced that it has entered into an agreement for the sale of its wholly owned subsidiary Talos Low Carbon Solutions LLC to TotalEnergies. The deal is for a purchase price of $125 million plus customary reimbursements, adjustments and retention of cash, which totals approximately $148 million.

According to a news release, Talos plans to use the proceeds from the sale to repay borrowings under its credit facility and for general corporate purposes. The sale includes Talos's entire carbon capture and sequestration business, which includes its three projects along the U.S. Gulf Coast with Bayou Bend CCS, Harvest Bend CCS, and Coastal Bend CCS.

There is an opportunity for additional future cash payments upon achievement of certain milestones at the Harvest Bend or Coastal Bend projects for Talos. More payments can be obtained also upon a sale of the aforementioned projects by TotalEnergies.

"Since TLCS's inception, we have successfully applied our energy expertise as an early mover aimed at developing decarbonization solutions along the U.S. Gulf Coast,” Talos President and CEO Timothy S. Duncan says in a news release. ”Strong market interest during our capital raise provided the strategic option to fully monetize the business to TotalEnergies, an established global leader in CCS development."

Talos Executive Vice President, Low Carbon Strategy and Chief Sustainability Officer Robin Fielder will continue to serve in her role for a transition period before leaving Talos.

"Robin and our entire CCS team did an outstanding job crystallizing value for Talos shareholders for a strong financial return," Duncan continues. "The transaction will further enable Talos to prioritize cash flow generation and optimal capital allocation in our core Upstream business. We are also continuing to explore business development and strategic M&A opportunities."

TotalEnergies is active in the Houston energy transition ecosystem and recently signed on as a partner at Greentown Houston. Last fall, the company also started commercial operations of its new solar farm, Myrtle Solar, just south of Houston.

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Talos, a technology-based energy company that aims to work towards low-carbon solutions, acquired QuarterNorth Energy Inc. Photo via talosenergy.com

Houston energy company makes strategic acquisition in $1.29B deal

M&A moves

Houston-based Talos Energy Inc. announced a $1.29 billion acquisition this month.

Talos, a technology-based energy company that aims to work towards low-carbon solutions, acquired QuarterNorth Energy Inc., which has ownership in several big offshore fields, and is a privately-held U.S. Gulf of Mexico exploration and production company. The acquisition of the assets are expected to provide additional scale from high quality deepwater assets “with a favorable base decline profile along with attractive future development opportunities” from QuarterNorth.

QuarterNorth's assets include six major fields and are 95 percent operated and 95 percent in deepwater. The deal will add production of around 30,000 barrels of oil equivalent per day expected for 2024, which will average 75 percent oil.Talos will now expect run-rate synergies of about $50 million a year to be by end of 2024.

QuarterNorth's assets will bring ”significant reserves upside beyond current production from both producing probable zones and near-term development opportunities in 2024 and 2025” according to Talos.

“The addition of QuarterNorth's overlapping deepwater portfolio with valuable operated infrastructure will increase Talos's operational breadth and production profile while enhancing our margins and cash flow,” Talos President and CEO Timothy S. Duncan says in a news release. “This transaction aligns with Talos's overall strategy of leveraging existing infrastructure and complementary acreage to accelerate shareholder value creation. The pro forma footprint in the U.S. Gulf of Mexico should allow us to capture meaningful operating synergies.”

Talos secured $650 million in bridge financing from a syndicate of banks representing the majority sum of the company's reserves-based loan lender group.

“The expected financing structure of the transaction accelerates de-leveraging, immediately improves our credit profile, is accretive on key metrics, and positions us to consider additional capital return initiatives following deleveraging in the near term,” Duncan adds. “We look forward to completing this transaction in the next few months and continuing our strategy of building a large-scale, diverse energy company."

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Oxy subsidiary secures Microsoft as largest-ever DAC carbon removal credit customer

major move

Occidental Petroleum’s Houston-based carbon capture, utilization and, sequestration (CCUS) subsidiary, 1PointFive, has inked a six-year deal to sell 500,000 metric tons of carbon dioxide removal credits to software giant Microsoft.

In a news release, 1Point5 says this agreement represents the largest-ever single purchase of carbon credits enabled by direct air capture (DAC). DAC technology pulls CO2 from the air at any location, not just where carbon dioxide is emitted.

Under the agreement, the carbon dioxide that underlies the credits will be stored in a below-the-surface saline aquifer and won’t be used to produce oil or gas.

“A commitment of this magnitude further demonstrates how one of the world’s largest corporations is integrating scalable [DAC] into its net-zero strategy,” says Michael Avery, president and general manager of 1PointFive. “Energy demand across the technology industry is increasing, and we believe [DAC] is uniquely suited to remove residual emissions and further climate goals.”

Brian Marrs, senior director for carbon removal and energy at Microsoft, says DAC plays a key role in Microsoft’s effort to become carbon-negative by 2030.

The carbon dioxide will be stored at 1PointFive’s first industrial-scale DAC plant, being built near Odessa. The $1.3 billion Stratos project, which 1Point5 is developing through a joint venture with investment manager BlackRock, is designed to capture up to 500,000 metric tons of CO2 per year.

The facility is scheduled to open in mid-2025.

Aside from Microsoft, organizations that have agreed to buy carbon removal credits from 1Point5 include Amazon, Airbus, All Nippon Airways, the Houston Astros, the Houston Texans, and TD Bank.

Occidental says 1PointFive plans to set up more than 100 DAC facilities worldwide by 2035.

Texas Gov. Greg Abbott demands answers from Houston power company following Beryl

investigation incoming

With around 270,000 homes and businesses still without power in the Houston area almost a week after Hurricane Beryl hit Texas, Gov. Greg Abbott on Sunday said he's demanding an investigation into the response of the utility that serves the area as well as answers about its preparations for upcoming storms.

“Power companies along the Gulf Coast must be prepared to deal with hurricanes, to state the obvious,” Abbott said at his first news conference about Beryl since returning to the state from an economic development trip to Asia.

While CenterPoint Energy has restored power to about 2 million customers since the storm hit on July 8, the slow pace of recovery has put the utility, which provides electricity to the nation’s fourth-largest city, under mounting scrutiny over whether it was sufficiently prepared for the storm that left people without air conditioning in the searing summer heat.

Abbott said he was sending a letter to the Public Utility Commission of Texas requiring it to investigate why restoration has taken so long and what must be done to fix it. In the Houston area, Beryl toppled transmission lines, uprooted trees and snapped branches that crashed into power lines.

With months of hurricane season left, Abbott said he's giving CenterPoint until the end of the month to specify what it'll be doing to reduce or eliminate power outages in the event of another storm. He said that will include the company providing detailed plans to remove vegetation that still threatens power lines.

Abbott also said that CenterPoint didn't have “an adequate number of workers pre-staged" before the storm hit.

Following Abbott's news conference, CenterPoint said its top priority was “power to the remaining impacted customers as safely and quickly as possible,” adding that on Monday, the utility expects to have restored power to 90% of its customers. CenterPoint said it was committed to working with state and local leaders and to doing a “thorough review of our response.”

CenterPoint also said Sunday that it’s been “investing for years” to strengthen the area’s resilience to such storms.

The utility has defended its preparation for the storm and said that it has brought in about 12,000 additional workers from outside Houston. It has said it would have been unsafe to preposition those workers inside the predicted storm impact area before Beryl made landfall.

Brad Tutunjian, vice president for regulatory policy for CenterPoint Energy, said last week that the extensive damage to trees and power poles hampered the ability to restore power quickly.

A post Sunday on CenterPoint's website from its president and CEO, Jason Wells, said that over 2,100 utility poles were damaged during the storm and over 18,600 trees had to be removed from power lines, which impacted over 75% of the utility's distribution circuits.

Things to know: Beryl in the rearview, Devon Energy's big deal, and events not to miss

taking notes

Editor's note: Dive headfirst into the new week with three quick things to catch up on in Houston's energy transition.

Hurricane Beryl's big impact

Hundreds of thousands of people in the Houston area likely won’t have power restored until this week, as the city swelters in the aftermath of Hurricane Beryl.

The storm slammed into Texas on July 8, knocking out power to nearly 2.7 million homes and businesses and leaving huge swaths of the region in the dark and without air conditioning in the searing summer heat.

Although repairs have restored power to nearly 1.4 million customers, the scale of the damage and slow pace of recovery has put CenterPoint Energy, which provides electricity to the nation's fourth-largest city, under mounting scrutiny over whether it was sufficiently prepared for the storm and is doing enough now to make things right.

Some frustrated residents have also questioned why a part of the country that is all too familiar with major storms has been hobbled by a Category 1 hurricane, which is the weakest kind. But a storm's wind speed, alone, doesn't determine how dangerous it can be. Click here to continue reading this article from the AP.

Big deal: Devon Energy to acquire Houston exploration, production biz in $5B deal

Devon Energy is buying Grayson Mill Energy's Williston Basin business in a cash-and-stock deal valued at $5 billion as consolidation in the oil and gas sector ramps up.

The transaction includes $3.25 billion in cash and $1.75 billion in stock.

Grayson Mill Energy, based in Houston, is an oil and gas exploration company that received an initial investment from private equity firm EnCap Investments in 2016.

The firm appears to be stepping back from energy sector as it sells off assets. Last month EnCap-backed XCL Resources sold its Uinta Basin oil and gas assets to SM Energy Co. and Northern Oil and Gas in a transaction totaling $2.55 billion. EnCap had another deal in June as well, selling some assets to Matador Resources for nearly $2 billion. Click here to continue reading.

Events not to miss

Put these Houston-area energy-related events on your calendar.

  • 2024 Young Leaders Institute: Renewable Energy and Climate Solutions is taking place July 15 to July 19 at Asia Society of Texas. Register now.
  • CCS/Decarbonization Project Development, Finance and Investment, taking place July 23 to 25, is the deepest dive into the economic and regulatory factors driving the success of the CCS/CCUS project development landscape. Register now.
  • The 5th Texas Energy Forum 2024, organized by U.S. Energy Stream, will take place on August 21 and 22 at the Petroleum Club of Houston. Register now.

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