Friday 19 October 2018

Talos Energy Inc. announced that the Company entered into a transaction with Hokchi Energy, S.A. de C.V., ("Hokchi"), a subsidiary of Pan American Energy LLC, to cross assign the Company's Participating Interest ("PI") in Block 2 and Hokchi's PI in Block 31, both in the Sureste Basin offshore Mexico.

Under the agreed conditions for the swap, Talos will assign a 25% PI in Block 2 to Hokchi in exchange for a 25% PI in Block 31, which is immediately to the south of Block 2. Once the transaction is completed, Hokchi will be the operator of both blocks and Talos will own a 25% PI on Block 2 and a 25% PI on Block 31. The transaction is subject to approval by the Mexican oil & gas regulator, the National Commission of Hydrocarbons (CNH), and has not yet been approved by CNH.

Talos was awarded the Production Sharing Contract ("PSC") for Block 2 in September of 2015 as part of the competitive bidding process in the historic Round 1.1 auction. Hokchi was awarded the PSC for Block 31 as part of a competitive bidding process on Round 3.1 in June of 2018. Both blocks had multiple bids.

As part of Talos' broad investment in Mexico, the Company utilizes proprietary seismic reprocessing that includes both Block 2 and Block 31, and the Company sees the Hokchi swap as a way to aggregate and accelerate the investment in the various quality prospects existing in both blocks, specifically the Acan (formerly known as Bacab) prospect in Block 2, but also other high potential drilling opportunities in Block 31. The exploration campaign will begin on Block 2 in 2Q 2019, where two wells will be drilled, starting with the Acan prospect. Soon thereafter, Talos plans to participate in two wells in Block 31. Beyond Acan, Blocks 2 and 31 contain a significant portfolio of compelling prospects with strong technical ties to offsetting discoveries.