2019 Annual Report PASSION IN OUR PURSUIT 74508.indd 1 3/30/20 7:46 AM Talos Energy is a leading offshore energy company focused on oil and gas exploration and production in the United States Gulf of Mexico and offshore Mexico. NYSE: TALO Talos Energy – Who We Are RESERVES AT A GLANCE Proved Reserves PDP (50%) PDNP (23%) PUD (27%) 181 MMBOE Proved Reserves by Commodity Oil (70%) Gas (23%) NGLs (7%) 181 MMBOE Proved Reserves by Geography All reserves figures as of year end 2019 at SEC prices. Pro forma reserves estimated and compiled by Talos reservoir engineers. Approximately 85% of reserves audited by Netherland, Sewell & Associates, Inc. and Cawley, Gillespie and Associates. 181 MMBOE Deepwater (79%) Shelf (21%) APRIL 2020 TALOS ENERGY 74508.indd 2 3/30/20 7:46 AM Talos Energy Core Areas LOUISIANA MISSISSIPPI ALABAMA FLORIDA TEXAS Viosca Knoll Talos Blocks(1) Gulf of Mexico Shelf Mississippi Canyon Ewing Bank DeSoto Canyon East Breaks Garden Banks Green Canyon Atwater Valley Core Area – Mississippi Canyon Core Area – Gulf of Mexico Shelf Core Area – Green Canyon Keathley Canyon Walker Ridge Gulf of Mexico Talos is a leader in offshore energy exploration and production. We combine our technical experience in geology, geophysics and engineering with innovative resource evaluation techniques and seismic imaging expertise to discover new resources. We rely on decades of operational experience to safely and responsibly optimize production and recovery from our assets. Finally, we leverage our commercial and corporate management experience to most effectively allocate capital to balance risk and reward, grow our business and maximize long-term shareholder value. (1) Pro forma as of December 2019. Core Area – Mexico Gulf of Mexico Block 7 Zama Block 31 MEXICO TALOS ENERGY 3/30/20 11:04 AM 74508.indd 3-4 Letter to Shareholders APRIL 2020 Since my letter to shareholders one year ago, Talos has achieved a series of milestones that have continued to position the Company as a premier offshore exploration and production company. We successfully executed on our capital program as planned while achieving our best year on record from a health, safety and environmental perspective. We We also executed on several major strategic initiatives, most notably the acquisitions of certain assets from ILX Holdings and Venari Resources. These transactions were transformative completed the appraisal of our globally recognized Zama for our business, adding substantially more scale and cash (cid:976)low, discovery with better than expected results. Finally, we exposure to new projects and partners as well as deepening announced an important series of acquisitions as we exited our prospect inventory for the future. Notably, we were able the year. These achievements over the past twelve months to complete them with a structure and consideration that have made Talos a stronger, more resilient business with was accretive to our larger scale while also signi(cid:976)icantly increasing the number shareholders and retained of opportunities to build long term shareholder value. future upside while also 2019 Accomplishments We continued our focus on infrastructure-led development and exploration, bringing several new wells online during the year and laying the groundwork for the tie-in of our Bulleit discovery later this year. With the combination of our preserving our strong balance sheet and liquidity. Milestones in Offshore Mexico Looking forward, we believe our core competencies and strategy are well- suited for the current environment.” infrastructure ownership, our continued focus on operating We continued to advance our exploration and development costs and the quick turnarounds of these projects to (cid:976)irst oil, efforts in offshore Mexico throughout 2019, most notably we maintained solid margins for the year that rival the best with the successful conclusion of our Zama appraisal program in the industry. Importantly, this provides low-variable cost and the associated completion of an independent resource incremental production additions to our existing (cid:976)ixed cost assessment, which con(cid:976)irmed our initial expectations infrastructure, thereby producing solid positive cash (cid:976)low even that Zama would be one of the largest shallow water oil in the current commodity price environment. discoveries in the world over the last few decades. We also announced a second material discovery with our Xaxamani Throughout the year, we proactively executed numerous project on Block 31. Most recently, we delivered our entire business development transactions that unlocked new physical geological data set, one of the largest collections of opportunities, including several with some of the largest and physical rock samples ever collected in an offshore appraisal most sophisticated companies in the Gulf of Mexico. While project, back to Mexico’s Comisión Nacional de Hidrocarburos we actively evaluate and execute on these prospects, we will for further study by both regulators and generations of continue our highly active business development efforts as a geologists at several universities in Mexico. means to add diversity, risk-weighted project exposure and growth optionality to our expanding portfolio of opportunities. (Continued on Page 2) ANNUAL REPORT 4508InsertC1.indd 1 1 3/30/20 7:22 AM Letter to Shareholders (CONTINUED) We have steadily built a growing, sustainable and healthy business, and we currently see more opportunities than ever to achieve our long- term goal – to create the next great offshore E&P organization.“ Since our early entry into Mexico in the country’s (cid:976)irst bid round, we have remained committed to exploring for and unlocking new hydrocarbon resources, and have done so with great ef(cid:976)iciency and success and also without any signi(cid:976)icant health, safety or environmental incidents. We continue to believe in the potential of our Mexico projects for all of our stakeholders, including not only Talos shareholders but also the citizens and institutions of Mexico. We recognize and accept head-on the complexities that accompany major discoveries in emerging offshore jurisdictions, and remain con(cid:976)ident in the value of our Mexico discoveries to our business. An Enduring Strategy for Any Commodity Environment Our Company’s strategy is built to leverage our decades of technical experience in conventional oil and gas plays as well as our knowledge and reputation as an experienced offshore operator. These skill sets have become increasingly unique over the past decade as capital investments and industry have shifted to onshore shale plays. Meanwhile, we have steadily built a growing, sustainable and healthy business, and we currently see more opportunities than ever to achieve our long- term goal – to create the next great offshore E&P organization. Achieving this goal requires the ability to invest and execute across the asset lifecycle in a wide variety of projects and environments, to maintain a deep and resilient portfolio of both producing assets and prospects, and to operate with prudent and conservative (cid:976)inancial policies that allow the (cid:976)irm to thrive over the long-term. Talos is well-positioned across all of these categories. In 2019, our strategy was highly successful. We generated solid (cid:976)inancial results with meaningful free cash (cid:976)low from our producing Gulf of Mexico business as well as positive Adjusted Earnings per share for each quarter in 2019. We continued to advance and mature both our world-class Zama discovery as well as other prospects and projects for the future. 2 4508InsertC1.indd 2 TALOS ENERGY 3/30/20 7:22 AM Letter to Shareholders (CONTINUED) Finally, we continued to maintain our highly competitive operating cost structure, a strong hedge book and high liquidity. Looking forward, we believe our core competencies and strategy are well-suited for the current environment. We have built a strong business with solid fundamentals and have been through and succeeded in challenging environments in the past. With prudent management and our proven strategy, we continue to remain excited about what the future holds for Talos. Continued Focus on the Environment and Our Community Safety, sustainability and social responsibility have always been, and will always be, central to Talos’s business. In 2019, we continued our track record of safe operations, including TIMOTHY DUNCAN TALOS ENERGY CEO logging a recordable incident rate below the industry In closing, as I write this note, the industry and the global averages, reaching over 2.2 million man hours at our Helix economy are facing uncertain times. Amidst this challenging Producer I Floating Production Unit (FPU) facility without a backdrop, we are committed to focusing on our key principles lost-time incident and achieving a perfect recordable incident and strategies. First and foremost, we continue to believe that record across our plugging and abandonment activities for what we do – safely and ef(cid:976)iciently supplying reliable sources the year, which alone encompassed over 350,000 man hours. of energy to the world – is vitally important. Operationally, we will continue to protect the well-being of our employees, In 2020, we aim to continue our safety performance while our communities and all of our stakeholders. Financially, we better communicating with our stakeholders regarding entered the year with strong hedges, low leverage and a record the sustainability and environmentally-conscious nature of our business, as well as our ongoing commitment to our level of liquidity, and we will continue to do everything possible to maintain our (cid:976)inancial health. With this conviction, focus employees, stakeholders and communities. This year, we will and careful management, we believe we will be in a position to also will be publishing our inaugural ESG report addressing a (cid:976)ind opportunities in these uncertain conditions, and on this wide spectrum of operational, environmental and governance foundation Talos will continue to thrive in the future. topics. Finally, we recognize that everything we do is made possible by the support and tireless efforts of our employees Sincerely Yours, – in 2019 we were voted to the Houston Chronicle’s Top Workplace list for the seventh year in a row, spanning every year since our founding. This is a trend we believe indicates a strong culture built to last. Timothy S. Duncan President and Chief Executive Officer ANNUAL REPORT 4508InsertC1.indd 3 3 3/30/20 7:22 AM Who We Are COMPANY IDENTITY AND COMMITMENT TO HSE Talos is a leader in offshore energy exploration and production. We are one of the largest independent producers in the U.S. Gulf of Mexico and offshore Mexico, with an asset portfolio that is oil-weighted, highly operated and primarily located in prolific deepwater regions. We combine our technical experience in geology, geophysics and engineering with decades of offshore operations experience to discover new resources and safely Our asset footprint and experience cover the spectrum of known geologies, operating environments, and life stages, providing diversi(cid:976)ication and balance to our business while and responsibly optimize the production and total resource allowing for signi(cid:976)icant growth potential. recovery from our assets. We leverage our corporate management and business development experience to We manage our business with prudent and conservative unlock new opportunities, grow our business and maximize (cid:976)inancial policies, targeting low leverage, high liquidity and long-term shareholder value. a robust hedging program. Our capital planning aims to maintain a stable and healthy business, balancing the right At Talos, we invest in the full-life cycle of offshore level of risk and reward to ensure that we generate free cash conventional assets from (i) redeveloping mid-to-late life (cid:976)low while exposing ourselves to a wide variety of projects assets that we acquire, (ii) using our owned infrastructure that allow for sustainable growth in shareholder value. to engage in short cycle-time exploitation and exploration projects and (iii) leveraging our seismic database to engage in We’re proud of our role in supplying secure and affordable high impact exploration. energy for the world’s needs. Three principles are critical to our day-to-day business. We recognize the importance of safety, sustainability and social responsibility to all of our stakeholders as a foundational element of our license to operate. Talos will publish its inaugural ESG report in 2020. SAFETY SUSTAINABILITY SOCIAL RESPONSIBILITY We promote a safety-first culture in all stages of our business across employees, contractors and the public. We strive to be an industry leader with responsible, sustainable operations and minimal environmental impact. We aim to enhance the quality of life for our employees and the communities where we work and live. ■ Stop Work Authority granted to every employee and contractor directly from CEO ■ Talos incident rate well below the industry and numerous other economic sectors’ averages ■ ~2.2 million man hours on the Helix Producer I FPU without a lost-time incident ■ Zero recordable incidents across all P&A activities ■ Robust water and waste management protocols ■ Minimal flaring ■ Zero overboard tolerance ■ Subsea well leak detection systems ■ Employee-led Community Outreach team organizes support for numerous local, regional and national charitable organizations with volunteer activities and financial contributions ■ Every employee provided with an annual $500 allowance towards non-profit cause of their choice ■ Ranked a Top Workplace every year since inception 4 4508InsertC1.indd 4 TALOS ENERGY 3/30/20 7:22 AM TALe s IN Hey ANNUAL REPORT 4508InsertC1.indd 5 5 3/30/20 7:22 AM Core Areas KEY ASSET INFORMATIONN Green Canyon KEY FIELDS/ASSETS ■ Tornado ■ Phoenix ■ Boris ■ Bulleit ■ GC18 66 Proved Reserves (MMBOE) 80% Oil PHOENIX GC18 Mississippi Canyon KEY FIELDS/ASSETS ■ Ram Powell ■ Pompano ■ Amberjack ■ Marmalard ■ Odd Job ■ Claiborne 77 Proved Reserves (MMBOE) 72% Oil RAM POWELL POMPANO Notes: All reserves figures presented pro forma as of year end 2019 at SEC prices. Pro forma reserves estimated and compiled by Talos reservoir engineers. Approximately 85% of reserves audited by Netherland, Sewell & Associates, Inc. and Cawley, Gillespie and Associates. Green Canyon figures include Other Deepwater assets. Mexico figures are estimates based on independent assessment by Netherland, Sewell & Associates, Inc. 6 4508InsertC1.indd 6 AMBERJACK DELTA HOUSE TALOS ENERGY 3/30/20 7:22 AM Core Areas KEY ASSET INFORMATION Shelf KEY FIELDS/ASSETS ■ Ewing Bank 305-306 ■ Ship Shoal 113-114 ■ Main Pass 287-289 Mexico KEY FIELDS/ASSETS ■ Zama ■ Xaxamani 38 Proved Reserves (MMBOE) EWING BANK 47% Oil 670 - 1,010 Zama Resources (MMBOE) 94%+ Oil ZAMA XAXAMANI ANNUAL REPORT 4508InsertC1.indd 7 7 3/30/20 7:22 AM Talos Energy – By the Numbers CORPORATE HISTORY AND INFORMATION 2012 Talos Founded 2018 NYSE Listed 440 Employees TALOS CREW ON LOCATION Reserves and Production Reserves Growth (MMBOE) Production Growth (MBOE/D) 2019 181 2018 152 2016 104 2017 101 2018 46 2019 52 2017 29 2016 24 Acreage and Infrastructure Primary Term HBP Total Gross Net Gross Net Gross Net 378 310 217 122 142 184 129 36 186 78 85 49 428 240 - - 564 388 645 122 227 233 369 36 1,027 491 693 374 1,720 865 Mississippi Canyon(1) Green Canyon(2) Shelf Mexico Total >45MM ACRES Seismic Data Coverage 27 Manned Facilities (1) Acres include Deep Water Atwater Valley, DeSoto Canyon, Mississippi Canyon and Viosca Knoll. (2) Acres include Deep Water Garden Banks, Green Canyon, Keathley Canyon and Walker Ridge. Notes: Acreage figures as of February 2020, pro forma for recent acquisition. Figures shown in thousands of acres. All reserves figures as of year end at SEC prices. 2019 reserves presented pro forma and were estimated and compiled by Talos reservoir engineers. Approximately 85% of reserves audited by Netherland, Sewell & Associates, Inc. and Cawley, Gillespie and Associates. 8 4508InsertC1.indd 8 TALOS ENERGY 3/30/20 7:22 AM ANNUAL REPORT ANNUAL REPORT 4508InsertC1.indd 9 9 9 3/30/20 7:22 AM Financial Highlights 2016-2019 FISCAL YEARS Year Ended (Millions) Revenues Net Income (Loss) Capital Expenditures Total Long-term Debt(1) Reserves(2) (MMBoe) Proved Developed Producing (PDP) Proved Developed Non-Producing (PDNP) Proved Developed Proved Undeveloped (PUD) Total Proved Production Sales volume (MMBoe) Average daily production (Mboe/d) 2019 $927.6 58.7 545.7 $826.5 90.2 41.6 131.7 49.5 181.3 19.0 52.0 2018 $891.3 221.5 390.6 $766.2 78.1 37.5 115.5 36.2 151.7 16.7 45.9 2017 $412.8 (62.9) 227.2 $697.6 31.8 21.9 53.7 46.9 100.6 10.5 28.7 2016 $258.8 (208.1) 145.8 $701.2 39.7 26.1 65.8 37.9 103.7 8.9 24.4 (1) Inclusive of Capital Lease. (2) 2019 reserves presented pro forma and were estimated and compiled by Talos reservoir engineers. Approximately 85% of reserves audited by Netherland, Sewell & Associates, Inc. and Cawley, Gillespie and Associates. Notes: For reconciliation of Standardized Measure of oil and gas to PV-10 refer to the 10-K contained in this annual report. All reserves figures as of year end at SEC prices, numbers may not sum due to rounding. Special thanks to David Duncan Photography. 10 TALOS ENERGY 4508InsertC1.indd 10 3/30/20 7:22 AM (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:76)(cid:86)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:88)(cid:80)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:3) $150 $100 $50 $0 5/10/18 12/31/18 12/31/19 Talos Energy Inc. S&P 500 Index Dow Jones U.S. Select Oil Exploration & Production Index CORPORATE OFFICERS TIMOTHY S. DUNCAN President and Chief Execuive Officer JOHN A. PARKER Executive Vice President – Exploration ROBERT D. ABENDSCHEIN Executive Vice President and Head of Operations SHANNON E. YOUNG, III Executive Vice President and Chief Financial Officer WILLIAM S. MOSS III Executive Vice President and General Counsel BOARD OF DIRECTORS NEAL P. GOLDMAN(1) Managing Member, SAGE Capital Investments, LLC TIMOTHY S. DUNCAN President and Chief Execuive Officer Talos Energy, Inc. CHRISTINE HOMMES Partner, Apollo Global Management, LLC JOHN BRAD JUNEAU Sole Manager and General Partner, Juneau Exploration, L.P DONALD R. KENDALL, JR Director and Chief Executive Officer, Kenmont Capital Partners ANNUAL REPORT JOHN B. SPATH Senior Vice President – Drilling and Production Operations SERGIO L. MAIWORM JR. Vice President – Finance, Investor Relations and Treasurer DEBORAH HUSTON Vice President and Deputy General Counsel C. GORDON LINDSEY Vice President - Corporate Development ROBERT SHENINGER Vice President – Health, Safety, Environmental and Sustainability LOREN LONG Vice President - Mexico RAJEN MAHAGAOKAR Principal, Riverstone Holdings LLC CHARLES M. SLEDGE Private Investor ROBERT M. TICHIO Partner, Riverstone Holdings LLC JAMES M. TRIMBLE Chairman, Crestone Peak Resources OLIVIA C. WASSENAAR Senior Partner, Apollo Global Management, LLC (1) Chairman of the Board CORPORATE OFFICE 333 Clay St., Suite 3300 Houston, TX 77002 Phone: 713-328-3000 WEBSITE www.talosenergy.com STOCK EXCHANGE LISTING New York Stock Exchange Symbol: TALO ANNUAL MEETING May 12, 2020 10:30 a.m. CT Three Allen Center 333 Clay Street, Suite 3300 Houston, TX 77002 FORM 10-K Copies of the corporation’s 10-K are available on our website at www.talosenergy.com AUDITORS Ernst & Young Houston, TX SHAREHOLDER SERVICES Computershare Mailing: P.O. Box 505000 Louisville, KY 40233 1-800-962-4284 (Toll-Free) 1-781-575-3120 (International) OVERNIGHT MAIL 462 South 4th Street Suite 1600 Louisville, KY 40202 INVESTOR RELATIONS Additional corporate information is available on our website at www.talosenergy.com 74508.indd 5 3/30/20 7:47 AM CORPORATE OFFICE 333 Clay St., Suite 3300 Houston, TX 77002 Phone: 713-328-3000 74508.indd 6 3/30/20 7:47 AM