SUPPLEMENTAL NON-GAAP INFORMATION
Certain financial information included in our financial results are not measures of financial performance recognized by accounting principles generally
accepted in the United States, or GAAP. These non-GAAP financial measures may not be viewed as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP measures which may be reported by other companies. In addition, we believe that non-GAAP measures excluding CCS are a meaningful measure of financial performance that
can be used by investors, analysts and management in evaluating the performance of our “go-forward” business after giving effect to our CCS divestiture during the first quarter of 2024, and will
assist such readers of our financial statements in considering the results of this business in comparative periods.
Reconciliation of General and
Administrative Expenses to Adjusted General and Administrative Expenses Excluding CCS
We believe the presentation of Adjusted General and
Administrative Expenses excluding CCS provides management and investors with (i) important supplemental indicators of the operational performance of our business, (ii) additional criteria for evaluating our performance relative to our
peers and (iii) supplemental information to investors about certain material non-cash and/or other items that may not continue at the same level in the future. Adjusted General & Administrative
Expenses excluding CCS has limitations as an analytical tool and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP or as alternatives to net income (loss), operating income (loss) or any other
measure of financial performance presented in accordance with GAAP. We define these as the following:
General and Administrative Expenses. General
and Administrative Expenses generally consist of costs incurred for overhead, including payroll and benefits for our corporate staff, costs of maintaining our headquarters, costs of managing our production operations, bad debt expense, equity-based
compensation expense, audit and other fees for professional services and legal compliance. A portion of these expenses are allocated based on the percentage of employees dedicated to each operating segment.
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| ($ thousands) |
|
Three Months Ended
December 31, 2024 |
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|
Twelve Months
Ended December 31,
2024 |
|
| Reconciliation of General & Administrative Expenses to Adjusted General &
Administrative Expenses excluding CCS: |
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| Total General and administrative expense |
|
$ |
41,563 |
|
|
$ |
201,517 |
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| CCS Segment |
|
|
(59 |
) |
|
|
(10,454 |
) |
| Transaction and other expenses(1) |
|
|
(1,047 |
) |
|
|
(45,953 |
) |
| Non-cash equity-based compensation expense |
|
|
(5,603 |
) |
|
|
(14,415 |
) |
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| Adjusted General & Administrative Expenses excluding CCS |
|
$ |
34,854 |
|
|
$ |
130,695 |
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| (1) |
For the twelve months ended December 31, 2024, transaction expenses include $39.1 million in costs
related to the QuarterNorth Acquisition, inclusive of $22.2 million in severance expense, $8.5 million in costs related to the TLCS Divestiture, inclusive of a net $3.0 million in severance expense, and $5.0 million in severance
expense related to the departure of the Company’s President and Chief Executive Officer. |
Reconciliation of Net Income (Loss) to
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Excluding CCS
“EBITDA,” “Adjusted EBITDA” and “Adjusted EBITDA excluding
CCS” provide management and investors with (i) additional information to evaluate, with certain adjustments, items required or permitted in calculating covenant compliance under our debt agreements, (ii) important supplemental
indicators of the operational performance of our business, (iii) additional criteria for evaluating our performance relative to our peers and (iv) supplemental information to investors about certain material
non-cash and/or other items that may not continue at the same level in the future. EBITDA, Adjusted EBITDA, and Adjusted EBITDA excluding CCS have limitations as analytical tools and should not be considered
in isolation or as substitutes for analysis of our results as reported under GAAP or as alternatives to net income (loss), operating income (loss) or any other measure of financial performance presented in accordance with GAAP. We define these as
the following:
EBITDA. Net income (loss) plus interest expense; income tax expense (benefit); depreciation, depletion and amortization; and
accretion expense.
Adjusted EBITDA. EBITDA plus non-cash write-down of oil and natural gas properties,
transaction and other (income) expenses, decommissioning obligations, the net change in fair value of derivatives (mark to market effect, net of cash settlements and premiums related to these derivatives), (gain) loss on debt extinguishment, non-cash write-down of other well equipment and non-cash equity-based compensation expense.
Adjusted EBITDA excluding hedges. We have historically provided as a supplement to—rather than in lieu of—Adjusted EBITDA including hedges,
provides useful information regarding our results of operations and profitability by illustrating the operating results of our oil and natural gas properties without the benefit or detriment, as applicable, of our financial oil and natural gas
hedges. By excluding our oil and natural gas hedges, we are able to convey actual operating results using realized market prices during the period, thereby providing analysts and investors with additional information they can use to evaluate the
impacts of our hedging strategies over time.
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| TALOS ENERGY INC. |
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13 |
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333 Clay St., Suite 3300, Houston, TX 77002 |