Talos Energy provided some expected benefits to the Company if the Inflation Reduction Act of 2022 passes into law in its current form. The bill was approved by the Senate on Sunday, August 7, and is expected to be voted by the House of Representatives on Friday, August 12. If approved by the House, it is expected that President Biden will sign the Act into law.

Offshore Oil & Gas Lease Sales:

• Reinstates Lease Sale 257 held in November 2021, and high bidders must be awarded their leases: Talos was one of the most active bidders in Lease Sale 257 and was the high bidder on 10 blocks totaling over 57,000 gross acres.
• Requires holding previously cancelled Gulf of Mexico Lease Sales 259 and 261 within an established timeline. Lease Sale 259 must occur by March 31, 2023, and Lease Sale 261 by September 30, 2023.
• Future offshore wind lease sales tied to holding additional oil and gas lease sales: In order to issue an offshore wind lease, an oil and gas lease sale of at least 60 million acres, which is approximately the area-wide Gulf of Mexico size, must have been held in the prior year. This linkage will be in place for 10 years.
• Deepwater royalty rates capped at current rates for 10 years. Talos’s existing 1.3 million gross acres under lease are also unaffected.

Carbon Capture and Sequestration:

• Increases the federal 45Q tax credit for permanent sequestration of carbon dioxide to $85/ton subject to prevailing wage and apprenticeship requirements.
• Adds a direct pay component for the first five years of a project, after which it reverts to a federal income tax credit.
• Extends eligibility to projects that commence construction before January 1, 2033.

President and Chief Executive Officer Timothy S. Duncan commented: “We have always believed maintaining offshore leasing in the Gulf of Mexico is good energy policy that provides energy security, energy production and energy jobs in one of the lowest carbon-intensive oil producing basins in the world. The acreage we were the high bidders on in Lease Sale 257 have identified drilling opportunities that will be actionable in our longer-term drilling calendar. Additionally, consistent leasing is an important part of our strategy of responsible energy development. We are also excited about the 45Q tax credit expansion and its potential impact on our growing CCS business. We believe we have put together one of the most attractive portfolios available for permanent carbon sequestration in close proximity to several industrial hubs where these credits will allow decarbonization to become a priority. There is no doubt the legislation is an important step for offshore energy security and CCS development along the United States Gulf Coast.”