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Talos CEO says 'interested' in Anadarko's Gulf of Mexico assets, if Oxy sells

Houston — Small Gulf of Mexico operator Talos Energy may be interested in buying some of Anadarko Petroleum's deepwater Gulf of Mexico assets that Occidental Petroleum will acquire in its pending $57 billion purchase of that company, Talos' CEO said Thursday.

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In addition, Talos - the first foreign company to make a discovery in Mexico's offshore in about 80 years - may look elsewhere in the world for another key offshore basin where it can put to use the expertise it has developed in the broader Gulf of Mexico, Tim Duncan said at the Association of International Petroleum Negotiators' 2019 International Petroleum Summit.

Anadarko, a long-time deepwater Gulf of Mexico player, was one of the first companies to widely publicize the high-return, quick production tieback strategy that has made the US Gulf a more profitable operating arena today. That strategy contributed to a gradual comeback after years of relative inactivity during the 2015-2017 oil price downturn.

What Oxy will do with Anadarko's US Gulf assets -- which include seven operated production hubs, dozens of leases and several large producing fields -- remains a question.

'ANYTHING AND EVERYTHING'

"We're interested in anything and everything Anadarko operates," Duncan told reporters on the conference sidelines. "[Oxy] has a lot to digest and figure out."

Duncan said that as a relatively small operator in the Gulf of Mexico, Talos has limits to the amount of capital it can raise and the dollar value of potential acquisitions.

Also, "we have to see what fits our core areas and where we already have production," he said.

Oxy has been out of the Gulf of Mexico for many years, although US federal records show that it participated in bidding rounds in the late 1990s. Those records show it bid on leases in 1999, for example, with a partner in the Gulf's Viosca Knoll area off the toe of Louisiana - which coincidentally is an area in or near two current Anadarko-owned production facilities, Horn Mountain and Marlin.

Oxy's crown jewel in the US is the Permian Basin and it pursued Anadarko for that operation. But Duncan said that Oxy might also opt to keep Anadarko's US Gulf assets itself and re-enter operating in the US offshore basin.

As for looking outside the Gulf of Mexico into other offshore provinces, Talos has developed knowledge of "a geology we think we understand" in the US Gulf and then "made a bet and transferred [it] to Mexico," Duncan said.

"Can we continue to transfer that skill set to other offshore basins in the world?" he said. "We're looking at it."

At the moment, US Gulf of Mexico activity is beginning to rev up, while other offshore basins around the world, such as West Africa or South America, are underinvested and often mature. Even while Talos is small and must manage its capital dollars prudently, now may be the moment to enter those basins while the cost of doing so is low, Duncan said.

ZAMA SUCCESS

When Talos, founded in 2012, decided to participate in Mexico's offshore bidding rounds in 2015, it had to make a similar bet on an unknown entity that carried a certain amount of risk, he said. But Duncan knew it would be difficult for his company, which was then privately held, to compete with larger competitors with deeper pockets.

Since Talos already had production on the US side of the Gulf of Mexico, that could help fund exploration in Mexico. Talos found success with its first Mexican well, Zama, where the company is now in the appraisal stage. It aims to bring the field online in second-half 2022.

Talos is now talking to midstream companies about pipeline and related infrastructure to bring that and potentially other discoveries to market, Duncan said.

"We're asking what they [midstream operators] think about not only Zama but all the permits around it," he said. "I can tell you there's a lot of midstream interest. You can see permits to the west and north."

"There's a bellwether find in Zama, so what's the plan to get to first oil quicker that's sustainable not only for our development but others?" he added.

-- Starr Spencer, starr.spencer@spglobal.com

-- Edited by Jeff Mower, newsdesk@spglobal.com