Apr. 30 at 3:41 PM
$TALO I am predicting a large beat at earnings for the following reasons.
- As far as I can tell, the majority of the oil that Talos produces is a Mars blend, not WTI.
- In the physical market, prompt barrels of Mars have been selling for an average of
$15 above WTI, more or less, since the war began.
- Talos was about 47% hedged in q1. For their unhedged barrels, they should have received full Mars price. Importantly, because their hedges are set to WTI, for their hedged barrels they should also receive the differential between the price they received on Mars barrels and WTI, which, again has been averaging around a
$15 a barrel difference.
- This Mars premium is an artifact of the war (Mars is similar to much of the oil that typically comes out of the SoH, and is thus at a premium) and ought to persist.
- For projections, the only question will be what, if anything, Talos has done w additional hedges in ‘26 and ‘27.
If you think I am wrong, please tell me why!
