US Gulf Weather Whacks Indie Offshore Output

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Talos Energy usually sees its operations in the US Gulf of Mexico go off line for five to seven days each year due to tropical storms in the region. But during this year’s record hurricane season, the company reported 35 days of storm downtime in the third quarter alone, CEO Tim Duncan told investors during a conference call. The severe weather in the Gulf of Mexico represents the latest twist in an already challenging 2020 for US offshore producers, which are still grappling with the Covid-19 pandemic and low oil prices. Duncan said Talos has been impacted by eight named storms so far this year, of which five were in the third quarter. The company's production for the quarter averaged 46,000 barrels of oil equivalent per day -- a far cry from the firm's year-end goal of 71,000-73,000 boe/d. Fellow US Gulf producer Murphy Oil said earlier in the week that it saw 12,400 boe/d of storm-related downtime in the third quarter, more than double its guidance of 4,800 boe/d (OD Nov.5'20). Project Impacts Talos had aimed to be done with its lineup of new projects -- largely near-field tie-back and infill wells -- by September, and under normal circumstances would be looking ahead to next year’s budget. But the company is still playing catch-up, and aims to bring those wells on line by year’s end. It is also expected to spud the Puma West exploration well with operator BP in the fourth quarter. Constrained Capex There does not appear to be any rush to ramp up spending at either Talos or Murphy once 2020 is in the rearview. Murphy CEO Roger Jenkins said the company’s 2020 spending levels would likely stay flat through 2021 and even 2022. Those levels are also likely to drop substantially as major offshore projects, namely the greenfield King’s Quay, come on line and begin to generate free cash flow. Talos will take its time to plot out its spending strategy for 2021, Duncan said, but he did say he expects next year's capital expenditure to be down from this year. "I don't think ... we're talking about a production growth year," he said. Kathrine Schmidt, Houston

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