Talos still working to finalize unitization agreement for Zama offshore Mexico

Talos Energy is working to finalize terms of a unitization and unit operating agreement (UUOA) based on international best practices for its Zama discovery in Block 7 offshore Mexico. The UUOA will address initial tract participating interest splits between Talos, its Block 7 partners and Pemex. It will also address the mechanism to redetermine those splits in the future, as well as operatorship.

A third-party reservoir engineering firm engaged by the Block 7 partners and Pemex to evaluate initial tract participation (“ITP”) within the Zama reservoir recently concluded that the Block 7 Consortium, led by Talos, holds 49.6% of the gross interest in Zama and Pemex holds 50.4%. An independent evaluation engaged by Talos last year concluded that the Block 7 consortium holds 59.6% of the gross interest, compared to 40.4% for Pemex.

The UUOA will separately provide for specific milestones upon which participating interest splits among the Zama parties will be re-determined and adjusted based on evolving data collected over the asset lifecycle. Redetermination provisions are standard in unitizations and ensure equitable participation over time. Under the redetermination provisions in the Zama UUOA, Block 7 partners and Pemex will reevaluate the ITP and subsequently determined splits in line with international best practices.

“We continue to push in earnest to reach full agreement on the commercial terms of the unitization. We believe the recent third-party analysis underestimates relevant data obtained during the appraisal campaign,” said Talos President and CEO Timothy Duncan. “Regardless of the ITP established in the final UUOA, we expect that the true percentages will ultimately be realized through the redetermination process, which is a standard component of any unitization agreement and a global best practice, and other factors. ITP percentages are a single variable among those still being determined, most importantly operatorship. We remain confident that Talos is best positioned to operate the field moving forward and we will further update the market once a commercial agreement on the unitization has been reached.”