HOUSTON—For Talos Energy CEO Tim Duncan, a response of OK is fantastic when someone asks “how is it going?” in today’s lower-for-longer commodity price environment.

Fresh off of news of a Pliocene oil discovery in the deepwater U.S. Gulf of Mexico (GoM) and eyes on further potential pay as an early entrant in Mexico’s shallow water, the 4-year-old company is chasing opportunities armed with seismic technology and expertise with private equity capital.

“We’ve got a little bit of wind behind us and a little bit of good news at a time when it is hard to find good news by having a major discovery in the first quarter in the midst of this commodity crisis,” Duncan told a crowd gathered this week for a luncheon hosted by the Independent Petroleum Association of America and the Texas Independent Producers & Royalty Owners.

Located in the Green Canyon area and drilled down dip, the Tornado discovery well hit 291 feet of high-quality oil pay. The Talos-operated well was then sidetracked to an up-dip take point, where it encountered 281 feet of oil pay, according to partner Deep Gulf Energy Cos. Plans are for the well to be tied back to the Helix Producer 1. Talos expects to flow oil for the development by year-end, Duncan told Hart Energy.

While commodity prices play a big role in the development of discoveries, new technology such as wide azimuth seismic and reprocessing older data is leading to opportunities to strike oil and gas, including in GoM areas that have been left for dead. Talos is among the companies relying on its technological expertise to weather today’s storm.

Navigating The ‘Trough’

An expert in interpreting seismic data, the company builds on its G&G knowledge, applying learnings and newer technology needed in areas where fixed infrastructure already exists, and puts money toward its portfolio. With GoM shallow and deepwater assets spanning from High Island to Main Pass, Talos targets oilier plays.

The strategy is working so far, according to Duncan, who was a founder and senior vice president of business development for Phoenix Exploration Co., which was sold to a group led by Apache Corp. (NYSE: APA). “What we’re navigating is another commodity trough,” he added. “We navigated the same thing at Phoenix and it worked out OK.”

The latest find, at a water depth of 2,760 feet, is underneath an asset that had already produced between 60 million and 70 million barrels (bbl) for Chevron (NYSE: CVX) and BHP Billiton (NYSE: BHP), Duncan said. He noted Talos used some wide azimuth seismic data and reprocessing before testing the closure.

M&A and asset development are part of the Talos concept.

“We’re going to do a lot of reinvestment with the drillbit and we’re going to make sure we have enough seismic that that reinvestment opportunity delivers the best returns,” Duncan said.

With about 150 employees, Talos produced at least 72.5 MMbbl in 2015. So far this year, production has averaged 26,000 bbl/d, and 70% of the company’s production is hedged at $80, Duncan said. Talos has held its reserves flat through the cycle with plenty of recompletions and seismic.

The company has seismic data that covers more than 10 million acres.

Moving Into Mexico

Talos hopes to find more success in Mexico where the company—along with partners Premier Oil and Sierra Oil & Gas—picked up two shallow-water blocks for more than a combined 160,000 acres. The consortium beat out companies including Statoil (NYSE: STO) and Eni (NYSE: E) in Mexico’s first bid round after the country opened its energy sector to foreign oil and gas investors.

“The seismic is there,” Duncan said. “We’re dealing with worst case late ‘90s 3-D, best case pre-stack time 2010 3-D processing. So it’s ripe for reprocessing. It’s ripe for AVO (amplitude versus offset) products. It’s got everything that interests us.”

Tim Duncan, Talos Energy, Mexico, oil, Gulf of Mexico, U.S.

The blocks are located in the prolific Sureste Basin, where the Cantarell Field—a carbonate play—is located. “It wasn’t developed on Pliocene, Miocene, salt traps, subsalt, salt domes, lows that come in at three-way closures,” Duncan said. “That is still there.”

According to Premier, there are numerous leads.

Duncan said the company is currently developing the first block. He anticipates drilling the first well around this time next year, targeting a more than 200 MMbbl prospect.

“It’s got all the attributes I think you want to see,” he said. “Do you get some of the robust rates of returns when you look at the economic infrastructure? Not as much as you get in the Gulf, let’s be clear about that. What we get is an opportunity to underpin shorter life assets on the U.S. side with potentially longer life assets on the Mexico side.”

When it’s time to monetize the story, Talos believes the narrative might create some demand, “if we are lucky enough to be successful in Mexico,” Duncan said.

Whether Talos participates in Mexico’s upcoming deepwater round, which has already generated interest from some of the world’s biggest oil companies, remains to be seen.

“Never say never,” Duncan told Hart. “With the development we have on our side of the Gulf of Mexico and getting prepared to execute our minimum work program [in Mexico], our plate is probably full for the time being. With that said … we don’t want to ever turn away an opportunity.”

Velda Addison can be reached at vaddison@hartenergy.com.