The definition of a pure play stock, the company only invests its resources in one line of business. This equates to the stock being correlated to the industry. If the industry goes up, the stock goes up and vice versa.
In recent years, Tim Duncan of Talos Energy has made a lifestyle of tough situations. Deep into merger negotiations with Stone Energy Company, Hurricane Harvey hit Houston Texas. Duncan’s subdivision became impassable. The power went out and residents knew there was another six feet of water on the way. Duncan lifted his family into a FEMA boat. Afterward he called in a favor and flew the family to friends in Alabama.
The hurricane was not about to deter Tim Duncan from his goal. He set up shop at his parents dining room table and for the next few months worked on nothing else but the merger.
The merger between Talos and Stone Energy would create a company with annual revenues of $900 million. Stone Energy was a public company, Talos would not have to go through the laborious task of creating an IPO. The combined $2.3 billion-dollar company creates a low risk balance sheet with only $700 million in debt.
The initial risk for companies like Talos is their assets are concentrated, offshore. Drilling platforms can run in the hundreds of millions of dollars, with catastrophe lurking around every corner.
Wall Street believes the “smart money” is drilling in places like the Permian Basin and other well-trodden oil fields. Talos represents the classic wildcatter mentality, taking a chance on wells in both the US and Mexico waters.
Talos is producing 48,000 barrels of oil a day with plans for much higher production.
A life long oil man, Tim Duncan has a knack for finding or creating positive oil deals. Talos took over a platform from Chevron tethered to the seafloor 4000 feet below sea level. Then came Hurricane Rita, which sent the platform 60 miles across the Gulf. Talos now pumps 16,000 barrels a day from the platform.
Talos reexamined seismic data from the Phoenix platform. 3000 feet deeper and new reserves were discovered.
Tim Duncan has a knack for finding oil.
Read More : www.crunchbase.com/organization/talos-energy