The Federal Economic Competition Commission (Cofece) approved a consolidation agreement between Talos Energy and Hokchi Energy.

On August 16, 2022, Hokchi Energy, Hokchi Ibérica, Talos Energy and Talos México 2 notified Cofece of their intention to enter into a concentration.

The notified transaction consists of the acquisition by Hokchi Energy and Hokchi Ibérica of certain representative shares of the capital stock of Talos Offshore 2, currently owned by Talos Energy and Talos México 2.

As a result of the transaction, Hokchi Energy and Hokchi Ibérica will acquire all the rights and obligations currently held by Talos Offshore 2 in: the Contract for the Exploration and Extraction of Hydrocarbons under the Production Sharing Modality – Contract Area 2 No. CNH-R01-L01-A2. CNH-R01-L01-A2/2015, dated September 4, 2015 (Block 2 Contract) and its respective joint operations contract related to Block 2 Contract, dated April 8, 2019 (Block 2 JOA); and the Contract for the Exploration and Extraction of Hydrocarbons Under the Shallow Waters Shared Production Modality – Southeast Basins Contractual Area No. CNH-R03-L01-A2/2015, dated April 8, 2019 (Block 2 JOA); and the Contract for the Exploration and Extraction of Hydrocarbons Under the Shallow Waters Shared Production Modality – Southeast Basins Contractual Area No. CNH-R03-L01-A2/2015, dated April 8, 2019 (Block 2 JOA). CNH-R03-L01-AS-CS-15/2018, dated June 27, 2018 (Contract Block 31) and its respective joint operations contract related to Contract Block 31 dated May 22, 2019 (JOA Block 31).

Cofece

Talos Energy achieved ownership of a 25% interest in Block 31, which is operated by Hokchi Energy, a subsidiary of Pan American Energy.

At least until February 2022, Talos Energy had participated in a two-well drilling campaign that took place during 2019.

In considering Hokchi’s proposed appraisal program for Block 31, Talos Energy made a decision not to consent to the program to allow it to allocate capital to other projects.

Talos Energy recorded an impairment of $18.1 million for its investment in unproved properties in Block 31 during the year ended December 31, 2021, as the costs were not recoverable.

Cofece must analyze, prior to their implementation, those concentrations that fall under the assumptions established in the Federal Economic Competition Law (LFCE) and in its resolution may authorize, object or subject the concentration to compliance with conditions aimed at preventing possible effects contrary to free competition and the competition process.