TALOS ENERGY INC. Commitments Disclosure

Note 15 — Commitments and Contingencies

Legal Proceedings and Other Contingencies

From time to time, the Company is involved in litigation, regulatory examinations and administrative proceedings primarily arising in the ordinary course of business in jurisdictions in which the Company does business. Although the outcome of these matters cannot be predicted with certainty, the Company’s management believes none of these matters, either individually or in the aggregate, would have a material effect upon the Company’s financial position; however, an unfavorable outcome could have a material adverse effect on the Company’s results from operations for a specific interim period or year.

During the year ended December 31, 2024, the Company settled long-standing litigation initiated in June 2019 involving the former President of EnVen, which was assumed as part of the EnVen Acquisition. The Company paid $14.4 million to satisfy the judgment, inclusive of legal fees and interest.

By virtue of the Company’s acquisition of QuarterNorth, Talos is defending a lawsuit brought by a contractor concerning amounts allegedly owed for drilling operations at several locations in the Gulf of America. The lawsuit alleges that the contractor is entitled to certain statutory liens under Louisiana law. Talos disputes the contractor’s lien and damages claims and is defending the suit aggressively. A trial date has not been set for this case. It is reasonably possible that a loss may be realized, with the range of loss between zero and approximately $22 million.

By virtue of the Company’s acquisition of QuarterNorth, Talos is defending a lawsuit brought by plaintiffs (“Warrant Holders”) that held warrants issued by QuarterNorth pursuant and subject to warrant agreements. Warrant Holders allege that the QuarterNorth board improperly reduced the value of the warrants, which diluted their ownership interest in QuarterNorth prior to its acquisition by Talos. Trial is scheduled for May 2026, in the Court of Chancery of the State of Delaware. It is reasonably possible that a loss may be realized, with the range of loss between zero and approximately $21 million.

Firm Transportation Commitments

The Company has firm transportation agreements in place with pipeline carriers for future transportation of oil and gas production. The Company is obligated to transport a minimum monthly oil and gas volumes or pay for any deficiencies for years 2026 through 2030. Our production is currently expected to exceed the minimum monthly volume in the periods provided in the agreements.

Performance Obligations

Regulations with respect to the Company's operations govern, among other things, engineering and construction specifications for production facilities, safety procedures, plugging and abandonment of wells, and removal of facilities in the U.S. Gulf of America.

As of December 31, 2025, the Company had secured performance bonds from third party sureties totaling $1.5 billion. The cost of securing these bonds is reflected as “Interest expense” on the Consolidated Statements of Operations. Additionally, as of December 31, 2025, the Company had secured letters of credit issued under its Bank Credit Facility totaling $97.4 million. Letters of credit that are outstanding reduce the available revolving credit commitments. See Note 8 — Debt for further information on the Bank Credit Facility.

On November 3, 2025, the Company entered into arrangements with its surety providers to establish limits on the amount of aggregate collateral that such surety providers can require the Company to post, with annual collateral funding commitments set forth in the table below. The arrangements also require the Company to spend a minimum amount on plugging and abandonment activities each year. For the three years commencing January 1, 2026 and for the subsequent two years commencing January 1, 2029, the Company is required to spend $90.0 million and $45.0 million on these activities on an annual basis, respectively.

The collateral funding commitments may be secured by cash or letters of credit which will reduce the Company’s liquidity. For the year ended December 31, 2025, we posted collateral of $40.1 million secured by letters of credit. Collateral funded with cash will be reflected as “Restricted cash” within the Consolidated Balance Sheets. The collateral funding commitments, and ultimately any posted cash collateral, will be reduced as plugging and abandonment activities are completed and underlying surety bonds are released.

Decommissioning Obligations

The Company, as a co-lessee or predecessor-in-interest in oil and natural gas leases located in the U.S. Gulf of America, is in the chain of title with unrelated third parties either directly or by virtue of divestiture of certain oil and natural gas assets previously owned and assigned by our subsidiaries. Certain counterparties in these divestiture transactions or third parties in existing leases have filed for bankruptcy protection or undergone associated reorganizations and may not be able to perform required abandonment obligations. Regulations or federal laws could require the Company to assume such obligations. The Company reflects such costs as “Other operating (income) expense” on the Consolidated Statements of Operations.

Although it is reasonably possible that the Company could receive state or federal decommissioning orders in the future or be notified of defaulting third parties in existing leases, the Company cannot predict with certainty, if, how or when such orders or notices will be resolved or estimate a possible loss or range of loss that may result from such orders. However, the Company could incur judgments, enter into settlements or revise its opinion regarding the outcome of certain notices or matters, and such developments could have a material adverse effect on its results of operations in the period in which the amounts are accrued and its cash flows in the period in which the amounts are paid.