11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

If the Stone Energy stockholders do not adopt the Transaction Agreement or if the Transactions are not completed for any other reason, Stone Energy would be subject to a number of risks, including the following:

The occurrence of any of these events individually or in combination could have a material adverse effect on the results of operations of Stone Energy or the trading price of Stone Energy common stock. Stone Energy is also exposed to general competitive pressures and risks, which may be increased if the Transactions are not completed.

Each of Stone Energy and Talos Energy will be subject to business uncertainties and contractual restrictions while the Transactions are pending that could adversely affect each of them.

Uncertainty about the effect of the Transactions on employees and Stone Energy’s and Talos Energy’s business relationships may have an adverse effect on either or both of Stone Energy and Talos Energy, regardless of whether the Transactions are eventually completed, and, consequently, on New Talos. These uncertainties may impair Stone Energy’s and Talos Energy’s ability to attract, retain and motivate key personnel until the Transactions are completed, or the Transaction Agreement is terminated, and for a period of time thereafter, and could cause customers, suppliers and others that deal with Stone Energy or Talos Energy to seek to change existing business relationships with Stone Energy or Talos Energy or to delay or defer certain business decisions.

The pursuit of the Transactions and the preparation for the integration of Stone Energy and Talos Energy have placed, and will continue to place, a significant burden on the management and internal resources of both Stone Energy and Talos Energy. There is a significant degree of difficulty and management distraction inherent in the process of closing the Transactions and integrating Stone Energy and Talos Energy, which could cause an interruption of, or loss of momentum in, the activities of each company’s existing businesses, regardless of whether the Transactions are eventually completed. Before and immediately following Closing, the management teams of Stone Energy and Talos Energy will be required to devote considerable amounts of time to this integration process, which will decrease the time they will have to manage their respective existing businesses. One potential consequence of such distractions could be the failure of management to realize other opportunities that could be beneficial to Stone Energy or Talos Energy, respectively. If Stone Energy’s or Talos Energy’s management is not able to effectively manage the process leading up to and immediately following Closing, or if any significant business activities are interrupted as a result of the integration process, the business of Stone Energy or Talos Energy could suffer.

36

Under the terms of the Transaction Agreement, each of Stone Energy and Talos Energy is subject to certain restrictions on the conduct of its business until the earlier of the effective time of the Merger and the termination of the Transaction Agreement, which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to enter into contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures, as applicable. Such limitations could negatively affect Stone Energy’s and Talos Energy’s businesses and operations prior to the completion of the Transactions.

For a description of the restrictive covenants applicable to Stone Energy and Talos Energy, see “The Transaction Agreement—Operations of Stone Energy and the Talos Entities Pre-Closing” beginning on page 130 of this consent solicitation statement/prospectus.

The integration of Stone Energy and the Talos Entities following Closing will present challenges that may result in a decline in the anticipated benefits of the Transactions.

The Transactions involve the combination of two businesses that currently operate as independent businesses. New Talos will be required to devote management attention and resources to integrating its business practices and operations, and prior to the Transactions, management attention and resources will be required to plan for such integration. New Talos could be adversely affected by the diversion of management’s attention, the loss of key employees and skilled workers, and any delays or difficulties encountered in connection with the integration of Stone Energy and Talos Energy. If New Talos experiences difficulties with the integration process, the anticipated benefits of the Transactions may not be realized fully or at all, or may take longer to realize than expected. These integration matters could have an adverse effect on the business, results of operations, financial condition or prospects of New Talos during this transition period and for an undetermined period after completion of the Transactions.

The Transaction Agreement contains provisions that may discourage other companies from trying to acquire Stone Energy.

The Transaction Agreement contains provisions that may discourage third parties from submitting business combination proposals to Stone Energy that might result in greater value to the Stone Energy stockholders than the Transactions. The Transaction Agreement generally prohibits Stone Energy from soliciting any competing proposal. In addition, if the Transaction Agreement is terminated by Stone Energy or Talos Energy in circumstances that obligate Stone Energy to pay a termination fee and to reimburse transaction expenses to Talos Energy, Stone Energy’s financial condition may be adversely affected as a result of the payment of the termination fee and reimbursement of transaction expenses, which might deter third parties from proposing alternative business combination proposals.

The shares of New Talos common stock to be received by the Stone Energy stockholders as a result of the Transactions will have different rights from shares of Stone Energy common stock.

Following Closing, the Stone Energy stockholders will no longer be stockholders of Stone Energy but will instead be stockholders of New Talos holding New Talos common stock. There are important differences between the rights of the Stone Energy stockholders and the New Talos stockholders. For a description of different rights associated with Stone Energy common stock and New Talos common stock, see “Comparison of Stockholder Rights and Corporate Governance Matters” beginning on page 165 of this consent solicitation statement/prospectus.

No trading market currently exists for New Talos common stock.

There will not be a trading market for the New Talos common stock prior to Closing. At Closing, the New Talos common stock is expected to be listed for trading on NYSE. However, there can be no assurance that an active market for the New Talos common stock will develop after Closing, or if it develops, that such market will be sustained. In the absence of an active trading market for the New Talos common stock, investors may not be able to sell their New Talos common stock at the time that they would like to sell.

37

Following the completion of the Transactions, New Talos will be controlled by entities controlled by or affiliated with Apollo Management and Riverstone. The interests of Apollo Management and Riverstone may differ from the interests of other stockholders of New Talos.

Immediately following Closing, Talos Energy stakeholders will beneficially own and possess voting power over 63% of the shares of New Talos common stock. Under the Stockholders’ Agreement, the Apollo Funds and the Riverstone Funds may acquire additional shares of New Talos common stock without the approval of the Company Independent Directors.

Through their ownership of a majority of New Talos’s voting power and the provisions set forth in the New Talos Charter, the New Talos Bylaws, and the Stockholders’ Agreement, the Apollo Funds and the Riverstone Funds will have the ability to designate and elect a majority of New Talos’s directors. As a result of the Apollo Funds’ and the Riverstone Funds’ ownership of a majority of the voting power of New Talos common stock, New Talos will be a “controlled company” as defined in NYSE listing rules and will, therefore, not be subject to NYSE requirements that would otherwise require New Talos to have (i) a majority of independent directors, (ii) a nominating committee composed solely of independent directors, (iii) director nominees selected, or recommended for the board’s selection, either by a majority of the independent directors or a nominating committee composed solely of independent directors, and (iv) the compensation of its executive officers determined by a majority of the independent directors or a compensation committee composed solely of independent directors. Under the Stockholders’ Agreement, the New Talos Board will initially have four directors not designated by the Apollo Funds and the Riverstone Funds and six directors designated by the Apollo Funds and the Riverstone Funds. For further information regarding the New Talos Board and its committees following Closing, see “Certain Agreements Related to the Transactions—Stockholders’ Agreement” beginning on page 148 of this consent solicitation statement/prospectus.

Apollo Management and Riverstone will also have control over all other matters submitted to stockholders for approval, including changes in capital structure, transactions requiring stockholder approval under Delaware law, and corporate governance, subject to the terms of the Stockholders’ Agreement that require the Apollo Funds and the Riverstone Funds to vote in a specified manner on certain actions, including their agreement to vote in favor of director nominees not designated by the Apollo Funds and the Riverstone Funds. Apollo Management and Riverstone may have different interests than other holders of New Talos common stock and may make decisions adverse to your interests.

Among other things, Apollo Management’s and Riverstone’s control could delay, defer, or prevent a sale of New Talos that New Talos’s other stockholders support, or, conversely, this control could result in the consummation of such a transaction that other stockholders do not support. This concentrated control could discourage a potential investor from seeking to acquire New Talos common stock and, as a result, might harm the market price of the New Talos common stock.

Members of Stone Energy management and the Stone Energy Board have interests in the Transactions that are different from, or in addition to, those of other Stone Energy stockholders.

In considering whether to approve the Transactions, the Stone Energy stockholders should recognize that members of Stone Energy management and the Stone Energy Board have interests in the Transactions that differ from, or are in addition to, their interests as stockholders of Stone Energy. For a description of these interests, see the section titled “Additional Interests of Stone Energy’s Directors and Executive Officers in the Transactions” beginning on page 119 of this consent solicitation statement/prospectus.

Stone Energy and New Talos will incur transaction-related and restructuring costs in connection with the Transactions and the integration of the two businesses.

Stone Energy and New Talos will incur transaction-related and restructuring costs in connection with the Transactions and New Talos will incur costs in connection with the integration of Stone Energy’s and Talos

38

Energy’s businesses. Stone Energy and Talos Energy are in the early stages of assessing the magnitude of these costs and estimate $68.7 million in transaction-related costs. Stone Energy and Talos Energy are currently unable to provide estimates of restructuring and integration costs. The costs related to restructuring will be included as a liability in the purchase price allocation or expensed as incurred, depending on the nature of the restructuring activity. Moreover, many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. These expenses could, particularly in the near term, reduce the expected pre-tax synergies related to the integration of the businesses following the completion of the Transactions, and accordingly, any net synergies may not be achieved in the near term or at all. These integration expenses may result in New Talos taking significant charges against earnings following the completion of the Transactions. Some of these costs and expenses will be incurred even if the Transactions are not consummated.

The completion of the Merger and the Transactions is not conditioned on the receipt of an opinion of counsel to the effect that the Merger, the Talos Contribution, and the Sponsor Debt Exchange will qualify for the Intended Tax Treatment, and no ruling has been or will be sought from the IRS regarding the U.S. federal income tax consequences of the Merger.

It is intended that, for U.S. federal income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and, together with the Talos Contribution and the Sponsor Debt Exchange, as part of an exchange under Section 351 of the Code, which we refer to as the Intended Tax Treatment. However, the completion of the Merger is not conditioned on the Merger, the Talos Contribution and the Sponsor Debt Exchange qualifying for the Intended Tax Treatment or upon the receipt of an opinion of counsel to that effect. In addition, neither Stone Energy nor Talos Energy intends to request a ruling from the IRS regarding the U.S. federal income tax consequences of the Merger, the Talos Contribution and the Sponsor Debt Exchange. Accordingly, no assurance can be given that the Merger, the Talos Contribution and the Sponsor Debt Exchange will qualify for the Intended Tax Treatment. Further, even if Stone Energy and Talos Energy conclude that the Merger, the Talos Contribution and the Sponsor Debt Exchange qualify for the Intended Tax Treatment, no assurance can be given that the IRS will not challenge that conclusion or that a court would not sustain such a challenge. Each Stone Energy stockholder should read the discussion under “Material U.S. Federal Income Tax Consequences of the Merger” and should consult its own tax advisor for a full understanding of the tax consequences of the Merger to such stockholder.

The unaudited pro forma combined financial information of Stone Energy and Talos Energy in this consent solicitation statement/prospectus is not intended to reflect what actual results of operations and financial condition would have been had Stone Energy and Talos Energy been a combined company for the periods presented, and therefore these results may not be indicative of New Talos’s results of operations and financial condition.

The unaudited pro forma combined financial information presented in this consent solicitation statement/prospectus is for illustrative purposes only and is not intended to, and does not purport to, represent what New Talos’s actual results of operations or financial condition would have been if the Transactions had occurred on the relevant dates. In addition, such unaudited pro forma combined financial information is based in part on certain assumptions regarding the Transactions that New Talos, Stone Energy and Talos Energy believe are reasonable. These assumptions, however, are merely preliminary and will be updated only after Closing. The unaudited pro forma combined financial information has been prepared using the acquisition method of accounting, with Talos Energy considered the acquirer of Stone Energy. Under the acquisition method of accounting, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values with any excess purchase price allocated to goodwill. The pro forma purchase price allocation was based on an estimate of the fair values of the tangible and intangible assets and liabilities of Stone Energy. In arriving at the estimated fair values, Stone Energy and Talos Energy have considered the preliminary appraisals of independent consultants, which were based on a preliminary and limited review of the assets and liabilities related to Stone Energy to be held by New Talos following the consummation of the Transactions. Following Closing, New Talos will have a one-year period to complete the purchase price

39

allocation after considering the fair value of Stone Energy’s assets and liabilities at the level of detail necessary to finalize the required purchase price allocation. The final purchase price allocation may be different from that reflected in the pro forma purchase price allocation presented herein, and this difference may be material.

The unaudited pro forma combined financial information does not reflect the costs of any integration activities, transaction-related costs or incremental capital spending that Talos Energy’s or Stone Energy’s management believes are necessary to realize the anticipated synergies from the Transactions. Accordingly, the pro forma financial information included in this consent solicitation statement/prospectus does not reflect what New Talos’s results of operations or financial condition would have been had Stone Energy and Talos Energy been a combined entity during all periods presented, or what New Talos’s results of operations and financial condition will be in the future.

Completion of the Transactions may trigger change in control or other provisions in certain agreements to which Stone Energy or Talos Energy is a party.

The completion of the Transactions may trigger change in control or other provisions in certain agreements to which Stone Energy or Talos Energy is a party. If Stone Energy or Talos Energy is unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Stone Energy or Talos Energy is able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Stone Energy or Talos Energy.

The corporate opportunity provisions in the New Talos Charter could enable others to benefit from corporate opportunities that might otherwise be available to New Talos.

Subject to the limitations of applicable law, the New Talos Charter, among other things:

These provisions create the possibility that a corporate opportunity that would otherwise be available to New Talos may be used for the benefit of others. For a more complete description of the terms of the New Talos Charter, see “Description of New Talos Capital Stock” beginning on page 178 of this consent solicitation statement/prospectus.

40

Following the completion of the Transactions, the Apollo Funds and the Riverstone Funds will be prohibited from transferring shares of New Talos common stock until the first anniversary of Closing, after which, subject to restrictions, they will be permitted to transfer their shares of New Talos common stock, which could have a negative impact on New Talos’s stock price.

For 12 months following the completion of the Transactions, the Apollo Funds and the Riverstone Funds will be prohibited from transferring their shares of New Talos common stock other than to their respective affiliates, unless such transfer is approved by a majority of the Company Independent Directors. The lockup will cease to apply to 50% of the New Talos common stock that is issued to the Apollo Funds and the Riverstone Funds, respectively, at Closing on the six-month anniversary of the Closing Date and will cease to apply to an additional 25% of the New Talos common stock that is issued to the Apollo Funds and the Riverstone Funds, respectively, at Closing on the nine-month anniversary of the Closing Date. Following such 12-month lockup period, the Apollo Funds and the Riverstone Funds will be permitted, subject to restrictions explained in more detail in “Certain Agreements Related to the Transactions—Stockholders’ Agreement” beginning on page 148 of this consent solicitation statement/prospectus, to transfer shares of New Talos common stock, including in public offerings pursuant to registration rights to be granted by New Talos. Any such transfer could significantly increase the number of shares of New Talos common stock available in the market, which could cause a decrease in the price of New Talos common stock. In addition, even if the Apollo Funds or the Riverstone Funds do not transfer a large number of their shares into the market, the existence of their right to transfer a large number of shares into the market may depress the price of shares of New Talos common stock.

Additionally, pursuant to the Stockholders’ Agreement, until the first anniversary of the Closing Date, each of the Apollo Funds and the Riverstone Funds will be prohibited from transferring any shares of New Talos common stock in any transaction that would result in the transferee owning more than 35% of the outstanding shares of New Talos common stock without the prior approval of a majority of the Company Independent Directors, unless such transferee agrees in writing to be bound by substantially the same provisions as the stockholders are bound by pursuant to the Stockholders’ Agreement. Following the first anniversary of the Closing Date, the Apollo Funds and the Riverstone Funds could sell a significant percentage of the New Talos common stock to a third party that is not subject to provisions similar to the provisions in the Stockholders’ Agreement. See the section entitled “Certain Agreements Related to the Transactions—Stockholders’ Agreement” beginning on page 148 of this consent solicitation statement/prospectus.

New Talos does not have a contractual right to make indemnification claims against Talos Energy for the breach of any representations, warranties, or covenants made by Talos Energy in the Transaction Agreement.

Under the Transaction Agreement, New Talos does not have a right to make contractual claims against Talos Energy after Closing, including for a breach by Talos Energy of the representations and warranties made to Stone Energy or for a violation by Talos Energy of certain covenants and agreements in the Transaction Agreement.

Oil and natural gas prices are volatile. Significant declines in commodity prices in the future may adversely affect New Talos’s financial condition and results of operations, cash flows, access to the capital markets, and ability to grow.

New Talos’s revenues, cash flows, profitability, and future rate of growth will substantially depend upon the market prices of oil and natural gas. Prices will affect New Talos’s cash flows available for capital expenditures and its ability to access funds under its credit facility and through the capital markets. The amount available for borrowing under New Talos’s credit facility will be subject to a borrowing base, which will be determined by the lenders taking into account New Talos’s estimated proved reserves, and will be subject to periodic redeterminations based on pricing models to be determined by the lenders at such time. Oil and natural gas prices significantly declined in the second half of 2014, with sustained lower prices continuing throughout 2015, 2016 and 2017, and if commodity prices remain suppressed or decline further in the future, it will likely have material adverse effects on New Talos’s proved reserves and borrowing base. Further, because New Talos will use the full cost method of accounting for its oil and gas operations, it will perform a ceiling test each quarter, which will be impacted by declining prices. Significant price declines could cause New Talos to take additional ceiling test write-downs, which would be reflected as non-cash charges against current earnings. See “—Lower oil and natural gas prices and other factors in the future may result in ceiling test write-downs and other impairments of New Talos’s asset carrying values.”

In addition, significant or extended price declines may also adversely affect the amount of oil and natural gas that New Talos can produce economically. A reduction in production could result in a shortfall in New Talos’s expected cash flows and require New Talos to reduce its capital spending or borrow funds to cover any such shortfall. Any of these factors could negatively impact New Talos’s ability to replace its production and its future rate of growth.

The markets for oil and natural gas have been volatile historically and are likely to remain volatile in the future. For example, during the period January 1, 2014 through September 30, 2017, the West Texas Intermediate (“ WTI ”) crude oil price per Bbl ranged from a low of $30.62 to a high of $105.15, and the New York Mercantile Exchange (“ NYMEX ”) natural gas price per million British thermal units (“ MMBtu ”) ranged from a low of $1.71 to a high of $5.56. The prices New Talos will receive for its oil and natural gas will depend upon many factors beyond its control, including, among others:

42

These factors make it very difficult to predict future commodity price movements with any certainty. Substantially all of New Talos’s oil and natural gas sales will be made in the spot market or pursuant to contracts based on spot market prices and will not be long-term fixed price contracts. Further, oil prices and natural gas prices do not necessarily fluctuate in direct relation to each other.

New Talos will be required to meet a minimum work program expressed in work units during a four-year exploration period according to the production sharing contracts (“PSCs”) with the National Hydrocarbons Commission of Mexico (the “CNH”).

On September 4, 2015, Talos Production, together with its consortium partners Sierra Oil & Gas S. de R.L de C.V. (“ Sierra ”) and Premier Oil Plc (“ Premier ” and, together with Talos Production and Sierra, the “ Consortium ”) executed two PSCs with the CNH for the development of the Mexican acreage—one for each of Blocks 2 and 7. PSCs require that the Consortium execute a minimum work program expressed in work units during a four-year exploration period. The work units represent the performance of exploration studies and seismic and drilling activities. The aggregate value of the minimum work program under the PSCs is approximately $143 million (gross), for which Talos Production is responsible for its 35% participation interest in Block 7 and its 45% participation interest in Block 2. In order to guarantee the execution of the minimum work program under the PSCs, the Consortium was required to post a financial guarantee to the CNH of approximately $143 million (gross), of which Talos Production’s share was $48.7 million. Talos Production satisfied its share through a performance bond. As the Consortium completes the minimum work program under the PSCs, the amount of the financial guarantee will be reduced accordingly beginning after the second anniversary of entering into the PSCs. The activities already performed on Block 7 have satisfied the minimum work program on Block 7, subject to CNH’s certification. If Talos Production or the Consortium is unable to meet the minimum work program, after the completion of the Transactions, New Talos, whose principal asset will be 100% of the equity interests in Talos Production, could be liable for the full financial guarantee, and the CNH could rescind the PSCs for a default.

New Talos’s debt level and the covenants in any future agreements governing its debt, including the credit facility and the indenture for the new second lien notes, could negatively impact its financial condition, results of operations, and business prospects. New Talos’s failure to comply with these covenants could result in the acceleration of its outstanding indebtedness.

The terms of New Talos’s agreements governing its debt could impose significant restrictions on its ability to take a number of actions that New Talos may otherwise desire to take, including:

43

New Talos’s level of indebtedness, and the covenants to be contained in the agreements governing its debt, including the credit facility and the indenture for the new second lien notes, could have important consequences on its operations, including:

New Talos may be required to repay all or a portion of its debt on an accelerated basis in certain circumstances. If New Talos fails to comply with the covenants and other restrictions in the agreements governing its debt, it could lead to an event of default and the acceleration of its repayment of outstanding debt. New Talos’s ability to comply with these covenants and other restrictions may be affected by events beyond its control, including prevailing economic and financial conditions. Sustained low oil and natural gas prices will have a material and adverse effect on New Talos’s liquidity position. New Talos’s cash flow will be highly dependent on the prices it will receive for oil and natural gas, which have declined significantly since mid-2014.

New Talos will depend on its credit facility for a portion of its future capital needs. New Talos will be required to comply with certain debt covenants and ratios under its credit facility. New Talos’s borrowing base under its credit facility, which will be redetermined semi-annually, will be based on an amount established by the lenders after their evaluation of New Talos’s proved oil and natural gas reserve values. If, due to a redetermination of New Talos’s borrowing base, its outstanding credit facility borrowings plus its outstanding letters of credit exceed its redetermined borrowing base (referred to as a borrowing base deficiency), New Talos could be required to repay such borrowing base deficiency. New Talos’s credit facility is expected to allow it to cure a borrowing base deficiency through any combination of the following actions: (i) repay amounts outstanding sufficient to cure the borrowing base deficiency within 30 days after the existence of such deficiency; (ii) add additional oil and gas properties acceptable to the banks to the borrowing base and take such actions necessary to grant the banks a mortgage in such oil and gas properties within 30 days after the existence of such deficiency; (iii) pay the deficiency in four equal monthly installments with the first installment due within 30 days after the existence of such deficiency; or (iv) any combination of the above. New Talos expects that it will be required to elect one of the foregoing options within 10 days after the existence of such deficiency.

New Talos may not have sufficient funds to make such repayments. If New Talos does not repay its debt out of cash on hand, New Talos could attempt to restructure or refinance such debt, reduce or delay investments and capital expenditures, sell assets, or repay such debt with the proceeds from an equity offering. New Talos cannot

44

assure you that it will be able to generate sufficient cash flows from operating activities to pay the interest on its debt or that future borrowings, equity financings, or proceeds from the sale of assets will be available to pay or refinance such debt. Any refinancing of indebtedness could be at higher interest rates and may require New Talos to comply with more onerous covenants, which could further restrict business operations. The terms of New Talos’s debt, including its credit facility and its indenture for the new second lien notes, may also prohibit New Talos from taking such actions. Factors that will affect New Talos’s ability to raise cash through offerings of its capital stock, a refinancing of its debt, or a sale of assets include financial market conditions and New Talos’s market value and operating performance at the time of such offerings, refinancing, or sale of assets. New Talos cannot assure you that any such offerings, restructuring, refinancing, or sale of assets will be successfully completed.

Regulatory requirements and permitting procedures imposed by the Bureau of Ocean Energy Management (“BOEM”) and the Bureau of Safety and Environmental Enforcement (“BSEE”) could significantly delay New Talos’s ability to obtain permits to drill new wells in offshore waters.

BSEE and BOEM have imposed new and more stringent permitting procedures and regulatory safety and performance requirements for new wells to be drilled in federal waters. Compliance with these added and more stringent regulatory requirements and with existing environmental and spill regulations, together with uncertainties or inconsistencies in decisions and rulings by governmental agencies and delays in the processing and approval of drilling permits and exploration, development, oil spill-response, and decommissioning plans and possible additional regulatory initiatives could result in difficult and more costly actions and adversely affect or delay new drilling and ongoing development efforts. Moreover, these governmental agencies are continuing to evaluate aspects of safety and operational performance in the Gulf of Mexico and, as a result, are continuing to develop and implement new, more restrictive requirements. For example, in April 2016, BSEE published a final rule on well control that, among other things, imposes rigorous standards relating to the design, operation, and maintenance of blow-out preventers, real-time monitoring of deepwater and high temperature, high pressure drilling activities, and enhanced reporting requirements. Pursuant to President Trump’s Executive Orders dated March 28, 2017, and April 28, 2017 (the “ Executive Orders ”), respectively, BSEE initiated a review of the well control regulations to determine whether the rules are consistent with the stated policy of encouraging energy exploration and production, while ensuring that any such activity is safe and environmentally responsible. On October 24, 2017, BSEE announced, in a report published by the Department of the Interior, that it is considering several revisions to the regulations and that it is in the process of determining the most effective way to engage stakeholders in the process.

Also, in April 2016, BOEM published a proposed rule that would update existing air emissions requirements relating to offshore oil and natural gas activity on the Outer Continental Shelf (the “ OCS ”). BOEM regulates these air emissions in connection with its review of exploration and development plans, rights of way and rights of use, and/or easement applications. The proposed rule would bolster existing air emissions requirements by, among other things, requiring the reporting and tracking of the emissions of all pollutants defined by the U.S. Environmental Protection Agency (the “ EPA ”) to affect human health and public welfare. Pursuant to the Executive Orders, BOEM is reviewing the proposed air quality rule. On October 24, 2017, the Department of the Interior announced that it is currently reviewing recommendations on how to proceed, including promulgating final rules for certain necessary provisions and issuing a new proposed rule that may withdraw certain provisions and seek additional input on others.

Compliance with new and future regulations could result in significant costs, including increased capital expenditures and operating costs, and could adversely impact New Talos’s business. Furthermore, among other adverse impacts, new regulatory requirements could delay operations, disrupt New Talos’s operations, or increase the risk of leases expiring before exploration and development efforts have been completed due to the time required to develop new technology. This would result in increased financial assurance requirements and incurrence of associated added costs, limit operational activities in certain areas, or cause New Talos to incur penalties or shut-in production at one or more of its facilities. If material spill incidents were to occur in the

45

future, the United States or other countries where such an event may occur could elect to issue directives to temporarily cease drilling activities and, in any event, may from time to time issue further safety and environmental laws and regulations regarding offshore oil and natural gas exploration and development, any of which could have a material adverse effect on our business. We cannot predict with any certainty the full impact of any new laws or regulations on New Talos’s drilling operations or on the cost or availability of insurance to cover some or all of the risks associated with such operations.

New guidelines recently issued by BOEM related to financial assurance requirements to cover decommissioning obligations for operations on the OCS may have a material adverse effect on New Talos’s business, financial condition, or results of operations.

BOEM requires all operators in federal waters to provide financial assurances to cover the cost of plugging and abandoning wells and decommissioning offshore facilities. Historically, Stone Energy has been able to obtain an exemption from most bonding requirements based on its financial net worth. However, on March 21, 2016, Stone Energy received notice letters from BOEM stating that BOEM had determined that Stone Energy no longer qualified for a supplemental bonding waiver under the financial criteria specified in BOEM’s guidance to lessees at that time. In late March 2016, Stone Energy proposed a tailored plan to BOEM for financial assurances relating to its abandonment obligations, which provides for posting some incremental financial assurances in favor of BOEM. On May 13, 2016, Stone Energy received notice letters from BOEM rescinding its demand for supplemental bonding with the understanding that Stone Energy will continue to make progress with BOEM towards finalizing and implementing its long-term tailored plan. Currently, Stone Energy has posted an aggregate of approximately $118 million in surety bonds in favor of BOEM, third-party bonds, and letters of credit, all relating to its offshore abandonment obligations. Talos Energy has secured performance bonds for its abandonment obligations totaling approximately $238.6 million.

In July 2016, BOEM issued a new notice to lessees and operators (“ NTL ”), with an effective date of September 12, 2016, that augments requirements for the posting of additional financial assurance by offshore lessees. The NTL discontinues the policy of supplemental bonding waivers and allows for the ability to self-insure up to 10% of a company’s tangible net worth, where a company can demonstrate a certain level of financial strength.

Stone Energy received a self-insurance letter from BOEM dated September 30, 2016 stating that it was not eligible to self-insure any of its additional security obligations. Stone Energy received a proposal letter from BOEM dated October 20, 2016 indicating that additional security may be required. The September 30, 2016 self-insurance determination letter was rescinded by BOEM on March 24, 2017. Talos Production received notice from BOEM on December 29, 2016, ordering it to secure financial assurances in the form of additional security in the amount of $0.5 million. Subsequent to the December 29, 2016 order, BOEM has rescinded that order and all others sole-liability orders (i.e., orders related to properties for which there is no other current or prior owner who is liable) until further notice.

In the first quarter of 2017, BOEM announced that it would extend the implementation timeline for the new NTL by an additional six months. Furthermore, on April 28, 2017, President Trump issued an executive order directing the Secretary of the Interior to review the NTL to determine whether modifications are necessary to ensure operator compliance with lease terms while minimizing unnecessary regulatory burdens. On June 22, 2017, BOEM announced that, pending its review of the NTL, the implementation timeline would be indefinitely extended, subject to certain exceptions. At this time, it is uncertain when, or if, the new NTL will be implemented. Compliance with the NTL, or any other new rules, regulations, or legal initiatives by BOEM or other governmental authorities that impose more stringent requirements adversely affecting New Talos’s offshore activities could delay or disrupt its operations, result in increased supplemental bonding and costs, limit its activities in certain areas, cause New Talos to incur penalties or fines or to shut-in production at one or more of its facilities, or result in the suspension or cancellation of leases.

46

In addition, if fully implemented, the new NTL is likely to result in the loss of supplemental bonding waivers for a large number of operators on the OCS, which will in turn force these operators to seek additional surety bonds and could, consequently, challenge the surety bond market’s capacity for providing such additional financial assurance. Operators who have already leveraged their assets as a result of the declining oil market could face difficulty obtaining surety bonds because of concerns the surety companies may have about the priority of their lien on the operator’s collateral. Moreover, depressed oil prices could result in sureties seeking additional collateral to support existing bonds, such as cash or letters of credit, and New Talos cannot provide assurance that it will be able to satisfy collateral demands for future bonds to comply with supplemental bonding requirements of BOEM. If New Talos is required to provide collateral in the form of cash or letters of credit, its liquidity position could be negatively impacted and may require New Talos to seek alternative financing. To the extent New Talos is unable to secure adequate financing, it may be forced to reduce its capital expenditures. All of these factors may make it more difficult for New Talos to obtain the financial assurances required by BOEM to conduct operations on the OCS. These and other changes to BOEM bonding and financial assurance requirements could result in increased costs on New Talos’s operations and consequently have a material adverse effect on its business and results of operations.

New Talos will have a subsidiary that is subject to a plea agreement with the DOJ pursuant to which certain exploration and production activities must comply with a Safety and Environmental Compliance Program (“SECP”). Noncompliance with the SECP could result in a violation of the plea agreement and provide a basis for revocation or modification of probation.

In February 2014, Talos Energy received a grand jury subpoena from the DOJ addressing activities that occurred on the Ship Shoal 225A production platform operated by a subsidiary of Talos Energy, ERT. On November 30, 2015, ERT was charged with two violations of the Outer Continental Shelf Lands Act in connection with hot work and blowout preventer testing activities, and with two violations of the Clean Water Act for self-reported activities surrounding overboard discharge sampling and unpermitted discharges. On January 6, 2016, ERT pled guilty to these charges. On April 6, 2016, the United States District Court for the Eastern District of Louisiana (the “ Court ”) accepted ERT’s plea and sentenced ERT, consistent with the plea agreement, to pay a penalty of $4.2 million, which ERT has paid. The Court placed ERT on probation for three years. The conditions of probation include compliance with an agreed SECP, pursuant to which ERT and another subsidiary of Talos Energy, Talos Energy Offshore LLC, must implement enhanced safety and environmental compliance inspections, reviews and audits, implement a comprehensive training program, implement enhanced operational controls to better manage, detect and prevent safety and environmental violations, and preparation and implementation of schedule for decommissioning. While Talos Energy believes that it is in substantial compliance with the SECP, a failure to comply with the SECP could result in a violation of the plea agreement and provide a basis for revocation or modification of probation, which could adversely affect New Talos’s financial condition and operations.

A financial crisis may impact New Talos’s business and financial condition and may adversely impact its ability to obtain funding under its new credit facility or in the capital markets.

In the future, New Talos will use its cash flows from operating activities and borrowings under its credit facility to fund its capital expenditures and rely on the capital markets and asset monetization transactions to provide it with additional capital for large or exceptional transactions. However, New Talos may not be able to access adequate funding under its credit facility as a result of (i) a decrease in its borrowing base due to the outcome of a borrowing base redetermination or a breach or default under its credit facility, including a breach of a financial covenant or (ii) an unwillingness or inability on the part of its lending counterparties to meet their funding obligations. In addition, New Talos may face limitations on its ability to access the debt and equity capital markets and complete asset sales, an increased counterparty credit risk on its derivatives contracts, and the requirement by contractual counterparties of New Talos to post collateral guaranteeing performance.

47

New Talos will require substantial capital expenditures to conduct its operations and replace its production, and New Talos may be unable to obtain needed financing on satisfactory terms necessary to fund its planned capital expenditures.

New Talos will spend a substantial amount of capital for the acquisition, exploration, exploitation, development, and production of oil and natural gas reserves. New Talos will fund its capital expenditures primarily through operating cash flows, cash on hand, and borrowings under its credit facility, if necessary. The actual amount and timing of New Talos’s future capital expenditures may differ materially from its estimates as a result of, among other things, oil and natural gas prices, actual drilling results, the availability of drilling rigs and other services and equipment, and regulatory, technological and competitive developments. A further reduction in commodity prices may result in a further decrease in New Talos’s actual capital expenditures, which would negatively impact its ability to grow production.

New Talos’s cash flow from operations and access to capital will be subject to a number of variables, including:

If low oil and natural gas prices, operating difficulties, declines in reserves, or other factors, many of which are beyond its control, cause New Talos’s revenues, cash flows from operating activities, and the borrowing base under its credit facility to decrease, New Talos may be limited in its ability to fund the capital necessary to complete its capital expenditure program. After utilizing its available sources of financing, New Talos may be forced to raise additional debt or equity proceeds to fund such capital expenditures. New Talos cannot be sure that additional debt or equity financing will be available or cash flows provided by operations will be sufficient to meet these requirements. For example, the ability of oil and gas companies to access the equity and high yield debt markets has been significantly limited since the significant decline in commodity prices since mid-2014.

New Talos’s production, revenue, and cash flow from operating activities will be derived from assets that are concentrated in a single geographic area, making New Talos vulnerable to risks associated with operating in one geographic area.

New Talos’s production, revenue, and cash flow from operating activities will be derived from assets that are concentrated in a single geographic area, the Gulf of Mexico. Unlike other entities that are geographically diversified, New Talos may not have the resources to effectively diversify its operations or benefit from the possible spreading of risks or offsetting of losses. Its lack of diversification may subject New Talos to numerous economic, competitive, and regulatory developments, any or all of which may have an adverse impact upon the particular industry in which it will operate and result in its dependency upon a single or limited number of hydrocarbon basins. In addition, the geographic concentration of New Talos’s properties in the Gulf of Mexico and the Gulf Coast will mean that some or all of the properties could be affected should the region experience:

48

Because all or a number of New Talos’s properties could experience many of the same conditions at the same time, these conditions may have a relatively greater impact on its results of operations than they might have on other producers who have properties over a wider geographic area.

New Talos may experience significant shut-ins and losses of production due to the effects of hurricanes in the Gulf of Mexico.

New Talos’s production will be exclusively associated with its properties in the Gulf of Mexico and the Gulf Coast. Accordingly, if the level of production from these properties substantially declines, it could have a material adverse effect on New Talos’s overall production level and its revenue. New Talos will be particularly vulnerable to significant risk from hurricanes and tropical storms in the Gulf of Mexico. New Talos is unable to predict what impact future hurricanes and tropical storms might have on its future results of operations and production.

A significant portion of New Talos’s production, revenue and cash flow will be concentrated in its Phoenix Field. Because of this concentration, any production problems, impacts of adverse weather or inaccuracies in reserve estimates could have a material adverse impact on its business.

On a pro forma basis after giving effect to the Transactions, approximately 20% of New Talos’s 2016 production and 20% of its 2016 oil, natural gas, and NGL revenue was attributable to its Phoenix Field. This concentration in the Phoenix Field means that any impact on New Talos’s production from the Phoenix Field, whether because of mechanical problems, adverse weather, well containment activities, changes in the regulatory environment, or otherwise, could have a material effect on its business. New Talos will produce the Phoenix Field through the Helix Producer I (“ HP-I ”), a dynamically positioned floating production facility that is operated by Helix Energy Solutions Group, Inc. (“ Helix ”). The HP-I interconnects the Phoenix Field through a production buoy that can be disconnected if the HP-I cannot maintain its position on station, such as in the event of a mechanical problem with the dynamic positioning system or the approach of a hurricane. Because the HP-I may have to be disconnected from the Phoenix Field if circumstances require, New Talos’s production from the Phoenix Field may be subject to more frequent interruptions than if the Phoenix Field was produced by a more conventional platform. New Talos will also be required to disconnect and dry-dock the HP-I every two to three years for inspection as required by the United States Coast Guard, during which time it will be unable to produce the Phoenix Field. On September 10, 2016, the HP-I was disconnected from the production buoy and released for dry dock for 28 days. Upon completion of the dry dock, the HP-I remained disconnected from the buoy connecting it to the Phoenix Field due to Federal Emergency Management Agency testing of test upgrades to the power management system preventing Talos Energy from reconnecting the HP-I to the Phoenix Field for a further five days. Once the buoy was connected, Phoenix Field production remained shut-in for an additional five days to conduct buoy remediation of the swivel piping. In addition, for 25 days in March 2015, Talos Energy was required to disconnect the HP-I from the production buoy due to upgrades to the power management system of the vessel, which is an integral part of the dynamic positioning system. The upgrade work was followed by sea trials that tested the dynamic positioning system and were required by various regulatory groups, including the United States Coast Guard.

The HP-I is part of the Helix Well Containment Group (“ HWCG ”), which is a consortium that is available to respond to any deepwater well control event, such as the Macondo well oil spill. If such an event were to occur

49

and the HWCG was to be utilized for well control, the HP-I, which is the vessel that would be used to respond to the deepwater well control event, would be required to disconnect from the Phoenix Field until such time as the well control event was resolved and the HP-I could return to the Phoenix Field. During such time period, New Talos would not be able to produce the Phoenix Field. In the event the HP-I has to disconnect from the Phoenix Field, New Talos’s production, revenue, and cash flow will be adversely affected, which could have a material adverse effect on its business, financial condition, results of operations, and cash flows.

In addition, all New Talos’s production from the Phoenix Field will flow through the Boxer facility operated by Shell Ventures, Inc. To the extent Shell Ventures, Inc. temporarily shuts in their Boxer facility, whether for maintenance or otherwise, New Talos will not be able to produce the Phoenix Field during this period of time, which may have a material adverse effect on its business, financial condition, results of operations, and cash flows.

If the actual reserves associated with the Phoenix Field are less than New Talos’s estimated reserves, such a reduction of reserves could have a material adverse effect on its business, financial condition, results of operations, and cash flows.

New Talos will not be insured against all of the operating risks to which its business will be exposed.

In accordance with industry practice, New Talos will maintain insurance against some, but not all, of the operating risks to which its business will be exposed. New Talos will insure some, but not all, of its properties from operational loss-related events. New Talos will have insurance policies that will include coverage for general liability, physical damage to its oil and gas properties, operational control of well, oil pollution, construction all risk, workers’ compensation and employers’ liability, and other coverage. New Talos’s insurance coverage will include deductibles that will have to be met prior to recovery, as well as sub-limits or self-insurance. Additionally, New Talos’s insurance will be subject to exclusions and limitations, and there is no assurance that such coverage will adequately protect New Talos against liability from all potential consequences, damages or losses.

New Talos is expected to have general liability insurance coverage with an annual aggregate limit of $250 million. New Talos will selectively purchase physical damage insurance coverage for its pipelines, platforms, facilities, and umbilicals for losses resulting from named windstorms and operational activities.

New Talos’s operational control of well coverage is expected to provide limits that will vary by well location and depth and range from a combined single limit of $25 million to $500 million per occurrence. Exploratory deepwater wells will have a coverage limit of up to $500 million per occurrence. Additionally, New Talos will maintain up to $150 million in oil pollution liability coverage. New Talos’s operational control of well and physical damage policy limits will be scaled proportionately to its working interests. New Talos’s general liability program will utilize a combination of assured’s interest and scalable limits. All of New Talos’s policies described above will be subject to deductibles, sub-limits, or self-insurance. Under its service agreements, including drilling contracts, New Talos expects to be indemnified for injuries and death of the service provider’s employees as well as contractors and subcontractors hired by the service provider.

An operational or hurricane or other adverse weather-related event may cause damage or liability in excess of New Talos’s coverage that might severely impact its financial position. New Talos may be liable for damages from an event relating to a project in which it will own a non-operating working interest. Such events may also cause a significant interruption to New Talos’s business, which might also severely impact its financial position. New Talos may experience production interruptions for which it will not have production interruption insurance.

New Talos will reevaluate the purchase of insurance, policy limits, and terms annually. Future insurance coverage for New Talos’s industry could increase in cost and may include higher deductibles or retentions. In addition, some forms of insurance may become unavailable in the future or unavailable on terms that New Talos

50

believes will be economically acceptable. No assurance can be given that New Talos will be able to maintain insurance in the future at rates that it considers reasonable, and New Talos may elect to maintain minimal or no insurance coverage. New Talos may not be able to secure additional insurance or bonding that might be required by new governmental regulations. This may cause New Talos to restrict its operations in the Gulf of Mexico, which might severely impact its financial position. The occurrence of a significant event, not fully insured against, could have a material adverse effect on New Talos’s financial condition and results of operations.

Lower oil and natural gas prices and other factors in the future may result in ceiling test write-downs and other impairments of New Talos’s asset carrying values.

New Talos will use the full cost method of accounting for its oil and gas operations. Accordingly, New Talos will capitalize the costs to acquire, explore for and develop oil and gas properties. Under the full cost method of accounting, New Talos will compare, at the end of each financial reporting period for each cost center, the present value of estimated future net cash flows from proved reserves (based on a trailing 12-month average, hedge-adjusted commodity price and excluding cash flows related to estimated abandonment costs), to the net capitalized costs of proved oil and gas properties, net of related deferred taxes. New Talos will refer to this comparison as a ceiling test. If the net capitalized costs of proved oil and gas properties exceed the estimated discounted future net cash flows from proved reserves, New Talos will be required to write down the value of its oil and gas properties to the value of the estimated discounted future net cash flows. A write-down of oil and gas properties does not impact cash flows from operating activities, but does reduce net income. The risk that New Talos will be required to write down the carrying value of oil and gas properties increases when oil and natural gas prices are low or volatile. In addition, write-downs may occur if New Talos experiences substantial downward adjustments to its estimated proved reserves or its undeveloped property values, or if estimated future development costs increase. Volatility in commodity prices, poor conditions in the global economic markets and other factors could cause New Talos to record additional write-downs of its oil and natural gas properties and other assets in the future and incur additional charges against future earnings. Any required write-downs or impairments could materially affect the quantities and present value of New Talos’s reserves, which could adversely affect its business, results of operations and financial condition.

New Talos’s oil and gas operations will be subject to various international and U.S. federal, state and local governmental regulations that will materially affect its operations.

New Talos’s oil and gas operations will be subject to various international and U.S. federal, state and local laws and regulations. These laws and regulations may be changed in response to economic or political conditions. Regulated matters include: permits for exploration, development and production operations; limitations on New Talos’s drilling activities in environmentally sensitive areas, such as marine habitats, and restrictions on the way New Talos can discharge materials into the environment; bonds or other financial responsibility requirements to cover drilling contingencies and well plugging and abandonment and other decommissioning costs; reports concerning operations, the spacing of wells and unitization and pooling of properties; regulations regarding the rate, terms and conditions of transportation service or the price, terms, and conditions related to the purchase and sale of natural gas or crude oil; and taxation. Failure to comply with these laws and regulations can result in the assessment of administrative, civil or criminal penalties, the issuance of remedial obligations and the imposition of injunctions limiting or prohibiting certain of New Talos’s operations. In addition, because New Talos will hold federal leases, the federal government will require it to comply with numerous additional regulations applicable to government contractors.

In addition, the Oil Pollution Act of 1990 (“ OPA ”) requires operators of offshore facilities such as New Talos to prove that they have the financial capability to respond to costs that may be incurred in connection with potential oil spills. Under the OPA and other environmental statutes such as the Comprehensive Environmental Response, Compensation and Liability Act (“ CERCLA ”), the Resource Conservation and Recovery Act (“ RCRA ”) and analogous state laws, owners and operators of certain defined onshore and offshore facilities are strictly liable for spills of oil and other regulated substances, subject to certain limitations. Consequently, a

51

substantial spill from one of New Talos’s facilities subject to laws such as the OPA, CERCLA and RCRA could require the expenditure of additional, and potentially significant, amounts of capital, or could have a material adverse effect on New Talos’s earnings, results of operations, competitive position or financial condition. New Talos cannot predict the ultimate cost of compliance with these requirements or their impact on its earnings, operations or competitive position.

Production periods or reserve lives for Gulf of Mexico properties may subject New Talos to higher reserve replacement needs and may impair its ability to reduce production during periods of low oil and natural gas prices.

The vast majority of New Talos’s operations will be in the Gulf of Mexico. As a result, its reserve replacement needs from new prospects may be greater than those of other oil and gas companies with longer-life reserves in other producing areas. New Talos’s future oil and natural gas production will be highly dependent upon its level of success in finding or acquiring additional reserves at a unit cost that will be sustainable at prevailing commodity prices.

Exploring for, developing or acquiring reserves is capital intensive and uncertain. New Talos may not be able to economically find, develop or acquire additional reserves or make the necessary capital investments if New Talos’s cash flows from operations decline or external sources of capital become limited or unavailable. New Talos’s need to generate revenues to fund ongoing capital commitments or repay debt may limit its ability to slow or shut-in production from producing wells during periods of low prices for oil and natural gas. New Talos cannot assure you that its future exploitation, exploration, development and acquisition activities will result in additional proved reserves or that New Talos will be able to drill productive wells at acceptable costs. Further, current market conditions may adversely impact New Talos’s ability to obtain financing to fund acquisitions, and they have lowered the level of activity and depressed values in the oil and natural gas property sales market.

New Talos’s actual recovery of reserves may substantially differ from its proved reserve estimates.

Estimates of New Talos’s proved oil and natural gas reserves and the estimated future net cash flows from such reserves are based upon various assumptions, including assumptions required by the SEC relating to oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The process of estimating oil and natural gas reserves is complex. This process requires significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir and is therefore inherently imprecise. Additionally, New Talos’s interpretations of the rules governing the estimation of proved reserves could differ from the interpretation of staff members of regulatory authorities resulting in estimates that could be challenged by these authorities.

Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves will most likely vary from those estimated. Any significant variance could materially affect the estimated quantities and present value of reserves. New Talos’s properties may also be susceptible to hydrocarbon drainage from production by other operators on adjacent properties. In addition, New Talos may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing oil and natural gas prices and other factors, many of which are beyond its control.

You should not assume that any present value of future net cash flows from New Talos’s proved reserves represents the market value of its estimated oil and natural gas reserves. New Talos will base the estimated discounted future net cash flows from its proved reserves at December 31, 2017 on historical 12-month average prices and costs as of the date of the estimate. Actual future prices and costs may be materially higher or lower. Further, actual future net revenues will be affected by factors such as:

52

The timing of both New Talos’s production and its incurrence of expenses in connection with the development and production of oil and natural gas properties will affect the timing of actual future net cash flows from reserves, and thus their actual present value. In addition, the 10% discount factor that New Talos will use to calculate the net present value of future net revenues and cash flows may not necessarily be the most appropriate discount factor based on its cost of capital in effect from time to time and the risks associated with its business and the oil and gas industry in general.

At December 31, 2016, approximately 35% of New Talos’s estimated proved reserves (by volume) were undeveloped and approximately 24% were non-producing. Any or all of New Talos’s proved undeveloped or proved developed non-producing reserves may not be ultimately developed or produced. Furthermore, any or all of New Talos’s undeveloped and developed non-producing reserves may not be ultimately produced during the time periods New Talos will plan or at the costs it will budget, which could result in the write-off of previously recognized reserves. Recovery of undeveloped reserves generally requires significant capital expenditures and successful drilling operations. New Talos’s reserve estimates will include the assumptions that it will incur capital expenditures to develop these undeveloped reserves and the actual costs and results associated with these properties may not be as estimated. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of New Talos’s reserves, which could adversely affect its business, results of operations and financial condition.

Three-dimensional seismic interpretation does not guarantee that hydrocarbons are present or if present will produce in economic quantities.

New Talos will rely on 3D seismic studies to assist it with assessing prospective drilling opportunities on its properties, as well as on properties that New Talos may acquire. Such seismic studies are merely an interpretive tool and do not necessarily guarantee that hydrocarbons are present or if present will produce in economic quantities, and seismic indications of hydrocarbon saturation are generally not reliable indicators of productive reservoir rock. These limitations of 3D seismic data may impact New Talos’s drilling and operational results, and consequently its financial condition.

SEC rules could limit New Talos’s ability to book additional proved undeveloped reserves in the future.

SEC rules require that, subject to limited exceptions, proved undeveloped reserves may only be booked if they relate to wells scheduled to be drilled within five years after the date of booking. This requirement may limit New Talos’s ability to book additional proved undeveloped reserves as it pursues its drilling program. Moreover, New Talos may be required to write down its proved undeveloped reserves if it does not drill those wells within the required five-year timeframe.

New Talos’s acreage will have to be drilled before lease expiration in order to hold the acreage by production. If commodity prices become depressed for an extended period of time, it might not be economical for New Talos to drill sufficient wells in order to hold acreage, which could result in the expiry of a portion of its acreage, which could have an adverse effect on its business.

Unless production is established as required by the leases covering the undeveloped acres, the leases for such acreage may expire. New Talos will have leases on [●] acres that could potentially expire during fiscal year 2018.

53

New Talos’s drilling plans for areas not held by production will be subject to change based upon various factors. Many of these factors will be beyond New Talos’s control, including drilling results, oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, gathering system and pipeline transportation constraints, and regulatory approvals. On the acreage that New Talos will not operate, New Talos will have less control over the timing of drilling, and therefore there will be additional risk of expirations occurring in those sections.

The marketability of New Talos’s production will depend mostly upon the availability, proximity, and capacity of oil and natural gas gathering systems, pipelines, and processing facilities.

The marketability of New Talos’s production will depend upon the availability, proximity, operation, and capacity of oil and natural gas gathering systems, pipelines, and processing facilities. The lack of availability or capacity of these gathering systems, pipelines, and processing facilities could result in the shut-in of producing wells or the delay or discontinuance of development plans for properties. The disruption of these gathering systems, pipelines, and processing facilities due to maintenance and/or weather could negatively impact New Talos’s ability to market and deliver its products. Federal, state, and local regulation of oil and gas production and transportation, general economic conditions, and changes in supply and demand could adversely affect New Talos’s ability to produce and market its oil and natural gas. If market factors changed dramatically, the financial impact on New Talos could be substantial. The availability of markets and the volatility of product prices will be beyond New Talos’s control and represent a significant risk.

New Talos’s actual production could differ materially from its forecasts.

From time to time, New Talos will provide forecasts of expected quantities of future oil and gas production. These forecasts will be based on a number of estimates, including expectations of production from existing wells. In addition, New Talos’s forecasts may assume that none of the risks associated with its oil and gas operations summarized in this section would occur, such as facility or equipment malfunctions, adverse weather effects, or significant declines in commodity prices or material increases in costs, which could make certain production uneconomical.

New Talos’s operations will be subject to numerous risks of oil and gas drilling and production activities.

Oil and gas drilling and production activities are subject to numerous risks, including the risk that no commercially productive oil or natural gas reserves will be found. The cost of drilling and completing wells is often uncertain. To the extent New Talos will drill additional wells in the Gulf of Mexico deepwater and/or in the Gulf Coast deep gas, its drilling activities could become more expensive. In addition, the geological complexity of Gulf of Mexico deepwater, Gulf Coast deep gas, and various onshore formations may make it more difficult for New Talos to sustain the historical rates of drilling success of Stone Energy and Talos Energy. Oil and gas drilling and production activities may be shortened, delayed, or cancelled as a result of a variety of factors, many of which will be beyond New Talos’s control. These factors include:

The prevailing prices of oil and natural gas also affect the cost of and the demand for drilling rigs, production equipment, and related services. New Talos cannot assure you that the wells it will drill will be

54

productive or that New Talos will recover all or any portion of its investment. Drilling for oil and natural gas may be unprofitable. Drilling activities can result in dry wells and wells that are productive but do not produce sufficient cash flows to recoup drilling costs.

New Talos’s industry will experience numerous operating risks.

The exploration, development and production of oil and gas properties involves a variety of operating risks, including the risk of fire, explosions, blowouts, pipe failure, abnormally pressured formations and environmental hazards. Environmental hazards include oil spills, gas leaks, pipeline ruptures or discharges of toxic gases. New Talos will also be involved in drilling operations that utilize hydraulic fracturing, which may potentially present additional operational and environmental risks. Additionally, New Talos’s offshore operations will be subject to the additional hazards of marine operations, such as capsizing, collision and adverse weather and sea conditions, including the effects of hurricanes.

In addition, an oil spill on or related to New Talos’s properties and operations could expose New Talos to joint and several strict liability, without regard to fault, under applicable law for containment and oil removal costs and a variety of public and private damages, including, but not limited to, the costs of responding to a release of oil, natural resource damages and economic damages suffered by persons adversely affected by an oil spill. If an oil discharge or substantial threat of discharge were to occur, New Talos may be liable for costs and damages, which costs and damages could be material to its results of operations and financial position.

New Talos’s business will also be subject to the risks and uncertainties normally associated with the exploration for and development and production of oil and natural gas that will be beyond its control, including uncertainties as to the presence, size and recoverability of hydrocarbons. New Talos may not encounter commercially productive oil and natural gas reservoirs. New Talos may not recover all or any portion of its investment in new wells. The presence of unanticipated pressures or irregularities in formations, miscalculations or accidents may cause New Talos’s drilling activities to be unsuccessful and/or result in a total loss of its investment, which could have a material adverse effect on its financial condition, results of operations and cash flows. In addition, New Talos may be uncertain as to the future cost or timing of drilling, completing and operating wells.

New Talos will have an interest in five deepwater fields: the Phoenix Field, the Bushwood Field, the Gunnison Field, the Pompano Field and the Amberjack Field, and may attempt to pursue additional operational activity in the future and acquire additional fields and leases in the deepwaters of the Gulf of Mexico (water depths greater than 2,000 feet). Exploration for oil or natural gas in the deepwater of the Gulf of Mexico generally involves greater operational and financial risks than exploration on the OCS. Deepwater drilling generally requires more time and more advanced drilling technologies, involving a higher risk of technological failure and usually higher drilling costs. For example, the drilling of deepwater wells requires specific types of drilling rigs with significantly higher day rates and limited availability as compared to the rigs used in shallower water. Deepwater wells often use subsea completion techniques with subsea trees tied back to host production facilities with flow lines. The installation of these subsea trees and flow lines requires substantial time and the use of advanced remote installation mechanics. These operations may encounter mechanical difficulties and equipment failures that could result in cost overruns. Furthermore, the deepwater operations generally lack the physical and oilfield service infrastructure present on the OCS. As a result, a considerable amount of time may elapse between a deepwater discovery and the marketing of the associated oil or natural gas, increasing both the financial and operational risk involved with these operations. Because of the lack and high cost of infrastructure, some reserve discoveries in the deepwater may never be produced economically.

If any of these industry operating risks occur, New Talos could have substantial losses. Substantial losses may be caused by injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties, suspension of operations and production and repairs to resume operations. Any of these industry

55

operating risks could have a material adverse effect on New Talos’s business, results of operations, and financial condition.

New Talos’s business could be negatively affected by security threats, including cybersecurity threats, terrorist attacks, and other disruptions.

As an oil and gas producer, New Talos will face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable, threats to the security of its facilities and infrastructure or third-party facilities and infrastructure, such as processing plants and pipelines, and threats from terrorist acts. The potential for such security threats will subject New Talos’s operations to increased risks that could have a material adverse effect on its business. In particular, the implementation of various procedures and controls to monitor and mitigate security threats and to increase security for New Talos’s information, facilities, and infrastructure may result in increased capital and operating costs. Moreover, there can be no assurance that such procedures and controls will be sufficient to prevent security breaches from occurring. If any of these security breaches were to occur, they could lead to losses of sensitive information, critical infrastructure, or capabilities essential to New Talos’s operations and could have a material adverse effect on its reputation, financial position, results of operations, or cash flows. Cybersecurity attacks in particular are becoming more sophisticated and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and systems, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data. These events could damage New Talos’s reputation and lead to financial losses from remedial actions, loss of business, or potential liability.

The U.S. government has issued warnings that U.S. energy assets may be the future targets of terrorist organizations. These developments will subject New Talos’s operations to increased risks. Any future terrorist attack at New Talos’s facilities, or those of its purchasers, could have a material adverse effect on its financial condition and operations.

New Talos’s estimates of future asset retirement obligations may vary significantly from period to period and unanticipated decommissioning costs could materially adversely affect its future financial position and results of operations.

New Talos will be required to record a liability for the discounted present value of its asset retirement obligations to plug and abandon inactive, non-producing wells; to remove inactive or damaged platforms, facilities and equipment; and to restore the land or seabed at the end of oil and natural gas operations. These costs are typically considerably more expensive for offshore operations as compared to most land-based operations due to increased regulatory scrutiny and the logistical issues associated with working in waters of various depths. Estimating future restoration and removal costs in the Gulf of Mexico is especially difficult because most of the removal obligations may be many years in the future, regulatory requirements are subject to change or more restrictive interpretation, and asset removal technologies are constantly evolving, which may result in additional or increased or decreased costs. As a result, New Talos may significantly increase or decrease its estimated asset retirement obligations in future periods. For example, because New Talos will operate in the Gulf of Mexico, platforms, facilities and equipment will be subject to damage or destruction as a result of hurricanes and other adverse weather conditions. Also, the sustained lower commodity price environment may cause New Talos’s non-operator partners to be unable to pay their share of costs, which may require New Talos to pay its proportionate share of the defaulting party’s share of costs.

The estimated costs to plug and abandon a well or dismantle a platform can change dramatically if the host platform from which the work was anticipated to be performed is damaged or toppled rather than structurally intact. Accordingly, New Talos’s estimates of future asset retirement obligations could differ dramatically from what it may ultimately incur as a result of damage from a hurricane.

56