Exhibit 99.9

TALOS ENERGY INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements present the combination of the historical financial information of Talos Energy Inc., a Delaware corporation (the “Company” or “Talos”), ILX Holdings, LLC, a Delaware limited liability company (“ILX Holdings”), ILX Holdings II, LLC, a Delaware limited liability company (“ILX Holdings II”), Castex Energy 2014, LLC, a Delaware limited liability company (“Castex 2014”) and Castex Energy 2016, L.P., a Delaware limited partnership (“Castex 2016” and, together with Castex 2014, the “Castex Sellers”), adjusted to give effect to the Transactions (as defined below) and related financing consisting of borrowings under the Company’s revolving bank credit facility. In addition, while the Company acquired substantially all of the key operating assets of ILX Holdings, ILX Holdings II and the Castex Sellers, the historical financial information was adjusted to eliminate specified assets and liabilities, and the associated income affect, not in the ILX I Target Entities, ILX II Target Entities or Castex Target Entities (each as defined in the definitive Information Statement filed with the U.S. Securities and Exchange Commission on March 10, 2020, the “Information Statement”), or were considered Excluded Assets in the Purchase Agreements (as defined below).

The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2019 and year ended December 31, 2018 combines the historical consolidated statements of operations of Talos, ILX Holdings, ILX Holdings II and the Castex Sellers giving effect to the Transactions and related financing as if they had been consummated on January 1, 2018. The unaudited pro forma condensed combined balance sheet combines the historical condensed consolidated balance sheets of Talos, ILX Holdings, ILX Holdings II and the Castex Sellers as of September 30, 2019, giving effect to the Transactions and related financing as if closing had occurred on September 30, 2019.

The following unaudited pro forma condensed combined financial statements are based on, and should be read in conjunction with:

 

•

The historical audited consolidated financial statements of the Company and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Talos” included in the Information Statement;

 

•

The historical unaudited condensed consolidated interim financial statements of the Company and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Talos” included in the Information Statement;

 

•

The historical audited consolidated financial statements of ILX Holdings and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Sellers” included in the Information Statement;

 

•

The historical unaudited interim consolidated financial statements of ILX Holdings and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Sellers” included in the Information Statement;

 

•

The historical audited consolidated financial statements of ILX Holdings II and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Sellers” included in the Information Statement;

 

•

The historical unaudited interim consolidated financial statements of ILX Holdings II and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Sellers” included in the Information Statement;

 

•

The historical audited consolidated financial statements of Castex 2014 and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Sellers” included in the Information Statement;

 

•

The historical unaudited condensed consolidated interim financial statements of Castex 2014 and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Sellers” included in the Information Statement;

•

The historical audited consolidated financial statements of Castex 2016 and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Sellers” included in the Information Statement; and

 

•

The historical unaudited condensed consolidated interim financial statements of Castex 2016 and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Sellers” included in the Information Statement.

On February 28, 2020 (the “Closing Date”), the Company acquired the outstanding limited liability interests in certain wholly owned subsidiaries of ILX Holdings, ILX Holdings II, ILX Holdings III LLC, a Delaware limited liability company (“ILX Holdings III”) and Castex 2014, each a related party and an affiliate of certain entities controlled or affiliated with Riverstone Energy Partners V, L.P. (collectively, the “Riverstone Sellers”), and Castex 2016 (together with the Riverstone Sellers, the “Sellers”) with an effective date of July 1, 2019 (collectively, the “ILX and Castex Acquisition”). The ILX and Castex Acquisition was consummated pursuant to separate Purchase and Sale Agreements, dated December 10, 2019 (as amended from time to time, the “Purchase Agreements”) for aggregate consideration consisting of (i) $385.0 million in cash subject to customary closing adjustments and (ii) an aggregate 110,000 shares (the “Preferred Shares”) of a series of the Company’s preferred stock, par value $0.01 per share, designated as “Series A Convertible Preferred Stock” were issued to the Riverstone Sellers (such issuance, the “Preferred Stock Issuance”) on the terms and subject to the conditions set forth in that certain Certificate of Designation of Preferences, Rights and Limitations relating to the Series A Convertible Preferred Stock (the “Certificate of Designation”) which subsequently converted to 11.0 million shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) on March 30, 2020 (the “Conversion” and such Common Stock, the “Conversion Stock”). The Preferred Stock Issuance, the ILX and Castex Acquisition, the Conversion and the other transactions contemplated by the Purchase Agreements are referred to herein collectively as the “Transactions”. The cash payment and escrow deposit were funded with borrowings under the revolving bank credit facility.

The accompanying unaudited pro forma condensed combined financial statements were derived by making certain adjustments to the historical financial statements listed above that are (i) directly attributable to the Transactions and related financing, (ii) factually supportable and (iii) with respect to the unaudited pro forma condensed combined statement of operations, expected to have a continuing impact on the combined results. The adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual adjustments may differ from the pro forma adjustments. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of the Transactions and related financing and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements and related notes are presented for illustrative purposes only and should not be relied upon as an indication of operating results that Talos would have achieved if the Transactions and related financing had taken place on the specified date. In addition, future results may vary significantly from the results reflected in the unaudited pro forma condensed combined financial statements and should not be relied on as an indication of the future results of Talos.

TALOS ENERGY INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS

AS OF SEPTEMBER 30, 2019

(In thousands, except per share data)

 

		Talos Historical				Target Assets Historical				Pro Forma Adjustments								Pro Forma Combined
						Note 2				Note 4
ASSETS
Current assets:
Cash and cash equivalents		$	90,682			$	3,786			$	—							$	94,468
Accounts receivable, net																			—
Trade			108,354				6,803				—								115,157
Joint Interest			17,562				—				—								17,562
Other			31,768				6,100				—								37,868
Assets from price risk management activities			43,058				—				—								43,058
Prepaid assets			39,378				28				—								39,406
Other current assets			1,952				148				—								2,100
Total current assets			332,754				16,865				—								349,619
Property and equipment:
Proved properties			4,012,100				1,059,334				(648,505	)			(a	)			4,422,929
Unproved properties, not subject to amortization			178,174				86,377				(6,377	)			(a	)			258,174
Other property and equipment			28,690				—				—								28,690
Total property and equipment			4,218,964				1,145,711				(654,882	)							4,709,793
Accumulated depreciation, depletion and amortization			(1,967,610	)			(605,755	)			605,755				(a	)			(1,967,610	)
Total property and equipment, net			2,251,354				539,956				(49,127	)							2,742,183
Other long-term assets:
Assets from price risk management activities			7,820				—				—								7,820
Other well equipment inventory			9,251				—				—								9,251
Leased assets			8,082				—				—								8,082
Other assets			2,624				2,226				(1,974	)			(b	)			2,876
Total Assets		$	2,611,885			$	559,047			$	(51,101	)						$	3,119,831
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	95,737			$	13,719			$	12,416				(c	)		$	121,872
Accrued liabilities			169,152				443				—								169,595
Accrued royalties			37,763				—				—								37,763
Current portion of asset retirement obligations			63,404				3,133				(3,133	)			(d	)			63,404
Liabilities from price risk management activities			3,832				—				—								3,832
Accrued interest payable			21,058				—				—								21,058
Leased liabilities			1,416				—				—								1,416
Other current liabilities			18,993				—				—								18,993
Total current liabilities			411,355				17,295				9,283								437,933
Long Term Liabilities:
Long-term debt			697,192				—				293,095				(e	)			990,287
Asset retirement obligations			321,808				63,126				(18,637	)			(d	)			366,297
Liabilities from price risk management activities			750				—				—								750
Long-term leased liabilities			17,249				—				—								17,249
Other long-term liabilities			88,707				—				—				(f	)			88,707
Total liabilities			1,537,061				80,421				283,741								1,901,223
Members’ equity			—				478,626				(478,626	)			(g	)			—
Stockholders’ Equity:
Preferred stock, $0.01 par value; 30,000,000 shares authorized and no shares issued or outstanding as of September 30, 2019
Common Stock, $0.01 par value; 270,000,000 shares authorized; 54,196,145 shares issued and outstanding as of September 30, 2019			542				—				110				(h	)			652
Additional paid-in capital			1,342,993				—				156,090				(h	)			1,499,083
Accumulated deficit			(268,711	)			—				(12,416	)			(c	)			(281,127	)
Total stockholders’ equity			1,074,824				478,626				(334,842	)							1,218,608
Total liabilities and stockholders’ equity		$	2,611,885			$	559,047			$	(51,101	)						$	3,119,831

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

TALOS ENERGY INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(In thousands, except per share data)

 

		Talos Historical				Target Assets Historical				Pro Forma Adjustments								Pro Forma Combined
						Note 2				Note 4
Revenues:
Oil revenue		$	624,486			$	213,657			$	—							$	838,143
Natural gas revenue			41,738				23,607				—								65,345
NGL revenue			15,095				8,628				—								23,723
Other			13,061				—				—								13,061
Total revenue			694,380				245,892				—								940,272
Operating expenses:
Direct lease operating expense			122,243				62,070				(119	)			(i	)			184,194
Insurance			12,462				3,581				—								16,043
Production taxes and other			1,067				1,120				—								2,187
Total lease operating expense			135,772				66,771				(119	)							202,424
Workover and maintenance expense			49,525				13,473				—								62,998
Depreciation, depletion and amortization			248,518				105,336				(58,801	)			(j	)			295,053
Oil & Gas Write down			13,778				38,683				(38,683	)			(k	)			13,778
Accretion expense			26,868				3,549				—								30,417
General and administrative expense			53,795				10,993				—								64,788
Total operating expenses			528,256				238,805				(97,603	)							669,458
Operating income			166,124				7,087				97,603								270,814
Interest expense			(73,273	)			—				(10,690	)			(l	)			(83,963	)
Price risk management activities income (expense)			(35,829	)			—				—								(35,829	)
Other income			1,831				438				—								2,269
Income before income taxes			58,853				7,525				86,913								153,291
Income tax expense			(428	)			—				(591	)			(m	)			(1,019	)
Net income		$	58,425			$	7,525			$	86,322							$	152,272
Net income per common share:
Basic		$	1.08															$	2.34
Diluted		$	1.07															$	2.33
Weighted average common shares outstanding:
Basic			54,178																65,178				(n	)
Diluted			54,364																65,364				(n	)

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

TALOS ENERGY INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2018

(In thousands, except per share data)

 

		Talos Historical				Target Assets Historical				Pro Forma Adjustments								Pro Forma Combined Company
						Note 2				Note 4
Revenues:
Oil revenue		$	781,815			$	213,399			$	—							$	995,214
Natural gas revenue			73,610				28,952				—								102,562
NGL revenue			35,863				13,369				—								49,232
Other			—				—				—								—
Total revenue			891,288				255,720				—								1,147,008
Operating expenses:
Direct lease operating expense			145,988				49,698				(389	)			(i	)			195,297
Insurance			15,342				3,853				—								19,195
Production taxes and other			1,989				1,018				—								3,007
Total lease operating expense			163,319				54,569				(389	)							217,499
Workover and maintenance expense			64,961				1,656				—								66,617
Depreciation, depletion and amortization			288,719				127,271				(82,800	)			(j	)			333,190
Oil & Gas Write down			—				9,706				(9,706	)			(k	)			—
Accretion expense			35,344				2,687				—								38,031
General and administrative expense			85,816				11,122				—								96,938
Total operating expenses			638,159				207,011				(92,895	)							752,275
Operating income			253,129				48,709				92,895								394,733
Interest expense			(90,114	)			—				(14,253	)			(l	)			(104,367	)
Price risk management activities income (expense)			60,435				—				—								60,435
Other income			1,012				553				—								1,565
Income before income taxes			224,462				49,262				78,642								352,366
Income tax expense			(2,922	)			—				(81	)			(m	)			(3,003	)
Net income		$	221,540			$	49,262			$	78,561							$	349,363
Net income per common share:
Basic		$	4.81															$	6.12
Diluted		$	4.81															$	6.12
Weighted average common shares outstanding:
Basic			46,058																57,058				(n	)
Diluted			46,061																57,061				(n	)

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

TALOS ENERGY INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The unaudited pro forma condensed combined financial statements present the combination of the historical financial information of Talos, ILX Holdings, ILX Holdings II and the Castex Sellers, adjusted to give effect to the Transactions and additional borrowings under the revolving bank credit facility. In addition, while the Company acquired substantially all of the key operating assets of ILX Holdings, ILX Holdings II and the Castex Sellers, the historical financial information was adjusted to eliminate specified assets and liabilities not acquired by Talos as part of the Transactions. See Note 2 — Consolidation of Acquired Entities, for additional information.

The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2019 and fiscal year ended December 31, 2018 combines the historical consolidated statements of operations of Talos, ILX Holdings, ILX Holdings II and the Castex Sellers, giving effect to the Transactions and related financing as if they had been consummated on January 1, 2018. The unaudited pro forma condensed combined balance sheet combines the historical condensed consolidated balance sheets of Talos, ILX Holdings, ILX Holdings II and the Castex Sellers as of September 30, 2019, giving effect to the Transactions and related financing as if the closing had occurred on September 30, 2019. The Transactions and other adjustments are described in Note 4 — Pro Forma Adjustments to these unaudited pro forma condensed combined financial statements.

Certain reclassifications have been made to the historical financial statements of ILX Holdings, ILX Holdings II and the Castex Sellers to reflect the comparability of financial information. However, the pro forma condensed combined financial statements may not reflect all adjustments necessary to conform the accounting policies of ILX Holdings, ILX Holdings II and the Castex Sellers to those of Talos due to the limitations on the availability of information.

The pro forma adjustments represent management’s estimates based on information available as of the date hereof and are subject to change as additional information becomes available and additional analyses are performed. The pro forma financial statements do not reflect the impact of possible revenue or earnings enhancements, cost savings from operating efficiencies or synergies, or asset dispositions. Also, the pro forma financial statements do not reflect possible adjustments related to restructuring or integration activities or transaction or other costs following the Transactions that are not expected to have a continuing impact. Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, closing of the Transactions are not included in the pro forma statements of operations. However, the impact of such transaction expenses is reflected in the pro forma balance sheet as an increase to accounts payable and accumulated deficit.

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting with Talos as the accounting acquirer of the Target Assets (as defined in the Information Statement). Under the acquisition method of accounting, the purchase price is allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values, with any excess in purchase price allocated to goodwill. The fair value of identifiable assets acquired and liabilities assumed from the Transactions are based on a preliminary estimate of fair value using assumptions described in the accompanying notes to the unaudited pro forma condensed combined financial information that the Company believes is reasonable. See Note 3 — Preliminary Purchase Price Allocation, for additional information.

Note 2. Consolidation of Acquired Entities

The following table illustrates the historical balances sheets of ILX Holdings, ILX Holdings II and the Castex Sellers, including the elimination of specific assets and liabilities not acquired by Talos, that form the Target Assets Historical column on the unaudited condensed combined balance sheet as of September 30, 2019. Certain reclassifications have been made to the historical financial statements of ILX Holdings, ILX Holdings II and the Castex Sellers to reflect the comparability of financial information.

 

		ILX Holdings Historical				ILX Holdings II Historical				Castex 2014 Historical				Castex 2016 Historical				Excluded Assets								Total Target Assets Historical
ASSETS
Current assets:
Cash and cash equivalents		$	29,772			$	35,901			$	3,093			$	693			$	(65,673	)			(a	)		$	3,786
Accounts receivable, net
Trade			10,690				12,557				6,096				707				(23,247	)			(b	)			6,803
Other			252				833				6,100				—				(1,085	)			(b	), (d)			6,100
Assets from price risk management activities			2,433				6,233				1,104				—				(9,770	)			(c	)			—
Prepaid assets			670				1,371				28				—				(2,041	)			(b	)			28
Other current assets			—				891				133				15				(891	)			(b	)			148
Total current assets			43,817				57,786				16,554				1,415				(102,707	)							16,865
Property and equipment:
Proved properties			266,578				628,676				259,208				15,883				(111,011	)			(e	)			1,059,334
Unproved properties, not subject to amortization			—				89,738				32,435				378				(36,174	)			(e	)			86,377
Total property and equipment			266,578				718,414				291,643				16,261				(147,185	)							1,145,711
Accumulated depreciation, depletion and amortization			(162,059	)			(332,038	)			(108,510	)			(3,148	)			—								(605,755	)
Total property and equipment, net			104,519				386,376				183,133				13,113				(147,185	)							539,956
Other long-term assets:
Assets from price risk management activities			491				1,049				—				—				(1,540	)			(c	)			—
Other assets			18,237				22,722				228				24				(38,985	)			(b	)			2,226
Total Assets		$	167,064			$	467,933			$	199,915			$	14,552			$	(290,417	)						$	559,047
LIABILITIES AND EQUITY
Current liabilities:
Accounts Payable		$	10,498			$	8,226			$	11,388			$	2,331			$	(18,724	)			(b	)		$	13,719
Accrued liabilities			1,318				1,412				405				38				(2,730	)			(b	)			443
Current portion of long-term debt			—				—				—				980				(980	)			(f	)			—
Current portion of asset retirement obligations			—				—				2,788				345				—								3,133
Liabilities from price risk management activities			815				208				—				—				(1,023	)			(c	)			—
Other current liabilities			208				50				—				—				(258	)			(b	)			—
Total current liabilities			12,839				9,896				14,581				3,694				(23,715	)							17,295
Long Term Liabilities
Long-term debt			—				—				21,653				—				(21,653	)			(f	)			—
Asset retirement obligations			5,549				17,250				37,245				4,547				(1,465	)			(e	)			63,126
Liabilities from price risk management activities			58				30				—				—				(88	)			(c	)			—
Total liabilities			18,446				27,176				73,479				8,241				(46,921	)							80,421
Total members’ equity			148,618				440,757				126,436				6,311				(243,496	)			(g	)			478,626
Total liabilities and members’ equity		$	167,064			$	467,933			$	199,915			$	14,552			$	(290,417	)						$	559,047

(a)	Reflects the exclusion of cash and cash equivalents from ILX Holdings and ILX Holdings II as such assets are considered Excluded Assets under the Purchase Agreements and are not included in the Transactions.

(b)	Reflects the exclusion of working capital and other long term assets of ILX Holdings and ILX Holdings II, as such assets and liabilities are considered Excluded Assets under the applicable Purchase Agreements and are not included in the Transactions.

(c)	Reflects the exclusion of assets and liabilities associated with price risk management activities of ILX Holdings, ILX Holdings II and the Castex Sellers as these financial instruments are considered Excluded Assets under the Purchase Agreements and are not included in the Transactions.

(d)	Reflects the exclusion of joint interest partner credits associated with the Katmai Field which is considered an Excluded Asset for ILX Holdings II under the applicable Purchase Agreement and are not included in the Transactions of $0.1 million.

(e)	Reflects the exclusion of capitalized oil and natural gas expenditures associated with the discovery of the Katmai Field, which is considered an Excluded Asset under the Purchase Agreements and are not included in the Transactions.

(f)	Reflects the exclusion of current and long-term debt of the Castex Sellers as the long-term debt is considered Excluded Assets under the Purchase Agreements and are not included in the Transactions.

(g)	Reflects the elimination of members’ equity for Excluded Assets under the Purchase Agreements.

The following table illustrates the historical income statements of ILX Holdings, ILX Holdings II and the Castex Sellers, including the elimination of expenses associated with specific assets and liabilities not acquired by Talos, that form the Target Assets Historical column on the unaudited condensed combined income statement for the nine months ended September 30, 2019. Certain reclassifications have been made to the ILX Holdings, ILX Holdings II and the Castex Sellers’ historical financial statements to reflect the comparability of financial information.

 

		ILX Holdings Historical				ILX Holdings II Historical				Castex 2014 Historical				Castex 2016 Historical				Excluded Assets								Total Target Assets Historical
Revenues:
Oil revenue		$	76,153			$	113,091			$	21,932			$	2,481				—							$	213,657
Natural gas revenue			4,915				5,698				11,675				1,319				—								23,607
NGL revenue			2,505				3,570				2,317				236				—								8,628
Total revenue			83,573				122,359				35,924				4,036				—								245,892
Operating expenses:
Direct lease operating expense			17,915				28,347				14,355				1,521				(68	)			(a	)			62,070
Insurance			879				1,073				1,465				164				—								3,581
Production taxes and other			—				—				977				143				—								1,120
Total lease operating expense			18,794				29,420				16,797				1,828				(68	)							66,771
Workover and maintenance expense			10,009				192				2,951				321				—								13,473
Depreciation, depletion and amortization			21,216				64,534				18,191				1,395				—								105,336
Oil & Gas Write down			—				12,577				26,106				—				—								38,683
Accretion expense			267				897				2,160				225				—								3,549
General and administrative expense			3,073				3,323				4,323				274				—								10,993
Total operating expenses			53,359				110,943				70,528				4,043				(68	)							238,805
Operating income (loss)			30,214				11,416				(34,604	)			(7	)			68								7,087
Interest expense			—				(2,185	)			(1,034	)			(50	)			3,269				(b	)			—
Price risk management activities (expense) income			(1,241	)			7,566				1,281				—				(7,606	)			(c	)			—
Other income			436				—				2				—				—								438
Net income (loss)		$	29,409			$	16,797			$	(34,355	)		$	(57	)			(4,269	)						$	7,525

The following table illustrates the historical income statements of ILX Holdings, ILX Holdings II and the Castex Sellers, including the elimination of expenses associated with specific assets and liabilities not acquired by Talos, that form the Target Assets Historical column on the unaudited condensed combined income statement for the year ended December 31, 2018. Certain reclassifications have been made to the historical financial statements of ILX Holdings, ILX Holdings II and the Castex Sellers to reflect the comparability of financial information.

 

		ILX Holdings Historical				ILX Holdings II Historical				Castex 2014 Historical				Castex 2016 Historical				Excluded Assets								Total Target Assets Historical
Revenues:
Oil revenue		$	91,579			$	107,417			$	13,392			$	1,011				—							$	213,399
Natural gas revenue			6,448				6,222				14,947				1,335				—								28,952
NGL revenue			5,506				4,621				2,970				272				—								13,369
Total revenue			103,533				118,260				31,309				2,618				—								255,720
Operating expenses:
Direct lease operating expense			18,583				23,184				7,548				521				(138	)			(a	)			49,698
Insurance			1,255				1,649				880				69				—								3,853
Production taxes and other			—				—				905				113				—								1,018
Total lease operating expense			19,838				24,833				9,333				703				(138	)							54,569
Workover and maintenance expense			1,187				104				305				60				—								1,656
Depreciation, depletion and amortization			26,882				85,235				14,198				956				—								127,271
Oil & Gas Write down			—				9,706				—				—				—								9,706
Accretion expense			394				1,289				955				49				—								2,687
General and administrative expense			4,099				4,264				2,383				376				—								11,122
Total operating expenses			52,400				125,431				27,174				2,144				(138	)							207,011
Operating income (loss)			51,133				(7,171	)			4,135				474				138								48,709
Interest expense			—				(2,920	)			(1,411	)			(30	)			4,361				(b	)			—
Price risk management (expense) activities			(953	)			(263	)			(595	)			—				1,811				(c	)			—
Other income			415				—				138				—				—								553
Net income (loss)		$	50,595			$	(10,354	)		$	2,267			$	444				6,310							$	49,262

 

(a)	Reflects the removal of direct lease operating expense associated with the Katmai Field which is considered an Excluded Asset for ILX Holdings II from the Transactions under the applicable Purchase Agreement.

(b)	Reflects the exclusion of interest expense associated with debt instruments held by ILX Holdings, ILX Holdings II and the Castex Sellers as the interest expense associated with debt instruments which are not included in the Transactions.

(c)	Reflects the elimination of price risk management income (expense) associated with derivatives held by ILX Holdings, ILX Holdings II and the Castex Sellers, which are considered Excluded Assets under the Purchase Agreements.

Note 3. Preliminary Purchase Price Allocation

Preliminary Estimated Purchase Price

The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting with Talos as the accounting acquirer of the Target Assets. Under the acquisition method of accounting, the purchase price is allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values, with any excess purchase price allocated to goodwill.