A summary of the detail comprising the Company’s debt and the related book values for the respective periods presented is as follows (in thousands):


	Year Ended December 31,
	2022			2021
12.00% Second-Priority Senior Secured Notes – due January 2026	$	638,541		$	650,000
7.50% Senior Notes – due May 2022		—			6,060
Bank Credit Facility – matures November 2024		—			375,000
Total debt, before discount and deferred financing cost		638,541			1,031,060
Discount and deferred financing cost		(53,201	)		(68,333	)
Total debt, net of discount and deferred financing costs		585,340			962,727
Less: Current portion of long-term debt		—			6,060
Long-term debt, net of discount and deferred financing costs	$	585,340		$	956,667

The 12.00% Second-Priority Senior Secured Notes due 2026 (the “12.00% Notes”) were issued pursuant to an indenture dated January 4, 2021 and the first supplemental indenture dated January 14, 2021 between the Parent Company (the “Parent Guarantor”), Talos Production Inc. (the “Issuer”), and certain of the Issuer's subsidiaries (the “Subsidiary Guarantors” and, together with the Parent Guarantor, the “Guarantors”) and Wilmington Trust, National Association, as trustee and collateral agent. The 12.00% Notes rank pari passu in right of payment and constitute a single class of securities for all purposes under the indentures. The 12.00% Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Parent Guarantor and on a second-priority senior secured basis by each of the Subsidiary Guarantors and will be unconditionally guaranteed on the same basis by certain of the Issuer’s future subsidiaries. The 12.00% Notes are secured on a second-priority basis by liens on substantially the same collateral as the Issuer’s existing first-priority obligations under its Bank Credit Facility. The 12.00% Notes mature January 15, 2026 and have interest payable semi-annually each January 15 and July 15.

At any time prior to January 15, 2023, the Company may redeem up to 40% of the principal amount of the 12.00% Notes at a redemption rate of 112.00% of the principal amount plus accrued and unpaid interest. At any time prior to January 15, 2023, the Company may also redeem some or all of the 12.00% Notes at a price equal to 100% of the principal amount of the 12.00% Notes, plus a “make-whole premium,” together with accrued and unpaid interest, if any, to, but excluding, the date of redemption. Thereafter, the Company may redeem all or a portion of the 12.00% Notes in whole at any time or in part from time to time at the following redemption prices (expressed as percentages of principal amount) plus accrued and unpaid interest if redeemed during the period commencing on January 15 of the years set forth below:


Period	Redemption Price
2023		106.00	%
2024		103.00	%
2025 and thereafter		100.00	%

The indenture governing the 12.00% Notes applies certain limitations on the Company’s ability and the ability of its subsidiaries to, among other things, (i) incur, assume or guarantee additional indebtedness or issue certain convertible or redeemable equity securities; (ii) create liens to secure indebtedness; (iii) pay distributions on equity interests, repurchase equity securities or redeem junior lien, unsecured or subordinated indebtedness; (iv) make investments; (v) restrict distributions, loans or other asset transfers from Talos Production Inc.’s restricted subsidiaries; (vi) consolidate with or merge with or into, or sell substantially all of Talos Production Inc.’s properties to, another person; (vii) sell or otherwise dispose of assets, including equity interests in subsidiaries; and (viii) enter into transactions with affiliates. The 12.00% Notes contain customary quarterly and annual reporting, financial and administrative covenants. The Company was in compliance with all debt covenants at December 31, 2022.

The Issuer initiated a notes consent solicitation on October 21, 2022, to obtain the requisite holders’ consent to certain amendments to the indenture governing the Issuer’s 12.00% Notes to permit the incurrence of indebtedness in respect of the 11.75% Senior Secured Second Lien Notes due 2026 of EnVen (the “Notes Consent Solicitation”). The Notes Consent Solicitation expired on October 27, 2022, with holders of 95.8% of the aggregate principal amount of the 12.00% Notes outstanding consenting. As a result, the Issuer entered into a second supplemental indenture to the base indenture on October 27, 2022, which became effective upon its execution. The Issuer offered holders of the 12.00% Notes consideration equal to 50 basis points times the principal amount of the 12.00% Notes held by such consenting holder (“Consent Fee”).

During the year ended December 31, 2022, the Company repurchased $11.5 million of the 12.00% Notes. The debt repurchases resulted in a loss on extinguishment of debt for the year ended December 31, 2022 of $1.6 million, which is presented as “Other income (expense)” on the Consolidated Statements of Operations.

Subsequent Event — On February 13, 2023, the Issuer paid the Consent Fee of approximately $3.1 million in the aggregate in connection with the closing of the EnVen Acquisition.

On January 13, 2021, the Company redeemed $347.3 million aggregate principal amount of the 11.00% Second-Priority Senior Secured Notes due 2022 (the “11.00% Notes”) at 102.75% plus accrued and unpaid interest using the proceeds from the issuance of the 12.00% Notes. The debt redemption resulted in a loss on extinguishment of debt of $13.2 million for the year ended December 31, 2021, which is included in “Other income (expense)” on the Consolidated Statements of Operations.

On June 15, 2020, the Company entered into an exchange agreement pursuant to which the Company agreed to exchange $37.2 million aggregate principal amount of the 11.00% Notes from certain holders in exchange for 3.1 million shares of the Company’s common stock plus cash in an amount equal to accrued interest up to the June 18, 2020 settlement date. Additionally, during the year ended December 31, 2020, the Company repurchased $6.4 million of the 11.00% Notes. The exchange agreement and debt repurchases resulted in a gain on extinguishment of debt for the year ended December 31, 2020 of $1.7 million, which is included in “Other income (expense)” on the Consolidated Statements of Operations.

On May 31, 2022, the 7.50% Senior Notes matured and were redeemed at an aggregate principal of $6.1 million plus accrued and unpaid interest.

The Company maintains a Bank Credit Facility with a syndicate of financial institutions. The Bank Credit Facility provides for the determination of the borrowing base based on the Company’s proved producing reserves and a portion of the Company's proved undeveloped reserves. The borrowing base is redetermined by the lenders at least semi-annually during the second quarter and fourth quarter of each year. On May 4, 2022, the Company entered into a (i) Borrowing Base Redetermination Agreement and Eighth Amendment to Credit Agreement (the “Eighth Amendment”) and (ii) Incremental Agreement of Increasing Lenders (“Incremental Agreement”). The Eighth Amendment and the Incremental Agreement, among other things, (i) increased the borrowing base from $950.0 million to $1.1 billion and (ii) increased the commitments from $791.3 million to $806.3 million. On December 23, 2022, the Company entered into the Incremental Agreement and Ninth Amendment to Credit Agreement (the “Ninth Amendment”). The Ninth Amendment, among other things, (i) extends the maturity date of the Bank Credit Facility from November 12, 2024 to March 31, 2027, (ii) increases the borrowing base from $1.1 billion to $1.5 billion and (iii) increases commitments from $806.3 million to $965.0 million, in each case contingent upon the closing of the EnVen Acquisition and the occurrence of certain events related thereto.

The Bank Credit Facility no longer bears interest at the applicable London InterBank Offered Rate plus the applicable margin. Interest under the Bank Credit Facility accrues at the Company’s option either at an alternate base rate (“ABR”) plus the applicable margin (“ABR Loans”), an adjusted term secured overnight financing rate (“SOFR”) plus the applicable margin (“Term Benchmark Loans”) or adjusted daily simple SOFR plus the applicable margin (“RFR Loans”). The ABR is based on the greater of (a) the prime rate, (b) a federal funds rate plus 0.5% or (c) the adjusted term SOFR for a one-month interest period plus 1.00%. The adjusted term SOFR is equal to the term SOFR for each applicable tenor (e.g., one-month, three-months, six-months, and twelve-months) calculated and published by the CME Group Inc. plus 0.10%. The adjusted daily simple SOFR is equal to the overnight SOFR calculated and published by the Federal Reserve Bank of New York plus 0.10%. In addition, the Company is obligated to pay a commitment fee on the unutilized portion of the commitments. The pricing grid below shows the applicable margin for Term Benchmark Loans, RFR Loans and ABR Loans as well as the commitment fee rate, in each case, prior to closing of the EnVen Acquisition, based upon the applicable borrowing base utilization percentage:


Borrowing Base Utilization Percentage	Utilization	Term Benchmark Loans and RFR Loans	ABR Loans	Commitment Fee Rate
Level 1	< 25%	3.00%	2.00%	0.50%
Level 2	≥ 25% < 50%	3.25%	2.25%	0.50%
Level 3	≥ 50% < 75%	3.50%	2.50%	0.50%
Level 4	≥ 75% < 90%	3.75%	2.75%	0.50%
Level 5	≥ 90%	4.00%	3.00%	0.50%

The Ninth Amendment provides that the above applicable margins for Term Benchmark Loans, RFR Loans and ABR Loans, each decrease by an amount equal to 0.25% from and after the closing of the EnVen Acquisition. The commitment fee rate also decreases to 0.375% from and after the closing of the EnVen Acquisition when the borrowing base utilization percentage is less than 50%.

The Bank Credit Facility has certain debt covenants, the most restrictive of which is that the Company must maintain a Consolidated Total Debt to EBITDAX Ratio (as defined in the Bank Credit Facility) of no greater than 3.00 to 1.00 calculated each quarter utilizing the most recent twelve months to determine EBITDAX. The Company must also maintain a current ratio no less than 1.00 to 1.00 each quarter. Under the Bank Credit Facility, unutilized commitments are included in current assets in the current ratio calculation. The Bank Credit Facility is secured by, among other things, mortgages covering at least 90.0% (or, from and after the closing of the EnVen Acquisition, 85.0%) of the oil and natural gas assets of the Company. The Bank Credit Facility is fully and unconditionally guaranteed by the Company and certain of its wholly-owned subsidiaries.

As of December 31, 2022, the Company's borrowing base was $1.1 billion with total commitments of $806.3 million. Additionally, no more than $200.0 million (or, from and after the closing of the EnVen Acquisition, $250.0 million) of the Company’s borrowing base can be used as letters of credit with current commitments at $150.0 million. The amount the Company is able to borrow with respect to the borrowing base is subject to compliance with the financial covenants and other provisions of the Bank Credit Facility. The Company was in compliance with all debt covenants at December 31, 2022. See Note 12 — Commitments and Contingencies for the amount of letters of credit issued under the Bank Credit Facility as of December 31, 2022.

Subsequent Event — On February 10, 2023, the Company borrowed $130.0 million primarily used to fund the cash portion of the purchase price in the EnVen Acquisition. On February 13, 2023, as a result of the closing of the EnVen Acquisition, the borrowing base increased, commitments increased and the other changes all described above as contingent on the closing of the EnVen Acquisition went into effect. As of closing of the EnVen Acquisition, the Bank Credit Facility had approximately $754.2 million of undrawn commitments.

The Company has not historically declared or paid any cash dividends on its capital stock. However, to the extent the Company determines in the future that it may be appropriate to pay a special dividend or initiate a quarterly dividend program, the Company’s ability to pay any such dividends to its stockholders may be limited to the extent its consolidated subsidiaries are limited in their ability to make distributions to the Parent Company, including the significant restrictions that the agreements governing the Company’s debt impose on the ability of its consolidated subsidiaries to make distributions and other payments to the Parent Company. With respect to entities accounted for under the equity method, the Company’s primary equity method investee as of December 31, 2022 did not have any undistributed earnings.

The Bank Credit Facility contains restrictions on the ability of Talos Production Inc. to transfer funds to the Parent Company in the form of cash dividends, loans or advances. The Bank Credit Facility restricts distributions and other payments to the Parent Company, subject to certain baskets and other exceptions described therein including the payment of operating expense incurred in the ordinary course of business and for income taxes attributable to its ownership in Talos Production Inc. Under the Bank Credit Facility, general distributions and other restricted payments may be made to the Company so long as after giving pro forma effect to the making of any such restricted payment (i) no default or event of default has occurred and is continuing; (ii) available commitments exceed 25% of the then effective loan limit; (iii) the pro forma current ratio of 1.0 to 1.0 is satisfied; and (iv) either (A) the Consolidated Total Debt to EBITDAX Ratio (as defined in the Bank Credit Facility) is not greater than 1.75 to 1.00 and the aggregate amount of such restricted payments does not exceed the Available Free Cash Flow Amount (as defined in the Bank Credit Facility) at the time made or (B) the Consolidated Total Debt to EBITDAX Ratio is not greater than 1.00 to 1.00.

In addition, the indenture governing the 12.00% Notes restricts the Company’s consolidated subsidiaries from, directly or indirectly, among other things, declaring or paying any dividend on account of their equity securities, subject to certain limited exceptions described in the indenture. Such exceptions include, among other things, if (i) no default has occurred or would occur as a result thereof, (ii) immediately after giving effect to such transaction on a pro forma basis, the issuer could incur $1.00 of additional indebtedness in compliance with a fixed charge coverage ratio of 2.25 to 1.00, (iii) the ratio of the issuer’s total debt to EBITDA ratio is not greater than 3.00 to 1.00, and (iii) if payments pursuant to such transaction, together with the aggregate amount of certain other restricted payments, is less than the cumulative credit permitted under the indenture.

At December 31, 2022, restricted net assets of the Company’s consolidated subsidiaries exceeded 25%.

On February 13, 2023, in conjunction with the closing of the EnVen Acquisition, the Company assumed EnVen’s 11.75% Senior Secured Second Lien Notes due 2026 (the “EnVen Second Lien Notes”) with a principal amount of $257.5 million. The EnVen Second Lien Notes mature on April 15, 2026 and interest accrues and is to be paid semi-annually in cash in arrears on April 15th and October 15th of each year. The indenture governing the EnVen Second Lien Notes requires the redemption of $15.0 million of the principal amount outstanding at par value on April 15th and October 15th of each year.

The EnVen Second Lien Notes are governed by an indenture by and among Energy Ventures GoM LLC, EnVen Finance Corporation as co-issuers, the guarantors party thereto and Wilmington Trust, National Association as trustee and collateral agent, dated as of April 15, 2021 (“EnVen Second Lien Notes Indenture”). Talos Production Inc. and certain of its subsidiaries entered into a supplemental indenture to the EnVen Second Lien Notes Indenture which, inter alia, provides for the assumption of the indebtedness in respect of the EnVen Second Lien Notes by Talos Production Inc., as well as guarantees of such indebtedness by certain subsidiaries of Talos Production Inc., as contemplated by the terms of the EnVen Second Lien Notes Indenture.

The EnVen Second Lien Notes Indenture contains certain covenants, which are customary with respect to non-investment grade debt securities, including limitations on the Company’s ability to incur and guarantee additional indebtedness, repay, redeem, or repurchase certain debt and capital stock, issue certain preferred stock or similar equity securities, pay dividends or make other distributions on capital stock, enter into certain types of transactions with affiliates, make loans or investments, and make other restricted payments. Additionally, certain covenants restrict Talos Production Inc. subsidiaries’ ability to pay dividends, create liens, and sell certain assets.

EnVen’s reserve based loan facility, which had no borrowings as of February 13, 2023, was terminated at the time of the EnVen Acquisition.