First Big Crude Discovery In Five Years In Gulf Of America

Inside a Floating Production vessel owned by Total oil company.

AFP via Getty Images

Talos Energy.

Deepwater plays are defined as water depths more than 1,000 ft. Deepwater wells accounted for 94% of the Gulf of America’s (GOA) crude production, and 80% of natural gas output in 2023. According to the EIA, about 15% of U.S. oil production comes from the GOA, and about 5% of U.S dry gas.

A recent depth outlier is the Whale project of Shell (Figure 1), whose Floating Production Unit (FPU) lies at 8,600 ft and is expected to produce 85,000 barrels of oil per day (bopd).

Talos Energy is a new kid on the block. Founded in 2012, it’s located in Houston, and primarily operates offshore, in the U.S. GOA and offshore Mexico. Talos was involved in the discovery of the Zama-1 field on the Mexico shelf, one of the largest shallow-water discoveries in recent years.

The company emphasizes innovation in exploration and production. As well as production of oil and gas, Talos’ strategy includes expanding into carbon capture and storage (CCS) where they are developing projects. In recent years, Talos merged with Stone Energy and acquired QuarterNorth Energy. Talos stock has been sliding since 2022, and is now down by about 50%.

Discovery of Daenerys Field.

But the bright light on the horizon is Talos’ discovery of the Daenerys field, a subsalt project in the Walker Ridge area of the GOA (Press note by Wood Mackenzie, 26 August 2025). With their innovative expertise, the company drilled a well to 33,000 feet total vertical depth, and the prospect could produce 65,000 bopd. Talos are expected to boost reserves by more than 50 MMboe (million barrels of oil equivalent), from 190 MMboe at end of 2024. It’s a game-changer for Talos, and if the new play were to add 200 MMboe, dreaming big, this would make the GOA’s biggest find since Shell’s Whale in 2017.

Daenerys may well make history even if the play doesn’t reach 200 MMboe. If it reaches 100 MMboe, it will be the first discovery to exceed this level since 2020. Other plays in the subsalt Miocene may emerge in this area of the GOA.

Coincidence or not, red-dot big discoveries in the bar chart correlate with the U.S. administration. Trump came to power in 2017, Biden in 2021, and Trump again in 2025. There may also be a significant uplift in oil production coming. One piece of the new One Big Beautiful Bill Act (OBBBA) law says that deepwater wells may now drill stacked plays from one well, meaning two or more zones completed at the same time from one vertical well. The Permian basin has proven this to be a remarkably efficient way to increase production.

The Challenges Of Deepwater Drilling And Production.

First, seismic imaging through large salt layers is difficult, and expensive, to carefully map prospective oil zones. Then subsalt drilling is expensive, ranging from $30 – $60 million for a single exploration well in 2020. You need specialized equipment for HPHT, longer wells, and narrow drilling windows. Add costs for drilling stacked plays, and the price may be up to $100 million in 2025. To fill out context, development costs in 2020 for drilling production and injection wells and production facilities lie in a range of $3 – $5 billion in GOA.

Second, in HPHT projects, preventing blowouts is critical. On the Deepwater Horizon platform in 2010, the failure of redundant systems showed how even advanced blowout preventers (BOPs) can fail under extreme conditions. After court cases, oil cleanup, and fines, this accident cost BP a grand total of $56 billion, and almost dissolved the company.

What are the positives? By this year, deepwater oil will account for 10% of global crude supply, according to Rystad Energy. Breakeven costs in 2014 were $80 per barrel, but are $35-$50 today.

Since the beginning in 2012, Talos’ expansion has been aggressive. The Daenerys find looks like a world class play and should be a game changer. Talos Energy has two large Deepwater projects in the pipeline: Enterprise and Hershey (Figure 1). Estimates before drilling exceed 100 MMboe for each play. If Talos can make these plays a success, the company should become one of the big winners in the GOA.