Vista Energy S.A.B. de C.V.

Ladies and gentlemen, thank you for standing by, and welcome to VISTA's fourth quarter and full year 2020 results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. It is now my pleasure to introduce Strategic Planning and Investor Relations Officer, Alejandro Chernacov.

Thanks. Good morning, everyone. We are happy to welcome you to VISTA's fourth quarter and full year 2020 results conference call. I am here with Miguel Galuccio, VISTA's chairman and CEO, and with Pablo Vera Pinto, VISTA's CFO. Before we begin, I would like to draw your attention to our cautionary statement on slide two. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from expectations contemplated by these remarks. Our financial figures are stated in U.S. dollars and in accordance with International Financial Reporting Standards, IFRS. However, during this call, we may discuss certain non-IFRS financial measures, such as adjusted EBITDA. Reconciliations of these measures to the closest high-interest measure can be found in the earnings release that we issued yesterday. Please check our website for further information. Our company, Vista Oil & Gas, is a Sociedad Anónima Bursátil de Capital Variable organized under the laws of Mexico, registered in the Bolsa Mexicana de Valores and the New York Stock Exchange. The tickers of our common stock are Vista in the Mexican Stock Exchange and BIST in the New York Stock Exchange. The ticker of our warrants is VTW408A. I will now tell the call over to Miguel.

Thanks, Alejandro. Good morning, everyone, and thank you for joining this earning call. The year 2020 presented us multiple challenges, and I'm proud to say we are up to the task. The presentation I will share with you today shows how most of our key indicators reflect a V-shaped recovery. On the back of an structurally lower development and operating cost. In short, I believe we have emerged stronger from the crisis. Our response to COVID pandemic has been firm. First and foremost, by protecting our staff and ensuring business continuity. We quickly established a health protocol for essential oil field operations. More than 75% of our staff was working from home by the end of March 2020. In July, we adopted a new protocol to restart drilling, completion, and pulling activities. This allowed us to tie in two four-well paths in Baja del Palo Este, boosting our production that reached 35,000 VOE per day by year-end. Our continued focus on efficiency gave way to solid results. During 2020, we redesigned our type well based on increased productivity and cost reductions. This has led to unexpected development costs of approximately $8 per DOE. We also lowered our operating cost base by renegotiating more than 20 key oil field services contracts. This led to a reduction in lifting costs to $8 per VOE in Q4. Therefore, we turn this time to a company that is even more resilient to low oil prices in Byron. By the end of 2020, our approved reserves increased to 128.1 million barrels of oil equivalent. This implies a reserve-replace ratio of 371% and an increase of 26% This result is a clear reflection of the resilience I was mentioning earlier. We increased reserves even though for 2020 we used $42 per barrel of realized oil price, compared with $56 per barrel in 2019 to run reserve economics. We also increase our well inventory by de-risking the lower carbonate-lining zone in Bajada del Palo Este. We choose successful wells with 2,400-meter laterals. Solid well productivity proved the lower carbonate as an economic play, enabling us to add 150 wells to our drill inventory, which now totals an estimated of 550 wells. In 2020, we also maintained a strong focus on sustainability. Our safety metrics continue to improve, having completely reworked safety standards and procedures since we took over this operation less than three years ago. Our total recordable incident rate for 2020 was 0.38, down from 1.25 in 2019, which was already in line with international Tier 1 standards. Our first sustainability report will be published at the end of April. After restarting drilling and completion in Q3 2020, we continue to see improvement in our performance metrics. Drilling speed in Path 6 was 108% above Path 1, a remarkable learning curve. When we started our shale oil development, drilling a well with 2,800 m2 would take us more than 35 days. Today it takes us less than 20 days. The consistent improvement in drilling speed allow us to tie in pad number 6 50 days before the scheduled date, boosting our production exit rate for the year. During 2020, we captured cost reduction in drilling and completion service rates, as well as tubular, propane, and flood-fuelling costs. In pad number 6, drilling cost per lateral foot was down to $472, A 37% improvement compared to pad number 1. Similarly, the completion cost for pad number 6 was down 45%. Finally, drilling and completion cost per well was $9.9 million per pad number 6, a 43% improvement compared to pad number 1. Additional efficiency was obtained by improving well design. As shown to the right of the slide, We are increasing lateral length and total frac stages. These are key drivers to increase well productivity and to reduce development costs to our target of approximately $8 per VOE. At the $9.9 million cost per well achieved in path number six, the development costs would actually be below $8 per VOE. We will deep dive into well productivity in the next two slides. The chart on the left shows the production performance of our wells in Baja del Palo Este. Each well shows in grey line. The blue line is the average production of all wells, which is 25% above our tight curve, showing black. I will give you some additional color on our 2020 performance. Three wells we landed in La Cocina, corresponding to Path 3, and four set Vaca Muerta records for 30-day peak oil. During the second half of 2020, we accelerated drilling and completion activity, untying pad number four and number five. This boosted our production in Baja del Palo Oeste to an exceed rate of 20.2 thousand VOE per day in December, more than tripling our production year on year. Finally, in the second half of the year, we started our gas lift pilot in pad number one and number two. The preliminary result of this artificial system It is a good fit for Baca Muerta horizontal wells. In the first two paths, we achieved production increases of around 20% after conversion to gas lift. Slide number six shows the comparison of our wells against peer wells in the Permian and Baca Muerta basins. I shared a previous version of this chart one year ago, and the message is the same. Our ability to deliver world-class productivity is still intact. In the top graph, compared to the Permian Wells, 40 of our Wells are top quartile, whereas our best eight Wells rank in the top 10%. This comparison is on normal life basis. Compared to Vaca Muerta Wells in the bottom graph, all our Wells fall within the top 25%, whereas our best 11 Wells are top 10%. VISTA 2019 Wells are shown in purple and 2020 wealth are shown in black, highlighting that the productivity of our wealth is ranking better year on year. Our audit proof reserve at the end of 2020 stood at 128.1 million BOEs, up from 101.8 at the end of 2019. Our reserve replenishment ratio was 371% in total and 512% for oil. Net additions were mainly driven by the incorporation of 30 new well locations in Bajada del Palo Este. Shell reserves are now 70% of our total proof reserve. As the important driver, we are increasing 10% of tight wells, EOR, and lower lifting costs. Such improvement more than offset a 25% decrease in realized oil prices. During 2020, we maintained A solid cash position in a very challenging macroeconomic environment. Our cash flow from operating activities was solid at $93.8 million, despite average realized oil prices that were down 30% with respect to 2019. Cash outflow from investment activities was $156.1 million. During Q2, we stopped all drilling and completion activities in response to the shard contraction in all demand. We took advantage of the flexibility embedded in our contract to reduce our capped run rate. In Novos, we demand recovery, greater prices visibility, and our new well design will ramp up activity again. We use a second rig to drill an additional path and tie it in before year end. Therefore, in Q4 2020, cash from investing activities was $55.9 million, more than two times Q2 and Q3, positioning Vista to capture the upside presented by the recovery of realized hold prices. Cash from financial activities was positive at $25.7 million during 2020, as we successfully raised $100 million in bonds in the Argentine capital market at a single digit. I will now go through a summary of our main metrics for the year. Proof reserves were up 26% year-on-year with 128.1 million BOEs as of December 2020. Total production was 26.6 thousand BOEs per day, 9% down year-on-year impacted by the effect of the COVID-19 on crude oil demand during Q2. Oil production stood at 18.3 thousand barrels per day, up 0.4% from 2019, driven by the ramp-up of activity in Q3 and Q4 in Baja del Palo Este, which has more than 90% of oil production. Realized oil prices were $37.2 per barrel on average for the year, 30% below 2019, as the reduction of oil demand caused a contraction in international oil prices. Revenues were $274 million, 34% down year on year, impacted by the lower production and prices. Listing costs improved 70% to $9 per VOE, down from $10.8 in 2019. During Q2, we set up a specific task force to renegotiate more than 20 key oil field service contracts to rebase our cost structure, with savings anchored on permanently lower rates and higher efficiency. Adjusted EBDA was $96 million for the year, down 44% vis-a-vis 2019, but showing a strong sequential recovery during the year, as you can see in the chart on the right. CAPEX for the year was $224 million, in line with 2019, and 30% lower than our original 2020 plan guidance. Cash at the end of the period was $203 million, which leaves us in a solid position to fund investing activities during 2021. In sum, 2020 was a challenging year, but we have successfully weathered the storm. Keymetrics has a V-shaped recovery, including total production and adjusted EBITDA, as shown on the right. Q4 2020 metrics are solid, showing progress vis-à-vis pre-pandemic levels. I will discuss the fourth quarter of 2020 in the following slides. Production in Q4 2020 was 30.6 thousand BOE per day, a 21% improvement quarter-on-quarter, driven by activity ramp-up in Baja del Palo Este. Oil production increased 31% quarter-on-quarter to 23.1 thousand barrels per day. Revenue were $18 million, increasing 14% vis-a-vis Q3 2020, driven by improvements in production volumes and price. Q4 2020 lifting costs came very solid at $8 per barrel, thanks to our effort to keep expenditures under control amid production increases due to diluted fixed costs. Asset to the BDA improved 48%, sequentially to $36 million for the quarter. More importantly, It is up 1% year-on-year, reaching an adjusted VDA margin of 45%. CAPEC in Q4 was $97 million for the quarter, driven by the activity ramp-up I mentioned earlier. Finally, cash at the end of the period was a solid $203 million, with net debt at $330 million. a robust starting point to keep developing Bajada del Palo Oeste in 2021. Moving to slide 11, total production is fully recovered from the COVID-19 pandemic impact and it is actually up 2% year-on-year. We are back on our profitable growth path driven by our Bajada del Palo Oeste development. Oil production is 23% up year-on-year and 31% sequentially due to the result of path number 4 and the early tie-in of Path No. 5. Gas production during the quarter decreased 3% sequentially as we continue to focus our development in Baja del Palo Este, which is a light oil asset with associated gas production. Revenues for the quarter increased 14% with respect to Q3, mainly driven by higher crude oil production. Realized oil price was essentially flat quarter on quarter, but is still down year-on-year, impacted by 27% decline in Brent. We have partially offset this effect through our commercial effort to reduce the discount to Brent of our oil. Therefore, realized oil prices were only 70% down year-on-year. In Q4, we continue our marketing effort to export crude oil. Approximately 20% of our revenue came from export market in the quarter. We plan to continue this strategy in Q1 2021 and have obtained very competitive discounts to Brent in our latest tenders at around $2 per barrel. Gas prices were down 27% year-on-year, impacted by softer demand in industrial segments, severely affected by the quarantine measures. Lifting costs for Q4 2020 came very solid at $22.6 million, representing a 12% reduction year-on-year. Distinct cost per VOE was $8 per barrel, $14 below Q4 2019 and $19 below Q3 2020, driven by the dilution of fixed costs as the production increased and higher cost efficiency. Adjusted EVA was $35.9 million in Q4 2020, 1% above Q4 2019, a solid evidence of V-shaped recovery. Adjusted EVDA was boosted by higher revenues and flatlifting costs, leading to a 48% expansion quarter-on-quarter. Adjusted EVDA margin was 45%, improving 10% points sequentially and 8% points year-on-year. This performance was achieved with a realized oil price of $40 per barrel, which is 70% down year-on-year. Net back, or adjusted EVDA per barrel, Q4 2020 was $12.7 per VOE. We achieved the same net back that in Q4 2019 with an average oil and gas realized price that was $7 lower. This is a clear evidence of VISTA potential for further margin expansion at higher oil prices as we are realizing today. Cash at the end of Q4 2020 was $203 million. In Q4 2020, cash from operations was $27 million, a 41% increase quarter-on-quarter, driven by higher adjusted VDA generation. Cash from investing activities was $55.9 million, mainly driven by activity ramp-up in Baja del Palo Este, as I explained earlier. Finally, cash flow from financing activities was positive in Q4 2020, as we raised another $20 million, in the Argentine capital market in dollar-linked bonds with maturity of 32 and 48 months. I will now present our guidance for 2021, which is quite exciting considering the challenge in 2020 we went through. In terms of activities in Bajada del Palo Oeste, we plan to keep drilling and completion at current run rates, with one drilling recuperation in our core acreage. We expect to tie in 16 shale oil wells during the year for a total of 36 producing wells by year end. Our production guidance for 2021 is between 37,000 and 38,000 VOE per day, a 40% improvement year on year. With one patch to be tied in each quarter, we forecast sequential growth in all quarters and an exit rate of about 40,000 VOE per day. Our plan reflects a lifting cost at at least $8 per BOE for the year. We are expecting a slight sequential increase in Q1 2021 due to a ramp up in pooling activity, but all quarter will show a reduction year on year with a total annual reduction of at least 12% compared to 2020. We are targeting adjusted EBDA at $275 million, tripling our 2020 adjusted EBDA We are planning capital expenditure for 2021 to be in line with adjusted EBDA at $275 million at our conservative oil price scenario. Finally, we plan to maintain growth debt at current levels. to achieve a quick normalization of our leverage ratios by Q3 2021. I will now recap on the main points of today's presentation. We continue to deliver world-class well productivity in our Baja del Palo core acreage. Our average as well is performing 25% above VISTA's type curve and 70% of our well rank in Baca Muerta top 10%. The ramp-up of activity in Q4 2020 boosted our production, setting the stage for continued growth in 2021. Our rebate cost structure led to a lifting cost of $8 per BOE in Q4 and an adjusted EBITDA margin of 45% at $40 per barrel. This lifts Q4 2020 margins above Q4 2019 levels, when oil prices were 70% higher and prove our resilience to lower oil price scenarios in the future. We maintain a solid balance sheet with over $200 million in cash at the end of 2020, fully prepared to face our 2021 CAPEC plan. For 2021, we expect solid growth metrics with production increasing 40% year-on-year and adjusted EVDA tripling to $275 million. We expect a Chastity VDA margin above 50%. We rely on prices at $45 per barrel. Before we move to Q&A section, I would like to thank our investors for their continued support and all the team at Vista for their passion and hard work during a very challenging year. We will now move to Q&A.