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

Good day and thank you for standing by. Welcome to the VISTA's third quarter 2021 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Alejandro Chernacov. Please go ahead.

Thanks. Good morning, everyone. We are happy to welcome you to VISTA's third quarter 2021 results conference call. I am here with Miguel Galuccio, VISTA's chairman and CEO, Pablo Vera Pinto, VISTA's CFO, and Juan Garoby, VISTA's COO. 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 all 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 in accordance with international financial reporting standards. However, during this conference call, we may discuss certain non-IFRS financial measures such as adjusted EBITDA. The conciliations of these measures to reclose the S.A.B. 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 Bolsa Mexicana de Valores and BISP in the New York Stock Exchange. The ticker of our warrants is BTW4088. I will now turn the call over to Miguel. Thanks, Ale. Good morning, everyone, and thank you for joining this earning call. I am delighted to share with you our results of the first quarter of 2021, during which we have continued our profitable growth path and recorded positive free cash flow. During Q3 2021, Total production averaged 40.3 thousand BOEs per day, a 59% increase year-over-year. Oil production was up 77% year-over-year, boosted by our development in Bajada del Palo Oeste, where we have already tied in 60 new wells year-to-date. Total revenues in Q3 2021 were $175 million. 150% increase year-over-year, mostly driven by the increase in oil production and stronger realized oil and gas prices. Lifting costs per VOE was $7.3 for the quarter, a 26% reduction year-over-year, reflecting that low marginal costs in Bajada del Palo Oeste continue to dilute our fixed cost base. and Javier Rodríguez Galli. positive free cash flow of $51 million, driven by robust cash flow from operations and our A&D transactions. Cash at the end of the period was $266 million. Net debt stood at $337 million, implying a healthy net leverage ratio of 1.1 times adjusted BDA. We will now deep dive into the main operational and financial metrics. Total production during Q3 2021 was 40.3 thousand BOEs per day, up 59% inter-annually. Production grew continuous to be driven by our flagship development in Bajada del Palo Oeste, where we tie in three paths in the first half of the year. will also tie in a fourth path, number nine, in late September. This path landed two wells in La Cocina and two wells in the Organico, with an average length of 3,078 meters per well and 61 average stages per well. Note that this path did not contribute with production during the quarter. Even the high oil mix in Baja del Palo Oeste wells We see a higher growth of oil production rate, which increased 77% year over year. During Q3 2021, we also tie in a gas well in Entre Lomas Concession, targeting the Punta Rosada Formation. This well is driving our sequential gas production growth, capturing high realization prices in the winter with a small CAPEX, and delivering on our planned gas commitments. Total revenues in Q3 2021 were $175 million, a strong interannual increase driven by the boost in oil production and realized oil prices. Realized oil prices for the quarter averaged $57 per barrel, up 46% year over year and 4% quarter over quarter. Sales to export markets accounted for 18% of the oil volumes, with a sale contract signed with Brent was trading around $72 per barrel. We still see pricings of our exported oil with discounts to Brent of less than $2 per barrel. The domestic market accounted for 82% of our total sales in the quarter. with a crude oil prices of approximately $55 per barrel. We continue to execute our strategy of building a sale book early on to lock in revenues and fund investment activities. Our entire Q4 oil sales volumes, with approximately 30% of export volumes, have already been locked in at an average value prices of around $60 per barrel. Trialized gas prices increased 89% year-over-year to $4.1 per million of BTU, boosted by the gas plant winter price of $4.1 per million of BTU, applicable to approximately 67% of our total volumes. Additionally, industry prices increased from $2 per million of BTU to $4.3 year-over-year. Moving to slide 6, we will have a look at our lifting cost performance. Total lifting cost for the quarter was $27.2 million. We have managed to maintain lifting cost virtually flat quarter over quarter despite pesos FX appreciation in real terms. Lifting cost per DOE was $7.3, down 26% year over year, as incremental production from Bajada del Palo Este continues to absorb our fixed cost base. Equentially, we maintain flat lifting costs per VOE with stable production. Adjusted EVDA for Q3 2021 stood at $102.9 million. We have quadrupled adjusted EVDA inter-annually Reflecting a boost in revenues amid stable listing costs. Adjusted EVDA stood flat vis-a-vis the previous quarter, even though it does not include operating income generated by the S.A.B. with Rafigura, which added approximately $5 million in Q2 2021. Our adjusted EVDA margin and net back have remained strong in the quarter, at 59%, and 27.8 dollars the BUE respectively. Moving to slide A, I will review our financial situation. During Q3 2021, we have another positive free cash flow quarter for a total of 51 million dollars. Cash flow from operating activities was 110 million dollars, six times higher than in Q3 2020. Cash flow Javier Rodríguez Galli, Juan Gabriel Rodríguez Galli, Juan Gabriel Rodríguez Galli, Juan Gabriel Rodríguez Deb stood at similar levels, and we paid interest for $25.5 million, including the semiannual payment on our syndicate loan and the full interest cost to date of Causiones Bursátiles that were canceled during the quarter. In Q3, we repaid a total of $112.1 million in loans and dollar-denominating bonds. We also raised the equivalent of $110 million in the Argentinian capital market in $2 lien bonds. 3011 was $9.2 million bullet due in four years with a coupon of 3.48%. 3012 was $100.8 million amortizing due in 10 years with a coupon of 5.5%. These issuances constitute robust steps to pre-finance 2022 maturities. Also, the average debt duration has increased from 1.4 years at the end of Q2 2021 to 2.7 years at the end of Q3 2021. Net leverage ratio has decreased from 1.7 times adjusted EBITDA at the end of the previous quarter to 1.1 times adjusted EBITDA at the end of Q3 2021, reflecting how cash flow from an operation is driven organic deliberation. Moving to the business development front, On September 16, we've acquired 50% working interest in the Aguada Federal and Mandurria Norte concessions from ConocoPhillips. VISTA may not ask for payment with control of the acquired entity that has $6.2 million in cash and assume the understanding investment carry of $77 million due to winter shale dia and 50% C.V. operating partner of the block. We also obtained from the seller a five-year bullet line of credit of $25 million available for 24 months at LIBOR plus 2%. The rationality for this transaction is strong, as this asset fits perfectly into our development strategy. The price of $2,800 per acre is low compared to the recent Vaca Muerta M&A transactions. Through this deal, we expand our portfolio of development wells, adding approximately 150 new well locations. We expect to contribute our Vaca Muerta expertise and low cost operating trust record to the S.A.B. Finally, the proximity to Bajada de Palo Oeste of the purchase assets, in particular, Aguada Federal, could lead to important synergies in terms of contractors, treatment facilities, and logistics. In short, through this transaction, we have added core access to our portfolio without stressing our balance sheet and strongly contributing to our growth potential and shareholder value creation. During Q3 2021, we also made good progress on the ESG front. We are currently executing three projects aimed at reducing 100,000 tons of CO2 equivalent on an annualized basis. We expect to achieve a 30% reduction in our emission intensity to approximately 29 kilos of CO2 equivalent per VOE in 2021. This leaves us in a good starting point to continue reducing emissions intensity during 2022. In the meantime, we continue to work on our long-term greenhouse gas reduction goals. During Q3, we have identified material projects in order to build our decarbonization plant. We are currently finalizing our carbon abatement cost curve. which is the cornerstone of our multi-year action plan to reduce greenhouse gas emissions and set corporate reduction goals. Moving to slide 12, I will present our revised guidance for the year which has improved on the back of strong execution and higher realization prices. Note that the updated guidance of this slide is compared against the guidance issued in the previous quarter which was an improvement compared to the original guidance from 2021. We have already tied in 16 wells during the year and we are on the track to tie in the fifth path of the year for a total of 20 wells by year end. We just finished drilling this path and will start completion in November. The rig has moved to a new location to drill The sixth part of the year and is expected to deliver four additional drills and uncompleted wells by year-end. As part of this decision to accelerate activity, we brought an expanded route to drill surface and intermediate sections of three parts of the 2022 drilling campaign. We forecast this acceleration in activity will have a positive impact in our 2022 production plan. We are confirming our revised production guidance in the range of 38,000 to 39,000 DOEs per day. Year-to-date production is 38,100 DOEs per day, and we expect the production from the fourth part of the year, recently tying, to drive Q4 production to higher levels. We are also confirming our lifting cost of approximately $7.5 per VOE for the year. Year-to-date lifting cost was $7.4 per VOE. We forecast this metric to remain in this range in Q4, despite pressure on cost by peso appreciation in real-time, as we have seen in Q3. We are revising upwards our adjusted EBDA guidance from $325 and Javier Rodríguez Galli. We are not allocating the entire increase in adjusted EBDA to capital expenditure, reinforcing our capital discipline and focus on free cash flow generation. Finally, we are improving our net leverage ratio guidance from 1.1 to 1 times adjusted EBDA by year-end. This reflects our successful refinancing effort during the year as well as the organic deliberation driven by the operating cash flow generation. Rough debt guidance increased from $500 to $600 million at the year end, reflecting the successful 10-year tenor bond issuance in Q3 2021 as an attractive chance to pre-finance 2022 maturities. To finalize this call, I will recap on today's headlines. In Q3 2021, we have seen strong performance across all key operational financial metrics, recording a $51 million free cash flow. Pajara El Palo Este continues to show solid results. We tie in our four-well path year-to-date, which leaves us on track to deliver 20 new well tie-ins for the year, accelerating our 2022 work program. In terms of cash, in Q3 2021, we successfully issued $110 million in new bonds at a competitive rate, extending average debt duration to 2.7 years and pre-financing 2022 maturities. On the business development front, we acquired 25,000 acres in Baja Muerta, adding approximately 150 net new well locations to our portfolio. Finally, as shown in the previous slide, we updated our 2021 guidance on the back of a strong year-to-date performance. Before we move to Q&A, I would like to announce that we call for the shareholder meeting scheduled for December 14th. In this meeting, we will initiate the process to seek formal approval for a potential share-by-back program or dividend payment in early 2022. Today, we are announcing Vista's Price Investor Day, scheduled to take place on December 9 and hosted by the executive team. During this event, we will present our updated strategy and medium-term targets. I will now take a moment to thank our investors for their continued support and interest in our story, and a special thanks to all the talented people that work at Vista for their extraordinary commitment to our company. And with that, operator, please open the line for Q&A.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Walter Chiaraviesio from Santander. Your line is now open.