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

Good day and thank you for standing by. Welcome to the VISTA second quarter 2022 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 a session, you need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. 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 second quarter 2022 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, the advice that I will remark today, including the answers to your questions, may include forward-looking statements. These forward-looking statements are adapted 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 Standard, IFRS. However, during this conference call, we may discuss certain non-IFRS financial measures, such as suggested EBITDA. Reconciliations of these measures to the closest IFRS measures can be found in the earnings release that we issued yesterday. Please check our website for further information. Our company, Vista Energy, is a Sociedad Anónima Bursátil de Capital Variable organized under the Law 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 BIST in the New York Stock Exchange. The ticker of our warrants is BTW408A.

I will now turn the call over to Miguel. Thanks, Ale. Good morning, everyone, and welcome to this earning call. I'm delighted to share with you our result of the second quarter of 2022, during which we have continued to deliver a strong operational and financial performance. During Q2 2022, total production averaged 44.8 thousand BOEs per day, a 12% increase year over year. Oil production was up 70% year over year, Bustis by a solid, well-performing Embajada del Palo Este, and especially in our two-wheels pilot Embajada del Palo Este. Total revenue in Q2 2022 were $294.3 million, a 78% increase compared to Q2 2021, driven by higher production and stronger realized oil prices. Per VOE was $7.8 for the quarter, sequentially flat, reflecting our success in containing cost pressure. Capital expenditure was $151.4 million, including the drilling of two paths and the completion of three paths during the quarter. Our production growth coupled with the strong realization prices and continued focus on efficiency have driven up adjusted EBDA to $202.1 million for the quarter, doubling year over year and implying a solid adjusted EBDA margin of 69%. During Q2 2022, we recorded positive three-cash flow of $62.6 million, driven by robust adjusted EBDA generation. Net leverage ratio at quarter end was 0.6 times adjusted EBDA. Adjusted net income was a solid $82.3 million, implying a quarterly adjusted EPS of $0.9 per share. We will now deep dive in our main operational and financial metrics. Total production during Q2 2022 was 44.8 thousand BOEs per day, up 12% inter-annually. Oil production was up 70% year over year and continues to be driven by our flagship development in Bajada del Palo Oeste. Total shale oil production, which also includes Bajada del Palo Oeste and Agua Federal, now represents 74% of our total oil production. Production growth during the quarter was boosted by the tie-in of our two-well pilot in Bajada del Palo Oeste in February and Path Number 12, Embajada del Palo Este in Maine. With 47 waves tied in to date, producing on average 5% above our tide curve, we continue to see solid performance in our core development in Embajada del Palo Este. During Q2, we completed and tied in Path Number 12 and 13. We are currently completing Path Number 14, which we plan to tie in during the coming weeks. We are on track to drill and complete two additional paths, number 15 and 16, which we plan to put on production in the second semester. This will increase the number of new wells in this block by 20 during 2022, so by year end, we expect to have 60 wells on production. In Aguada Federal, we completed and tied in our first two wells issued corresponding to paths Aguada Federal We drill two wells in pad Aguada Federal 3, a four-well pad with two wells drilled by previous operators. We are planning to complete and tie in this pad in the second half of the year. The contraction of the pipeline linking Aguada Federal to Baja del Palo Este is currently underway. The pipeline is scheduled to be ready by Q4 and will enable us to have an integrated operation In Bajada del Palo Este, the two wells we tie in in late February under our ongoing pilot project continue to show outstanding results. After 120 days of production, the average production of both wells is 15% above our Bajada del Palo Este TICUR on normal high basis. This initial pilot result confirmed the top quality of the western part of this block, and now we are planning to drill additional three wells to further derive the acreage in the eastern part of this block later this year. On the basis of this updated annual work program, we are increasing our annual guidance from 24 to 32 new well tie-ins for this year. Total revenues in Q2 2022 were $294.3 million, a 78% increase year-over-year driven by oil production growth and substantial improvement in realized oil prices. Realized oil price for the quarter averaged $78.4 per barrel, up 43% year-over-year and 22% quarter-over-quarter. This reflects improvements in the domestic market, where the average was $63.2 per barrel, and the international market with an average of $99.6 per barrel. Those two export markets accounted for 42% of oil volumes and 53% of oil revenues, having exported three cargoes in the quarter for 1.5 million barrels of oil in total. Going forward, we expect to maintain this level of export volumes for the remainder of the year. Realized gas prices increased 11% year-over-year to $3.9 per million of EQ, mainly boosted by winter prices, which positively impacted May and June. Land gas price was $4.1 per million of EQ, and industrial prices were $4.5 per million of EQ. In April, we spotted 10% of our gas boiling to Chile for a realized price of $5.4 per million BTU. Moving to slide 7, total lifting cost for the quarter was $31.7 million. Lifting cost per BYU was $7.8 up 7% year-over-year. We maintained lifting cost flat quarter-over-quarter despite Cost Pressure and Peso Denominated Services due to the appreciation of the pesos in real time. We are actively implementing tactical cost saving initiatives to contain the impact of the peso appreciation. We expect the production growth in the second semester to continue diluting feed costs, allowing us to deliver a total lifting cost of $7.5 per VOE for the full year in line with our guidance. Ashafty DBDA for the quarter was $202.1 million, implying an inter-annual growth of 97% and a sequential growth of 59%. This reflects a strong revenue growth and our successful effort to maintain a stable lifting cost. Ashafty DBDA margin came very strong at 69%, an improvement of 7% point vis-a-vis Q2 2021. Netback was $49.5 per VOE, a 76% inter-annual increase, and sequentially this translates into a $70 improvement, capturing the full upside of the realized oil price increase. This cash flow during Q2 2022 was a rapid $62.6 million, a 76% increase year-over-year, and Javier Rodríguez Galli, Javier Rodríguez Galli. which accounted for approximately $100 million. Other investments including gathering and facilities plus two new wells in our conventional blocks for a total capex of $151.4 million. Cash from investing was lower than a crude capex reflecting an increase in working capital. Cash flow used in financial activities stood at $19.4 million reflecting the issuance of a $43.5 million bond in June. This bond matures in two years, pays a 6% coupon, and will be used to refinance part of our short-term dollar debt maturity. We have already paid $45 million of principal of our syndicated loans, 50% in June and 50% in July. We are also planning to repay the $50 million bullet bond that matured on August 8. After such date, we expect our gross debt to be approximately $528 million, well below our original guidance of $575 million for ERM. Going forward, our plan is to maintain debt around such level by ERM, although depending on market conditions, We might opportunistically tap the local debt market. Net leverage ratio stood at a very healthy 0.6 times adjusted EBITDA at the quarter end. During Q2 2022, we have made good progress in the execution of our carbon footprint reduction projects. We are currently optimizing the glycol dehydrators in our main compressor stations. Three of the four compressors identified in our annual plan have already been upgraded. We are installing vapor recovery units in three key gathering and processing facilities in our Baja del Palo cluster, a project that is scheduled for completion in Q3 2022. We are also executing a project to connect Corindona Margo Norte, one of our conventional blocks, to the main electricity grid, therefore replacing the use of natural gas as main energy source. The total CAPEC allocated to this project is $5 million. Through the execution of this plan, we forecast to reduce our greenhouse gas emissions intensity This implies a 25% reduction compared to 2021. It also leads us well on track to achieve our target of reducing our intensity to 9 kilos of CO2 per VOE by 2026, in line with our net zero ambitions. Based on our solid operational results coupled with a positive pricing environment, we are upgrading our 2022 guidance. We are adding eight new wealth tie-ins, four Embajada del Palo Este, two Embajada Federal, and two Embajada del Palo Este. This raises our target to a total of 32 new wealth tie-ins for the year. This new activity will positively impact the production of the second half of the year and especially boost our 2023 entry point. We are raising our annual average production guidance to above 47,000 barrels of oil equivalent per day and forecasting an increase in our exceed rate to approximately 52,000 barrels of oil equivalent per day. As discussed We are successfully containing effect pressure on lifting costs. We expect production growth in the coming quarters to dilute fixed costs, driven lifting costs below current levels. This allows us to confidently maintain our original lifting cost guidance at an average of $7.5 per barrel for the year. We are raising our adjusted EBDA guidance from $625 to $750 million for the year based on higher production and realized oil prices. We are assuming an average realized oil price of $73 per barrel for the second half of the year. Topic guidance is increased from $400 to $500 million based on additional new well activity. As I explained earlier, our plan to fully repay our CES II bond due in August should leave gross debt at approximately $528 million. We are updating our gross debt level guidance to between $525 and $550 million by year-end. During Q2 2022, we have delivered strong financial performance, driven by production growth and higher realized oil prices. EBITDA has doubled year-on-year, as its net income came very strong at $82 million, which implies an adjusted EPS of $0.9 per share for the quarter. We continue to make great progress in our Bajada del Palo Oeste development. We have extended Our first two wells continue to outperform the tight core of our core development block. We remain focused on our decarbonization plan. We are currently executing several projects. which will deliver a 25% year-over-year reduction in greenhouse gas emissions intensity during 2022. We have updated our guidance reflecting a balanced capital allocation of incremental operating cash flow to additional growth and further debt reduction. Our plan is to remain flexible on this front in the coming months to strategically allocate our cash to grow and Deliverashing, depending on price and funding needs for all evacuation infrastructure projects that are key to deliver on our export-focused growth plan. During May and June, we successfully executed our first share buyback program. We purchased a total of 2.8 million shares. I will take this opportunity to thank our investors for their continued support and our incredible team at VISTA for their hard work and commitment. And with that, operator, please open the line for Q&A.