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

Thank you for standing by. Welcome to VISTA's third quarter 2022 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. 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, VISTA strategic planning and IRO. Please go ahead.

Thanks. Good morning, everyone. We are happy to welcome you to VISTA's third 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 of slide 2. 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 the expectations contemplated by these remarks. Our financial figures are stated in U.S. dollars and in accordance with international financial reporting standards. However, during this call, we may discuss certain non-IFRS financial measures such as adjusted EBITDA and adjusted net income. Reconciliations of these measures to the closest IFRS measure 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 Bustátil 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 BIST in the New York Stock Exchange. The ticker of our warrants is VTW408A. I will now turn the call over to Miguel.

Thanks, Ale. Good morning, everyone, and welcome to this evening call. I'm pleased to share with you our results for the third quarter of 2022, during which we have continued to deliver strong operational and financial performance. Total production averaged 50.7 thousand VOE per day, a 26% increase year over year. Oil production was up 35% year over year, boosted by the tiling of the last three paths in Bajada del Palo Oeste. Total revenue in Q3 2022 were $333.6 million, a 91% increase year over year, driven by higher production and stronger realized oil prices. Disting cost per VOE was $7.5 for the quarter, reflecting our success in containing cost pressure, as well as dilution of fixed costs through incremental production volumes. Capital expenditure was $162.8 million, including the drilling of six wells and the completion of three paths during the quarter. Production growth coupled with a strong realization prices amidst flat lifting costs boosted adjusted EVDA to $233.7 million for the quarter, more than doubling year over year. During Q3 2022, we record positive free cash flow of 44.4 million dollars, driven by robust adjusted VDA generation. Net leverage ratio at quarter end was zero point times adjusted VDA. Adjusted net income was a solid 79.4 million dollars, implying a quarterly adjusted EPS of 0.9 dollars per share. We will now deep dive into our main operation on our financial metrics. Total production during Q3 2022 was 50,700 VOE per day, up 26% interannually. Oil production was up 35% year over year, mainly driven by our flagship development in Bajara del Palo Oeste, where we tie in two four-well paths during the quarter and benefited from another path put on production in Leishun. Our year-to-date average production is 46,500 VOE per day, well on track to deliver on our production guidance of more than 47,000 VOE per day for the year. Total shed oil production, including Bajada del Palo Este and Aguada Federal, represented 77% of our total oil production during the quarter. I will now share some more details on each of these projects. In our flagship development in Bajada del Palo Oeste, wells continue to produce an average of 5% above our tide curve, with 55 wells tying in to date. During Q3, we completed and tied in paths Bajada del Palo Oeste 13 and Bajada del Palo Oeste 14. We are currently drilling the final well in path Bajada del Palo Oeste 15, which we plan to tie in late in December. This will lead to 20 new wells tying in for the year in this block. I'm very excited by the production results we are seeing in Aguada Federal, the assets we acquired a year ago and have successfully been integrated into our core development. At the end of Q2, we have completed untying our first two wells since becoming operators in this block. Three months on, we are seeing productivity in line with Bajarel Paloeste, in particular, The well we landed in La Cocina delivered an IP 30 of 2,500 BOEs per day and is currently producing 20% above our Bajada del Palo Este Taikur after 120 days on a normalized basis. We also completed four well paths in Aguada Federal 3, which was tying early this month. Finally, the pipeline connected Aguada Federal to Bajada del Palo Este is currently operating. This is a major milestone leading to future integration of both blocks as well as reducing lifting costs and environmental footprint. In Bajada del Palo Oeste, the two wells we tied in late February under our ongoing pilot program continue to show understanding results. After 180 days, the average production of both wells is 14 above our Bajada del Palo Oeste tie curve on a normal life basis. This initial pipeline results confirm the top quality of the western part of this block, adding up 50 wells to our inventory, for the total of 900 wells including Bajada del Palo Oeste and Aguada Federal. We are planning to drill three additional wells to further de-risk acreage in the eastern part of this block in Q4. Also, to treat the crude oil produced in this block, we have recently finalized a modular upgrade to the oil treatment plant in this cluster, leading to an increase in processing capacity from 40 to 47,000 barrels of oil per day. The next step is to increase this plant capacity to 63,000 barrels of oil per day during the first half of 2023. During Q3, we achieved a major mass store related to Bacamorta development as we started producing from our own sand mine and washing plant. The plan is located 250 km from Bajara del Palo Oeste, saving more than 1,000 km of sand tracking. The plan is currently producing 50,000 tons of sand per month, which is roughly 50% of VISTA requirements at the current leading and completion run rate, but is designed to soar 100%, which we estimate can be achieved during the first half of next year. This project is a significant contribution to our cost-saving efforts, as it is forecasted to enable saving of roughly $200,000 per well and almost 2% of our total drilling and completion costs. The overall capex of this plan was $16 million, so we expect a payback period of less than two years. Total revenues in Q3 2022 were $333.6 million, a 91% increase year over year, driven by oil production growth and substantial improvement in realized oil prices. Realized oil prices for the quarter averaged $76.6 per barrel, up 34% year over year. The average realized domestic price was $64.2 per barrel, where the realized price of the export market was $90.2 per barrel on average. Crude oil volumes sold during the quarter surpassed production by approximately 2,300 barrels of oil per day, reducing inventories to zero. Pairs to export market accounted for 48% of oil volumes and 56% of oil revenues were exported Four cargos during the quarter for 1.9 million barrels of oil in total. We expect to maintain this level of export volume during the coming quarter as well. Regarding prices, with current brand levels for Q4, we expect a total average realized oil prices were around 5% below Q3. Realized gas prices increased 7% year-over-year to $4.4 per million of the Q. mainly boosted by the sales to industrial customers at $4.9 per million of EQ, applicable to 32% of our sales volumes. Plant gas price was $4.1 per million of EQ, applicable to 65% of our sales volumes. The remaining volumes were exported to Chile. Total lifting cost for the quarter was $34.8 million. We have successfully implemented tactical cost-saving initiatives in water flooding projects in our conventional assets, pooling services and associated materials, click-line services, chemicals in all treatment plants, and in the reuse of impacting materials. All that to offset cost increases driven by depreciation of the pesos in real terms. The boost in production volumes continues to dilute feed costs. Therefore, on a sequential basis, we reduce lifting costs per VOE by 4%. We reiterate our guidance of $7.5 per VOE for the full year. A subsidy VDA for the quarter was $233.7 million, implying an interannual growth of 127%. and a sequential growth of 16%. This reflects strong revenues growth and our successful effort to maintain a stable listing cost. Our year-to-date adjusted EBITDA is $563 million, so we are well positioned to surpass our $750 million guidance for the full year. Adjusted EBITDA margin was a robust 70% during the quarter, and improvement of 11% points year over year. Net back was $50.1 per year and 80% interannual increase and in line with our previous score. In Q3 2022, we continue to generate positive free cash flow while also reducing gross debt. Cash from operating activities was $196.1 million and many others, impacted by advance payments of InContact for $26 million. Cash flow used in investing activities was $151.7 million, mostly driven by $104 million in drilling and completion activities in our core development projects, Bajada del Palo Este and Aguada Federal. Other investment included gathering, treatment and evacuation facilities, leading to a total CAPEX of $160 and Javier Rodríguez Galli. In the last two years, we have seen an increase of $2.8 million during the quarter on an accrual basis. Free cash flow during the quarter was a robust $44.4 million, leading to a year-to-date free cash flow of $140 million. Cash flow used in financing activities stood at $112.7 million, mainly driven by the debt repayment of $78 million including $22.5 million of principal of our syndicated loan and $50 million of our bond series 2. Interest paid amounted to $10.4 million. Drop debt stood at $522.6 million at the end of Q3. Our plan is to maintain debt around such a level by year-end in line with our latest guidance. Net leverage ratio stood and a very healthy 0.5 times Ashafti WDA at quarter end. During Q3 2022, we delivered strong operational and financial performance. As our Vaca Muerta projects continue to drive production growth, we recorded 50.7 thousand BOE per day during the quarter, a 26% increase year over year. Ashafti WDA was $233.7 million for the quarter, The net income was $79.4 million for the quarter and is currently $201 million year-to-date. Assisted EPS was $0.9 per share for the quarter. Based on the year-to-date performance, we are reiterating our guidance for the year. We continue to make good progress in projects to reduce emissions footprint of our operations. We forecast to reduce emissions intensity to 18 kilos per VOE, a 25% reduction vis-a-vis 2021. On the A&D front, we close the second Vaca Muerta development shaving with Trafigura, marking a record acreage evaluation for the basin, which, depending on how international prices evolve, should range between $59,000 and $140,000 per acreage. This agreement contributes to increase our free cash flow generation beyond the objectives laid out by our five-year plan, further reduce growth debt, distribute capital to shareholders through share buyback or dividends, and accelerate investment in Vaca Muerta, in particular in the mid-trim infrastructure projects. On October 4, the Warren Holders Meeting approved our proposed amendment to Vista Warrant's indentures, providing immediate certainty on the number of outstanding shares of the company. Approximately 89.7 million shares after 100 of the warrants are exercised. This is a significant milestone to improve our capital structure, limiting the delusion of shareholder value and favoring the correct price formation of Vista shares. Finally, this morning, I have called for shareholders' meeting scheduled to take place on December 7 to vote on a proposal to approve our second share-by-buy program for $25.6 million. This is another important step in our strategy to deliver shareholders' returns and partially sterilize the new understanding shares linked to the warrants exercise. I will take this opportunity to thank our investors for their continued support and our great team at Vista for their hard work, passion, and commitment. And with that, operator, please open the line for Q&A.