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

Good day and thank you for standing by. Welcome to the VISTA's first quarter 2023 earnings webcast 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. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alejandro Cherniako, Strategic Planning and Investor Relations Officer. Please go ahead.

Thanks. Good morning, everyone. We are happy to welcome you to VISTA's first quarter 2023 results conference call. I'm here with Miguel Galucho, VISTA's chairman and CEO, Pablo Grapinto, VISTA's CFO, and Juan Garobi, 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 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 conference call, we may discuss certain non-IFRS financial measures such as adjusted EBITDA and adjusted net income. The conciliations 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, 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. From this quarter onwards, you will only find the tickers of our stock as the warrants were canceled. Such tickers are Vista in the Bolsa Mexicana de Valores and BIST in the New York Stock Exchange. I will now turn the call over to Miguel. Thanks, Ale. Good morning, everyone, and welcome to this earning call. I am pleased to share with you our results for the first quarter of 2023, during which we have continued to deliver strong operational and financial performance. Total production averaged 52.2 thousand VOE per day, a 19% increase year over year. Oil production was up 24% on an inter-annual basis, boosted by the tie-in of SIG wells in our development hub. Total revenues in Q1 2023 were $303 million, a 46% increase year over year, driven by higher production and stronger realized oil prices. Lifting cost per VOE was $6.4 for the quarter, reflecting enhanced focus on our shale oil assets. Capital expenditure was $162 million, including the drilling of nine wells and the completion of eight wells during the quarter. Adjusted EBDA came very strong at $204 million for the quarter, an interannual increase of 61%. We recorded positive free cash flow of $35 million for the quarter. Net leverage ratio at the quarter end was 0.37 times adjusted EBDA. Adjusted net income was a solid $72 million, implying an interannual increase of 84% and quarterly adjusted EPS of $0.8 per share. We will now deep dive into our main operational and financial metrics. Total production during Q1 2023 was 52,200 VOE per day, up 19% inter-annually. Oil production was 44,000 barrels of oil per day, up 24% year over year. Our double-digit production growth reflects the strong performance of our shale oil projects, which has offset the impact of the transaction to fully focus on shale operations. which became effective of March 1st. On performance basis, we recorded a 7% sequential increase in both oil and total production. This was driven by a robust productivity of six wells tie-in during the quarter. Five impact Bajada del Palo Oeste 15 plus a well Bajada del Palo Oeste 2301 in our Bajada del Palo Oeste pilot. For additional details on our operating production and the production of the transfer asset, please refer to the earnings release published yesterday. I will now share an update on our development hub. In Bajada del Palo Oeste, we continue to see a strong productivity, with average well performance 3% above our tight curve for the first 360 days of production. In terms of new well activity, we finished drilling path Bajara del Palo Oeste 16. This path, located in the south of the block, contains four wells, two land in La Cocina and two in D'Organico. We start drilling path Bajara del Palo Oeste 17, which also contains four wells. Both paths will be completed and tied in by early July. In Aguada Federal, we recently completed and tied in Pat Aguada Federal 4 in the western part of the block. This is also a four-well pat. We landed two wells in La Cocina, one well in Organico, and one well in the Middle Carbonate. This is the first well we have landed in the Middle Carbonate in Aguada Federal. Embajada del Palo Este, we completed and tie in the third well of the ongoing pilot. We are very excited by the production result we are seeing. Cumulative production for the first 60 days was 75,000 VOE, with a peak IP30 above 1,500 VOE per day. This proves the quality of our acreage in Bajada del Palo Oeste and the continuity of the play from our flat-sheet block Bajada del Palo Oeste. Based on these successful results, we have increased our estimated ready-to-drill inventory in the block from 50 to up to 150 wells. This takes our total inventory to up to 1,000 wells, of which we have only drilled and completed 74 wells to date. As a reminder, our entire inventory is located in 35-year concessions, 100% owned and operated by Vista. Total revenues in Q1 2023 were $303.2 million, which is 46% up compared to the same period last year, driven by oil production growth and improved realized oil prices. Realized oil price for the quarter averaged $66.6 per barrel, up 4% year over year. The average realized domestic price was $65.9 per barrel, while the realized price of the export market was $59.8 per barrel. We expect realized oil prices during Q2 to remain broadly in line with those of Q1. Total sales volume was 2,500 barrels of oil per day, higher than production. This volume was drawn from our inventory. Sales to export markets accounted for 58% of oil volume. and 60% of oil revenues. We exported five cargos during the quarter for 2.4 million barrels of oil in total. In line with our export focus strategy, 55% of LTM revenues came from international markets. Radized gas prices increased 54% year over year to $4.7 per million BTU mainly boosted by the export to Chile, accounting for 30% of our total gas volume at the price of $8.9 per million of BTU. Lifting costs for the quarter was $30.1 million, 2% down from the same period last year. Lifting costs per VOE was $6.4, a reduction of 18% on an inter-annual basis and 11% on a sequential basis. We are already capturing the benefits from the deal we signed in the previous quarter to fully focus on our back and work operation. The deal is effective as much first, so costs from the quarter reflect a full month having removed the transfer assets from our cost base. We estimate the lifting costs for the month of March was around $5 per BOE. Our model shows we are well on track to deliver on our $5.5 per BOE guidance for the full year. Adjusted EBITDA for the quarter was $204.4 million, implying an inter-annual growth of 61%. This reflects a strong revenue growth and lower lifting costs as described previously. Adjusted EVDA margins was a robust 67% during the quarter, an improvement of six percentage points year over year. Next buck was $43.5 per VOE, a 35% inter-annual increase. Both metrics have increased sequentially, reflecting improved margin driven by the transaction to fully focus on our back-and-forth assets. During Q1 2023, we recorded 34% of free cash flow. Cash from operating activities was $158.8 million. This includes $60 million of upfront payment to all the VAT for the reservation of capacity in the oil pipeline expansion and a decrease of $5 million in account payables. Cash flow used in investment activities was $124 million. This is $38 million lower than the accrued capex, mainly due to $24 million in account payables and $10 million received from Aconcagua as an upfront payment for the transfer assets. Cash flow from financing activities was $71.1 million, mainly driven by debt issuance of $135 million. We successfully issued dollar lien bonds with a 0% coupon for a four-year maturity and 1% coupon for a five-year maturity. This was partially offset by the debt repayment of $22.5 million and interest payments of $7.9 million. Gross debt stood at $659.6 million at end of Q1. Cash at the end of the period was $350.2 million. This led to a slight reduction in the net leverage ratio to 0.37 times adjusted EBITDA at quarter end. To conclude this call, I will recap on today's key messages. During Q1 2023, we made good progress in our development hub. We continue to drive production growth. The successful results in our pilot Embajada del Palo Este has proven the quality of our assets and contributed to the addition of 100 wells to our ready-to-drill inventory. We are already seeing the benefits of the transaction we announced early this year to fully focus on our shale oil assets. Our lifting costs, evident margins, and net back have all improved sequentially. as the deal is effective as march 1st we only capture the effect partially and expect further upside in the coming quarters during this quarter we have once again delivered very solid operation and financial results this includes good progress in our decarbonization and natural based solution projects to meet our ambition to reach scope one and two net zero by 2026. We are well on track to deliver on our 2023 guidance across operational and financial metrics. Early this week, our shareholders approved an addition to our current share buyback plan, extending it from $20 to $50 million. To wrap up, and before we open the call for questions, I want to thank our employees and shareholders for the continued support. And with that, operator, Please open the line for Q&A. Thank you.

As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes in the line of Tiago Casquero from Morgan Stanley.