Vista Energy S.A.B. de C.V. American Depositary Shares, each representing one series A share, with no par value

Good day and thank you for standing by. Welcome to VISTA's fourth quarter 2023 earnings webcast. 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 the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Vista's Strategic Planning and Investor Relations Officer, Alejandro Chernyakov.

Thanks. Good morning, everyone. We are happy to welcome you to Vista's fourth quarter and full year 2023 results conference call. I am here with Miguel Galucho, Vista's Chairman and CEO, Pablo Verapinto, 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 US 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 VDA and adjusted net income. Reconciliation 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. Our ticker is 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 and welcome to this earnings call. We have an exceptional year in 2023. We have continued to deliver strong operational and financial results with double digit growth, improved reserves, total production, and adjusted EVDA. We also secure oil misting capacity in key projects, which underpin our updated production target for 2026. Our outstanding performance was reflected by our stock price performance, which doubled during the year. I will now present our Q4 2023 results and then move on to our full year results. During Q4, we continue to focus on drilling and completion activity in Bajada del Palo Oeste. This led to a sequential growth in total production, surpassing our consolidated production level prior to the transfer of the conventional asset in Q1 2023. Total production was 56.4 thousand BOEs per day during the fourth quarter, 14% above sequentially and 60% above inter-annually. on a pro forma basis. Oil production was 48.5 thousand barrels of oil per day, 70% above the previous quarter, and 80% percentage above the same quarter of last year, also on a pro forma basis. Total revenues during the quarter were $309 million, 2% above the previous quarter. We continue reducing our lifting costs. reaching $4.3 per VOE during the quarter. Capital expenditure was $212 million, mainly driven by 11-way drill and 7-way completing during the quarter. In Q4 2023, adjusted EBITDA was $288 million, 43% above year-over-year, supported by the stable revenues and other operated income growth amid lower lifting costs. Adjusted net income was $240 million, implying a quarterly adjusted EPS of $2.5 per share, mainly driven by higher adjusted EBITDA and the positive impact of the reduction in the full-year income tax. We recorded positive free cash flow of $107 million during the quarter, driven by a strong EBITDA generation and normalization of working capital compared with the previous quarter. Net leverage ratio at the quarter end was a solid 0.46 times adjusted EVDA. I will now deep dive into our main operational and financial metrics of the quarter. Total production during Q4 2023 was 56.4 thousand VOEs per day. driven by the of 11 wells in during the quarter. This led to a sequential increase of 14%. On an inter-annual basis, production increased 3%, reflecting that we have now surpassed the production levels prior to the transfer of the conventional asset back in March, 2023. On a pro forma basis, adjusting by the production of such asset, our total production growth was 16% year over year. During the quarter, we recorded an outstanding performance in oil production, which increased by 70% on a sequential basis and 80% on annual pro forma basis. On the other hand, gas production decreased 2% quarter over quarter, impacting our Q4 total production target and the exit rate. This was mainly due to the fact that during the quarter, we tied in two paths in the northeast of Bajada del Palo Oeste, which has a lower gas to oil ratio than other parts of our acreage. During the fourth quarter of 2023, we continue in full development mode with 100% of the drilling and completion activity in Bajada del Palo Oeste. We tie in 11 wells during the quarter in PAD Bajada del Palo Oeste 19, 20, and 21. The tie-ins boosted production in Q4 and led to an exceed rate close to 60,000 BOEs per day. The tie-in of 23 new wells during the second semester of 2023 reflects full utilization of two drilling rigs and one spudder rig, with a run rate of 46 new wells per year, in line with our 2024 plan, which we will discuss later on. During Q4 2023, our revenues were stable year over year. as oil production growth upset lower realized prices. Total revenues were $309 million, 2% increase compared to the previous quarter and 3% decline compared to Q4 2022. This was mainly driven by lower gas production, as discussed previously, and 50% decline in gas prices. Sales to export market accounted for 49% of the oil volume and 53% of net oil revenues. We exported 2 million barrels of oil composed by 1.6 barrels through the Atlantic and 0.4 million barrels by pipeline to Chile. Realized oil price for the quarter averaged $67.8 per barrel, down 2% year over year and flat compared to the previous quarter. The average realized domestic price was $63.7 per barrel, while the realized export price was $74.2 per barrel. We are seeing good recovery in the domestic prices with crude in line with the $65 to $66 range for January and February, which is key to fund our growth plan. Lifting cost was $22.3 million for the quarter, a 38% decrease compared to the same quarter of last year. Lifting cost per VOE was $4.3, a decrease of 40% compared to Q4 2022. These results continue to reflect the positive impact of our new operating model. fully focused on our shale oil asset, following the transfer of the conventional asset in the first quarter of the year. On a sequential basis, lifting cost per VOE was down 11% as the ramp-up of production volumes continued to dilute fixed costs. We expect this trend to continue during 2024. The devaluation of the peso of approximately 130% led to cost savings in the second half of December. We are still closely monitoring the full impact of this event on our lifting costs of Q1 2024. Adjusted EVDA during Q4 2023 was $288 million, an increase of 43% year over year. Adjusted EVDA performance was supported by production growth and lower lifting costs. It also includes $81 million in gains from repatriation of 27% of energy export proceeds at the blue chip swap exchange rate. This gain has been accounted for in other income. This benefit has been extended and currently allow us to repatriate 20% of our exports at blue chip swap rate. We continue to see an expansion of margins. Adjusted VDA margin was 73% during the quarter, an inter-annual increase of 7% points. Note that we have added the other income from the repatriation of export proceeds at the blue chip to our revenues to calculate our adjusted VDA margin. This provides a more accurate representation of our margins. For more detail, please see the earning notes released yesterday afternoon. Net back during the quarter was $55.6 per BOE, a 39% increase year over year. During Q4 2023, we have another positive free cash flow quarter. Cash from operating activities was $347 million. reflecting higher adjusted VDA generation and normalization of working capital related to cell collections. Cash flow used in investing activities was $240 million, in line with the capital expenditures of $212 million and a $70 million increase in working capital related to CAPEC. Free cash flow during Q4 2023 was therefore $107 million. Cash used in financing activities was $67 million, driven by the prepayment of local bonds adjusted by peso inflation, as well as bond series 3 in hard currency. Net leverage ratio stood at 0.46 times adjusted EBITDA at quarter end. Cash at the end of the period was $213 million. We now move on to the full year results. During 2023, we made solid progress across our four strategic levers. We increased P1 reserves and well inventory, reflecting the growth potential and the quality of our asset base. P1 reserves increased 27% year-over-year to 319 million BOEs. Well inventory increased 28% year-over-year to 1,150 wells, of which only 99 were on production at the end of 2023. We also deliver solid operational performance, maintaining our status as a leading operator in Vaca Muerta. Total production was 51.1 thousand BOEs per day, a 5% interannual increase, or 80% on a pro forma basis, adjusted by the transfer of the conventional assets in March 2023. Lifting cost was reduced 33% year over year to $5.1 per BOE. Our cost saving delivery was better than planned, reflecting a 7% improvement vis-à-vis our $5.5 per VOE guidance. Additionally, we made a strong progress in sustainability. We reduced emission intensity by 13% to 15.6 kilograms of CO2 equivalent, which placed our company in the best quartile compared to the comparable upstream player worldwide. I am also very proud of our safety track record. Total recordable incident rate, including employee and contractors, was below one every year for the last four years, with a 0.2 for 2023. Finally, during 2023, we continue to deliver robust total shareholder returns. Adjusted EVDA was $871 million, up 14% compared to 2022. Our stock price increased 115% from December 31st, 2022, up to date. As I mentioned previously, P1 reserves increased 27% compared to 2022. for a total of 318.5 million BOEs estimated at ERM 2023. This implies a total reserves replacement ratio of 458% and 485% for oil. Proof reserves life increased by 20% to 17 years. Net additions were 85.5 million BOEs. driven by the activity in Bajada del Palo Oeste, where we added 40 new well locations, and Bajada del Palo Oeste, where we added 26 locations. This resulted in a total of 297 book well locations in our P1 reserves. The certified present value at 10% discount rate attributable to the company interest in P1 Reserve is $3.3 billion, using a price assumption of $66.5 per barrel for oil, according to the SEC guidelines. During 2023, we also achieved significant operating milestones. We tie in 31 new wells, two above our original guidance. This drilling and completion activity boosted our total production, leading to an 18% increase year over year on a pro forma basis. Most of our drilling and completion activity in the first semester targeted the de-risking of our blocks. Solid productivity resolved in Águila Mora and Bajado del Palo Este allowed us to expand our inventory by 250 wells. During the year, we successfully secured the take-away capacity to deliver on our 2026 plan. We obtained capacity in two key projects, 12.5 thousand barrels of oil per day in the Bacamorta-Norte pipeline and 31.5 thousand barrels of oil per day in the Oldervalle expansion. The treatment plan in our development hub was expanded to 70,000 barrels of oil per day. We are currently working on another project to increase total treatment capacity to 85,000 barrels of oil per day before year-end. In terms of export volumes, in 2023 we increase oil exports to 52% of total oil sales, up from 44% in 2022. This was boosted by higher production and the start-up of exports to Chile, which reached 4.7 thousand barrels of oil per day in Q4 2023. During 2023, we also made solid progress in our emissions reduction and nature-based solution projects. Our decarbonization projects included the installation of a new vapor recovery unit, optimization of glycol dehydration process, and the addition of renewables to our energy metric, among other projects. Implementation of such projects led to the reduction of scope one and two, increased greenhouse gas emissions by 30 percent year over year. As previously discussed, emission intensity was also reduced by 30% over the same period to 15.6 kilos of CO2 equivalent per VOE. Regarding nature-based solutions, our subsidy, IK, achieved significant milestones during the year. We finalized planting our flagship project in Roland Cue with 2.5 million trees. and initiated soil preparation activities in a neighboring plot of land in Villa Zenaida. We have initiated work in our forest conservation project in Chago Aral and also made good progress in regenerative agriculture and livestock projects. In parallel, we started the process to certify the carbon credit of our projects with BERRA. We have consistently delivered strong financial metrics over the last three years, resulting in superior total shareholder returns. Adjusted EVDA increased by 14% year-over-year to $871 million, in line with the midpoint of our original guidance. ROA-CE was 39%, consistently delivering top-tier return of capital in the energy sector. Adjusted EPS per share was $5.2, an increase of 24% compared to 2022, driven by an adjusted net income of $191 million. We maintained healthy financial ratios with gross leverage at 0.71 times adjusted EBITDA and net leverage at 0.46 times. This outstanding performance across all financial metrics is reflected in the evolution of our share price, which more than doubled since year end 2022 to this date, outperforming our peers in LATAM upstream space. I will now share our 2024 guidance. As discussed during our investor day last September, we plan to increase the number of tie-ins to 46 by utilizing our existing drilling and completion capacity in full. The entire drilling campaign will be focused on our development hub, with most wealth in our flagship development, Embajada del Palo Oeste. Based on this activity, CAPEC is forecast to increase to $900 billion in 2024. According to our model, this activity will boost our production to between 68 and 70,000 BOEs per day during 2024. We expect lifting costs to continue to decrease on the back on focus on efficiency and the dilution of fixed costs by additional production volumes. We are forecasting $4.5 per BOE in 2024. Adjusted EBITDA is forecast to increase to between $1 billion and $1.15 billion using a realized oil price of $65 to $70 per barrel. Finally, we expect to continue reducing our greenhouse gas emissions intensity during 2024 in line with our 2026 reduction targets. I will now summarize the key takeaways of today's presentation. During 2023, we deliver robust operational and financial performance. We double-digit grow, improve reserves, total production, and adjusted VDA. The transfer of our conventional asset has converted Vista into a fully focused back and mortar company. We lower costs. and higher margins. Our robust performance during the year continues to prove our ability to deliver on our superior total shareholder return proposition reflected by our peer-leading share price performance. We issue an updated strategic plan supported by our large, high-quality inventory, our operating credentials, our existing drilling and completion capacity, and having secured misting capacity to deliver on our production targets. In this respect, we are well on track to double our production to 100,000 BOEs per day by 2026. Our 2024 guidance is the first step in this direction, with production growth of 35% and adjusted EBITDA growth of 23%. We plan to deliver on our 2024 and 2026 targets using our own cash generation. Before we move to Q&A, I would like to thank our investors for their continued support and the entire team at Vista for their commitment and hard work during 2023. I look forward to an equally successful 2024 and see you in our next earnings call. Operator, please open the line for Q&A.

Thank you. And as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To withdraw the question, press star 11 again. One moment for our first question, please. All right, first question is from Bruno Montanari with Morgan Stanley. Please proceed.

Good morning, everyone. Thanks for taking my question. Miguel, many great achievements in the year with the reserves, the cost evolution, and the financial results, which speak for themselves. So I have two questions, actually both about production. But the first question, there was a bit of a shortfall in production versus the original targets you had. I understand the gas issue you mentioned, but it seemed that for oil there was also a little bit less production. So if you could add a little bit more color on why that happened and then what the company is doing to overcome that, that would be great. And then if you could discuss what more can you do in 2024? You mentioned that you're fully utilizing the existing equipment. So is there any optionality to bring more equipment to Argentina? What is the likelihood of that happening? So how should we think about these 68,000 to 70,000 barrels per day for more equipment? confident on reaching 70, if there is upside to that number. So any color there would also be super helpful. Thank you very much.

Hi, Bruno. Thank you very much for your comment.

And regards production, yes, first of all, I would say, I mean, we closed, let me give you a bit of explanation. We closed Q3 2023 at almost 50,000 barrels per day. At that time, we guide on a sequential growth of 20% for Q4. We achieved really not the 20%. We achieved an oil production increase of 70% quarter on quarter, but natural gas production decreased 2%. In oil, we made very good effort to offset the lower production of the Q pilot that we mentioned before. The Q was a pilot, and we were testing to frack one zone 8 wells at the same time. And clearly, the intensity of the fracture, even though we are evaluating, it didn't give the result that we were expecting for. At the BOE level, the impact of 2 percent coral occurring decrease in gas production explained half of the coral miss. Gas production decreased by two factors. Basically, the wells that we connected have lower gas-oil ratio in the northeast of Bajada del Palo Oeste. And also, we have higher downtime of the legacy wells or the legacy conventional wells that we have in production. Regarding our 2024 guidance, we rated a target of 20,000 barrels per day. You should expect that Q1 2024 is at similar levels compared with Q4 2023. We plan to tie in this quarter 11 wells. We have three of them already tied in. And as we tie in the rest toward the end of Q1, you should see the second half of the first half of Q2 with a robust production growth for Q2 then. From Q2 onwards, I think you should expect between 10 and 50% growth quarter on quarter, arriving around in Q4 to an average of 80,000 barrels per day. Regarding the activity, our current plan is to fully utilize all our contracted rigs. We have two walking rigs and one spadder. We are working on potentially speeding up the tying of one or two pads that are included in 2024 plan, hiring and spot drilling and completion rig and completion capacity. So I think this one is pretty much is going to happen. In parallel, we are looking and we are having discussion with several oil service company providers to see if we can bring more equipment in terms of drilling and completion capacity to the country. So that discussion is ongoing, so you can factor in the fact that we are going to have And contracting a spot drilling rig and some completion capacity for one or two paths. The other thing is, as we said, is under negotiation. We will see if we get the right conditions to really bring more equipment to the country.

Great. Super clear. And just to confirm, this potential addition of new equipment would be upside to the existing drilling plan, right?

That's correct, Bruno.

Okay. Super. Thanks again.

Thank you.

One moment for our next question, please. It comes from the line of Tasso Vasconcelos with UBS. Please proceed. Hi, Miguel. Hi, Ali.

All the team present. Thanks for taking my questions here. I have two questions on my side. The first one, it would be great to hear your thoughts on Middle East government so far. What is going on better or worse than initially expected? and if it changes your company's expectations for the next one, two, three, four years at an extent. My second question, looking forward, of course, one of the main drivers for the case is production growth. We already discussed it a bit on what's dependent on the company, the drilling campaigns and so on. But, of course, part of this increased production is dependent on investment in infrastructure. So it would also be great to hear your thoughts on how investment in increasing this outflow capacity throughout Argentina is going on, if they are all on track, and if you see any risks, potential delays on these investments. Those are my questions. Thank you.

Hi, Tasso.

Thank you very much for your question, and welcome to this call. I guess it's your first time, so good to have you here. Regarding the first part of your question and how we see the government, we have a very positive view on some of the proposed changes that the government is making, such as no price intervention by the government and freedom of export. I believe both things are very good to attract investment to Argentina. Argentina has a very unique opportunity in terms of bringing more proceeds to Argentina through export. And clearly, these two initiatives will help a lot the country in terms of bringing more investment and, of course, exporting more. And Vista is an example of that. So we welcome this initiative. We support this initiative. I think the industry also was present at the Congress discussion through the president of a chamber that we have, the Astrin Companies, the CEPH, and basically he verbalized that support with his president of the Congress. So that is pretty good. Regarding infrastructure and the progress that we have on that, I think we are basically pretty much on track with the Chile connection and what we call Vaca Muerta Norte that is in place and we are supporting the volumes that we thought we would be supporting at the time that we thought we would be supporting. The one that is delayed is the project of Old El Val. So we are experiencing delay on the phase one that should be finished, it's supposed to finish the first quarter of 2024, and now it's delayed to October. In Q1 2024, the full project is supposed to deliver 120,000 barrel holes per day. Now, we believe it's going to be, we will get in terms of 120,000, 150,000 in October. The pipeline was not an issue. We have an issue or they have an issue or speeding delay with the provision of pump. But this issue is resolved. So all the equipment is in hand. So in October, we supposed to have this 150,000 coming in line. The delay does not impact our plan. We have enough capacity in all the open access today We are actually using 44,000 barrels per day. We speak and also we have Vaca Muerta Norte and we have the tracking that give us flexibility so we don't see any issues in infrastructure for 2024.

Great. All clear.

Thank you.

Thank you. One moment for our next question, please.

comes from the line of Marina Mertens with Latin Securities.

Please proceed.

Hi, good morning, and thank you for the update. I have two questions. First, considering all the changes going on in Argentina's politics and economy, the favorable outcomes at the Bajada El Palo have, and the recent announcement of increased food reserves, what would Vista need to accelerate the already ambitious CAPEX plan? And thus, the omnibus bill play any role in this decision? And the other one on domestic prices. We observed a rebound in the price of the local barrel in December, which continued into January. What are you anticipating for the remainder of the year?

Hi, Marina. Thank you very much for your question. I will start with the second part. basically the quarter we were requested additional volume by local refineries the price that we reflect by the earning reflect basically a myth a mix between domestic sale part of which we've been providing at as you said the local price and the additional volumes that were paid are export parity Of course, we see as a positive trend that domestic market is willing to validate the export parity, and we welcome everything that is moving in that direction. Regarding to additional capex, I mean, our plan for 2024, I would say this ambition is enough. The growth that we are aiming for is probably one of the highest in the last five years, 35%. So therefore, as we said, there's probably little room to aim a bit higher. Now, if you ask me, one thing that going forward will help to continue those levels of growth or even to aim higher will be... free access to be able to repatriate dividends or proceeds. Anything in terms of freeing the controls that we have today in Argentina, clearly we resonate with investors, with us, and we create additional growth.

Great. Thank you.

You're welcome.

Thank you. One moment for our next question, please. And it comes from the line of Daniel Guardiola with BTG Bactual. Please proceed.

Thank you and good morning, guys. And congrats for the results. I have a couple of questions for my end. The first one is on the capital structure of the company. I mean, clearly right now you're running a a very under-levered balance sheet, which makes sense considering that most of your operations are in Argentina. But bear in mind that the macroeconomic environment may improve towards the second half of the year. You're having a better visibility in terms of pricing dynamics. Will you consider this structure, this low leverage to be suboptimal? And can you share with us what will be, you know, for you guys, an optimal capital structure? So that would be my first question. And my second question is regarding growth. I mean, I understand your 2024 plan is already a very ambitious one. But looking beyond 2024, what I'm seeing is that Ivaca Muerta is a very concentrated basin with a few players with not a lot of opportunities, especially inorganic opportunities. And I wanted to know if If you're taking a look at the current process that Exxon is running to basically sell their back and water assets, that would be my two questions.

Hi, Daniel. Sorry I was in mute.

First of all, also welcome you to this call, and thank you very much for your question. As you mentioned, I mean, we feel very comfortable at the current stage with the way that we run the company leverage-wise. And as also you correctly mentioned, there's room for us to have a bit more leverage. But for that, we have to have a reason. As you also mentioned, I mean, our growth program is super ambitious. And we have the luxury to grow using our own cash flow generation. And I think that has been somehow recognized by the market and is part of what you see in the evolution of the stock price of Vista, I believe, is related to the way that we run the company. That doesn't mean, as you said, if there's an important change in context, that we can basically aim for further growth and have a different leverage ratio going forward. One of the things that could, for example, change the dynamics is that we have an acquisition. And of course, we are always active on that front. We are very... I mean, very active in terms of looking for new opportunities. In the particular case that you mentioned, yes, I mean, they have interest assets, and yes, we are looking into that. Probably nothing more that I can comment at this stage. Just the fact that, yes, we look every single opportunity that arouse in Bacamorta that is our turf.

Thank you.

Can I squeeze in an additional question?

Yes, Daniel, go ahead.

Regarding your cost structure, I mean, you have done a terrific job, you know, streamlining your cost structure, bringing down your lifting costs from, I don't know, 13 or 12 and a half, five years ago to very low levels right now, you know, close to 4.3, 4.4. Do you foresee additional room to streamline your overall cost structure, not only lifting, but maybe also, you know, SG&A?

Yeah. Yes, look, we come from a long way of reducing particularly the lifting costs. And I believe we have little room left as the result of the grown production. Most of the lifting costs probably 70% of the lifting cost structure is thick cost. So as we grow production, we will be diluting part of that cost, 70% of those. So I think we have a little room going forward, but I will say also that we are achieving the technical limit on things that we can do. So the reduction that you will see in lifting costs is going to be more as in to a number and no big reduction as we experienced at the beginning.

Understood. Thank you very much. You're very welcome.

Thank you. One moment for our next question. And as a reminder, to ask a question, simply press star 11 to get in the queue. Our next question is from Paula LaGreco with TPCG. Please proceed.

Hi. Thank you for taking my question. I would like to know what was the reason why crude oil exports were declining for Q23 in terms of volume sold. Was it because of an increasing crude oil demand from local refineries, so you were limited to exports?

Hi, Paula.

Look, I think there was two reasons why that happened. One is a matter of stock at the end of the year in the terminal that basically we experience almost every year. And the second part is related to the fact that, yes, we have more demand on the local market, a bit of more demand in the local market that, as I explained before, we sold our export parity. So this is pretty much the reason.

Thank you. One moment for our next question. And it comes from the line of Andres Felipe Cardona with Citi. Please proceed.

Hi. Good morning, everyone. Miguel, Pablo, Ali, congratulations on the solid results. Two very quick questions and perhaps one more detailed. So the first is, what is the implied realization price for the local sales or the domestic sales? The second one is, what is the assumption in terms of export taxes and if the export tax remain, sorry, what is the assumption of volumes exported and if the export tax remain at 8% at the end, and the more detailed question is why to consider M&A and not accelerate on the existing portfolio? I mean, you have close to 1,150 drilling locations. Why to pursue M&A at this stage?

Thank you. Andres. Hi, Andres.

This is Miguel. So the line was not so good, but I think I managed to listen. So the Q1 local prices that we are seeing so far is 66. So it's quite good. Export tax today is 8%. And I think there was a third question related to...

Yeah, Miguel, the question on the local crude sale prices, what is incorporated in the guidance? And the last question was why to consider M&A at this point and not accelerate on the existing portfolio when you have over 1,100 drilling locations, right?

Okay. Yeah, sorry, Andrea, the line is not so good. But again, I mean, in terms of pricing, what we ran in our plan was between $65 and $70 total. This is real life price. Today, we are looking at the local price, what the refinery is paying for us, $66. This is Q1, okay? Now, our guidance was a plan between $1 billion EBITDA and $1.5 $1,150 a vida. Look at the price range of realized pricing, 65 to 70, localized pricing. Local price, Q1, 66 today. In terms of M&A, I don't think you will see anything that will impact our planning during 2024. And as I mentioned before, we are basically active M&A wise, as have we been in the past, evaluating opportunities that are today in place. That mainly is one that was the question I don't remember from who before.

Thank you, Miguel. You're welcome.

Thank you. One moment for our last question, please. It comes from the line of Alejandro de Michelis with Jefferies. Please proceed.

Good morning, guys. Thank you for taking my call and congratulations on the call. Just one quick question, Miguel. You're talking about accelerating production, if you can, or M&A and so on. Can you talk about how you see potentially to bring in partners into your acreage? Is that something that in the current situation of Argentina, improving conditions in Argentina, that you could see feasible?

Hi, Alejandro. Yeah, thank you for your question.

I mean, yes, I mean, when we talk about M&A, we consider everything. As you know, I mean, we have today, our activity is concentrating in what we call the development hub. And the development hub is Aguada Federal, Baja del Palo Este, And Baja del Palo Oeste now became part of the development hub. So everything that we have in the north, particularly Aguila Mora, is a place that in the future, yes, we could consider to bring a partner to add capital. We are very well, I mean, we are recognized and we are very well positioned as a low cost, low carbon and reputable operator. Yes, when we look at M&A, this is something that we could consider in the future.

That's great.

Thank you. You're welcome.

Thank you. And with that, we conclude the Q&A session. I will turn the call back to Miguel Galuccio for final comments.

Well, guys, thank you very much for participating, for your questions, for the support, and looking forward to see you next quarter.

Thank you, ladies and gentlemen.

You may now disconnect. Thank you. Bye. Thank you.

Good day and thank you for standing by. Welcome to Vista's fourth quarter 2023 earnings webcast. 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 the question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Vista's Strategic Planning and Investor Relations Officer, Alejandro Chernyakov.

Thanks. Good morning, everyone. We are happy to welcome you to Vista's fourth quarter and full year 2023 results conference call. I am here with Miguel Galucho, Vista's Chairman and CEO, Pablo Verapinto, 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 US dollars and in accordance with International Financial Reporting Standards . However, during this call, we may discuss certain non-IFRS financial measures, such as adjusted VDA and adjusted net income. Reconciliation 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, It's 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. Our ticker is 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 and welcome to this earnings call. We have an exceptional year in 2023. We have continued to deliver strong operational and financial results. with double digit growth, improved reserves, total production, and adjusted EVDA. We also secure capacity in key projects, which underpin our updated production target for 2026. Our outstanding performance was reflected by our stock price performance, which doubled during the year. I will now present our Q4 2023 results and then move on to our full year results. During Q4, we continue to focus on drilling and completion activity in Bajada del Palo Oeste. This led to a sequential grow in total production, surpassing our consolidated production level prior to the transfer of the conventional asset in Q1 2023. Total production was 56.4 thousand BOEs per day during the fourth quarter, 14% above sequentially and 60% above inter-annually. on a pro forma basis. Oil production was 48.5 thousand barrels of oil per day, 70% above the previous quarter, and 80% percentage above the same quarter of last year, also on a pro forma basis. Total revenues during the quarter were $309 million, 2% above the previous quarter. We continue reducing our lifting costs. reaching $4.3 per VOE during the quarter. Capital expenditure was $212 million, mainly driven by 11-way drill and 7-way completing during the quarter. In Q4 2023, adjusted EBITDA was $288 million, 43% above year-over-year, supported by the stable revenues and other operated income growth amid lower lifting costs. Adjusted net income was $240 million, implying a quarterly adjusted EPS of $2.5 per share, mainly driven by higher adjusted EBITDA and the positive impact of the reduction in the full-year income tax. We recorded positive free cash flow of $107 million during the quarter, driven by a strong EBITDA generation and normalization of working capital compared with the previous quarter. Net leverage ratio at the quarter end was a solid 0.46 times adjusted EVDA. I will now deep dive into our main operational and financial metrics of the quarter. Total production during Q4 2023 was 56.4 thousand VOEs per day. driven by the of 11 wells in during the quarter. This led to a sequential increase of 14%. On an inter-annual basis, production increased 3%, reflecting that we have now surpassed the production levels prior to the transfer of the conventional asset back in March 2023. On a performance basis, adjusting by the production of such asset, our total production growth was 16% year-over-year. During the quarter, we recorded an outstanding performance in oil production, which increased by 70% on a sequential basis and 80% on annual performance basis. On the other hand, gas production decreased 2% quarter over quarter, impacting our Q4 total production target and the exit rate. This was mainly due to the fact that during the quarter, we tied in two paths in the northeast of Bajada del Palo Oeste, which has a lower gas to oil ratio than other parts of our acreage. During the fourth quarter of 2023, we continue in full development mode with 100% of the drilling and completion activity in Bajada del Palo Oeste. We tie in 11 wells during the quarter in PAD Bajada del Palo Oeste 19, 20, and 21. The tie-ins boosted production in Q4 and led to an exceed rate close to 60,000 BOEs per day. The tie-in of 23 new wells during the second semester of 2023 reflects full utilization of two drilling rigs and one sputter rig, with a run rate of 46 new wells per year, in line with our 2024 plan, which we will discuss later on. During Q4 2023, our revenues were stable year over year. as oil production growth offset lower realized prices. Total revenues were $309 million, 2% increase compared to previous quarter, and 3% decline compared to Q4 2022. This was mainly driven by lower gas production, as discussed previously, and 50% decline in gas prices. Sales to export market accounted for 49% of the oil volume and 53 of net oil revenues. We exported 2 million barrels of oil composed by 1.6 barrels through the Atlantic and 0.4 million barrels by pipeline to Chile. Realized oil price for the quarter averaged $67.8 per barrel, down 2% year over year and flat compared to the previous quarter. The average realized domestic price was $63.7 per barrel, while the realized export price was $74.2 per barrel. We are seeing good recovery in the domestic prices with crude in line with the $65 to $66 range for January and February, which is key to fund our growth plan. Lifting cost was $22.3 million for the quarter, a 38% decrease compared to the same quarter of last year. Lifting cost per VOE was $4.3, a decrease of 40% compared to Q4 2022. These results continue to reflect the positive impact of our new operating model. fully focused on our shale oil asset, following the transfer of the conventional asset in the first quarter of the year. On a sequential basis, lifting cost per VOE was down 11% as the ramp-up of production volumes continued to dilute fixed costs. We expect this trend to continue during 2024. The devaluation of the peso of approximately 130% led to cost savings in the second half of December. We are still closely monitoring the full impact of this event on our lifting costs of Q1 2024. Adjusted EVDA during Q4 2023 was $288 million, an increase of 43% year-over-year. Adjusted EVDA performance was supported by production growth and lower lifting costs. It also includes $81 million in gains from repatriation of 27% of energy export proceeds at the blue chip swap exchange rate. This gain has been accounted for in other income. This benefit has been extended and currently allows us to repatriate 20% of our exports at blue chip swap rate. We continue to see an expansion of margins. Adjusted EBITDA margin was 73% during the quarter, an inter-annual increase of 7% points. Note that we have added the other income from the repatriation of export proceeds at the blue chip to our revenues to calculate our adjusted EBITDA margin. This provides a more accurate representation of our margins. For more detail, please see the earning notes released yesterday afternoon. Net back during the quarter was $55.6 per BOE, a 39% increase year over year. During Q4 2023, we have another positive free cash flow quarter. Cash from operating activities was $347 million. reflecting higher adjusted VDA generation and normalization of working capital related to cell collections. Cash flow used in investing activities was $240 million, in line with the capital expenditures of $212 million and a $70 million increase in working capital related to CAPEC. Free cash flow during Q4 2023 was therefore $107 million. Cash used in financing activities was $67 million, driven by the prepayment of local bonds adjusted by peso inflation, as well as bond series 3 in hard currency. Net leverage ratio stood at 0.46 times adjusted EBITDA at quarter end. Cash at the end of the period was $213 million. We now move on to the full year results. During 2023, we made solid progress across our four strategic levers. We increased P1 reserves and well inventory, reflecting the growth potential and the quality of our asset base. P1 reserves increased 27% year-over-year to 319 million BOEs. Well inventory increased 28% year-over-year to 1,150 wells, of which only 99 were on production at the end of 2023. We also deliver solid operational performance, maintaining our status as a leading operator in Vaca Muerta. Total production was 51.1 thousand BOEs per day, a 5% inter-annual increase, or 80% on a pro forma basis, adjusted by the transfer of the conventional assets in March 2023. Lifting cost was reduced 33% year over year to $5.1 per BOE. Our cost saving delivery was better than planned, reflecting a 7% improvement vis-à-vis our $5.5 per VOE guidance. Additionally, we made a strong progress in sustainability. We reduced emission intensity by 13% to 15.6 kilograms of CO2 equivalent, which placed our company in the best quartile compared to the comparable upstream player worldwide. I am also very proud of our safety track record. Total recordable incident rate, including employee and contractors, was below one every year for the last four years, with a 0.2 for 2023. Finally, during 2023, we continue to deliver robust total shareholder returns. Adjusted EVDA was $871 million, up 14% compared to 2022. Our stock price increased 115% from December 31st, 2022, up to date. As I mentioned previously, P1 reserves increased 27% compared to 2022. for a total of 318.5 million BOEs estimated at ERM 2023. This implies a total reserves replacement ratio of 458% and 485% for oil. Group reserve life increased by 20% to 17 years. Net additions were 85.5 million BOEs. driven by the activity in Bajada del Palo Oeste where we added 40 new well locations and Bajada del Palo Oeste where we added 26 locations. This resulted in a total of 297 book well locations in our P1 reserves. The certified present value at 10% discount rate attributable to the company interest in P1 Reserve is $3.3 billion, using a price assumption of $66.5 per barrel for oil, according to the SEC guidelines. During 2023, we also achieved significant operating milestones. We tie in 31 new wells, two above our original guidance. This drilling and completion activity boosted our total production, leading to an 18% increase year over year on a pro forma basis. Most of our drilling and completion activity in the first semester targeted the de-risking of our blocks. Solid productivity resolved in Aguila Mora and Bajado del Palo Este allowed us to expand our inventory by 250 wells. During the year, we successfully secured the take-away capacity to deliver on our 2026 plan. We obtained capacity in two key projects, 12.5 thousand barrels of oil per day in the Bacamorta-Norte pipeline and 31.5 thousand barrels of oil per day in the Oldal Valley expansion. The treatment plan in our development hub was expanded to 70,000 barrels of oil per day. We are currently working on another project to increase total treatment capacity to 85,000 barrels of oil per day before year end. In terms of export volumes, in 2023, we increase all exports to 52% of total oil sales. up from 44% in 2022. This was boosted by higher production and the start-up of exports to Chile, which reached 4.7 thousand barrels of oil per day in Q4 2023. During 2023, we also made solid progress in our emissions reduction and nature-based solution projects. Our decarbonization projects included installation of a new vapor recovery unit, optimization of glycol dehydration process, and the addition of renewables to our energy metric, among other projects. Implementation of such projects led to the reduction of COP 1 and 2 in greenhouse gas emissions by 30% year over year. As previously discussed, emission intensity was also reduced by 30% over the same period to 15.6 kilos of CO2 equivalent per VOE. Regarding nature-based solutions, our subsidy, IK, achieved significant milestones during the year. We finalized planting our flagship project in Roland Cue with 2.5 million trees. and initiated soil preparation activities in a neighboring plot of land in Villa Zenaida. We have initiated work in our forest conservation project in Chagoaral, and also made good progress in regenerative agriculture and livestock projects. In parallel, we started the process to certify the carbon credit of our projects with BERRA. We have consistently delivered strong financial metrics over the last three years, resulting in superior total shareholder returns. Adjusted EVDA increased by 14% year-over-year to $871 million, in line with the midpoint of our original guidance. ROA-CE was 39%, consistently delivering top-tier return of capital in the energy sector. Adjusted EPS per share was $5.2, an increase of 24% compared to 2022, driven by an adjusted net income of $191 million. We maintained healthy financial ratios with gross leverage at 0.71 times adjusted EBITDA and net leverage at 0.46 times. This outstanding performance across all financial metrics is reflected in the evolution of our share price, which more than doubled since year end 2022 to this date, outperforming our peers in LATAM upstream space. I will now share our 2024 guidance. As discussed during our investor day last September, we plan to increase the number of tie-ins to 46 by utilizing our existing drilling and completion capacity in full. The entire drilling campaign will be focused on our development hub, with most wealth in our flagship development, Embajada del Palo Oeste. Based on this activity, CAPEC is forecast to increase to $900 billion in 2024. According to our model, this activity will boost our production to between 68 and 70,000 BOEs per day during 2024. We expect lifting costs to continue to decrease on the back on focus on efficiency and the dilution of fixed costs by additional production volumes. We are forecasting $4.5 per BOE in 2024. Adjusted EBITDA is forecast to increase to between $1 billion and $1.15 billion using a realized oil price of $65 to $70 per barrel. Finally, we expect to continue reducing our greenhouse gas emissions intensity during 2024 in line with our 2026 reduction targets. I will now summarize the key takeaways of today's presentation. During 2023, we deliver robust operational and financial performance. We double digit grow, improve reserves, total production, and adjusted VDA. The transfer of our conventional asset has converted Vista into a fully focused back and mortar company with lower cost and higher margins. Our robust performance during the year continues to prove our ability to deliver on our superior total shareholder return proposition reflected by our peer-leading share price performance. We issue an updated strategic plan supported by our large, high-quality inventory, our operating credentials, our existing drilling and completion capacity, and having secure misting capacity to deliver on our production targets. In this respect, we are well on track to double our production to 100,000 BOEs per day by 2026. Our 2024 guidance is the first step in this direction with production growth of 35% and adjusted EBITDA growth of 23%. We plan to deliver on our 2024 and 2026 targets using our own cash generation. Before we move to Q&A, I would like to thank our investors for their continued support and the entire team at Vista for their commitment and hard work during 2023. I look forward to an equally successful 2024 and see you in our next earnings call. Operator, please open the line for Q&A.

Thank you. And as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To withdraw the question, press star 11 again. One moment for our first question, please. All right, first question is from Bruno Montanari with Morgan Stanley. Please proceed.

Good morning, everyone. Thanks for taking my question. Miguel, many great achievements in the year with the reserves, the cost evolution and the financial results, which speaks for themselves. So I have two questions. One about, actually both about production, but the first question, there was a bit of a shortfall in production versus the original targets you had. I understand the gas issue you mentioned, but it seemed that for oil production, There was also a little bit less production. So if you could add a little bit more color on why that happened and then what the company is doing to overcome that, that would be great. And then if you could discuss what more can you do in 2024? You mentioned that you're fully utilizing the existing equipment. So is there any optionality to bring more equipment to Argentina? What is the likelihood of that happening? So how should we think about these 68,000 to 70,000 barrels per day? If you're more confident on reaching 70, if there is upside to that number, so any color there would also be super helpful. Thank you very much.

Hi, Bruno. Thank you very much for your comment.

And regards production, yes, first of all, like we said, I mean, we closed Let me give you a bit of explanation. We closed Q3 2023 at almost 50,000 barrels per day. At that time, we guide on a sequential growth of 20% for Q4. We achieved really not the 20%, we achieved an oil production increase of 70% quarter on quarter, but natural gas production decreased 2%. In oil, we made very good effort to offset the lower production of the Q pilot that we mentioned before, The Q was a pilot, and we were testing to frack once on eight wells at the same time. And clearly, the intensity of the fracture, even though we are evaluating, it didn't give the result that we were expecting for. At the BOE level, the impact of 2 percent quarry occurring decrease in gas production explained half of the quarry miss. Gas production decreased by two factors. One, basically the wells that we connected have lower gas-oil ratio in the northeast of Bajada del Palo Oeste. And also, we have higher downtime of the legacy wells or the legacy conventional wells that we have in production. Regarding our 2024 guidance, we rated a target of 20,000 barrels per day You should expect that Q1 2024 is at similar levels compared with Q4 2023. We plan to tie in this quarter 11 wells. We have three of them already tied in. And as we tie in the rest toward the end of Q1, you should see the second half of the first half of Q2 with a robust production growth for Q2 then. From Q2 onwards, I think you should expect between 10 and 50% growth quarter on quarter, arriving around in Q4 to an average of 80,000 barrels per day. Regarding the activity, our current plan is to fully utilize all our contracted rigs. We have two working rigs and one spadder. We are working on potentially speeding up the tying of one or two pads that are included in 2024 plan, hiring and spot drilling and completion rig and completion capacity. So I think this one is pretty much is going to happen. In parallel, we are looking and we are having discussion with several oil service company providers to see if we can bring more equipment in terms of drilling and completion capacity to the country. So that discussion is ongoing, so you can factor in the fact that we are going to have And contracting a spot drilling rig and some completion capacity for one or two paths. The other thing is, as we said, is under negotiation. We will see if we get the right conditions to really bring more equipment to the country.

Great. Super clear. And just to confirm, this potential addition of new equipment would be upside to the existing drilling plan, right?

That's correct, Bruno.

Okay. Super. Thanks again.

Thank you. One moment for our next question, please.

It comes from the line of Tasso Vasconcelos with UBS. Please proceed. Hi, Miguel.

Hi, Ali. All the team present. Thanks for taking my questions here. I have two questions on my side. The first one, it would be great to hear your thoughts on Middle East government so far. What is going on better or worse than initially expected? and if it changes your company's expectations for the next one, two, three, four years at an extent. My second question, looking forward, of course, one of the main drivers for the case is production growth. We already discussed it a bit on what's dependent on the company, the drilling campaigns and so on. But, of course, part of this increased production is dependent on investment in infrastructure. So it would also be great to hear your thoughts on how investments in increasing these outflow capacity throughout Argentina is going on, if they are on track, and if you see any risks, potential delays on these investments. Those are my questions. Thank you.

Hi, Tasso.

Thank you very much for your question, and welcome to this call. I guess it's your first time, so good to have you here. Regarding the first part of your question and how we see the government, we have a very positive view on some of the proposed changes that the government is making, such as no price intervention by the government and freedom of export. I believe both things are very good to attract investment to Argentina. Argentina has a very unique opportunity in terms of bringing more proceeds to Argentina through export. And clearly, these two initiatives will help a lot the country in terms of bringing more investment and of course, exporting more. And Vista is an example of that. So we welcome this initiative, we support this initiative I think the industry also was present at the Congress discussion through the president of a chamber that we have, the Astrin Companies, the CEPH, and basically he verbalized that support with his presence at the Congress. So that is pretty good. Regarding infrastructure and the progress that we have on that, I think we are basically pretty much on track with the Chile connection and what we call Vaca Muerta Norte that is in place and we are supporting the volumes that we thought we would be supporting at the time that we thought we would be supporting. The one that is delayed is the project of Old El Val. So we are experiencing delay on the phase one that should be finished, is supposed to finish the first quarter of 2024, and now it's delayed to October. In Q1 2024, the full project is supposed to deliver 120,000 barrel holes per day. Now, we believe it's going to be, we will get in terms of 120,000, 150,000 in October. The pipeline was not an issue. We have an issue or they have an issue or speeding delay with the provision of pump. But this issue is resolved. So all the equipment is in hand. So in October, we supposed to have this 150,000 coming in line. The delay does not impact our plan. We have enough capacity in all the open access today We are actually using 44,000 barrels per day. We speak, and also we have Vaca Muerta Norte, and we have the tracking that give us flexibility, so we don't see any issues in infrastructure for 2024.

Great. All clear. Thank you.

Thank you. One moment for our next question, please.

comes from the line of Marina Mertens with Latin Securities.

Please proceed.

Hi, good morning, and thank you for the update. I have two questions. First, considering all the changes going on in Argentina's politics and economy, the favorable outcomes of the Baja El Palo hub, and the recent announcement of increased food reserves, what would Vista need to accelerate the already ambitious CAPEX plan, and thus the Omnibus Bill play any role in this decision? And the other one on domestic prices. We observed a rebound in the price of the local barrel in December, which continued into January. What are you anticipating for the remainder of the year?

Hi, Marina. Thank you very much for your question. I will start with the second part. basically the quarter we were requested additional volume by local refineries the price that we reflect by the earning reflect basically a miss a mix between domestic sale part of which we've been providing at as you said the local price and the additional volumes that were paid are export parity Of course, we see as a positive trend that domestic market is willing to validate the export parity, and we welcome everything that is moving in that direction. Regarding to additional capex, I mean, our plan for 2024, I would say this ambition is enough. The growth that we are aiming for is probably one of the highest in the last five years, it's 35%. So therefore, as we said, there's probably little room to aim a bit higher. Now, if you ask me, one thing that going forward will help to continue those levels of growth or even to aim higher will be free access to be able to repatriate dividends. or proceeds. Anything in terms of freeing the controls that we have today in Argentina, clearly we resonate with investors, with us, and we create additional growth.

Great. Thank you.

You're welcome.

Thank you. One moment for our next question, please. And it comes from the line of Daniel Guardiola with BTG Bactual. Please proceed.

Thank you and good morning, guys. And congrats for the results. I have a couple of questions from my end. The first one is on the capital structure of the company. I mean, clearly right now you're running a very underlevered balance sheet, which makes sense considering that most of your operations are in Argentina. But bear in mind that the macroeconomic environment may improve towards the second half of the year. You're having a better visibility in terms of pricing dynamics. Will you consider this structure, this low leverage, to be suboptimal? And can you share with us what will be, for you guys, an optimal capital structure? So that would be my first question. And my second question is regarding growth. I mean, I understand your 2024 plan is already a very ambitious one. But looking beyond 2024, what I'm seeing is that Ivaca Muerta is a very concentrated basin with a few players with not a lot of opportunities, especially inorganic opportunities. And I wanted to know if you're taking a look at the current process that Exxon is running to basically sell their their back-and-forth assets. That would be my two questions.

Hi, Daniel. Sorry I was in mute.

First of all, also welcome you to this call, and thank you very much for your question. As you mentioned, I mean, we feel very comfortable at the current stage with the way that we run the company leverage-wise. uh unless also you correctly mentioned the room for us uh to have a bit more leverage but for that we have to have a reason uh as as you also mentioned i mean our our grow program is super ambition and we have the luxury to grow uh using our own cash flow generation and i think that has been uh Somehow recognized by the market and is part of the part of what you see on the evolution of the stock price of vista I believe is related to the way that we run the company That doesn't mean as you said if they change there's a important change in context that we can basically Aim for further grow and have a different leverage ratio on going forward One of the things that could, for example, change the dynamics is that we have an acquisition. And of course, we are always active on that front. We are very active in terms of looking for new opportunities. In the particular case that you mentioned, Yes, I mean, they have interest assets, and yes, we are looking into that. Probably nothing more that I can comment at this stage. Just the fact that, yes, we look at every single opportunity that arouses in Bacamorta that is our turf.

Thank you. Can I ask Cristina an additional question?

Yes, Daniel, go ahead.

Regarding your cost structure, I mean, you have done a terrific job, you know, streamlining your cost structure, bringing down your lifting costs from, I don't know, 13 or 12 and a half, five years ago to very low levels right now, you know, close to 4.3, 4.4. Do you foresee additional room to streamline your overall cost structure, not only lifting, but maybe also, you know, SG&A?

Yes, we come from a long way of reducing particularly the lifting costs. And I believe we have little room left as the result of the grown production. Most of the lifting costs, probably 70% of the lifting cost structure is fixed costs. So as we grow production, we will be diluting part of that cost, 70% of those. So I think we have a little room going forward, but I would say also that we are achieving the technical limit on things that we can do. So the reduction that you will see in listing costs is going to be more asymptotic to a number and not big reduction as we experienced at the beginning.

Understood. Thank you very much. You're welcome.

Thank you. One moment for our next question. And as a reminder, to ask a question, simply press star 1-1 to get in the queue. Our next question is from Paula LaGreco with TPCG. Please proceed.

Hi. Thank you for taking my question. I would like to know what was the reason why crude oil exports began for Q23 in terms of boiling salt. Was it because of an increasing crude oil demand from local refineries? So you are limited to export.

Hi, Paula.

Look, I think there was two reasons why that happened. One is a matter of stock at the end of the year in the terminal that basically we experience almost every year. And the second part is related to the fact that, yes, we have more demand on the local market, a bit of more demand in the local market that, as explained before, we sold our export parity. So this is pretty much the reason.

Thank you. One moment for our next question. And it comes from the line of Andres Felipe Cardona with Citi. Please proceed.

Hi, good morning, everyone. Miguel, Pablo, Ali, congratulations on the solid results. And I have two very quick questions, and perhaps one more detailed. So the first is, what is the implied realization price for the local sales or the domestic sales? The second one is, what is the assumption in terms of export taxes And if the export tax remain, sorry, what is the assumption of volumes exported and if the export tax remain at 8% at the end? And the more detailed question is why to consider M&A and not accelerate on the existing portfolio? I mean, you have close to 1,150 drilling locations. Why to pursue M&A at this stage?

Thank you. Andres. Hi, Andres.

This is Miguel. So the line was not so good, but I think I managed to listen. So the Q1 local prices that we are seeing so far is 66. So it's quite good. Export tax today is 8%.

And I think there was a third question related to... Miguel, the question on the local crude sale prices, what is incorporated in the guidance? And the last question was why to consider M&A at this point and not accelerate on the existing portfolio when you have over 1,100 drilling locations, right?

Okay. Yeah, sorry, Andres. The line is not so good. But again, I mean, in terms of pricing, what we ran in our plan was between 65 and 70 total. This is real life price. Today, we are looking at the local price, what the refinery is paying for us, 66. This is Q1. Okay. Now, our guidance was a plan between $1 billion every day and $1. Look at the price range of realized pricing, 65 to 70, localized pricing. Local price, Q1, 66 today. In terms of M&A, I don't think you will see anything that will impact our planning during 2024. And as I mentioned before, we are basically active M&A wise, as have we been in the past, evaluating opportunities that are today in place. That mainly is one that was the question I don't remember from who before.

Thank you, Miguel. You're welcome.

Thank you. One moment for our last question, please. It comes from the line of Alejandro de Michelis with Jefferies. Please proceed.

Good morning, guys. Thank you for taking my call and congratulations on the call. Just one quick question, Miguel. You're talking about accelerating production, if you can, or M&A and so on. Can you talk about how you see potentially to bring in partners into your acreage, if that's something that in the current situation of Argentina, improving conditions in Argentina, that you could see feasible?

Hi, Alejandro. Yeah, thank you for your question.

I mean, yes, when we talk about M&A, we consider everything. As you know, I mean, we have today, our activity is concentrating in what we call the development hub. And the development hub is Aguada Federal, Baja del Palo Este, and Baja del Palo Oeste now became part of the development hub. So everything that we have in the north, particularly Aguila Mora, is a place that in the future, yes, we could consider to bring a partner to add capital. We are very well, I mean, we are recognized and we are very well positioned as a low cost, low carbon and reputable operator. yes when we look at m&a this is something that we could consider in the future that's great thank you you're welcome thank you and with that we conclude the q a session i will turn the call back to miguel galusio for final comments well guys thank you very much for participating for your question for for the support and looking forward to see you next quarter thank you ladies and gentlemen you may now disconnect