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

Good day, and thank you for standing by. Welcome to the second quarter 2024 earnings webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, it 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 1-1 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 Chanaco. Please go ahead.

Thanks. Good morning, everyone. We are happy to welcome you to VISTA's second quarter of 2024 results conference call. I am here with Miguel Gallucho, VISTA's chairman and CEO, Pablo Beravinto, 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 accord 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. 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 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 tickers are VISTA in the Bolsa Mexicana de Valores and BISD in the New York Stock Exchange. I will now turn the call over to Miguel.

Thanks, Ale. Good morning, everyone, and welcome to this earnings call. The second quarter of 2024 was marked by a strong inter-annual and sequential growth across key operational financial metrics, driven by new well activity in our development hub in Vaca Muerta. Total production was 65.3 thousand BOEs per day, an increase of 40% year over year and 19% quarter over quarter. Oil production was 57.2 thousand barrels per day. 46% above the same quarter of last year. Total revenues during the quarter were $397 million, a 66% increase compared to the same quarter of last year. Lifting costs was $4.5 per BOE, 6% down year over year. Capital expenditure was $346 million, mainly driven by 14 wells drilled and 14 wells complete during the quarter, reflecting the acceleration of capital deployment in new wells activity and $63 million in development facilities. Adjusted EVDA was $288 million, 90% above year over year, driven by robust revenue growth and lower listing cost per VOE. Adjusted net income was $22 million, implying a quarterly adjusted EPS of $0.7 per share. Pre-cash flow was $8 million during the quarter, as higher cash flow investing driven by increase in CAPEC activity was financed with robust cash flow operations driven by the boost in adjusted VDA. Net leverage ratio at quarter end was a solid 0.6 times adjusted VDA. I will now deep dive into our main operational financial metrics of the quarter. Total production during the quarter was 65.3,000 VOEs per day, our highest quarter ever. Production was 40% above on our interannual basis, reflecting the ramp up of our new well activity as we tie in 48 new wells during the last 12 months. On a sequential basis, production growth was 19%, driven by the connection of four paths in Bajada del Palo Este and one path in Bajada del Palo Este between the second half of Q1 and the third half of Q2. Oil production was 57.2 thousand barrels of oil per day, an interannual growth of 46% and a sequential growth of 21%, reflecting that the share of oil in our new wells is above our base production. We expect this trend to continue going forward as we continue to drill in our oil-prone development hub, especially Bajada del Palo Este. Natural gas production increased 70% year over year and 5% quarter over quarter. Based on our new well activity plan, Our model shows that production is forecast to keep growing on a double-digit basis over the next two quarters, leaving us on track to deliver 85,000 BOEs per day in Q4. We also reiterate our guidance of 68,000 to 70,000 BOEs per day on average for the full year, noting that we will likely be on the upper end of this range. During the second quarter of 2024, we continue to make solid progress in the execution of our annual work program. We tie in four well paths during Q2, two in Embajada del Palo Oeste, one in Embajada del Palo Este, and one in Agueda Federal for a total of 14 new wells. We connected 25 new wells during the first six months of the year. leaving us on track to deliver our activity guidance, which is between 50 and 54 new wells for the year. We also achieved a major milestone in terms of production capacity expansion by signing a contract with SLV for the second frag set. We expect the set to be fully operational for us towards year-end, adding capacity to the three high-spec drilling rigs and one frag set we are currently operating. This new contract will give us additional flexibility to potentially accelerate our activity as of 2025. During Q2 2024, we have made solid progress in securing additional oil treatment and minstering capacity for our growth plan. Within it, our oil treatment plant in Entre Lomas expanded to a total capacity of 85,000 barrels of oil per day. We also finalized the connection of our development hub to the Vaca Muerta Norte oil pipeline, doubling our capacity to export oil to Chile to a new total of 12,500 barrels of oil per day. Finally, we initiated a project in our oil treatment plant to expand the tracking capacity from 22,000 to 37,000 barrels of oil per day. We expect this to be fully operational by the end of Q3. This will provide us with incremental takeaway capacity that is key while the pipeline system is being expanded. In Q2 2024, total revenue soared to $397 million, a 66% increase compared to Q2 2023, and then 25% above the previous quarter, driven by strong production growth, as well as an increase in realization prices. Realized oil prices was $71.8 per barrel on average, up 12% on interannual basis. Realized oil price in the domestic market was $73.7 per barrel, including 42% of domestic volumes sold at expropriety link pricing. Net of tracking costs domestically realized oil prices were $68.9 per barrel. During Q2 2024, we tracked 23% of the volume sold in the domestic market. In the export market, our realization price was $76.6 per barrel. We exported 1.9 million barrels of oil, 22% above the previous year, capitalizing on the strong growth of our production. Combining sales to international buyers and domestic buyers paying export parity 64% of our total sales were sold at export parity. Lifting cost was $26.7 million for a quarter, implying a lifting cost per BOE of $4.5. The 31% increase in absolute level compared to the same quarter of last year was driven by higher costs in gathering, processing, compression, and power generation to accommodate current production and future growth. On a unit cost basis, our lifting cost was down 6% compared to the same quarter of last year, reflecting our low-cost operating model, now fully focused on shale oil. We expect a dilution of the fixed component of this incremental cost as we continue to ramp up production. Based on our annual work program, our model shows we are on track to deliver on our guidance of $4.5 per barrel for the year. Adjusted VDA during Q2 2024 was $288 million, an increase of 90% year-over-year, mainly driven by strong revenue growth. On a sequential basis, adjusted VDA increased by 31%. Adjusted VDA margin was 70% during the quarter, an interannual increase of 7% points reflecting the benefit of the economy of the scale as we deliver robust revenue growth while decreasing lifting costs per VOE. Net back was $48.5 per VOE, a 35% increase year over year reflecting the higher prices and increase in oil to gas ratio for our sales. Free cash flow during the quarter was $8 million Even as we accelerate CAPEX, a strong adjusted VDA generation boosted cash from operating activities. Operating activities cash flow was $281 million in line with adjusted VDA as advance payment for ministry expansion of $36 million were funded by a decrease in working capital of $33 million. Cash flow used in investing activities was $273 million, reflecting CAPEC of $346 million for the quarter, partially offset by the $74 million decrease in CAPEC-related working capital. Cash at period N was $328 million, as cash from financing activities generated $168 million. Net leverage ratio stood at a very healthy 0.56 times adjusted VDA at quarter end. I will now summarize the key takeaways of today's presentation. During Q2 2024, we continue delivering a strong execution of our drilling and completion plan. We tie in 40 new wells in line with our annual guidance for a total of 25 during the first semester of the year. This generated a robust production increase in Q2, both on an inter-annual and a sequential basis. A strong revenue generation driven by robust web productivity and improved reliable prices, showingly with the focus on cost efficiency, boosted adjusted EVDA, which in the 12 months surpassed $1 billion for the first time in our company history. We also achieved measure milestones in preparing our company for future growth, expanding our oil treatment capacity, and connecting our operation to the Vaca Muerta Norte pipeline. We also secure a second FRACset, which adds flexibility to potentially accelerate our short cycle hard return capital program as of 2025. This reflects the constructive view we have on the dynamics of our industry, both globally and domestically. and is underpinned by our strong conviction on our ability to deliver value to our shareholders. The first semester has ended on a high note for us and put us on track to deliver on our annual guidance. Before we move to Q&A, I would like to thank our shareholders for their continued support and congratulate the entire VISTA team for their outstanding performance. Operator, please open the line for Q&A.