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

Thank you for standing by and welcome to VISTA's fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. I would now like to hand the call over to Alejandro Chernekov, Strategic Planning and Investor Relations Officer. Please go ahead.

Thanks. Good morning, everyone. We are happy to welcome you to VISTA's fourth quarter and full year 2024 results conference call. I am here with Miguel Gallucho, VISTA's Chairman and CEO, Pablo Verapinto, VISTA's CFO, Juan Garobi, VISTA's CTO, and Matias Weisel, VISTA's COO. Before we begin, I would like to draw your attention to our cautionary statement of slide two. Please, the advice that our remarks today, including the answers to your questions, may include forward-looking statements. These forward-looking statements are just 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 measures, such as adjusted WDA 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 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. 2024 was another outstanding year for Vista, marked by double-digit growth rates in production and adjusted EVDA, having delivered on guidance for both metrics. We also secured new drilling, completion and oil treatment and transportation capacity, which will underpin further growth in the coming years. I will kick it off by going over the results of Q4 and later a deep dive into the highlights of the full year. The fourth quarter of 2024 was marked by strong operational and financial performance, driven by new oil activity in our development hub in Vaca Muerta. Total production was 85.3 thousand VOEs per day, an increase of 51% compared to the same quarter of last year, and 70% compared to the previous quarter. Oil production was 73.5 thousand barrels of oil per day, 52% year over year, and 16% quarter over quarter. Total revenues during Q4 2024 were $471 million, 52% above the same quarter of last year. Lifting cost was $4.7 per DOE, almost flat quarter over quarter. Capital expenditure was $340 million, driven by 11 wells drilled and 13 wells completed during the quarter, plus $64 million in development facilities. Adjusted EVDA was $273 million, 5% below the same quarter of last year. If we net out the income generated by the repatriation of exports at the blue-chip swap rate, quarterly adjusted EVDA grew 27% year-over-year. Net income was $94 million, implying a quarterly EPS of $0.98 per share. deducting deferred income tax, adjusted net income during the quarter was $22 million. Pre-cash flow was $57 million during the quarter. And finally, net leverage ratio at quarter end was a solid 0.63 times adjusted EBITDA. During Q4, we record another quarter of double-digit production growth on a sequential and inter-annual basis. Total production at 85.3 thousand VOEs per day was 70% above the previous quarter and 51% above the same quarter last year. Production growth was driven by the acceleration of capital deployment in our core development hub. New well activities increased from 31 new wells in 2023 to 50 new wells connected during 2024. Twenty-five new wells were connected between mid-August and early December, driving our understanding production performance during the last quarter of the year. Oil production was 73.5 thousand barrels of oil per day following the same trend, 60 percent above the previous quarter and 52 percent above the fourth quarter of last year. Gas production increased 52 percent on an inter-annual basis and 27% on a sequential basis. In Q4 2024, total revenues were $471 million, a 52% increase year over year and 2% quarter over quarter, mainly driven by oil production growth. On a sequential basis, The relatively lower increase in total revenues compared to the 70% production increase reflects the normalization of oil inventories from below average level in the previous quarter, as well as the commissioning of all the value expansion pipeline. We require 70,000 barrels of oil for the line pack. Combining both effects, 280,000 barrels of oil production were not sold during the quarter. Realized oil price was $67.1 per barrel on average, down 1% on interannual basis and 2% lower on a sequential basis, mainly driven by a slightly lower international prices. Export realization prices were $66.6 per barrel, cosmetic, Realization prices were $67.8 per barrel, including volumes sold at export parity. During Q4, we continued to execute our export-oriented strategy, with an increasing amount of oil sold in the international market, driven by the production growth. We exported 3.6 barrels of oil during the quarter, 79% above the previous year. Additionally, 1.1 million barrels of oil were sold in the domestic market at export parity prices. Combining the sales to international buyers with the domestic buyers paying export parity, 73% of our total oil sales were sold at export parity prices. Lifting cost during Q4 was $36.6 million, implying a lifting cost per BOE of $4.7. On a unit cost basis, lifting costs was up 8% year over year. This increase was driven by inflation in U.S. dollars impacting pesos denominated contracts and a ramp up in oil field expenditures to accommodate our production growth. These effects were partially offset by the delusion of fixed costs as we continue gaining scale. Adjusted EBITDA during the quarter was $273 million 5% lower on an inter-annual basis. This reflects the fact that Q4 of last year included $81 million corresponding to the repatriation of export proceeds at the blue cheese swap rate compared to the $9 million during Q4 2024. Excluding this effect, adjusted EBDA spanned 27% on inter-annual basis. On a sequential basis, adjusted EBDA was down 12% reflecting a series of one-off and temporary factor of setting the 70% total production growth. Firstly, the normalization of oil inventories from the previous quarter and the commissioning of oil by line, which I already mentioned. Secondly, the increase in tracking expenditure, as tracking volumes increased from 12,000 to 20,000 barrels of oil per day, quarter over quarter. This impacted sales expenses with an increase of $25 million on a sequential basis. Finally, you should note that with this quarterly print, we have achieved our annual adjusted EBITDA guidance. During Q4 2024, operating activities cash flow was $369 million, reflecting a decrease in working capital of $133 million and an advance payment for ministering expansions of $27 million. Cash flow used in investing activities was $312 million, reflecting accrued capex of $340 million partially offset by $34 million decrease in capex related to working capital. Free cash flow during the quarter was therefore $57 million. Cash flow from financing activities reflects proceeds from borrowing of $836 million and the repayment of borrowings of $340 million. During Q4, we achieved a major milestone by pre-financing all the ramp up of CAPEC activities plan for 2025. Finally, cash at period end was $764 million and net leverage ratio stood at a very healthy 0.63 times adjusted VDA. I will now move to our full year highlight. During 2024, we achieved major milestones across all four strategic pillars. We have accelerated the development of our deep short cycle well inventory in Vaca Muerta. Solid productivity results have supported the expansion of our P1 reserve to 375 million barrels of oil equivalent, implying a 323% reserve replacement ratio. We continue to improve our peer-leading performance capabilities, driving total production to an average of 69.7 thousand VOEs per day during the year, up 36% compared to 2023. Listing cost was down 10% year-over-year for a total of $4.6 per VOE, reflecting our low-cost asset base and our continuous focus on efficiency. We also made solid progress on the sustainability front, recording a greenhouse gas emission intensity of 8.8 kilos of CO2 equivalent per VOE. a 44% reduction compared to the previous year on the back of the capital expenditure in decarbonization projects. Our total recordable incident rate was below our target of one for the fifth consecutive year, demonstrating our focus on employee and contractor safety. Finally, we continue to successfully execute our total shareholder return strategy. Adjusted EVDA expanded 25% compared to 2023 on the back of production growth and cost control. Our share price increased 83% from year end 2023 to year end 2024. P1 reserves increased 18% compared to 2023 for a total of 375 million BOEs estimated at year end 2024. This implies a total reserve replacement ratio of 323 and 339 for oil. Net additions were 82.2 million BOEs driven by activity in Bajada del Palo Oeste where we added 52 new wealth locations. Bajada del Palo Oeste where we added 34 locations and Aguada Federal where we added 15 locations. This results in a total of 400 book well locations in our P1 reserves. The certified present value at the 10% discount rate attributable to the company interest in P1 reserve is $4 billion, using a price assumption of $69.4 per barrel for oil, according to SEC guidelines. During 2024, we achieved significant operating milestones to continue driving profitability growth. We successfully ramped up our new well activity from 31 new well times in 2023 to 50 in 2024. This led to robust inter-annual production growth and delivery of our annual guidance for new well connections and total production. We increased our oil tracking transportation capacity to 37,000 barrels of oil per day, which was a key enabler to deliver our production growth plan. In turn, production growth led an increase in all exports. During 2024, we export 10.6 million barrels of oil, 29% above 2023 for a total of $748 million of net revenues. We also achieved a key milestone that will unlock further profitability growth going forward. We secured three drilling rigs and two frag sets, which enabled us to ramp up to 50 new waste connections in 2024, as well as guiding for 52 to 60 connections in 2025. We recently finished upgrading our oil treatment plants to a capacity of 90,000 barrels of oil per day. We have already identified projects to expand this capacity further, and will allocate capex to this effort during 2025. We also made cash contributions to fund the expansion of the Old Elbal pipeline, which is now complete. The pipeline is currently ramping up, and we expect it to reach full capacity by quarter end. As a reminder, Vista owns 32,000 barrels of oil per day of film transportation capacity in this pipeline. We have also partnered in Vaca Muerta Sur Company, securing an additional 50,000 barrels of oil per day of transportation, storage, and export capacity in the project. During 2024, we made solid progress in reducing the carbon footprint in our operations. We reduced our total scope one and two emissions by 28% compared to 2023, even as we increased total production during the year. Measured by intensity, at 8.8 kilograms of CO2 per VOE for 2024, the decrease was 44% year-over-year. Our single-digit intensity placed Vista well within the first quartile of global oil and gas operation, materializing our ambition to become a low-cost, lower-emissions upstream producer. To achieve this, we increased the offtake of renewable energy in our operation, replacing gas-fired power generation. This includes the start-up of the first gas compression station powered by renewable energy in Latin America. We also made improvements in vapor recovery units to improve reliability and construct a gas-fired line from Aguada Federal to Bajada del Palo Oeste to increase gas evacuation capacity. Moving to nature-based solution front, our subsidiary ICAT made solid progress across all verticals. We planted 1,800 hectares combining afforestation and reforestation projects in Corrientes and Formosa provinces. We also completed critical facilities, including fire protection, fences, water wells, and housing in our forest conservation project in Salta. Finally, we increased the amount of hectares under management in our regenerative livestock and agriculture project in San Luis, Cordoba, and Buenos Aires. During 2024, we have continued to deliver strong financial metrics, resulting in superior total shareholder returns. As a CDBDA increase by 25% year-over-year to $1.1 billion, above the midpoint of our annual guidance range. ROSI remains strong at 24%. Specifically, as it is measured at ERN, it was negatively impacted by the issuance of $600 million of debt, which will be applied to high-return new wealth capex during 2025. Without such effect, ROSI in 2024 will have been closer to 30%. The strong operational and financial performance during the last three years allow us to deliver an average ROCI of 35%. EPS per share increased 18% year-over-year to $5 per share, reflecting solid bottom-line performance in 2024. Moreover, we continue to maintain robust financial ratios. We successfully tapped to the local and international debt market to fund The acceleration of our CAPEX plan, maintaining a healthy net leverage ratio at 0.6 times adjusted EBITDA and gross leverage ratio of 1.3 times adjusted EBITDA. Finally, we repurchased $100 million of company stock during 2024 and an average price of $48 per share. This outstanding performance across all financial metrics was recognized by the market. and is reflected in the evolution of our share price, which increased 83% from year end 2023 to year end 2024. I will make some closing remarks before we move to Q&A. During 2024, we completed another year of robust operational and financial performance, having delivered again on our annual guidance. We record a solid 36% increase in total production and a P1 reserve replacement ratio of 323%. We updated our 2025 targets after securing our third drilling rig and second frag set. This allow us to bring forward the target we have initially planned for 2026 to 2025. Additionally, we secure enough oil treatment, transportation, and export capacity to deliver on our updated 2025 production target and our 2030 mission. We made significant reduction in greenhouse gas emissions through solid execution of decarbonization projects and made good progress in the development of our MBS portfolio. We recorded a strong financial result with an adjusted EBDA of $1.1 billion and deliver robust return measured by adjusted EBDA margin and ROSI. We also deliver on our superior total shareholder return proposition with an 83% stock price appreciation and a share repurchase of $100 million. In summary, 2024 has been an outstanding year for our company. A final comment from my side, I am very proud of our staff, their commitment and passion. We have always been key to our success. Many thanks to all of them. Operator, we can now move to Q&A.

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. We ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question. comes from Bruno Montanari of Morgan Stanley. Your question, please, Bruno.