Vista Energy - Earnings Call - Q1 2022

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by, and welcome to Vista's First Quarter twenty twenty two 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. It is now my pleasure to introduce Strategic Planning and Investor Relations Officer, Alejandro Chernigov.

Speaker 1

Thanks. Good morning, everyone. We are happy to welcome you to Vista's first quarter twenty twenty two results conference call. I'm here with Miguel Gallucho, Vista's Chairman and CEO and Pablo Ella Pinto, 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 could cause actual results to be materially different from expectations contemplated by these remarks. Our financial figures are stated in U. S. Dollars and in accordance with International Financial Reporting Standards, IFRS.

However, during this conference call, we may discuss certain non IFRS financial measures such as adjusted EBITDA. Reconciliations of these measures to the closest IFRS measure can be found in the earnings release that we issued yesterday. Please check our website for further information. Our company Vista is associated with the Capitala variably organized under the laws of Mexico registered in the Bolsa Mexicana de Valores and the New York Stock Exchange. The tickers of our common stock are VISTA in the Vuelta Mexicana de Valores and BIST in the New York Stock Exchange.

The ticker of our warrants is VTW408A. I will now turn the call over to Miguel.

Speaker 2

Thanks, Ale. Good morning, everyone, and thank you for joining this earning call. I am delighted to share with you our results of the 2022, showing our robust performance across all key operational and financial metrics. During Q1 twenty twenty two, production averaged 43,900 BOEs per day, a a 29% increase year over year. Oil production was up 35% year over year boosted by solid well performance in Bajada del Palo Verde.

Total revenues in Q1 twenty twenty two were $207,900,000 a 79% increase compared to Q1 twenty twenty one, driven by the production increase and stronger realized pricing. Lifting costs per BOE was $7.8 for the quarter in line with guidance for the year. Adjusted EBITDA was $127,100,000 implying a solid adjusted EBITDA margin of 61%. Capital expenditure for the quarter was $80,600,000 reflecting drilling activity in two parts and the completion of our first two wells in Bajada Del Palo Este. During Q1 twenty twenty two, we generated positive free cash flow of $33,000,000 driven by robust cash flow from operations.

Additionally, we reduced gross debt by $35,000,000 Adjusted net income of the quarter was a solid $39,100,000 We will now deep dive into the main operational and financial metrics. Total production during Q1 twenty twenty two was 43,009 BOEs per day, up 29% interannually. Production growth continues to be driven by our flagship development in Bajada Del Palo Este, which now represent 70% of our total oil production. In this quarter production was boosted by pads number nine and number 10. These pads were tied in Q4 twenty twenty one and are now producing in line with our type curve.

During Q1 twenty twenty two, gas production increased 9% year over year mainly driven by associated gas from Bajada Del Palo Oeste. As shared with the market last week, we are excited with the successful result of our first two wells in Bajada Del Palo Oeste corresponding to path number 11 next to our flagship development in Bajada Del Palo Oeste. Both wells targeted La Cocina landing zone of Vaca Muerta and were completed with an average of 46 stages per well. After sixty days since first oil, the average peak production was about 2,400 BOEs per day per well. This result continues to prove our track record as a top back and forth operator and the high quality of our assets.

More importantly, the location of the wells close to the eastern border of Bajada Del Palo Este confirms our geological model. At the same time, it points to the continuity of the play into Bajada Del Palo Este where we hold further acreage. At number 11 is the first phase of our five well pilot program. The next three wells will be drilled in two parts to the east as shown on the map. Upon completion of the first pilot, we will have a clear basis to upside our portfolio of ready to drill wells in Vaca Muerta.

In Bajada Del Palo Oeste, we have finished drilling pad 12 And 13, which will be completed during Q2. We are on track to deliver 24 wells tie in by year end as per guidance. Total revenues in Q1 twenty twenty two were $207,900,000 a strong inter annual increase driven by the boost in oil and gas production and better realized prices. Realized oil prices for the quarter averaged $64.1 per barrel, up 41% year over year and 6% quarter over quarter. Sales to export market accounted for 33% of oil volumes having exported two cargoes in the quarter or 1,000,000 barrel of oil in total.

These sales contracts were executed with an average Brent of around $85 Commercial discounts to Brent were around $1 per barrel on average. The domestic market accounted for 67% of oil volumes in Q1 twenty twenty two. Domestic crude oil averaged $57 per barrel continuing to show a gradual improvement over the last six quarters. March sales to domestic market were close to $60 per barrel on average. We have already locked in 100% of April and May sales.

Regarding export, we have sold one cargo in April with Brent about $100 We forecast to sell between one and two additional cargoes during the quarter, which should enable us to significantly increase our revenues during Q2. With domestic prices around $60 mark, we estimate a realized oil price above $70 per barrel in Q2. Realized gas prices increased 40% year over year to $3 per million Btu, mainly boosted by the planned gas price of $2.7 per million Btu and industrial prices also of $2.7 per million BTU. In addition, 10% of our gas volumes were sold to the export market for a realized price of $5.9 per million BTU driving 10% quarter over quarter increase in average realized gas prices. Total lifting cost for the quarter was $30,800,000 We maintained lifting cost virtually flat quarter over quarter despite pesos FX appreciation in real time.

Lifting cost per BOE was $7.8 up 3% year over year driven by the acquisition of Aguada Federal and Bandurria Norte and partially offset by the incremental production from Bajada del Palo Este, which continues to absorb our fixed cost base. We started executing our lifting cost optimization program in Aguada Ferral and Mandurianorte. So far, we achieved a 58% cost reduction in this block from $2,400,000 at 50% working interest in Q4 twenty twenty one to $2,000,000 at 100% working interest in Q1 twenty twenty two. We expect further appreciation of the pesos in real term in the coming months. Our current outlook for Q2 twenty twenty two is around $8 per BOE.

However, driven by the cost saving in Aguafera and Mandurianorte in combination with the incremental volume from Bajada del Palo Verde, we forecast a lifting cost of $7.5 per BOE for the full year and this is in line with guidance. Adjusted EBITDA for Q1 twenty twenty two was $127,100,000 This reflects an expansion of 118% year over year driven by a strong revenue growth and stable cost. Adjusted EBITDA improved 9% sequentially, even though it does not include operating income generated by the JV with Trafigura, which added approximately $4,500,000 in Q4 twenty twenty one. Our adjusted EBITDA margin was 61% improving by 11 percentage points year over year and two percentage points quarter over quarter. Net back was $32.2 per BOE, a 69 inter annual increase.

This was driven by the increase in realized oil price to $64.1 per barrel and an increase in the oil to gas mix with a stable cost per BOE. Oil is now 81% of our total production driven by the growth in Bajada Del Palo Oeste. During Q1 twenty twenty two, we recorded a strong financial performance with $33,000,000 of positive free cash flow and $35,000,000 of gross debt reduction. Cash flow from operating activities was $112,900,000 reflecting a strong EBITDA generation. Change in working capital for the quarter was negative at $21,000,000 and is the main driver behind the sequential reduction in free cash flow.

In Q1 twenty twenty two, we normalized the collection cycle from our domestic crude off takers with whom we have reached an agreement in December 2021 to accelerate payment. Cash flow used in investment activities excluding the payment to Wintershall for the acquisition of Aguada Feral and Maduria Norte was $79,900,000 The main CapEx drivers in Q1 twenty twenty two were drilling activities in PAT 12 And 13 in Bajada Del Palo Este and the completion of the PAT 11 in Bajada Del Palo Este. Cash flow used in financial activities was $50,100,000 mainly driven by the payment of $45,000,000 of principal of our syndicated loan and $8,000,000 of our bond Series four. Debt stood at $576,200,000 at the end of the period, down 6% sequentially. We have already achieved our debt reduction target for the year.

Net leverage ratio has decreased from three times adjusted EBITDA at the end of Q1 twenty twenty one to a healthy 0.8 times adjusted EBITDA at the end of Q1 twenty twenty two. Moving to slide 10, I will present an update of our guidance for the year. Regarding activity, we tied in two shale oil wells during Q1. This is in line with guidance leaving us on track to tie in 24 wells for the year. Total production was 43,900,000 BOEs per day in Q1 twenty twenty two in line with plan.

We maintain our 2022 guidance of 46,000 to 47,000 BOEs per day, a 20% increase vis a vis 2021. As Perio discussed, lifting cost for the quarter was slightly higher sequentially. We were expecting this increase due to the FX appreciation in real terms and the consolidation of the recently acquired assets. The ongoing cost reduction initiative in Aguada Ferra and Mandurria Norte and the increase in production in the second semester will be the main drivers to review lifting cost back to $7.5 per BOE for the year in line with guidance. We are raising our adjusted EBITDA guidance to $625,000,000 an increase of $50,000,000 compared to the original guidance.

This reflects an assumption of $64 of realized oil price for the year in line with Q1 twenty twenty two prices. We see additional upside to this EBITDA guidance if the current international oil prices scenario prevail. We maintain our original CapEx guidance of approximately $400,000,000 noting that we are currently evaluating additional activity in our high return short cycle shale oil projects for the second semester. Regarding gross debt, during Q1, we essentially achieved our target of gross debt reduction for the year. We are currently analyzing options to make further debt reductions and additional drilling activity given the additional free cash flow expected due to higher realized oil price.

Before moving to Q and A, let me share with you that we are making good progress in our sustainability drive. We are timely executing projects to reduce greenhouse gas emission intensity by 25% in 2022 compared to 2021. We are also making good progress in the execution of the Project Directory to achieving our net zero ambition in 2026 with carbon offset from nature based solutions. We will publish our sustainability report next month where we'll present more details on our ESG progress. In this edition, we are including TCFD disclosure, which is key for shareholders to understand our governance strategy and risks related to climate change.

In Q1 twenty twenty two, we tie in our first two wells in Bajada Del Valloitte, which showed robust production levels. This is very important milestone as it proved our geological model and the continuity of our play into the Bajada Del Palo Este block. On the financial front, we have another positive free cash flow quarter and recorded adjusted net income of $39,100,000 Additionally, we further strengthened our balance sheet by reducing gross debt by 6% in one quarter. In Q1 twenty twenty two, our operation and our financial performance was solid setting us on track to deliver on 2022 guidance. We have raised our adjusted EBITDA guidance by $50,000,000 to $625,000,000 for the year.

Early this week, we held our Annual Shareholders Meeting in which we obtained approval to initiate our first share buyback program for $23,400,000 This is an important step in our strategy to deliver shareholder return. I will take this opportunity to also thank our investors for their continued support and our incredible team at Vista for their hard work and continuous commitment. And with that, operator, please open the line for Q and A.

Speaker 3

Certainly.

Speaker 0

Our first question comes from the line of Guillermo Levy with Morgan Stanley.

Speaker 4

Hi, good morning everyone. Congratulations on the results and thank you for taking my questions. My first question is on crude exports. I wanted to get more color on your expectations for crude oil exports into the coming quarters and years from both Vista and if you have any thoughts on Argentina too? And also if you could share with us the current amount of spare capacity in the Argentine oil transportation system, Just for us to get an idea of how much time does the company and the country have before it can become an issue.

And then the second question, I just wanted to pick your brain and see if you have identified any increase in the appetite from international companies more recently to accelerate the drilling campaigns in Vaca Muerta. Thank you.

Speaker 2

Thank you, Guilherme, for your question, and thank you for the congratulations. So starting with the oil exports for the second quarter, we continue to see that in the second quarter, we'll be able to export 1,500,000 barrels, barrels and we continue also to see that this 1,500,000 barrel will continue exporting during the rest of the year. We were able to export around 1,000,000 in the third quarter. We already have €1,000,000 for sugar that we're going to export in the second quarter and there's a third cargo that we can allocate on the second quarter. So we are very, very confident on that.

And I think this is the result that you could see in Q2. Your next question was related to the evacuation capacity. So actually, the Vale main trunk pipeline that transports the crude oil between Neuquina Basin and Bahia Blanca is running around 265,000 BOE per day, okay? And actually have an spare capacity, I will say, between 1015%. By the end of the year, they are planning to add additional capacity of around 15,000 to 20,000 barrels per day.

They are planning to use drag reduction agent to reduce friction and that will add additional capacity toward the end of the year. And also, we understand that the field plans to add one more pipeline to double the capacity in a step toward 2024. And the first step is going to be probably Q3 or 2023. So if that plants go ahead at this plant, we should be okay to export I mean to continue exporting what we plan to export and taking in consideration the growth that we are having in Vaca Muerta, we should be in good shape.

Speaker 0

Thank you. And our next question comes from the line of Walter Cervizio with Santander.

Speaker 5

Hello, good morning. Thank you for taking my questions and congratulations for the results. I would like to ask you if you could give us an idea of how is the local price dynamic going in this high prices, global speaking of the oil? Are you seeing conversations to increase prices of the palm that could affect the oil price locally? Whatever thought you could give us on that would be great.

And the other thing is that if you expect cost pressures in the future given the global inflationary trends across the economy and I don't know in particular in the oil industry? That's from me. Thank you.

Speaker 2

Thank you, Walter, for your question. And before we start with your question, probably adding to Guillermo's question that I skipped regarding the appetite of Vaca Muerta of international players. So Guillermo, we see appetite in international players as we move particularly the ones that are today in Vaca Muerta and active. We see them having growing plan. And I think one fact that is showing that is that production have grow have increased 40% in one year from 160,000 barrels to 220,000 barrels.

This is the running rate. This is a 40% increase in last year. This is not coming from Vista. It's the total production of Vaca Muerta. So clearly, the rest of the players are having appetite.

Walter, going to your question in terms of prices. So as you see, I mean, we have upgraded our EBITDA from $575 to $625 The $575 EBITDA number was done with a write price of $60 dollars and we are seeing an average of $64 we are expecting an average of $64 going forward in the six point two five dollars that we have signaled. Now the $64 the average $64 is the price that we have in Q1. So in Q2, we are seeing local prices at least of $60 We are coming from $57.4 And airport prices, basically the point that we have today is the one cargo that we already closed that was a Brent of $103 So you should expect realized prices around $95 So that is for pricing. Average for Q2, I will set, we could estimate that we will be around €70,000,000 So yes, I mean, all the movement in prices is positive.

The local price, as you know, depend somehow linked to the pump price. So what will happen with the pump, I cannot I can expect that logically that we will see further increase. Increases that we have seen in the beginning of the year so far in pump is 8% in dollars. So we should expect to see further prices increases at the pump. That will be the logical thing to happen.

If we are seeing pressure of cost inflation, yes, definitely we do. We are seeing cost inflation on the OpEx side. This is linked to the real peso appreciation in Argentina. We're still keeping our $7.5 per barrel lifting cost mark, and we have restated today on our guidance. And that's really the main effect that is allowing us to do that is, first of all, I mean, are fighting that inflation in every corner.

We have an organization that is doing that, and we've been we are pretty good doing that. But also and the main effect that allow us to maintain that guidance is the fact that we are adding more unconventional production. And of course, that dilute our fixed lifting cost and that's why we are maintaining that guidance. We also see pressure from our main service our main oilfield service providers that will be on the CapEx side. But I mean, that is a matter of how we move forward and how we negotiate and how many options we have.

But yes, we are seeing cost pressure in all fronts.

Speaker 5

Thank you very much.

Speaker 2

Do we have any further questions?

Speaker 0

Yes. I'm showing our next question comes from the line of Regis Cardoso with Credit Suisse.

Speaker 3

Hi, good morning. Thanks, Miguel, Alejandro for the call. Congratulations on the results. Two quick follow ups from my side and then two questions. The follow ups, one on lifting cost, dollars 7,800,000.0 currently.

So you said you plan to reach the objective of 7.5%. So I understand you can still reduce costs from here. Just wanted to understand how do you balance this between getting a higher cost base in Aguada Federado and Bandurria Noorte versus the cost inflation we've discussed, right? I think the inflation we're living through now has been a little bit of a surprise for everyone. Wanted to get a sense of how much you're getting affected by this.

The other follow-up is just quickly on the realized export prices. Just wanted to get a sense of what should we compare export prices to? Do you price lagging one month? Because the implied price in the first quarter seemed relatively low compared to Brent prices. Just wanted to get a sense why is that?

And apparently, will be a significant improvement for the second quarter. If you want to tackle those two, Miguel, and then I just follow-up with the other two quick ones.

Speaker 2

Regis, starting for the second one that is quite straightforward. I mean, you can expect a lack of two months on the export parity on the export prices. And that's probably the effect that are you seeing. Now to give you probably a data and of course, I mean, you remember that the question is quite simple. I mean, we have Brent prices and the discount on export tax is 8% plus the commercial discount.

But as you have seen, we have been reducing from our first export of $5 to toward $1 sometimes less than $1 So this is how you have to calculate. Then for what you see in the quarter, yes, you can see a lag of two months probably. And that, of course, going to somehow to create a bit of noise on the prices that we are seeing. But for example, we have one cargo that we sport in Q2 that was done at $104 I think and the realized price was $95 okay? So I'm giving you that data.

This is the cargo that we sport in the first part of Q2, and we have two more to go, okay? So that is the second question. The first question, I don't know if I really understand it, but

Speaker 3

so just wanted to get a sense of how much of the cost lifting cost reduction could come from efficiency gains in Aguada Fidel and Bandurria North? And how much could it increase from an inflation perspective?

Speaker 2

Okay. So from Bandurria North is not producing, okay? So Aguada Federal today, yes, we will see a reduction, a big reduction because we are laying a 10 kilometer pipeline and today we are tracking. So today we have in Aguada Ferral a core lifting cost of probably $30 per barrel, it will come down toward the end of the year to $10 per barrel. Now this is in 500 barrels of oil per day of production, okay?

So the effect in the total production is still small. So it's not really something that is really going to move the needle. Now on the OpEx side, we are getting a lot of pressure. And what we are doing is to fight that pressure of the FX rate with efficiencies. And I think in absolute value, we will not be able to reduce that FX rate or to couple that to neutralize the effect rate just with efficiencies.

So part of the fact that we are part of the things that allow us to maintain the 7.5 is the additional volume that come from the unconventional production that we are going to add during the year that is unconventional that doesn't have a lifting cost of $7.5 per barrel. We have a much lower lifting cost. Therefore, we dilute our fee cost and that is what allow us to maintain the guidance. I hope so that is clear.

Speaker 3

Very clear, Miguel. Thanks so much. If I may, just two quick ones on the investment side. In this CapEx plan of $400,000,000 how many rigs and how many pads are embedded in this plan? And whether you continue to you plan on continue to drill in Bajada Del Palo Este after the recent results?

Speaker 2

Okay. So we have in the plan, we have 1.5 rigs, okay? This is the actual plan. With that actual plan, basically are going to drill 24 wells. This again is the actual plan.

We are looking toward we will review that toward the middle of the year. It's clear that we are generating better EBITDA, clear that we are generating more cash. So towards the second part of the quarter, one decision that we are going to make if we add additional activity and also if we want to further reduce debt. The 24 wells that we are going to tie in are two from Baja Del Palo Oeste, 16 from Baja Del Palo Oeste, four from Aguaja Ferral that are back. So these are wells that are already drilled that we are going to basically complete and tie in and two for an Aguilar Mora.

This is the 24 that we have today in our plan.

Speaker 3

Very clear. Thanks so much.

Speaker 2

You're welcome.

Speaker 0

Thank you. And our next question comes from the line of Alejandro DeMichelis with NAU Securities.

Speaker 2

Hello, Alejandro.

Speaker 0

Alejandro, please check your mute button.

Speaker 2

Hello? Can you hear me now? Yeah. We we listen to you, Alejandro. No.

Yes. Okay. That's great. So well, first, thank you very much for taking the call and congratulations. Just I wanted to follow-up on the situation of accelerating activity.

So could you please give us some kind of feeling of what are you thinking about doing if you think you have enough money and you like what the outlook is, please? Yes, Alejandro, that is very simple. I mean, if we decide to add activity, it will be most likely one part in Bajada Del Palo Este. We could also look at Agua Feral that we today perceive Agua Feral as a continuation of a higher value RTE as per today information that we have. But it's going to be most likely, if we add, it's going to be one more part.

Are you there, Alejandro? Hello?

Speaker 0

Okay. Something seems to be wrong with this line. We'll move on. Our next question is from Andres Cardona with Citigroup.

Speaker 2

Hi, good morning everyone. Congratulations for both the results and the successful drilling at Bajal Palo Este. Let me start from there. Do you have plans to drill the East Side of Bajal Palo Este after the good results of Bajal sorry, do you have plans to drill the East Side of Bajal Palo Este after the positive results you have at Bajal Palo Este? And the second one is, could you consider more deals like the ones you did with Trafigura or even the incremental cash flow you're ready to accelerate by your own?

And maybe why not do both, right? Or how to balance this potential better return that you can get because of higher prices and accelerate in both ways. So I just wanted to hear your thoughts about these possibilities. Thanks. Thank you very much for your question.

So starting with Bajada del Palo Este. So let me tell you first about Bajada del Palo Este that I think is important to understand. So we have a delineation plan of five wells in Bajada Del Palo Este from which we drilled the first two wells, as you said, on the of our Bajada Del Palo on the east of our Bajada Del Palo Este and the west of the Bajada Del Palo Este. These two wells that we completed in Q1 were two well of around 2,250 meters. We put in that 46 frac stages and we saw initial production around 2,400 barrels per day.

This production is a fantastic production and it basically proves expectation or proves our geological model. And proves our geological model mainly in two parameters. One is portal pressure and the other one is API gravity. The API gravity of those wells were around 30 API. And also, I mean, this for Vaca Muerta is a fantastic news, but because it proved that we can have this kind of productivity with 30 API gravity wells.

So this somehow is very encouraging. So as per your question, yes, of course, this is proving that our East Side Of Vajada Del Palo Verde is good, but also is proving that in that area where we drilled that path, we probably, I would say, cannot around 50 locations within the West Side Of Bajada Del Pado, very close of the path that we drilled, okay? So very good news, very encouraged about that. What is left is for us to drill another three wells. We will probably place a path toward the center of the block, so toward east.

And then probably we will drill farther east one more well just finish assessing the opportunity, the complete opportunity of Vajray Del Padoeste. Any other question?

Speaker 0

Yes. Our next question comes from the line of with Dalliance.

Speaker 6

Hi. This is with Valens. Thanks for taking my question. I have three questions, sorry for the extension that they should be rather quick. So first, looking at implied royalty rates for the quarter, it looks higher than the 12% for unconventional wells.

Are there any specific royalty rates for some of the wells that we are missing?

Speaker 2

Oriana, sorry. We are having a hard time listening to you. Can you speak slowly and because the line is not so good, so I can get the question.

Speaker 6

Yes. I'm I'm sorry. Do do you hear me better now?

Speaker 2

Yes.

Speaker 6

Okay. So my first question was around royalty rate. When we look at the implied royalty rates for the quarter, it looks higher than the 12% for the unconventional. So just trying to figure out if there's any specifics that we are missing.

Speaker 2

Okay. All right. So look at it. This is a mix of the 12% that we have in unconventional plus 15% that we have on the conventional. So the calculation should be quite straightforward.

So I'm not sure if that's different between 1512% is what you're seeing. But I mean happy to follow-up with Alejandro on that one if you want to have more detail.

Speaker 6

That sounds good. Maybe if we could move to the following one. Just seeing global industry trends that are pressing on availability and cost of rigs, do you expect this to have a particular effect on CapEx per well or the speed of your development plans post 2022 or anything in particular for Vista that we should have in consideration?

Speaker 2

No, really, I mean, we as I mentioned to you, on the CapEx side also we would have oil oilfield services contract pressure. We have contract in place. So it will be more of a theme for the future. And then we will have probably inflation from wages and other things. So we will have to deal with that.

In terms of the rate, we continue, as I said before, with the 24 wells. Just to have an idea because you saw in Q1 that we shut in two wells in Bajada Del Palo Oeste. Now Q2, we should see around eight wells coming in from Bajada Del Palo Oeste. Q3, another four, eight wells four from Bajada Del Palo Oeste and four from Agua Serial. These are the DACs that we are going to complete at Dahin.

And Q4, we should expect another four wells from Bajada Del Palo Verde and two wells from Aguila Mora, okay? So this will complete. This will be the pace and the velocity where we complete the plan that we have outlined so far. And of course, this is done with 1.5 rig. So also we will evaluate the possibility of adding one part toward the second part of the year, but that has not been decided yet.

Speaker 6

Okay. That's perfectly clear. Thank you. And just one last one. We have heard some rumors about a potential new law that could allow exporters to keep some sort of free use reserve offshore.

Just wondering what is your take on this? Do you see this with some solid ground or for the time you know you immerse?

Speaker 2

Oriana, yes. So yes, we have plenty of discussion on that. It's clear for the country that this is a win win situation if they allow to flexibilize and how cross border moving of proceed. So I understand the minister is somehow positive with that and favorable with that. It's a win win situation for countries and the industry.

So I will not comment on the likelihood of that to happen, but I think it makes a lot of sense.

Speaker 6

Perfect. That sounds great. Thanks for taking the question. And again, congratulations for the results.

Speaker 2

Thank you, Oriana, for being present.

Speaker 0

Thank you. And our next question comes from the line of Jorge Maro with Fundamental.

Speaker 7

Yes. Hello. My question is regarding Baja and Baja Estee and if you can comment on the results so far relating to your long term plan. I mean, given the now that you have completed these wells, do you have any change on that plan? Or is it going negative?

What if you can comment on how that's going be lifted? Thank you.

Speaker 2

Thank you, Jorge, for your question. So I mean, for Vajada De Valoeste, the first thing that we need to do is to complete the delineation. So we just complete the first part of that. And I will say the easiest part of that because we complete the first part very close to Bajada Del Palo Oeste. It is a fantastic news because allow us to demonstrate that in that block surrounding where we did the first part, as I mentioned before, probably we have already additional 50 locations.

Now before to deciding what will be our strategy to really tackle the full block, we need to finish the delineation. After that, we could decide if we want to be alone, if we want to bring a partner, if you want to sell part of the block or whatever. But so far what we need to do is to finish the completion of the delineation that will as I said before, it will take additional three wells. So far, we believe that one is going to be in the middle of the block and two and then one path very farther east, okay? As we move farther east, we know that was one of the formation that will not be present.

So we need to really try to recalibrate and demonstrate how the the actual model that we have is working exactly with the reality. So that will be the first step. And then we can decide commercially what is the strategy to develop to fully develop Palo Verde. As you know, we have today in our well inventory eight fifty wells, okay? That's coming from Bajada Del Palo Oete and Aguada Ferral.

So we have really more reserves that we can discuss at the pace that we are going. So it will be plenty of options for us to develop ahead of Istik.

Speaker 7

Thank you.

Speaker 2

You're welcome, Jorge.

Speaker 0

Thank you. Now I'm showing no further questions. So with that, I'll hand the call back over to Miguel for any closing remarks.

Speaker 2

Well, ladies and gentlemen, thank you very much for attending this conference call. We are super happy with the results. And also, we would like to take opportunity to thank you for your support and for following us and for the interest. So looking forward to see you next quarter.

Speaker 0

Ladies and gentlemen, this concludes today's conference call. Thank you

Speaker 3

for

Speaker 0

participating and you may now disconnect.