Vista Energy - Earnings Call - Q2 2021

Transcript

Speaker 0

Good day, and thank you for standing by. Welcome to the Vista Second Quarter twenty twenty one Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Alejandro Cherniakov. Please go ahead.

Speaker 1

Thanks. Good morning, everyone. We are happy to welcome you to Vista's Second Quarter twenty twenty one Results Conference Call. I am here with Miguel Gallucho, Vista's Chairman and CEO Paulo Vella 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 that could cause actual results to be materially different from expectations contemplated by these remarks. Our financial figures are stated in U. S. Dollars and in accordance with International Financial Reporting Standards, IFRS.

However, during this conference call, we may discuss certain non IFRS financial measures such as adjusted EBITDA. 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, the is laws of Mexico registered in the Volta Mexicana de Valores and the New York Stock Exchange. The tickers of our common stock are Vista in the Volta Mexicana de Valores and BIST in the New York Stock Exchange.

The ticker of our warrants is BTW408A. I will

Speaker 2

now turn the call over to Miguel. Thanks, Jose. Good morning, everyone, and thank you for joining this earnings call. I am delighted to share with you our results of the 2021, during which we have obtained understanding achievements across all key operations and financial metrics. We made good progress with respect to our 2021 guidance on the back of a strong execution in terms of drilling and completion pace in Bajada Del Palo Este.

Q2 twenty twenty one was our fourth consecutive quarter with total production growth, achieving a record of 39,009 BOC per day. This implies a 67% increase year over year. Oil production was up 101% year over year and 19% sequentially, boosted by the tie in of pad number seven in Bahad Del Palo Estes in March. It is fair to say that Q2 twenty twenty is a low comparison base, given the production shut in in response to the drop in demand due to the COVID pandemic. This comment applies to most metrics compared on an interannual basis.

Total revenue were $165,000,000 with triple revenues year over year, but also performed robustly quarter over quarter, mostly driven by the increase in oil production and stronger realized oil prices. In hindsight, we made a good decision to ramp up activity in late Q3 last year, so we are now capturing higher oil prices across a stronger production base. Listing cost per BOE was $7.3 per quarter, a 15% reduction year over year, reflecting lower incremental costs in Baja del Palo Este, which continued diluting our fixed cost base. Adjusted EBITDA was $102,000,000 confirming a turning point in our performance and achieving 62% adjusted EBITDA margins. Capital expenditure for the quarter was $75,000,000 in line with execution of our 2021 guidance and reflecting the completion of our third path for the year in Bajada Del Palo Deste.

During Q2 twenty twenty one, we generate positive free cash flow driven by a robust cash flow from operation and making good progress in liability management. Cash at the end of the period was $237,000,000 Net debt stood at $368,000,000 We will now deep dive into the main operational and financial metrics. So please turn to Slide four. Total production during Q2 twenty twenty one was up 67% year over year and 17% quarter over quarter. Halfway through the year, this leaves us ahead of our original 2021 guidance.

Production growth was driven by our flagship development in Baja del Palo Este, where we had in part seven in March. Given the high share of oil in this development, we see greater impact in the oil production metrics, which increased 101% year over year and 19% quarter over quarter. During Q2 twenty twenty one, we executed workover projects in two gas plays, which drew a gas production increase of 10% quarter over quarter and 5% year over year, allowing us to comply with our planned gas commitments. Total revenues in Q2 twenty twenty one were $165,300,000 a strong increase year over year having doubled both production prices. Sequentially, total revenue increased by 43%, driven by the additional production generated by the tie in of Part seven and higher oil and gas prices.

Trialized oil price in Q2 twenty twenty one was $54.9 per barrel, up 107% year over year and 21% quarter over quarter. The domestic market accounted for 83% of our total sales in Q2 twenty twenty one, reflecting an improvement in domestic crude oil price to the $54.55 dollars per barrel range. Sales to export market accounted for the remaining 70% of oil volumes. With a contract signed when Brent was trading around $63 per barrel, we still see pricing of exports oil with discounts to Brent of less than $2 per barrel. We are continuing with our strategy of building a sale book early on to lock in revenues and fund investment activities.

Most of our Q3 oil sales with a mix of domestic and export volumes have already been locked in at an average realized price of approximately $56 per barrel. Realized gas prices have increased 59% year over year to $3.5 per million BTU, boosted by the planned gas winter price of $4.1 per million BTU, applicable to approximately 60% of our total volumes starting May 2021. Additionally, industry prices increased from $1.9 per million with you in Q2 twenty twenty to $3 per million BQ in Q2 twenty twenty one. Moving to Slide six, we see our continuous improvement in term of listing cost per BOE. Total listing cost per the quarter was $26,500,000 partially driven by increasing oil fill activities, but also by the impact of a stronger peso in our operating contracts.

We have seen this swing in FX in the past and they always have minor impact in our total cost. The graph on the right shows how the production increase in Mahalpaloeste continues to absorb our fixed cost base, driving a reduction of 3% quarter over quarter to $7.3 per BOE. In Q2 twenty twenty one, adjusted EBITDA stood at $102,300,000 This implies an expansion of nine times year over year and a 75% growth quarter over quarter, reflecting the boost in revenues as described earlier and lower lifting cost per BOE. Adjusted EBITDA margin was 62%, reflecting an improvement of 12 percentage points quarter over quarter and 42 percentage points year over year. Netback for the quarter was $28.2 per BOE, dollars 9 per BOE above Q1 twenty twenty one as a stable cost per BOE allow us to capture the full increase in realized prices.

Moving to our financial situation, which I believe is also a highlight of this quarter, we were free cash flow positive having generated $35,500,000 in Q2 twenty twenty one with a CapEx level of $80,500,000 Cash flow from operating activities in Q2 twenty twenty one shows a sequential increase of 270% for a total of $116,000,000 This reflects an increase in cash flow generation driven mainly by higher revenues. Cash flow from investment activities was $80,500,000 in line with CapEx activities of $74,600,000 Approximately 85% of the investment was deployed in Bajada Del Palo Este. Cash flow from financing activities was $37,800,000 During Q2 twenty twenty one, we repaid a total of $30,600,000 in bank loans. In June, we successfully raised the peso equivalent of $71,400,000 in Argentinian capital market. We issued $38,800,000 bond in pesos dollar linked due in two years with a 4% coupon and additionally a $32,600,000 bond in peso inflation adjusted due in three point seven five years with a coupon of 4%.

Additionally, during July, we will draw $24,000,000 from available credit line with local banks. This cash raise with new debt is being fully utilized to repay all the debt. We have already repaid $45,000,000 corresponding to our top term loan, and we will repay $50,000,000 corresponding to our Series one bullet bond. Under these assumptions, total debt as of August 2 is forecasted at $534,000,000 which is $16,000,000 lower than Q1 twenty twenty one. Our increasingly strong operating and financial performance during the last quarter has led to progressive normalization of financial ratios.

We were negatively impacted one year ago when the lockdown restrictions softened crude oil prices and sell volumes. In Q2 twenty twenty one, net leverage ratio was 1.7 times adjusted EBITDA. Based on our plan for the next two quarters, we are forecasting a net leverage ratio of approximately 1.1x adjusted EBITDA by year end. Our flagship development in Bajada Del Palo Verde continued to drive growth. The chart on the left of Line 9 shows our total shelter production since we started this project and the tie in date of each pad.

The tie in of Pad seven at the end of the previous quarter boosted shale production in Q2 twenty twenty one. Pad eight landed two wells in La Cocina and two wells in De Organico with an average lateral length of approximately 2,600 meters and 54 average frac stages per well. Normalized drilling and completion cost per well was $9,500,000 in line with our previous path. We are currently finishing drilling the four wells of part number nine, which we completed and tie in in late Q3. I will now share a summary of our business development activity.

In June 28, we signed an investment agreement with Trafigura for the showing development of five parts of four well each in Bajada Del Palo Deste. The price tag paid by Trafigura is $5,000,000 per pack, which equates to $55,000 per acreage. The working interest in Zepat is 80% to Vista and 20% to Trafigura, with each partner paying its share of well CapEx and receiving pro rata production. Trafigura will pay to Vista an operator fee that covers all direct and indirect costs associated with each production. Vista remain 100% title holder of the concession and operator of the block.

Previously, we have sold our remaining 10% of the Corinone Amargo Sur Deque concession to Shell for $21,500,000 The implied valuation was about $13,000 per acreage, which is one of the highest multiples for a concession in Vaca Muerta's history. Both deals have a strong strategic rationale. Proceeds have improved our financial position even further, allowing us to accelerate the development in Vaca Muerta Del Palo Verde. Also focusing our capital and team on our core project with the best economic allow us to generate higher return at a consolidated level. Finally, the deal with Trafigura strengthened the relationship with our key domestic offtaker and one of the most important crude oil trader at a global level as well as bringing a new player into Vaca Muerta upstream.

I will now give you an update on ESG matters where we have made good progress to review greenhouse emissions in our operation. As discussed in our previous call, during Q1, we finished a study we determined our base CHG emissions. We covered Scope one and Scope two emissions providing granularity at the asset level and identifying many offenders. This milestone was significant achievement laying the foundation for an actionable emission reduction plan. We are currently working on such a plan, which will be disclosed in our next sustainability report.

This plan will set short medium and long term cooperation reduction goals consistent with the 2015 Paris Agreement. In Q2, we approved a plan for 2021, which will allow us to reduce 100% of the new emissions generated by the incremental production embedded in our 2021 activity growth program. This plan is being executed and is forecasted to lead to a 30% reduction year over year in emission intensity down to approximately 29 kilogram of CO2 equivalent per BOE. Sustainability is detailed to our business strategy, and I am confident we are taking the right step to becoming a leading low cost and increasingly a low carbon energy producer. We made further progress regarding our commitment to gender equality.

In the 2021, 58% of our new hires were women, an improvement compared with the 50% achieved in 2020. Finally, we have continued to support social investment in the town of Catriel Rio Negro. We have finished a first stage of a bicycle lane project that will stretch eight kilometers. Have also assigned company premises in Katriel to be used as a COVID vaccination center. Moving to Slide 12, I will present our updated guidance for the year.

Reflecting improved performance vis a vis the original plan. We have originally scheduled 16 new wells in Bajada Del Palo Este for 2021. We have already tied in 12 of such wells and we are currently drilling the last well of the four pads, which will be completed during Q3. We have added a five pad to the annual work program, which will be drilled during Q3 and completed during Q4. The rationale behind this decision is that we have a robust balance sheet thanks to the higher production, better realized price and lower development costs, which allow us to add further activity without losing capital discipline and prepare us for a strong start in 2022.

We are updating our production guidance from a range of 37,000 BOE to a range of 38,000 BOE per 39,000 BOE per day. This forecasted increase is driven by faster drilling and completion, which is enabling earlier times in Bajada Del Palo Este coupled with above expected well productivity and to a lesser extent by the contribution of the feed pad at the end of the year. Lifting cost guidance has been revised from less than $8 per BOE to approximately $7.5 per BOE. Q1 and Q2 came in at $7.5 and $7.3 per BOE respectively and we forecast to remain within this range in Q3 and Q4 as incremental production continues to absorb our fixed cost base. We are revising upwards our adjusted EBITDA guidance from $275,000,000 to $325,000,000 Adjusted EBITDA has been positively impacted by the additional production, higher realization prices in Q2 and Q3 twenty twenty one and lower listing cost per BOE.

Based on the acceleration of Guajada Del Palo Alto development, we are increasing our CapEx guidance from $275,000,000 to $310,000,000 Looking at the graph on the bottom left, it is clear that we are not allocating the entire increase in adjusted EBITDA to capital expenditure, reinforcing our commitment to capital discipline. Finally, we are maintaining our guidance for gross debt at approximately $500,000,000 and adding guidance for our net leverage ratio, which is forecasted at approximately 1.1 times adjusted EBITDA at the end of the year, clearly marking the successful execution of our deleveraging strategy. In short, our year to date performance is ahead of our original guidance having achieved solid operational results in the executed project, delivering strong financial results on a consolidated basis and capturing the upside of higher realized prices. Our updated guidance position us for a strong start in 2022. To finalize this call and before we move to Q and A, I will recap on today's headlines.

In Q2 twenty twenty one, we have seen a strong performance across all key operational financial metrics with a production record and a triple digit adjusted EBITDA reflecting a $400,000,000 EBITDA run rate. Majada del Palo Alto continues to show good progress with tying our third four well pad with solid drilling and completion metrics, which lead us ahead of the original scheduled plan and with robust production metrics. In terms of cash flow, in Q2 twenty twenty one, we recorded a solid positive free cash flow. Also, a successful liability management allow us to maintain a strong balance sheet. Following the repayment schedule for August, we have no more material maturities in 2021.

Recent acquisition and disinvestor activities with a solid strategic rationality led us to an improved financial position supporting the acceleration of Aja Del Palo Estre development. With the Trafigura deal, we brought a new strategic player to the upstream Vaca Muerta. Finally, as shown in the previous slide, we update our 2021 guidance by increasing our activity in Bajada Del Palo Este, production and also adjusted EBITDA. Before we move to Q and A session, I would like to thank our investors for their continued support and all the team at Vista for their usual hard work and commitment. And with that, operator, please open the line for Q and A.

Speaker 0

You.

Speaker 3

Now first question coming from the line of Bruno Montei with Morgan Stanley. Your line is open.

Speaker 4

Good morning, Miguel, Alejandro. Thanks for taking the question. Good to see the continued growth performance in Bahada Del Palo Este. I have two quick questions, one on M and A. Miguel, I wanted to pick your brain on what would make you perhaps pursue more transactions similar to Trafigura for the remainder of the acreage you have on your plate?

Is it valuation sensitive? Is it strategy sensitive? So just wanted to understand what could prompt more deals putting a value stamp on the assets. And my second question is about any developments on the new hydrocarbon law. What has been agreed?

What is spending? Timeline? So anything you could mention on that front would be super helpful. Thank you very much.

Speaker 2

Hello, Guervino, and thank you very much for your question. Do you listen me well? Yes. Can hear you. Thank you.

Okay. Super. Well, Luca, first of all, I mean, coming to the first question of m and a, we really like what we did with Trafimura. And I think, for that to happen, first of all, we have to have a partner that we like. And since the start of operation, we have built a super relationship with Trafigura management in Argentina and Trafigura management worldwide.

We believe our business and how are naturally complementary within Argentina, and we always have the ambition to do something else based on that relationship. So that would be the first point to consider, continue doing some something similar with somebody else. Now the business model that we put together with Trafigura, we really like I think it's a business model that is super accretive to shareholders. We said to both shareholders. In this case, the entry price of Trafigura was $5,000,000 per tap was up to 25,000,000 for five packs.

That equates pretty much to $55,000 per average. That is the value that you can create in one pack. Remember, Vajada del Palos, we have around 60,000 acreage. We have around five hundred five fifty locations, which we have four fifty acres per part. Trafigura acquiring 20% of five parts and equivalent, as I said before, to 450 per 25,000,000, leading to the number that I gave you before.

So we really like that model. I think in traditional way, we could do more. Yes. We have plenty of acreage and plenty of locations when it comes to account what we have in the portfolio today. When you look at our portfolio, we have a land bank of 132,000 acreage in Vaca Muerta, 62,000 from Bajada Del Palo Oeste, and we have also 21,000 from Aguilamora and 50,000 from Bahare Palioeste that we would start to develop early our deal early this year.

So, yes, the short answer is yes. If yes, We can entertain to do a bit more on that. Second part of your question is the hydrocarbon law. So putting it on context, and I thought what we said that we have a very good hydrocarbon law in Argentina, fifteen year old. In 02/2014, the federal government passed and changed what basically created framework for Shell Shell project, which is also very good and been working very well.

Now I think the aim of this new law is more a promotion to the industry. We have seen draft of the versions of this new law. And I think the more important of the key element of what we have seen is the guarantee of export organization or ability of part of the export being able to remain abroad as FX proceed. And we believe that it's super important to attract investment and also super important for the country to generate effects that sells on the macroeconomic side. So that's my comment.

I think that's that's good will from the government to pass that promotion law. And I believe, from what I hear, that somehow we should have some news in the next in the next few weeks. The law also have other items, but I think this is the core one and the central one for Argentina from the EUC side.

Speaker 4

Perfect. Thank you very much, Miguel.

Speaker 2

Thank you, Bruno, for your question.

Speaker 3

And our next question coming from the line of Marcelo Guimier with Credit Suisse.

Speaker 5

Congratulations on the results. I have two questions for today. The first one is for production in 2021. I mean, we've seen a very fast paced drilling and completion activity in Barra Da Palueste. We saw that you have updated your guidance for 2021 with 38,000 to 39,000 barrels of oil equivalent per day for the year.

I was wondering if we could see, I mean, higher production for this year or for example, another pad is due in 2021. I just want to get a sense of we could the guidance is on a conservative note. And the second question is more on the outlook for 2022, so next year. I was wondering, I mean, how do you see CapEx really in completion activity and etcetera for the next year? It is more about cash flow generation or do I mean should we expect Vista to put a higher CapEx for production growth?

Thank you for taking the questions again.

Speaker 2

No, thank you, Marcelo, for the question. It's a good question. So in terms of production for 2022, first of all, production for 2021, I think we just upgrade the guidance. So, I mean, that is a fair perception of what we believe will be. So we have upgraded the range in 1,000 barrel per day, and think we should be there.

Now we are doing two things that are related to the production of 2022. One is the increase of activity in Q4 and the increase of guidance for Q4 that will put us in a better position to start 2022 with a better starting point. And also the fact that we will start reading PAD 11 in December, But also, I mean, from where it's located, I mean, it's in the border between Maharaj Pala Oeste and Maharaj Pala Oeste, that should have also an impact in our production in 2022, We should continue growing in in 2022 at the double digit number. That's for sure. I think we probably will not be able to accelerate much more than we are accelerating today.

We have to reduce our billing our billing speed or increase our billing speed in the double since 02/2017. So we shouldn't expect that we are going to see much more increase in the speed during the year. And also one thing that is important, we want to keep the trend of having free cash flow flow as we have this year. In terms of CapEx, I believe if we continue or we decide to continue working with one rig, we will basically have a similar CapEx to the one that we have this year. Now, of course, as we are becoming cash flow positive, there's a broader discussion related to what we will do with that cash for next year and going forward.

And, of course, here, the main driver for us is to create a stake a stakeholder value. And for that, we will analyze different options and all options, okay, including increasing increasing activity that will depend pretty much the context. And because I I I take for granted that we will continue having the same operational results that we are having today. And, of course, we will analyze other things like paying dividend, buyback shares, and and all the options that we should have on the table based on what is the reduction to create more stakeholder value. So I hope Marcelo has answered your question.

Speaker 5

Perfect, dear. Thank you very much.

Speaker 3

Our next question coming from the line of Andres Cardona from Citigroup. Your line is open.

Speaker 6

Good morning, everybody. Miguel, Pablo and Alejandro, congratulations on the results and the great milestone of posting a positive cash flow. Most of my questions have been asked, but I would like to understand the improvement in realization price for the third quarter to $56 per barrel. Is it driven by international prices or by an improvement in domestic realization price? Thank you.

Speaker 2

Thank you, Andres. Thank you for your question. So I will say that both things are linked here, as you probably know, in Argentina. So when you look at what what are the realization prices for us today, you have two elements of that. One, for Q2, you have the domestic market.

In Q2, we sold 2,200,000 barrel of crude oil at $54.5 per barrel in the local market. But also we managed to access to the core market. In Q2, we sold 5,000,000 barrels with a blend around approximately 63. Now the realized taxes of 63 was 56.2. Okay?

So the combination of those two prices is what we what you see and we report after realizing price of 54.9 per five years. Okay? Now the the realization price of the through that we sold in the core market, you have to discount $2 more or than the the commercial discount. And then you have to discount 8% of the export tax that basically give you the adjustment of the 63 brand to 56.2 that we basically realized. I think that the dynamic going forward, I mean, we continue.

We don't perceive it's gonna change. The law will bring more visibility to what we can afford and who. But I think the overall gain here for the industry and also for Argentina in some extent is to increase production. As we have more companies like Vista that have the raw levels of the one that we are having, we will have more spare Vaca Muerta crude oil to be exported. And I think we are in that trend.

We have seen other companies announcing investment plans towards incremental production. YPF for sure has been very open in that and is moving and increasing leading risk activities within their area. Most of I would say, all of their partners are following up. And we have seen another international trade also releasing news that they are going to increase production. So I think as far as that continue, we should we should see more volume of export more volume of Vaca Muerta as we work ready to be export.

In terms of demand, I think we will not I don't foresee that we will see a big increase on demand when you see macroeconomic numbers for next year. So it's going to be around the number that we have. So I'm positive. I'm positive for Q4. I'm positive for next year in terms of access to export market.

Speaker 6

You, guys.

Speaker 3

Next question coming from the line of Alejandro DeMichelis from Nell Securities. Your line is open.

Speaker 7

Yes. Good morning, gentlemen. Thank you very much for taking the call and congratulations on great results. A couple of follow-up questions. Miguel, you mentioned that with the deleveraging, with the what you're seeing in terms of cash flow generation for next year, all of the options are open in terms of dividends or buybacks or increasing activity.

So to understand the framework for that, how should we think about, say, your target leverage? Is 1.1x something you're comfortable with? Or you're looking to go below that over the medium term? That's probably the first question. Then the second question is with Part 11 on the border between the two blocks, if that were to be successful, would that mean that you may start on the other block kind of trying to push for that development too?

Speaker 2

Yeah. Thank you, Alejandro, for for that question. And and thank you for mentioning the 1.1. So, yes, as I mentioned to you, all of options are on the table. I think there's one thing that we cannot precisely forecast in the context even though we have a view on that, and that will play an important role.

In term of net leverage ratio, I mean, as and as you know, most of the unconventional most of the old companies that are focused on unconventional have a higher leverage ratio than the one that we are going to achieve at the end of this year. So I will say with 1.1, we feel comfortable. That doesn't mean that due to the contract, we decide also to go a bit lower or a bit higher. Okay? But, again, it will depend on how we perceive that we can create more stakeholder value.

Coming back to five eleven, I think it's it's going to be a very interesting fact. As you know, every time every time that we move to the East, we perceive that and we believe that we will have higher APR gravity and therefore not the same level of liquidity. Now, of course, with the reduction of cost that we have generate, I mean, today, our total cost of development in Vaca Muerta is half of what it was in 02/2017. We are basically with a lifting cost of $7 and a development cost of $7. And as we continue, we may be below $14 per barrel of total development cost, that mean development plus lithium.

So therefore, if we find a type curve that is close to what we are producing today or even a bit lower than we are seeing today, I mean, Bajada Del Palo Este in that border could be highly accretive. So yes, we are excited about that, and that will allow us to have more proven acreage and therefore to continue thinking Arduino Arduino app how or what kind of business model we can put in place to realize and to unlock that value and to accelerate our value generation activity. So I hope I answered your question.

Speaker 7

Yes. No, that's great. And just as a quick follow-up, what is your plan for Aguilamora? Would would you be looking to also add a partner or you you you feel you you can go first on your own and then look for a partner?

Speaker 2

I think for the first move that we are going to do that, I mean, in both cases, is you've been treating dealing with the. Okay. If he it makes sense, it's a basic way to bring a partner alongside. But in two cases, we will in 2022, we will de risk of luck, ourselves.

Speaker 8

Okay. That's fantastic. Thank you.

Speaker 3

Our next question coming from the line of Regis Cardoso with Credit Suisse. Your line is open.

Speaker 9

You. Good morning. Thanks for taking the questions, Miguel. And I have a quick one from my side, and I think it goes back to your answer on a previous question by Marcelo. But but with a specific spin, I mean, if you think of the uses of capital, and and I wanted maybe to focus on the capital flow constraints that we have in Argentina, right?

When we talk, for example, about paying dividends, there is, of course, a difficulty in, let's say, buying the dollars to pay out to shareholders if you are generating that revenue locally in Argentina. So my question is, given that context, what do you think would be the best thing to do, the users of the cash to go forward as you have more as you have higher oil prices? You can accelerate the development. Would it make sense to raise any sort of external capital to invest in Argentina or that would just lock in that cash in the country? And then maybe finally, last one related to that, would it make sense for Vista to speak opportunities elsewhere, for instance, in Mexico where you already have a footprint to sort of have somewhere else to allocate the proceeds?

Thank you.

Speaker 2

Thank you, Rashid, for your question. And I think your question more of a question also give us some food for thoughts. But look at first of all, as you said and as I mentioned before, it will all depend of the context. Part of the context today, we know. And as part of the context is gonna change or it could change next year.

When it comes to optionalities, just comment on your comment, we have today a structure with cash abroad that give us the optionality to pay pay dividends if that is what really makes sense for us to do for our stakeholders. As you you know, I'm in front of the our investors and stakeholders very actively. So, of course, I have a feeling what they want and what they don't want and what they see or how they perceive. So I think that optionality, we still have it. And if that law is put in place, also, we will probably have been able to repatriate part of the proceed of exports and also in line with that possibility.

Now I don't want to say that that is the way that we will go because it's it's not clear, and we have an equity story that today is working and is very accretive at the old pricing that we got today and at the, again, at the cost that we have managed to achieve for the development of ParcaMopita. So I believe I believe options that will be open, and then we will evaluate what what is is the the best way to go. I don't think I can add too much to the other ratios. You have the second part of the question or that was all?

Speaker 9

No. That that was all. I think, you know, the the second part was more on investing abroad. Do you understand that from your answer, I understand that you you believe you you have better returns and a equity story that is working in in Bahada Del Pago in Argentina, like, more. Right?

Speaker 2

We've been looking abroad, Rajesh. And then, I mean, we are very active DD wise. Today, it's not easy to find opportunities abroad that are data creative to our shareholders are the one that we have here in Argentina today. And that mean with the development cost that we have, it will be difficult to find something different. Now, again, back to your previous question, we we also need to see the reaction of our shares.

So that also a player role in in what we do with our cash, okay, in terms of deciding buyback of shares and so on. That that will play a role. But coming back to the DD part, yes, we see opportunities that probably will take us somewhere else and we will have cash. Now we see in term of return on investment that all those opportunities that we see or we find in Latin America we have have a hard time to to compete with what we have here and with the quality of the of of the resource that we have here in Argentina.

Speaker 9

Very, very clear, Miguel. Thanks so much for the answers.

Speaker 3

And our next question coming from Martin from Orange Balance Capital. Your line is open.

Speaker 8

Yes. Hello. Martinez here from Capital. First of all, congratulations on a great quarter, and thank you as always for the materials. I have three questions.

Well, you already mentioned something about your exports expectations. But I want to know what export sales mix should we expect for the second half of the year? And what do you target or hope for in 2022? Then we want to confirm how Vista will be booking the recent agreement with Trafigura. We mentioned that the company will be booking 100% of the CapEx, 80% of the volumes, 80% of the revenues and a 100% of the operational cost.

Apart from that, we you will receive the the cash payment and the compensation fee for expenses expenses, which might came as additional revenue line. I will correct on that. And finally, is it the fifth part for this year related to the Trafigura joint venture, or it will be additional to that? Thank you.

Speaker 2

Yeah. Thank you thank you very much, Martin, for your question. So I will probably start with the second part and cover Trafigura. I think that how we are going to book the agreement is quite simple. In a nutshell, we consolidate our part.

Our part is 80% of the CapEx, 80% of the OpEx, 80% of the production, and that is consolidated. Then there are 5,000,000 that is the entry fee that is the that you will find it that goes to other incomes. Okay? So that is how we are going to consolidate that. So we consolidate our part of production, our part of CapEx, and the 5,000,000 goes to other income.

In term in term of the part from Trafigura, so Trafigura will be that's gonna be the part to be tabular Trapimura is is participating. And then it's also going to participate in tab number 10 that are the four or fifth part of of this year. Okay? And then we will see how this are dissipated on the rest of the part that won't be given the higher value for it too. For the presentation of 8.244, I'm positive.

Positive by q four, we will have we have extra volume that can be exported. I cannot put a number to that today, but our visibility today for Q4 is good. Twenty twenty two, difficult to tell you, but as I mentioned before, I believe everybody is increasing, everybody. And that YPF needs another in incrementing production in in Vaca Muerta. I think demand will be similar.

We are today a nice little concern of the demand capacity that the refinery has. So we see all probably almost close to full demand to break COVID numbers. Therefore, I don't think I think that we're achieving zero that we're expecting to see much more than that. So the loss in the rationality said that we should see additional volume to the airport next year. Okay?

Speaker 8

Okay. Thank you very much.

Speaker 2

You're welcome.

Speaker 3

Our next question coming from the line of Constantinos with Congratulations

Speaker 10

on your results again. This is Constantinos Papallias for Puente, Argentina. I have two quick questions. One is regarding your early production facilities capacity. What is your current installed capacity?

Are we talking something beyond 38,000 barrels a day? And what happens if this production level, if your facility's capacity is maxed out? Should we expect that processing capacity to curtail your production? Or should we see an expansion in processing capacity? And the second question goes for lifting costs.

Now that you have now that we have seen you reaching scale and diluting fixed costs in Bajada Del Palo Este, could we expect those lifting costs to remain stable? Or was it a onetime low, which could probably get a bit higher? Thank you very much, and congratulations again.

Speaker 2

Thank you, Constantino, for your question. Very good question. So coming back to the first part of your question, today, for 2022 and this year also, we have a plan that we call we call internally drill drill to fill. That means that we are drilling to fill the capacity that we have. So, for twenty twenty one, twenty twenty two, we have no problem.

Our capacity is around 55,000 barrel per day. We will end up, as you know, with, which has a better guidance between '3 and twenty nine. So we should be we should be in good shape for next year to continue drilling to fill in that capacity. And that capacity give us give us some room to continue growing. Okay?

We have an additional 15,000 barrels per day that we can allocate in our existing facilities. Your question on lifting cost is a very interesting one. I think we have a record on the lifting cost of around $7.3 per BOE. But when we look at specifically you see that the unconventional that we are doing today have a listing between three and four dollars per BOE. So our model that continue to to be growing our unconventional volumes, we should see in the long run that our listing cost will continue decreasing toward a number, and I don't want to give you a number, but we can set mid term around 6.

That is basically the result of of the keep adding unconventional production and diluting our fixed cost that we have to run our full operation, unconventional operation and the conventional on the conventional operation. So you could expect that lithium cost will continue decreasing mainly due to the addition of unconventional volumes.

Speaker 10

Thank you. That's fantastic. I would like to follow-up question. Capacity processing capacity is one thing. But if you expand beyond Bajal Palau Oeste, shouldn't it wouldn't it impact on lifting costs here due to higher distance towards the production facilities.

And that's all. Thank you very much.

Speaker 2

Yes. Aguilar Mora, in case we decide to go through development, will require additional facilities. That additional facilities are not going to be lifting. It's going to be CapEx. So additional CapEx to that development it has to be put in place.

I think we are few years away from that to happen. Is neighbor block to Of course, if we decide that we we have the the the opportunity to do a full development of Bajada Del Palo Oeste, we will require new facilities. But the path that we are drilling now, the path 11, for example, is like path is like path 10. Okay? So there's no problem to connect that path to the facilities of a Jardel Palo or to our existing facilities.

So that will not require any CapEx.

Speaker 10

You. Thank you very much. And again, congratulations on your results.

Speaker 2

Thank you, Konrad. No further question.

Speaker 3

And I see no further questions at this time. I would like to turn the call back to Michelle Galicia for closing remarks.

Speaker 2

Well, thank you, gentlemen, for joining the the call, and thank you for your comments, and thank you for your reports. I'm looking forward to see you again in q three. Have a good day.

Speaker 3

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.