Vista Energy - Q3 2022
October 27, 2022
Transcript
Operator (participant)
Good day, thank you for standing by. Welcome to Vista's third quarter 2022 results conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alejandro Cherñacov, Strategic Planning and IRO, Vista Energy. Please go ahead.
Alejandro Cherñacov (Strategic Planning and Investor Relations Officer)
Thanks. Good morning, everyone. We are happy to welcome you to Vista's third quarter 2022 results conference call. I am here with Miguel Galuccio, Vista's Chairman and CEO, Pablo Vera Pinto, Vista's CFO, and Juan Garoby, 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 the 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 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, Vista Energy, is a Sociedad Anónima de Capital Variable 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 Bolsa Mexicana de Valores and VIST in the New York Stock Exchange. The ticker of our warrants is VTW408A. I will now turn the call over to Miguel.
Miguel Galuccio (Chairman and CEO)
Thanks, Ale. Good morning, everyone, and welcome to this earnings call. I'm pleased to share with you our results for the third quarter of 2022, during which we have continued to deliver strong operational and financial performance. Total production averaged 50,700 boe/d, a 26% increase year-over-year. Oil production was up 35% year-over-year, boosted by the tie-in of the last three pads in Bajada del Palo Oeste. Total revenue in Q3 2022 were $333.6 million, a 91% increase year-over-year, driven by higher production and stronger realized oil prices. Lifting cost per boe was $7.5 for the quarter, reflecting our success in containing cost pressure as well as dilution of fixed costs through incremental production volumes.
CapEx was $162.8 million, including the drilling of six wells and the completion of three pads during the quarter. Production growth coupled with strong realized prices amidst flat lifting costs boosted Adjusted EBITDA to $233.7 million for the quarter, more than doubling year-over-year. During Q3 2022, we record positive free cash flow of $44.4 million, driven by robust Adjusted EBITDA generation. Net leverage ratio at quarter end was 0.0x Adjusted EBITDA. Adjusted Net Income was a solid $79.4 million, implying a quarterly adjusted EPS of $0.9 per share. We will now deep dive into our main operational and financial metrics. Total production during Q3 2022 was 50,700 boe/d, up 26% year-over-year.
Oil production was up 35% year-over-year, mainly driven by our flagship development in Bajada del Palo Oeste, where we tie in two four-well pads during the quarter and benefited from another pad put on production in Aguada Federal. Our year-to-date average production is 46,500 boe/d, well on track to deliver on our production guidance of more than 47,000 boe/d for the year. Total shale oil production, including Bajada del Palo Oeste and Aguada Federal, represented 77% of our total oil production during the quarter. I will now share some more details on each of these projects. In our flagship development in Bajada del Palo Oeste, wells continue to produce an average of 5% above our type curve, with 55 wells tie-in to date.
During Q3, we completed and tied in pads Bajada del Palo Oeste 13 and Bajada del Palo Oeste 14. We are currently drilling the final well in pad Bajada del Palo Oeste 15, which we plan to tie in late in December. This will lead to 20 new wells tied in for the year in this block. I'm very excited by the production results we are seeing in Aguada Federal. The asset we acquired a year ago and have successfully been integrated into our core development. At the end of Q2, we have completed and tied in our first two wells since becoming operators in this block. Three months on, we are seeing productivity in line with Bajada del Palo Oeste.
In particular, the well we landed in La Cocina delivered an IP-30 of 2,500 boe/d, and is currently producing 20% above our Bajada del Palo Oeste type curve after 120 days on a normalized basis. We also completed a four-well pad in Aguada Federal 3, which was tied in early this month. Finally, the pipeline connected Aguada Federal to Bajada del Palo Oeste is currently operating. This is a major milestone leading to future integration of both blocks, as well as reducing lifting costs and environmental footprint. In Bajada del Palo Oeste, the two wells we tied in in late February under our ongoing pilot program continue to show outstanding results. After 180 days, the average production of both wells is 14% above our Bajada del Palo Oeste type curve on a normalized basis.
These initial pilot results confirm the top quality of the western part of this block, adding up 50 wells to our inventory for the total of 900 wells, including Bajada del Palo Oeste and Aguada Federal. We are planning to drill three additional wells to further de-risk acre in the eastern part of this block in Q4. Also, to treat the crude oil produced in this block, we have recently finalized a modular upgrade to the oil treatment plant in this cluster, leading to an increase in processing capacity from 40,000 bbl/d-47,000 bbl/d. The next step is to increase this plant capacity to 63,000 bbl/d during the first half of 2023. During Q3, we achieved a major milestone related to Vaca Muerta development, as we started producing from our own sand mine and washing plant.
The plant is located 260 km from Bajada del Palo Oeste, saving more than 1,000 km of sand trucking. The plant is currently producing 50,000 tons of sand per month, which is roughly 50% of Vista's requirement at the current drilling and completion run rate. It is sized to soar 100%, which we estimate can be achieved during the first half of next year. This project is a significant contribution to our cost saving efforts, as it is forecasted to enable saving of roughly $200,000 per well, and almost 2% of our total drilling and completion cost. The overall CapEx of this plant was $16 million, so we expect a payback period of less than two years.
Total revenues in Q3 2022 were $333.6 million, a 91% increase year-over-year, driven by oil production growth and substantial improvement in realized oil prices. Realized oil prices for the quarter averaged $76.6/bbl, up 34% year-over-year. The average realized domestic price was $64.2/bbl, while the realized price of the export market was $90.2/bbl on average. Crude oil volumes sold during the quarter surpassed production by approximately 2,300 bbl/d, reducing inventories to zero. Sales to export market accounted for 48% of oil volumes and 56% of oil revenues. We exported four cargoes during the quarter for 1.9 MMbbl of oil in total.
We expect to maintain this level of export volume during the coming quarter as well. Regarding prices, with current Brent levels for Q4, we expect a total average realized oil prices of around 5% below Q3. Realized gas prices increased 7% year-over-year to $4.4/MMBtu, mainly boosted by the sales to industrial customers at $4.9/MMBtu, applicable to 32% of our sales volumes. Plan Gas price was $4.1/MMBtu, applicable to 65% of our sales volumes. The remaining volumes were exported to Chile. Total lifting cost for the quarter was $34.8 million.
We have successfully implemented tactical cost saving initiatives in waterflooding projects in our conventional asset, pooling services and associated materials, slickline services, chemicals in oil treatment plants, and in the reuse of impacting materials. All that to offset cost increases driven by the appreciation of the pesos in real terms. Additionally, the boost in production volumes continues to dilute fixed cost. Therefore, on sequential basis, we reduce lifting costs per boe by 4%. We reiterate our guidance of $7.5/boe for the full year. Adjusted EBITDA for the quarter was $233.7 million, implying an interannual growth of 127% and a sequential growth of 16%. This reflects a strong revenues growth and our successful effort to maintain a stable lifting cost.
Our year-to-date Adjusted EBITDA is $563 million, so we are well positioned to surpass our $750 million guidance for the full year. Adjusted EBITDA margin was a robust 70% during the quarter, an improvement of 11 percentage points year-over-year. Netback was $50.1/ boe, an 80% interannual increase and in line with our previous quarter. During Q3 2022, we continued to generate positive free cash flow while also reducing gross debt. Cash from operating activities was $196.1 million, impacted by advanced payments of income tax for $26 million.
Cash flow used in investing activities was $151.7 million, mostly driven by $104 million in drilling and completion activities in our core development projects, Bajada del Palo Oeste and Aguada Federal. Other investment included gathering, treatment, and evacuation facilities, leading to a total CapEx of $162.8 million during the quarter on an accrual basis. Free cash flow during the quarter was a robust $44.4 million, leading to a year-to-date free cash flow of $140 million. Cash flow used in financing activities stood at $112.7 million, mainly driven by the debt repayment of $78 million, including $22.5 million of principal of our syndicated loan and $50 million of our bond series two.
Interest paid amounted to $10.4 million. Gross debt stood at $522.6 million at the end of Q3. Our plan is to maintain debt around such a level by year-end, in line with our latest guidance. Net leverage ratio stood at a very healthy 0.5x Adjusted EBITDA at quarter end. During Q3 2022, we delivered a strong operational and financial performance. Our Vaca Muerta projects continued to drive production growth. We recorded 50,700 boe/d during the quarter, a 26% increase year-over-year. Adjusted EBITDA was $233.7 million for the quarter. Adjusted Net Income was $79.4 million for the quarter, and is currently $201 million year-to-date. Adjusted EPS was $0.9 per share for the quarter.
Based on the year-to-date performance, we are reiterating our guidance for the year. We continue to make good progress in projects to reduce emissions footprint of our operation. We forecast to reduce emissions intensity to 18 kg CO2e/boe, a 25% reduction vis-à-vis 2021. On the A&D front, we closed the second Vaca Muerta development shaping with Trafigura, marking a record acre valuation for the basin, which, depending on how international prices evolve, should range between $59,000-$140,000 per acre. This agreement contributes to increase our free cash flow generation beyond the objectives laid out by our five-year plan, further reduce gross debt, distribute capital to shareholders through share buyback or dividends, and accelerate investment in Vaca Muerta, in particular in the midstream infrastructure projects.
On October 4, 2022 the warrant holders meeting approved our proposed amendment to Vista Warrants Indentures, providing immediate certainty on the number of outstanding shares of the company, approximately 89.7 million shares after 100 of the warrants are exercised. This is a significant milestone to improve our capital structure, limiting the dilution of shareholder value and favoring the correct price formation of Vista shares. Finally, this morning, I have called for shareholders meeting scheduled to take place in December 7, 2022 to vote on a proposal to approve our second share buyback program for $25.6 million. This is another important step in our strategy to deliver shareholder return and partially sterilize the new outstanding shares linked to the warrants exercise. I will take this opportunity to thank our investors for their continued support and our great team at Vista for their hard work, passion and commitment.
With that, operator, please open the line for Q&A.
Operator (participant)
Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile the Q&A roster. One moment for our first question. The first question comes from the line of Andrés Cardona with Citi. Please go ahead.
Andrés Cardona (Director)
Hi. Good morning, Miguel, Pablo, and Ale. Congratulations on the results and the recent developments. I have two questions. The first one has to do with the 2026 production target. With now over 50,000 bbl/d, how do you think about it? Does it seem to be now conservative or how should we think about it? Despite the early results at Aguada Federal and Bajada del Palo Oeste being very encouraging, what do you think is the best strategy to develop these fields? Like continue to risk it on a solo basis, seek partners that farm in and carry you on the CapEx, maybe slow down and focus on Bajada del Palo Oeste. How do you think about the best strategy for these two emerging assets? Thank you.
Miguel Galuccio (Chairman and CEO)
Hello, Andrés. Good morning, and thank you very much for the congratulations and the questions. Starting with the first part of your question on 2026 target and how realistic they are today. Well, we finish 2022 around 53,000 bbl/d-54,000 bbl/d. We are really having a very good 2022, and we see 2023 growing at a similar rate that we've been growing so far. I would say, for you to calculate, you should assume that we will continue growing around 15%-20% growth in production volumes year-over-year. Your statement is right.
I mean, if you do that calculation, you will find that, probably at the end of average 2026, we should be about the number that we proposed in Investor Day. That was 80,000 bbl/d. Yes, we are coming higher and definitely if we continue growing the way that we grow, that I don't think why we should not do that, we will have a higher target. Related to Aguada Federal and Bajada del Palo Oeste and the operational model and business model that we use to develop, I think you have to consider that we've continued developing ourselves. I mean, the deal that we have with Trafigura, it has worked pretty well.
It's something that we will do in basically when we need to add more CapEx above what we have in our plan, and it's going to be considered on the economic basis. The reality is Aguada Federal is going to be integrated to Bajada del Palo Oeste. It's already integrated by a pipeline. The wells are performing excellent. We have the same result that we have in Bajada del Palo Oeste. Bajada del Palo Oeste, part number one, have proved that the east side of Bajada del Palo Oeste, Oeste is pretty good, and we can add probably quite a nice portion of Bajada del Palo Oeste also to our Bajada del Palo Oeste block.
All that you have to consider that from the operation point of view, it's one field for us and one operational setup. Nothing. We are adding more acre. It's making our position to 2026 very strong because the portfolio is very strong. Of course, as we develop, we will encounter more challenge, but as much acre that we have, of the quality that we have, more robust is our plan and our performance.
Operator (participant)
Does that answer your question, Andrés?
Andrés Cardona (Director)
It does. Thank you.
Operator (participant)
Thank you. One moment for our next question, please. Our next question comes from the line of Walter Chiarvesio with Santander.
Walter Chiarvesio (Head of Equity Research, Argentina)
Hello, good morning. Congratulations for this very strong quarter. My question comes regarding the infrastructural front in the country. How important you see that for the long-term growth for the company? There is some information that was released publicly in the media mostly. I want, I would like to ask you and hear from you, how do you see those projects evolving over time and being handled by the private sectors, private companies? If Vista is having some intervention in those projects, I mean, Oldelval, OTASA, et cetera. That's from my side, guys. Thank you.
Miguel Galuccio (Chairman and CEO)
Thank you, Walter, for your question. The answer is, yes, we are participating in all of that. Our strategy is basically to actively participate in the expansion projects of Oldelval, the other one, Vaca Muerta Norte. Also we are using and considering other options in order to maximize the optionality and the potential of evacuation. Starting with Oldelval, as you know, I mean, we have the main pipeline that is 80,000 bbl/d-280,000 bbl/d, currently, at full capacity. Vista today is transporting around 42,000 bbl/d in Oldelval.
As you said, and it's publicly known, there's an expansion project of Oldelval of 225,000 bbl/d that is aimed to add that capacity early 2024 or the beginning of 2025. We have a public tender for expansion that took place last week. We participated in it. One of the results that we saw is that there is a clear aim of a clear ambition of most of the participants to increase production above what the market was expecting. And now all the analysts analyzing those bids and basically consider how to allocate that capacity and probably even look at the option to offer even a larger expansion or more capacity. We remain super confident in that allocation. Meanwhile, something that we are doing as well is tracking.
Part of our relationship with Trafigura, we have set up a way of tracking around 5,000 bbl/d. We are using around 25 trucks, so it's not a big amount of trucks. Of course, this is costly, but taking into consideration the netback that we are having, it's super profitable for us to use that option. There are additional optionalities that we are looking at and we are working on. One is basically something that we call the reversal of Escondida. This is using the existing facilities and in terms of sending through Oldelval to Bahía Blanca, rerouting toward Luján de Cuyo. Also we are looking with a consortium an option to export to Chile.
We are super active on exploration. I think as an industry, we are a bit behind. Nevertheless, we don't see that compromising our current plans toward 2026. We will have optionality. We are building optionality and yeah, and we will deliver the numbers that we promised.
Walter Chiarvesio (Head of Equity Research, Argentina)
Perfect. Thank you very much, Miguel.
Miguel Galuccio (Chairman and CEO)
You're welcome, Andrés.
Operator (participant)
Thank you. One moment for our next question, please. Comes from the line of Regis Cardoso with Credit Suisse. Your line is open.
Regis Cardoso (VP of Equity Research and Head of Latam Oil & Gas, Infrastructure and Transportation)
Thank you. Good morning, everyone. Good morning. Congratulations, Miguel, Alejandro, on the excellent results. Two topics I would like to discuss with you. One is that balance between CapEx so reinvestment and shareholder remuneration. Maybe bring to that discussion kind of the pace or the level of your exports. Are you expected to continue increasing your share of exports and therefore generate more of your revenue linked to international prices? Would that be a driver for you know to have higher cash from operations on the same production, let's say? If you do have more cash from operations there, do you you know redirect it to CapEx, or do you plan to do more of shareholder remuneration either buybacks or dividends?
Likewise, I mean, we discussed this in previous questions, as you reinvest and you will, you know, continue growing production, what are your next hurdles in terms of logistics as well as your pace of tie-ins? Are you required at any point to, let's say, allocate more of your capital to lower return assets like midstream? I mean, it's more of a discussion than a specific question. Overall, you know, do you expect to generate more cash? How do you redirect it from between investments and shareholder remuneration, and particularly touching on those points of share of exports and pace of additional wells and requirements in midstream? Thank you.
Miguel Galuccio (Chairman and CEO)
Hi, Regis, how are you? Thank you very much for your question. Look at related to the exports, that is probably the most straightforward one. Every single barrel that we add, it go to export. If you remember in our Investor Day, we said that, I mean, we say we calculate that we will have probably a mix of 60% of export and 40% in the local market, considering the volume that we have calculated at that time, that it was an average of 80,000 bbl/d of production arriving in 2026. That 60%-40%, it today, if we have more production, it will be higher than 60%. That's the reality.
Today, any additional barrel, since we have the local market as an industry fully supplied, it goes to export. If you follow the export market at the percentage VIST and the rest, you see the incremental in the industry month by month, quarter by quarter, how we are adding more cargos and adding more exportation quarter by quarter. In terms of cash flow, yes, of course, we will have more production. We have better prices than the one that we calculate when we have the investor day toward 2026, that was 60%. Therefore, and there, I think we signal that on that plan, a cash flow generation toward 2026 or around $2.5 billion, if I remember correctly.
Therefore, I think we will have additional cash. Now, today, the cash that we are generating, we are taking care, of course, of the CapEx. We have a rate of growth that we want to meet, and also is in line with infrastructure that we have, that is around 15%-20% in terms of production. The rest we are using it for buyback programs. Of course, we are at the moment that we have to front-end infrastructure to meet that plan. There will be CapEx that is going to be in the first two years, dedicated not only to wells, but now we will have an infrastructure component. The main case is the expansion of all the well.
After that, 2024, 2025, 2026, we will aim to continue probably reducing debt using buyback or dividends or whatever is the best means that we have to really redistribute to our shareholders. We don't have another plan. Of course, we can always come up with a plan with additional CapEx in order to have higher growth than the one that we have signaled to the market. This is something that we will consider based on performance and based on oil prices. But I will say that decision will be 2025 onward. That is the way that we are thinking and basically what we are doing.
In terms of CapEx, you have to think that 2025 onward, we will have enough cash to think on what else we have to do. From now to 2023, 2024, infrastructure, buybacks and continue the equity growth story that we have today.
Regis Cardoso (VP of Equity Research and Head of Latam Oil & Gas, Infrastructure and Transportation)
Very clear. Thanks, Miguel. I would assume the majority of that activity will be in Bajada del Palo still and not necessarily in the other.
Miguel Galuccio (Chairman and CEO)
Yeah, Bajada del Palo. You need to start to think that Bajada del Palo, Aguada Federal. The west part of Bajada del Palo is one operation for us. We will start to develop that and unify that operation. Yes, that is the main core of our operation.
Regis Cardoso (VP of Equity Research and Head of Latam Oil & Gas, Infrastructure and Transportation)
Understood. Thank you so much. Congratulations on the excellent results so far.
Miguel Galuccio (Chairman and CEO)
Thank you very much.
Operator (participant)
Thank you. One moment for our next question, please. Thank you. From Rodrigo Nistor with Latin Securities, please go ahead.
Rodrigo Nistor (Head Of Equity Research)
Hi, good morning, everyone, and congratulations on a strong quarter. I was wondering if you could comment on Argentina's crude oil pricing dynamics for the domestic market and also for exports. If you recently see an increase in discounts to international benchmarks for Medanito. If so, what's been driving it and when you expect it to normalize. Thank you.
Miguel Galuccio (Chairman and CEO)
Hi, Rodrigo. Thank you for the question and also for your report. Yes, in terms of the local market, we see in Q4 something very similar to Q3. Q3, we have local prices in the $64-$65 range. I think you should expect that Q4 will be around those numbers. In terms of export, as you know, we plan to have four export cargoes in Q4. As you know, we saw higher discounts in the last, probably September and October.
That was the impact, as we all know, of the lower demand that we have in the U.S. West Coast because some maintenance schedule in the Gulf Coast and the oversupply and the in the U.S. Gulf Coast due to the hurricane season. I think also that was coupled with some local things happening. One was the overlap of the Secretary of Energy, where we have a change in Argentina, and then we have a bit of delay on the work permit. Also we have some maintenance in refineries ongoing in Argentina that somehow create a compound effect. As you know, we saw discounts of $16/bbl in September. Now we see that coming back to normal.
We see probably around 13-12 in October, and we see December normalizing at the level probably of $5-$4 discount. Remember we come from $1 in July and $0.6 in August. We should continue going through normal discount. Back to Q4, we see four cargos. First cargo in October with discount of $13, last cargo in December got discount of $4. We have to take an average of the discount that we have there. And oil prices, Brent prices, I will consider in the range of $92-$95. We believe that we will have a bit softening in the Brent price in Q4 compared with Q3.
Rodrigo Nistor (Head Of Equity Research)
That was really helpful. Thank you.
Operator (participant)
Thank you. One moment for our next question, please. Our next question comes from Alejandro Demichelis with NAU Securities. Please go ahead.
Alejandro Demichelis (Managing Director)
Yes. Good morning, gentlemen. Congratulations on the results. Couple of questions. Actually, one clarification, one question. The clarification is, Miguel, you said for next year, expect 15%-20% growth on production. What kind of CapEx should we then assume for that kind of level of growth for next year, please? First question.
Miguel Galuccio (Chairman and CEO)
Hi, Alejandro. Yes, that's correct. I think we see production growth in the 15%-20% rate. The CapEx, we are working right now on the CapEx numbers. We are exactly now doing the budget exercise. I think you should consider that the CapEx will be in line with the CapEx that we spent this year. This year was around $500 million total. You could consider $500 million or a bit higher.
Pablo Vera Pinto (CFO)
The 500 include all Oldelval and all the rest, yeah?
Miguel Galuccio (Chairman and CEO)
No, that is normal CapEx.
Alejandro Demichelis (Managing Director)
Okay. For Oldelval and all the infrastructure?
Miguel Galuccio (Chairman and CEO)
Yeah. Oldelval, we need to see how it goes. Yes, if we have Oldelval, it's going to be a bit additional to that.
Alejandro Demichelis (Managing Director)
Okay. That's great. Thank you. The second question is.
Miguel Galuccio (Chairman and CEO)
Alejandro, one thing you need to consider that Oldelval, the way that is structured the deal, we have some cash advance, but it's not really CapEx, the way that is set up the deal.
Alejandro Demichelis (Managing Director)
Okay. That's great. Thank you. The second question is more technical if you want. Pad 15, you're drilling with five wells. Is that right?
Miguel Galuccio (Chairman and CEO)
That's correct.
Alejandro Demichelis (Managing Director)
Is that the way you think you're going to develop Bajada del Palo Oeste going forward?
Miguel Galuccio (Chairman and CEO)
Not necessary. We have we keep the flexibility to drill pad between four and six wells. We are using. I will say the technology or process called Cube. That if you want at some point of time, Alejandro, Juan, or any of our guys can introduce you to what we are doing. Cube is aimed to avoid any kind of interference between wells. Therefore, depends on the geology that we have to be developed in a particular area where that pad is and how our engineers and geologists and geophysicists look at the possible interference between wells is how we decide if we do a pad of four, five, or we could do a pad of six. Okay.
Of course, there's also the economic part of that and the delay of production, including production and our production target that play a role. Usually the main factor that is taken into consideration on the decision of the number of pad is reservoir management. Managing the reservoir the best way possible. The answer is no. Okay. We will not develop with pad of five. You can see that we can do pad of four, five or six depending on what our technical people see the best way to develop the reservoir.
Alejandro Demichelis (Managing Director)
Okay. Can we see, like we are seeing in, say, the U.S. basins, that if you reduce the well spacing, we start seeing much better economics and efficiencies in the field?
Miguel Galuccio (Chairman and CEO)
We are always looking and recalculating the models in terms of the sweet spot, in terms of productivity and also reserve development. We are always looking at that. We are always challenging ourselves with the length of well, with the distance between the wells, with the positions of the well, how many we do to La Cocina, how many we do with Orgánico. This, Rodrigo, is an ongoing discussion. Telling you that we will change the distance between wells today, I don't want to say that. I mean, we are okay where we are today, but it's not unthinkable that we change one of those parameters in the future if our reservoir model said that it's a better way to develop.
We've been changing. We're changing length, we're changing frac design, we're changing intensity of proppant that we put in the formation. All that variables go together. Today, we are super comfortable we are doing the work that we are doing it, but we are open to change all the time.
Alejandro Demichelis (Managing Director)
Okay, that's great. Thank you.
Operator (participant)
Thank you. As a reminder, to ask a question, simply press star one one on your telephone. One moment for our next question, please. It comes from the line of Ezequiel Fernandez with Balanz. Please go ahead.
Ezequiel Fernandez (Credit & Equity Research Director)
Hi. Good morning, everybody. This is Ezequiel Fernandez from Balanz. Thank you for the materials. Very complete as always, and congratulations on the Aguada Federal results. I have three questions. I would like to go one by one, if you do not mind. The first one is related to Aguila Mora. I don't know if with the positive results in your new hub of Aguada Federal, and the different zones in Bajada del Palo, are you putting maybe Aguila Mora on the back burner, or if you will continue to do work on that next year?
Miguel Galuccio (Chairman and CEO)
Ezequiel, that is no at all. I mean, we are planning to do two wells in Aguila Mora between the end of the year and beginning of next year. Nothing, we go ahead with the plan or continue the rig in that block.
Ezequiel Fernandez (Credit & Equity Research Director)
Okay, great. Thank you. I would like to go back, sorry for the insistence, maybe to some of the topics that Walter, Regis, and Alejandro mentioned on Oldelval and the expansion of the coastal terminals. Securing that capacity or at least a portion of that capacity for Vista. You mentioned that you should not face significant equity investments up front for that. Should we conclude that it should be mostly about signing long-term take-or-pay contracts for securing that capacity?
Miguel Galuccio (Chairman and CEO)
Yeah. It's an advancement. It's not CapEx. We have Pablo Vera Pinto, the CFO, online, and he's been following that tender. I don't know, Pablo, if you want to add something to that.
Pablo Vera Pinto (CFO)
Sure. In terms of sort of financially what it means, this would be under the structure contemplated by Oldelval advanced payments, right? They would not be recognized as CapEx, but they would be in cash outflow towards the end of this year and in the course of next year. That process is still open, and we're having discussions with Oldelval and other producers to accommodate our needs with the capacity that Oldelval can offer. Obviously, we think there is more capacity to be offered than what they have tendered so far. Our preliminary assessment is that we should not have issues accommodating the production ramp up that we have presented in the investor day presentation.
Ezequiel Fernandez (Credit & Equity Research Director)
Okay. That's great. Thank you very much. My final question is related to the Oldelval expansion. It's a little bit more than 200,000 bbl/d, right? And that would mean 1/3 of the current nationwide production in Argentina. Could we expect that pipe expansion to be filled maybe in three, four years, and maybe all those barrels go to the export market considering that there are no refinery expansions planned in Argentina? Would that be too optimistic?
Miguel Galuccio (Chairman and CEO)
I mean, we
Pablo Vera Pinto (CFO)
Yes. Go ahead.
Miguel Galuccio (Chairman and CEO)
Yeah. We model the production of Argentina, and of course, we have a view for that. The reality is, I think. First of all, what we saw in the bid was that basically everybody have probably greater ambitions for their plan to grow in the next few years. Oldelval is a piece of that. As I mentioned before, we are looking to other options. Oldelval is an important one, and it will add a lot of capacity. The reversal of Escondida, Vaca Muerta Norte through Chile, a potential Vaca Muerta South pipeline that there are discussions about that. I think you will see all those projects as we move along coming together. Are we a bit late today?
Yes, I think we are a bit late as an industry in having the second pipeline of Oldelval. Another thing to happen is that Oldelval consider to have a pipeline that has higher capacity to the one that was offered. I mean, all that discussions are today ongoing.
Ezequiel Fernandez (Credit & Equity Research Director)
Okay. That's great. Thank you for the general color and for the questions.
Operator (participant)
Thank you. I'm not showing any further questions in the queue, sir. I'll pass it back to management for any final remarks.
Miguel Galuccio (Chairman and CEO)
All right. Once again, I mean, thank you very much for your support, for the questions, for the report. I take the opportunity to thank the Vista team also for their hard work and for the outstanding result that we have this quarter. With that, we close the line. All of you have a good day.
Operator (participant)
Thank you for participating in today's program. This concludes the Q&A and the presentation. You may now disconnect.