Vista Energy - Earnings Call - Q4 2021

Transcript

Speaker 0

Good day, and thank you for standing by. Welcome to the Vistas Fourth Quarter twenty twenty one Earnings Webcast 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 fourth quarter and full year twenty twenty one results conference call. I am here with Miguel Gallucho, Vista's Chairman and CEO Paulo Vedapinto, Vista's CFO and Juan Galobi, 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 measures such as adjusted EBITDA. Reconciliations of these measures to the closest IFRS measure can be found in our earnings release that we issued yesterday. Please check our website for further information. Our company Pista is a Sociedadon in Maburgatil de Capitalo Ariable 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 BIST in the New York Stock Exchange.

The ticker of the warrants is BTW408A. I will now turn the call over to Miguel.

Speaker 2

Thanks, Ale. Good morning, everyone, and thank you for joining this earnings call. Today, I will share with you the fourth quarter and full year results of 2021. We have made excellent progress across all key fronts, delivering solid operating and financial performance, increasing P1 reserves and ready to drill well inventory, strengthening our balance sheet and reinforcing our commitment to sustainability. 2021 mark a turning point for our company initiating a clear path of a strong total shareholder return.

I will kick it off by going through our Q4 results and I will then move on to full year results. During Q4 twenty twenty one, total production averaged 41,001 BOE per day, a 34% increase year over year. Oil production was up 41% in the same period, boosted by our development in Bajada Del Palo Este, where we tie in 20 new wells during the year. Total revenues in Q4 twenty twenty one were $196,000,000 a 146% increase year over year, mostly driven by the increase in oil production and stronger realized prices. Lifting costs per BOE was $7.5 for the quarter, excluding costs related to the 50% non operated working interest we held in Aguada Federal and Bandurria Norte.

This implies an inter annual reduction of 7%. Adjusted EBITDA was $117,000,000 more than doubling year over year and implying a solid adjusted EBITDA margin of 59%. Capital expenditure for the quarter was $97,000,000 reflecting the completion of our FEED pad in the year in Bajada Del Palo Oeste. During Q4 twenty twenty one, we generate proceeds free cash flow of $62,800,000 driven by robust cash flow from operations. Adjusted net income was a solid $35,400,000 showing significant progress vis a vis Q4 twenty twenty, which showed a loss of $21,600,000 We will now deep dive into the main operation and financial metrics of the quarter.

Total production during Q4 twenty twenty one was 41,001 BOE per day, up 34% interannually and 2% sequentially. Production we borrowed was driven by our flagship development in Baja Del Palo Este, which continues to deliver productivity above our type curve. Given the high oil mix in Baja Del Palo Este wells, we see a higher growth in oil production, which increased 41% year over year to 32.4 barrels of oil per day. In December, we tie in part number 10 consisting in four wells, two landed in La Cocina and two in the Organico with an average length of 2,850 meters per well and 54 average stages per well. Note that this pad did not contribute meaningful production in the fourth quarter.

Gas production increased 15% year over year. The sequential decrease reflect our strategy to boost gas production during the winter in line with the higher demand and prices. Total revenues in Q4 twenty twenty one were $196,000,000 a strong inter annual increase driven by the boost in oil production and realized oil prices. Realized oil prices for the quarter averaged $60.6 per barrel, up 51% year over year and 6% quarter over quarter. Sales to export markets accounted for 33% of the oil volumes.

We choose sales cargoes during the quarter and sales contracts executed when Brent was trading at around $78 per barrel on average. The domestic market accounted for 67% of our total sales in the quarter with a crude oil price of $55.5 per barrel. We continue to execute our strategy of building a sale book early on to lock in revenues and fund investment activities. Our entire Q1 twenty twenty two oil sales with approximately 34% of export volume have already been locking at an average realized price of around $63 per barrel. Realized gas prices increased 70% year over year to $2.7 per million of BTU, boosted by the planned gas summer price of $2.7 per million of BTU applicable to approximately 70% of our total volumes.

Additionally, industrial market prices increased from $1.6 to $2.7 per million BTU year over year. Total lifting cost for the quarter was $27,900,000 As in the previous quarter, we managed to maintain lifting costs virtually flat sequentially despite peso effect appreciation in real terms. Lifting cost per BOE was $7.5 down 7% year over year as incremental production from Bajada del Palo Verde with low marginal cost continues to dilute our feed cost base. You should know this figure do not include the impact of our 50 non operated working interest in Aguaja Ferral and Bandurria Norte, which add $2,400,000 or $0.5 per BOE to our total lifting cost. As we took over operatorship and became sole concessions holders of Aguada Ferral and Bandurria Norte on January 17.

We started to work on several projects to review lifting costs through the integration of this asset with our Bajada Del Palo Oeste cluster. We forecast to reduce lifting cost per BOE of this asset to single digit during 2022. Adjusted EBITDA for Q4 twenty twenty one stood at $116,500,000 an expansion of three times compared to Q4 twenty twenty, reflecting higher production rate and realized oil prices amid stable lifting costs. Sequentially, adjusted EBITDA improved 13%. You should note that Q4 twenty twenty one includes $4,500,000 of operating income generated by the JV with Trafigura, which had no impact in the previous quarter.

Our adjusted EBITDA margin has remained strong in the quarter at 59%. Net BUGs have improved 11% sequentially to $30.8 per BOE, mainly driven by higher revenues per BOE amid flat operating costs. Moving to Slide eight, I will review our financial situation. Cash flow from operating activities in Q4 twenty twenty one was a robust $138,800,000 five times higher on a year over year comparison. Cash flow used in investing activities was $76,000,000 with a CapEx activity of $97,300,000 This solid result led to a positive free cash flow of $62,800,000 for the quarter.

In turn, cash flow used in financial activities was 13,500,000 mainly driven by interest payment of $3,800,000 and debt repayment of $1,600,000 This led to a cash position at year end of $315,000,000 We believe that Q4 results are good evidence of our strong operating and financial performance. This is driving profitability growth and free cash flow generation. I will now move to the full year results. First, I will highlight how our achievements in 2021 have solidified the foundations of our strategic plan. We continue to successfully underpin our growth plan by expanding reserve and our ready to drill well inventory.

P1 reserve increased by 42% to 181,600,000 BOEs, resulting in an implied reserve repayment ratio of 477%. This was mainly driven by organic growing Bajada del Palo Este. We also acquired 50,000 core acreage in Vaca Muerta, adding approximately 300 locations to our new well inventory. Half of these locations, considering Aguada Ferral only, are an extension of our core development cluster. We increased total production 46% year over year to 38,008 BOE per day, driven by the tie in of 20 new wells in Bajada Del Palo Verde in line with guidance.

We reduced lifting costs 18% year over year to $7.4 per BOE, also delivering on guidance. We also reduced D and C costs by 18% year over year to $10,000,000 per well on normalized basis. We have also continued to strengthen our balance sheet. Solid performance during the year has led to a reduction of our net leverage ratio to 0.8 times adjusted EBITDA as well as a positive free cash flow of $105,900,000 We successfully raised $260,000,000 in the Argentinian debt capital market, achieving an extension in average debt duration to two point five years at year end from one point five years at the 2020. Finally, we reinforce our commitment to sustainability.

In 2021, we have published our inaugural sustainability report, stressing our pledge to sustainable business practices and transparent reporting. We reduced COP one and COP two greenhouse gas emissions by 14% year over year to 360,000 tons of CO2 equivalent by upgrading our facilities to reduce our operational carbon footprint. Last but not least, we established our ambition to become net zero in 2026 by combining a reduction of 35% in absolute greenhouse gas emissions in our operation with implementation of our own program of nature based solutions. Moving to Slide 10, I will comment on our proved reserve, which increased by 42% vis a vis 2020 for a total of 181,600,000.0 estimated at year end 2021, implying a total reserve replacement ratio of 477%. This constitutes an outstanding achievement by our operations team as we continue to prove the quality of our core Vaca Muerta acreage and our ability to organically generate profitable growth.

Net additions were at 67,600,000 BOEs, mainly driven by the activity in Baja Del Palo Este, where we added 52 new West locations, resulting in a total of 134 booked relocations. Total reserves in Bajada Del Palo Estee are now estimated at 155,000,000 BOEs or 85% of the total proved reserves. The reduction of lifting cost by 16% year over year as well as the increase in oil prices have also contributed with the reserve additions by extending the economic life of the wells. Proof developed reserve increased 21% to 64,700,000 BOEs, whereas proved undeveloped reserve increased 56% to 116,900,000 BOEs. The 35% value at 10% discount rate attributable to Vista's interest improved reserve is $1,500,000,000 using a price assumption of $55 per barrel for oil and $3.92 per million of standard cubic feet for gas according to SAC guidelines.

We will now deep dive in our key operating achievements. During 2021, we made solid progress in Bajada Del Palo Oeste by tying 20 new wells for the year, we have doubled the number of wells of production. This boosted the total shale production by three times and total oil production by 66% vis a vis 2020. Our 2021 development plan was delivered within budget with a total CapEx of $324,000,000 2% below guidance. As discussed before, we reduced drilling and completion costs by 18% year over year to an average of $10,000,000 per well on normalized basis, a key contributor to our profitable growth plan.

This achievement is the consequence of a clear roadmap with focus on continuous improvement across several fronts. From an execution standpoint, during 2021, we reduced drilling days per well by 27.6% compared to 2020 and increased completions efficiency to 8.2 stages per day. We have also captured saving in completion fluid through the application of the right technologies as well as close collaboration with our service providers. In terms of procurement, we have achieved savings through the reduction of drilling and completion service rate as well in water and propane purchases. It is worth noting that these are permanent savings already built into our cost base.

In terms of productivity, our well continue to perform above our type curve of 1,500,000 BOE of EUR. For the first one hundred and eighty days, our average well considering our first 32 wells is 6% above Tae Kur. For the first three sixty days, considering our first 20 wells, our average well is 9% above Tycoon. Our productivity and cost results have driven our development cost down to a highly competitive $7.3 per BOE, a cornerstone of our high return short cycle growth plan. During 2021, we continue to strengthen our balance sheet.

Cash from operating activities was a robust $401,400,000 up 328% compared to 2020. Cash from investing activities doubled year over year to $295,500,000 mainly driven by the increase in drilling and completion activities in Bajada Del Palo Oeste. This result in a positive free cash flow of $105,900,000 reflecting a clear turning point in our operation when compared to the negative sixty two point three million dollars in 2020. Based on our highly efficient cost structure and with conservative realized prices in the $60 per barrel area, we are on track to deliver superior total shareholder return through profitable growth and free cash flow generation. Our successful activity in the Argentinian debt market was a key to pre finance 2020 maturities, extend debt duration as shown earlier and reduce the average cost of debt to 5.8% at year end 2021 from 6.9% at year end 2020.

Finally, the expansion in adjusted EBITDA, which as shown early increased by three times inter annually led to a steady reduction in net leverage ratio from 3.5 times at year end 2020 to a healthy 0.8 times at the 2021. I will now give you some additional color on our ESG progress. On the environmental front, we achieved significant milestones in relation to our emission reduction plan. During 2021, we finalized a study to determine our greenhouse gas emissions for 2019 and 2020, which constitute the best line against we will measure progress. We also completed our abandonment cost curve, a tool that is key to prioritize project aimed at reducing our operational footprint and outline our roadmap to net zero.

We are currently executing several project from this portfolio. We capture cube wins in 2021, which led to a 14 reduction 14% reduction in absolute Scope one and two greenhouse gas emissions, even as the total production increased 46% year over year. This led to a 39% reduction in intensity to 24.1 kilos of CO2 equivalent per BOE. We have outlined a plan to reduce emission in our operation by 35% through 2026. We also kicked off projects from our own portfolio of natural based solutions to offset the remaining CO2 emissions with implementations of forest and salt carbon sequestration.

The combination of these two plants drive our ambition to became net zero in SCO one and two emissions in 2026. Moving to the social front, we have made good progress regarding our people and the communities in which we operate and live. The safety of our employees and contractor working in our operation continues to be our main priority. In 2021, total recordable incident rate was 0.29, improving on the 0.38% rate record in 2020, which was already well above Tier one international oil and gas standards. In term of diversity, continue with implementation of our gender program, which comprehensively address multiple fronts such as hiring, mentoring and advancement, training and awareness and new policies focused on diversity, equity inclusion.

As an example of our progress and ambition target, during 2021, 60% of our new hire were Guna. We made good progress in strengthening our local supply chain. In 2021, the total value of local purchases was $78,000,000 reflecting a 56% increase year over year. The share of the local supplier increased to 21% of total purchases. We continue to invest in social infrastructure in Cattriel.

During 2021, we completed the first phase of an eight kilometers bicycle lane, assigned company premises for children sport activities and sponsored a local female table tennis player. In terms of governance, we made a good progress in reporting, not only by issuing our inaugural report April. We are working closely with our Board, which is engaged in ESG activities through the Corporate Practice Committee. Finally, we are showing leadership in the region, having disclosed our net zero ambition in our Investor Day in December. We look forward to publishing our next report in May 2022.

In 2021, we established an internal cargo price of $50 per ton of CO2 equivalent to reflect the cost of emission in strategic planning and capital allocation exercises. Finally, we also strengthened in governance by issuing policies related to human rights, conflict of interest and anti corruption and train staff to continue improving awareness. On January 17, we acquired a 50% working interest in Aguada Ferral and Bandurria Norte concession from Wintershaldea. This means we will now are operators and sole concession holders of both blocks. Vista made a payment of $90,000,000 in January, while an additional $50,000,000 are due in eight quarterly installments.

The transaction effectively canceled the current consideration of $77,000,000 assumed when we acquire the initial 50%. So the implied valuation of the deal is approximately $2,700 per acreage, which is significantly below historic M and A multiples in Vaca Muerta. Through the combined deals with Conoco in September and Wintershall in January, we have added more than 50,000 core Vaca Muerta acreage and 300 new well locations to our inventory. Being the operators of the block, we expect to quickly replicate the successful operating model of Vajada del Palo Verde, capturing synergies to reduce lifting costs and D and C costs. Also being owners of 100%, we will gain additional flexibility in our development plan.

We have already taken control of the blocks. We are now integrating the asset with Vista operations, gaining full advantage of the synergies we can capture using existing crews, oil services and procurement. These projects are forecasted to reduce the block lifting cost to a single digit during 2022. We are building a pipeline to connect Aguada Ferral to part number five located in the Northwest of Vajada Del Palo Este. This pipeline is expected to become operational in the second half of the year, allowing oil evacuation of the three producing well in Aguada Ferral through our Bajada Del Palo cluster.

This will lower transportation and treatment costs and eliminate the carbon footprint of the truck currently used for transportation. We are also planning complete four already drilled, but uncompleted wells in Aguada Ferreira in Q4 twenty twenty two. In 2021, we delivered a strong performance across all key financial metrics. Realized crude oil prices improved 48% year over year from $37.2 per barrel in 2020 to $54.9 per barrel in 2021. We exported 3,100,000 barrels of oil, which represent 28% of oil sales volumes in 2021.

Over the same period, total revenues increased by 138% from $274 to $652,000,000 Higher revenues combined with a reduction of listing costs described earlier led to a boost in adjusted EBITDA, which quadrupled to $380,000,000 for 2021, exceeding our guidance of $370,000,000 Return on average capital employed was 70% in 2021, a significant turnaround considering that the minus 5% recorded in 2020 and reflecting solid execution of our profitable growth plan. Adjusted net income is showing the same trend with $7,079,000,000 dollars in 2021 vis a vis a loss of $150,000,000 recorded in 2020. These results leave us well on track to deliver on the five year plan we laid out in our last Investor Day. I will now present our updated guidance for 2022, which reflects activity in our federal. We expect to tie in 24 new wells during the year.

Most of the drilling activity is planned in Baja del Palo Este, where we will tie in 16 wells. The first four well pad is planned to be tie in during April. To fulfill pilot commitment in unconventional concessions, we are currently tying in two wells in Bajada Del Palo Este, and we plan to drill complete and tie in two wells in Aguilamora. Finally, we plan to complete and tie in the four wells that were already drilled in Aguada Ferral. This work program is forecasted to deliver a solid production growth of approximately 20% year over year, leading to an average between 46,000 BOE and 47,000 BOE per day for 2022.

We forecast the excess rate to be around 50,000 BOE per day. We expect lifting cost to remain flat at $7.5 per BOE, including Aguada, Ferrana and Manduray Norte. We have the right projects in place to adapt the acquired block to Vista Lifting Cost Standard and also offset the slight inflation we are seeing in San Oilfield Services driven by the appreciation of the peso in real terms during the 2021. We expect adjusted EBITDA to reach between $550,000,000 and $575,000,000 an inter annual growth of approximately 40 This forecast is based on an average realized oil price of $60 per barrel. We are planning to export 5,500,000 barrels of oil, which represent 40% of our crude oil sales, an increase of 77 in the sporting volume year over year.

As a reference, if we Brent average $90 for the remainder of the year in line with the spot prices, did add approximately $50,000,000 of adjusted EBITDA. CapEx guidance is in the range of $375,000,000 to $400,000,000 reflecting additional activity in Agua Aferral. This CapEx is partially front loaded during the year as we build infrastructure for our new production impacting free cash flow in the first two quarters. For the full year, we continue to expect positive cash flow. Finally, we expect to reduce gross financial debt from $611,000,000 at December 2021 to $575,000,000 forecasted as of December 2022.

To wrap up during 2021, we have seen solid operating performance delivering on activity, production lifting costs and adjusted EBITDA guidance. We expanded proved reserve by 42%, driven by the strong performance of Vajra del Palo Verde. We also added 300 new West locations to our inventories through M and A activity in Vaca Muerta. Muerta. We successfully refinanced debt maturities, extending average debt duration and lower average cost of debt.

Our balance sheet was further strengthened with a reduction in net leverage ratio to 0.8 times. We delivered a strong financial performance recording a 70% return on average capital employee and an adjusted net income of $79,000,000 We reinforced commitment to sustainability with solid progress reducing emissions. We reduce absolute greenhouse gas emissions by 14% year over year and laid out a comprehensive plan to become net zero in 2026. We have laid out an ambitious set of target for 2022 as shown in our guidance. We expect to continue delivering solid improvement across key operating and financial metrics.

In short, 2021 was a turning point for our company, initiating a clear path of a strong total shareholder return. In this respect, we plan to submit for shareholder approval a $20,000,000 share buyback program in our next general shareholder meeting expected to take place in April 2022. I will now take a moment to thank our investor for their continued support and interest in our company. I will also like to thank all the staff of Vista for their hard work during 2021, which was a key factor in delivering the result shown today. And with that, operator, please open the line for Q and A.

Speaker 0

Our first question comes from the line of Bruno Montanari from Morgan Stanley. Your line is now open.

Speaker 3

Good morning, everyone, and thanks for taking my question. I have three quick ones. Miguel, I think looking at the guidance, it looks very achievable, and we know that the company has been able to deliver and over deliver on the guidance. So just wondering what would lead to upside in production and margins for 2022, wondering if there is any room to accelerate drilling? The second question is about the capital structure.

How could we think perhaps about either a fast prepayment of debt or an increase in shareholder remuneration. So how do you find that balance to be when looking at the capital structure? And last, what are you seeing recently in the industry in terms of cost and CapEx inflation? And if there is any specific bottleneck because of that for your activities in Argentina? Thank you very much.

Speaker 2

Hi, Bruno. Thank you for your question and thank you for your comments. So starting with the first one, I'd say source of acceleration. Yes, definitely we have, as you know, a deep portfolio of opportunities and locations that we can use. I will say for this year, of acceleration that we are not planning yet to use, but we have it and we have it in mind and we have had the discussion internally are one Aguada Ferreira where so far we are just planning to complete the four docks that we have there.

And this we believe that is a long hanging fruit and also an area that is enabled to our main center of operation that is Bajada Del Palo Verde that of course, we believe is going to give us flexibility and potential to grow from the development plan point of view. And the other is the possibility of adding a fifth pad in Bajada Del Palo Este and I will say not early than the second half of the year. Again, is not in the plan. These are potential way of accelerating related to your question. In terms of debt, we are not planning to prepay.

We are planning to reduce debt when the maturity is due. First, we have announced we will reduce from $611,000,000 our debt position that is at year end 2021 to EUR575 million at year end 2022. As we announced in December that also we are planning to take the debt further down to EUR400 million. And that's I mean, we will see how we move on that. As you know, we have restriction, cross border restriction.

And the idea is first to reduce our cross border debt. I think we will give that priority to that. And then be flexible in how we distribute back to shareholders through different means. Of course, one is that we are announcing today is the buyback program. Related to pressures in the industry, yes, definitely there is pressure in the industry now.

We don't see that pressure in the industry today from prices of services to be a bottleneck. We have long term contracts and long term relationship with our main contractors. So really we don't see a bottleneck there. Infrastructure is not a bottleneck today, but I think it's something that we need to keep being very proactive in Argentina, particularly Old El Bal to make sure that we continue upgrading that pipeline and that facilities since the rate of growing in Vaca Muerta have been improved during the last two years to be good one. So we should keep an eye on that.

So what was the other question? No, that was it.

Speaker 3

No, great. Yes. Thank you, Miguel.

Speaker 2

Thank you.

Speaker 0

Thank you. Our next question comes from the line of Andres Cardona from Citigroup. Your line is now open.

Speaker 2

Good morning, everyone. Thanks for the presentation. Miguel, congratulations on the results on both sides on the financial and the reserves front. I have two questions. Maybe the first follow-up from Bruno's question about the how to accelerate the 2022 guidance.

You mentioned some alternatives, but my question is what do you need to trigger those optionalities? And if the facilities that you currently have in place are enough or are becoming a bottleneck? And the second question may have to do with the talks that the IMF and the Argentinean government are taking place. It seems they are getting closer to reach an agreement. And my question is, if you may expect a change of the capital control front?

Or do you think it will remain in place for longer? Thanks and congratulations again. Thank you, Andre, for your question. The first one related to acceleration in terms of context, I would say that what we need in order to put that in operation, we have it. I mean, have access to rig, we have our internal infrastructure is ready, we have facilities and with spare capacity to allocate further growth during this year.

I think what is going to determine if we will reaccelerate the plan or not is going to be the context. As you see, we are basically coming in Q1 better than we planned context wise, meaning pricing, exportation and the rest. So I think that is going to be key. I mean, we see the context playing, I would say export pricing. Yes.

In terms of the IMF agreement, I believe it was required and understand it's on the way to be perfected. So I mean, good news for Argentina in that front. If that is going to ease effect controls effect controls to me are related to lack of foreign currency. We need to see how the economy roll after the MF agreement and which other economic measure the government take and that's how we change that access to currency. But I mean, are not betting that, that is going to drastically change very soon.

Hope I answered your question, Andres. Thank you. Thank you, Yusit.

Speaker 0

Thank you. Our next question comes from the line of Regis Cardoso from Credit Suisse. Your line is now open.

Speaker 4

Hi, Miguel, Alejandro. Thanks for taking the questions. One of the questions going back to the return to shareholder topic. I just wanted to think of dividends, buybacks, other ways you could get returns back to shareholders in light of not just your investment plans, but also in light of the capital restrictions, right, the excess to dollars. Is there anything, for instance, the hydrocarbon law that was proposed a while back that would allow you to keep part of the export revenues.

So is there any trigger, something like I need to be exporting X amount and then I need to have at least X percent of revenues? I mean, what would be necessary for you actually be able to distribute cash to shareholders? And is it just an issue if it's dividends or if you do buybacks, the same logic applies? And then if I may, a second question about the lifting costs went up a little bit this quarter to $8 per barrel, probably partly explained by the new asset additions. So I just wanted to get a sense of how do you see these the lifting costs going forward on a consolidated basis?

Thank you.

Speaker 2

Thank you, Regis, for your question. Yes, as you mentioned, I mean, have restriction in Argentina and also we have part of our cash in dollars as you know. We have decided that the more effective way of getting back to investor at the moment and in the current condition is with a buyback program that we will launch now in April. We have partial access to dollar currency to repay debt. So also we will we believe and we are doing and we will continue doing that is good to gradually continue reducing debt or the delivery That is how we believe is we could make the best use of our proceed today under the current conditions.

As you mentioned, I mean, I think there's a win win for the industry and for the country in having a program that somehow is the restriction investment and based on the capacity that today we have to generate proceed cross border through exportation. Definitely, we'll be pushing. We are vocal about that because it's a no brainer and it's a win win for country and industry. And hope I mean, I don't think we need a law, but I hope at some point of time, there's a kind of a scheme of program that will allow us and the country to take advantage of that opportunity that we have. We've said I mean, I cannot further comment on that because there's nothing concrete yet today.

In terms of lifting costs, and yes, as you mentioned, I mean, with the acquisition of Agua Ferral, we add acreage, we add low opportunity and also we brought an area that have high lifting costs. The current run rate today of OpEx of expenditure there is around $20,000,000 We have a target to reduce that at the 2022 to approximately $7,000,000 What it means, we want to take that lifting cost that today is quite high, that to take it to single digit number by the end of the year. Where we are planning to do what we are today first, fair initiative is to eliminate the tracking. So we will build a pipeline that connect Aguara Federal to Bajada Del Palo Verde. I don't know, it's an eight kilometer pipeline.

So it's not a big deal. We will use the treatment plan of Palo Cluster. And also we use existing contract for O and M, chemical, security, safety services, everything that we have in place. As you know, lifting cost, one of the parties is fixed cost. So as we add more location, now we add more production, we managed to dilute that and we will take advantage of that.

So yes, we are working on that. The impact on our lifting cost today is marginal. Nevertheless, nothing as you know, we will tackle, we will reduce it. And if we achieve our plan, our lifting cost at the end of the year, it will be close to probably $6.5 per bag. So we are on the case.

Speaker 4

Very clear. Thanks Miguel for the answers.

Speaker 0

Thank you. Our next question comes from the line of Walter Chiarvesio from Santander. Your line is now open.

Speaker 5

Hello, good morning. Congratulations for the results and thank you for taking my question. Actually, it was quite already answered, but to follow on with follow-up with the wells drilled in the other blocks out of PPO, I understand this doesn't mean that is the kickoff of more massive development in these new blocks, especially in Aguada Federal. Is that correct? It's my first question.

I mean this is more testing wells or pilot wells rather than drilling more and the focus will keep being BPO in the short term? And what is the productivity that you expect in these new blocks compared to Bajada De Valloeste That's from my side.

Speaker 2

Thank you, Walter, for your follow-up question. Yes, your what you said is correct. I mean, we are not planning yet full development of Aguaja Ferral. We are completing four wells that were drilled and non complete. So we basically not even we are going to drill those wells.

We are going to complete those wells, I mean, fracking those wells and put it on production, lay the pipeline to tie in those wells directly to the facilities that we have in Bajada Del Palo. This is what we are planning at the moment. Do we have if those wells are good wells, what in terms of geology, there's nothing that made us think that area is different to what we have. I mean, it will be for sure good quality. But of course, those well depend how they've been drilled, how well they've been land, how they are completed and so on.

We will be really responsible for the completion. We didn't land the wells, we didn't place the well. So anyway, we are positive about the result. And of course, we see the performance of the well, yes, there's potential to do more in Aguada Ferral, the location is prime and is neighbor of Baja Este. So it's I mean, it's a natural place to grow.

The rest is two wells in Baja del Palo Este that we are cleaning up right now and we are not planning to drill more during this year there. And then we have two wells in Aguila Mora, okay, that is farther north but also is just these two wells. So again, back to your question, we could add a rig a fifth rig pad Chubaja Del Palo Este. And yes, Aguada Ferral in case those four wells that we complete are very good. It also it give us an upside to grow more if we need.

Speaker 5

Perfect. Thank you very much.

Speaker 2

You're very welcome Walter.

Speaker 0

Thank you. Our next question comes from the line of Oriana Kovoldt from Valens. Your line is now open.

Speaker 6

Hi, this is Oriana Kovoldt from Valens. Thanks for taking my questions and congratulations for a good quarter. I had a couple of follow ups. First and foremost, just to ratify, the CapEx guidance for 2022 is already included in the acquisition of the remaining 50%, the $375,000,000 to $400,000,000 that you were putting in your presentation. That's on one end.

Second question that I had is that it's our understanding that refineries might be running at higher levels this year and that this could impact export levels. So just we were wondering what is your take on this? And is it reasonable to say that we would be expecting lower export levels this year but kicking off to 2023? And last, in your ESG strategy, if you could further elaborate on this natural based solution portfolio and what are you doing? Those details would be great for us.

Thank you.

Speaker 2

Thank you, Raina, for your question. So the first one, very straightforward, your affirmation on CapEx is correct. So it includes the activity on Aguaferral. The CapEx doesn't include the buying of the area, okay? Related to export level, and I think if I understand your question correctly, that may be the option of the refineries or the willingness of the refinery to lower the refinery a bit more to create some sub product related to whatever for the local market.

Look, I mean, yes, it could happen. I think most of the refineries are run by operators that are fully integrated. So really, if the refinery decide to take local prices or to push local prices and against prices export prices that of volume that we can export to create sub product to subsidize the local market. If they do that, I mean, an integrator like YPF or others, I mean, business wise, they are shooting in their foot. And I don't think that is good business practice.

It could happen, could happen. If it happened, they are not managing the business well. Related to your question on sustainability, so just to put in context a bit, so the sustainability program, we filed the baseline in 2020 with our actual baseline was four twenty tons, around 39 kilograms CO2 per BOE of intensity. This year, we managed to take this 04/20 to three sixty and intensity from 39 to 24.1. As we mentioned, 1439% reduction.

Further down to 2026, we want to take it to two sixty five in absolute number, 1,000 of ton of CO2 and our intensity to nine. And that will be intensity wise a reduction of 75%. And the rest, we announced that is going to be offset through MBS. That MBS initiative company, it has been put in place, team are in place. And actually, we are working in the portfolio of what we are going to address this year.

I cannot disclose much yet because I think it's not time to disclose. But just for you to have a view, we will tackle from that portfolio around four projects this year. Projects have been somehow identified, and we are working on that. As we have more concrete news, I mean, we will update you. But this is everything I can say at the moment.

So we have created structure, and we have a team in place. And basically, are going through the main priority within our portfolio and we will have actual project up and running this year.

Speaker 6

Perfect. Thank you very much.

Speaker 2

Thank you.

Speaker 0

Thank you. Our next question comes from the line of Constantinos Papaglia from Puentes. Your line is now open.

Speaker 5

Thank you. Thank you very much. Good morning and congratulations on your results. My question for you today concerns evacuation capacity for oil. How much spare capacity does Old Del Val have, as you mentioned?

And how does it affect your expansion plans

Speaker 2

on Baja Del Palo Oeste and

Speaker 5

on Aguada Ferral? Do you think we could expect Vista to use its cash to buy stakes in trunk lines so as to integrate operations now that exports start growing and become a significant portion of your revenues? You very much.

Speaker 2

Did you

Speaker 3

receive my question? Received it.

Speaker 2

We started to answer and we were on mute. So related to your question on track pipeline and Odelval. Yes, definitely Odelval today first of all, today we have not a capacity issue. Odelval Trunk Pipeline currently have the capacity of 225,000 barrels per day. They are planning an increase to 265,000 in the first state adding some palm and station.

And then also understand there is another plan to further upgrade the facility to three seventy five with pipeline loops and so on. One is it will be executed more in the short term. The other one, it will take a bit more time. So my comment on that is that we don't have today a capacity evacuation problem, but we need to act because everybody is growing. We are not planning at the moment to take any stake in Old Val and I don't think even we have the opportunity to do so.

So to answer your question, we don't have today nothing on the table to be part of the management of all the value.

Speaker 5

That was very clear.

Speaker 2

Thank you. Thank you very much. You're welcome, Constantino.

Speaker 0

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Miguel Gallucho for closing remarks.

Speaker 2

Gentlemen, thank you very much again for your question, your interest and follow-up and reports on Vista. So have a good day and looking forward to see you next quarter.

Speaker 0

This concludes today's conference call.

Speaker 6

Thank you

Speaker 0

for participating. You may now