Q2 2023 Vista Energy SAB de CV Earnings Call
Secondly, evacuation capacity limited our production growth. Although this has been unlocked in June .
14 oil via pipeline to Chile.
Suddenly as we focus on our pilot in annular more and by the way.
We tie in less wells than on a what I would ask quarter.
The three drivers we factor into 2023 plan and guidance. So we would expect to meet our production guidance of 55000 barrels of oil per day.
For the year in the following slide we will deep dive into our shale oil developments and will explain how we have shipped back to bajada del Palo Este and how that will drive growth in the coming quarters.
I will start with some details on our successful results in aggregate more of them are held by the way the pilots in.
<unk> Mora with AED, two whereas in but I will have more than one landing one well in local sina and one well in either carbonate.
Cumulative production of the pad was performing 4% about our <unk> by the way Tycho.
60 days of production.
These are the first two wells we drill in this block located in the north of a competitor.
Based on these successful results, we added up to one country west to our inventory.
In Bajada del Palo Este weekday in one well in the past <unk> II, which is currently showing robust production with cumulative production performance, 72% above our highlight by the way Tycho as.
Of that 80 days on production.
This is the first well we drilled in this block and reconfirmed, our 150, well inventory in bajada del Palo Este.
The two words in pad one on the western side of the block and the single well pad on the eastern part of the block continue delivering solid production performance at.
As shown on the chart on the right.
Successful result in <unk> by the way the pilot enable us to attain our moral each recording known amount of minority enabling block to the south this.
This is a concession where we hold 85% working interest with the remaining 15% is headed by gas EBIT earlier, and again, the oil and gas company AUM by Daniel Kemp drawings, we estimate and inventory of up to 50 words in this book.
The successful activity in Bajada del Palo Este, and Angela Moura pilot lead to the addition of 300 <unk> two our inventory for a total of 1150 well across all back more to assets.
As I will explain later during the presentation. This is SaaS one of the key factors that leave us well prepared for a profitable growth acceleration beyond our current strategic plan.
After concluding the pilot we moved back to Palo Este, where we have made solid progress in new well drilling.
During Q2 2023, we finished drilling and completed but <unk> 16, and also drilled by Bajada Palo <unk> 17, which is currently in the completion.
<unk> consists of four well each are being developed as a cube in a pilot, we're running seeking to optimize well productivity.
This means we will diene both pads simultaneously during the coming week, which also resulted in lower production in Q2 2023.
We are currently drilling.
Well, but <unk> <unk> <unk> thousand 19, <unk> is expected to be completed in time by the end of Q3 and Bajada del Palo <unk> 19 in Q4, leaving us well on track to tie in 'twenty was in the second semester of 2023 as per our guidance.
We are on track to upgrade our oil treatment plan by the end of Q3 2023.
This will increase our trimming capacity to 70000 barrels of oil per day in line with the requirements of our production plan through 2026.
During Q2, we secured enough meat to me about <unk> capacity to meet our production targets through 2026.
At the end of May we started exporting oil to Chile through the Odessa OTC highlight that they started operating after more than a decade being shut.
This reverted the pipeline.
Flow from less co leader, nor was through the <unk> system.
Current flow to Chile is 47000 barrels oil per day, and could increase up to $5 7000 barrels per day over the following months.
In Q2, we secured our participation in the back on more of a noted by Laing.
With an 8% working interest this will give us access to increase evacuation capacity to Chile to $12 5000 barrels oil per day, including the current flow.
We expect they might come out and noted by Laing to be operational in Q4 2023 at that time, we plan to rebound at the existing non thereby by line from less conductor back to the original direction of flow.
Adding to our existing capacity not available the new locomotive Pan Nordic capacity means that by year end 2023, we forecast to have 57000 of.
Oil per day of pipeline capacity.
These can be complemented by up to 11000 barrels of oil per day of trucking capacity.
If we consider the capacity already contracted in all delivery expansion to port oral solids, we forecast to have 89000 barrels of oil per day by year end 2025, or Henry's house in barrels of oil per day, if you're tracking is included.
This means we have already secured initiative evacuation capacity to deliver on our 2020 production target.
We have room for further acceleration.
I cannot stress enough the importance of this significant milestone.
And its contribution to support our growth plans.
Total revenues in Q2, 2023 were $231 million, which is 22% below the same period last year.
This decrease was the result of two factors suddenly the normalization of our crude oil stock from lows in previous quarter, which combined with our production being rerouted to chill. It led to less volume available in the terminal for exports to the Atlantic.
This delay our last cargo of the quarter formulation to the first week of July .
And therefore, we exported three cargoes during the quarter is that we originally expected.
Secondly organization prices so.
Often you had in the quarter realized oil price for the quarter I would add $64 $3 per barrel down 18% year over year and 3% sequentially.
Yes, I would actually domestic price was $63 one dollar per barrel wider realized price of the export market was $68 $6 per barrel.
<unk> market accounted for 48% of the OE volumes and 51% of revenues.
Supported one 6 million barrels of oil composed by three categories through the Atlantic.
152000 barrels by body language, Chile, we remain.
Focus on our export driven strategy by 55% of last 12 months of revenue coming from international markets.
We expect to increase this to about 60% in Q3 2023.
Although gas prices decreased 16% sequentially to $3 $9 per million Btu, mainly driven by lower export volumes to Chile accounting for 10% of our total gas volumes at a price of $7 $6 per million Btu.
We have very good news on the cost side.
After a quarter of operating only our shale oil asset.
Costs dropped to $4 $8 per Boe.
Thanks Sam.
One on in that annual basis, and 25% on sequential basis.
This reflects the cost benefit of the transaction, we announced in the previous quarter.
We remain well on track to deliver on our 5.5 dollars per view of guidance for the full year.
Adjusted EBITDA for the quarter was $151 8 million.
Adjusted EBITDA margin was a robust 66% during the quarter.
And in their annual basis, DC said drop of only three percentage points. Despite an 18% decrease in realized oil prices, which was possible even our rebased cost structure. Following the transaction to fully focus on shale assets.
The decrease in adjusted EBITDA reflects softer prices the focus on drilling pilot during the first semester.
And inventory buildup IHS mentioned.
Additionally, in this quarter, we have not <unk> under this JV with <unk>, which generated $10 million of other income in Q2 2022.
We expect strong results in the second semester.
And the completion pace have already pickup and will allow us to tie into oil.
Palo Este West in Q3 moved in oil production and revenues.
Normalized inventories on flow to Chile, we plan to port volumes have accumulated to fight categories, including exports to Chile in Q3.
Finally, we plan to tie in Threep back under the Trafigura, JV, which will generate $90 million of other income in Q3 2023.
During Q2 2023 cash from operating activities was $89 3 million.
<unk> in the payment of annual income tax of $36 million.
Change in working capital of $70 million in advanced payments for transport infrastructure of $5 million.
Cash flow used in investing activities was $174 million.
In language Capex of $179 million for the quarter.
This acceleration in capital deployment set the stage for growth in the coming quarters.
During Q2, 2023, we recorded negative free cash flow of $85 million.
We should be a bone for $13 5 million and repaid $22 5 million corresponding to an installment of our syndicate loan.
You also refinanced.
$48 million.
Maturity in 2024 to 2026.
In Q3, we plan to repay the last installment of our syndicated loan when she'd like 20 <unk>.
After this event, we will have no remaining debt maturities in 2023.
Cash at the end of the period was $223 million.
That reduction be savvy than of the previous quarter reflects our tactical decision to refinance our investment plans with liquidity available at a very competitive cost in the local market.
During Q2 2023, we have continued to strengthen our balance sheet.
Gross debt currently stands at $651 million.
Over the past quarters, we have tactically access the local debt market in Argentina at a very competitive interest rates.
This not only allow us to pre finance, our capex acceleration, but has also reduced our cost of debt, which as of quarter end was 3%.
Our financing strategy is focused on reducing cross border debt, which we have successfully reduced from 54 of our total debt in 2020% to 22% of our total debt at quarter at quarter end.
The average life of our debt is three years, our gross leverage ratio is a very healthy <unk> eight times adjusted EBITDA.
Our solid financial they start to leave us in a good position for an acceleration in growth going forward.
To conclude this call I will recap on today's key messages and announced our upcoming Investor day, where we will provide an update to our strategic plan.
During Q2 2023, we made robust progress in <unk> by the way.
Considering our progress in drilling and completion activity. We are on schedule with two time 12 wells during Q3.
This will boost production and drive an increase in adjusted EBITDA in the second semester in line with our annual Award program.
We're well on track to meet 2023 production and cost guidance.
Successful results in our pilot in <unk> by the way.
<unk> had led us to a 10 drilling inventory to 1150 ready to drill with this.
This provides significant upside potential through our existing strategic plan.
Which was designed at that time.
With our inventory was less than half of that site.
To grow beyond our current strategic plan, we need more evacuation capacity, which we have achieved this quarter.
We have secured mid teen and therefore evacuation capacity to deliver well above our 2020 seed production target base.
Based on our current capacity under contract we have in place we forecast to have 100000 barrel of oil per day of firm.
About question capacity by the end of 2025.
Finally, we have a solid balance sheet with a very healthy leverage ratios manageable debt maturities at a very competitive cost and relatively low share of cross border.
On the basis of our strong position I am extending an invitation to a retail investor they hosted by myself and the rest of this debt executive team.
During this event, which will take place on September 26, we will provide an update on our strategic plan and set new targets for 2020, we.
We will provide further information on the event through our.
Usual investor relation channels.
To wrap up and before we open the call.
Two questions.
I want to thank our employees for their relentless work during the quarter and also since our investor for their continued support.
We will now move to Q&A operator, please open the line.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.
Our first question comes from the line of Bruno Montanari from Morgan Stanley .
Good morning, Thanks for taking my questions. Thank you Miguel Thank you Alejandro.
Two questions on my end, one just to confirm.
So today you have no more restrictions to export more to Chile is that correct.
With anyway of equation capacity desktops.
Was.
Was achieved.
And wanted to know also if you have faced any problems with the rain. We have been reading that there has been some restriction because of the rain. So just wondering if that affects your production and exports.
Now at the beginning of the quarter and then my second question is about the acceleration.
Very clear let me go based on the presentation that you are in a very good position to potentially accelerate the growth, especially in the in the coming few years.
So two items there one is there anything you can do already in 2023 that would perhaps make you.
And above a little bit above the 55000 barrels per day target and two.
Would you say the acceleration.
More on adding new equipment or doing things more efficiently and being able to drill and complete and tie in the beds faster than what we were doing today. Thank you very much.
Hi, Bruno Thank you very much for the question.
With the first one.
You're correct I mean, we don't have any restriction with it by Atlanta at CIT.
Chile at the moment the by line.
Chile was shut down for 70 days.
Doug by line pass below Ariva, and rebate bit move and thereby line was a bit of a set of fees that they decide to.
To have a check on the by line.
The momentum is very.
I mean is very happy with the quality of the crude oil that we are sending so I am sure. We will play some catch up during the year, but that doesn't change the plan that we have for the year.
Sure.
Basically we don't depend also we don't depend only from Chile, we have.
Exit through the Atlantic So.
I don't see any issue with the slight problem that we have with Chile in thermal that validation for the topic of 2023.
Our current plan leave us, we despair reading them fracking capacity for Q4.
We have done also our commvault in demo Weber equation on payment capacity. So we will have a payout treatment evacuation capacity.
But at the moment, we are not going to announce anything so let me the news to announce in September in the Investor Day.
Thank you anyway for the question.
Thank you very clear.
Thank you one moment for our next question.
Our next question comes from the line of Rodrigo on the store from Latin security.
Good morning, everyone. Thanks for the update I got two questions for you. So the first one unique strategic capital spending percentages initiatives, we have outlined.
What are the expectations for cash flow generation over the coming quarters.
And then another one on <unk>.
And what I mean, following the successful results from the final call yet.
Wanting to invest in the necessary infrastructure to connect live load and if you have an estimate on the required capex for that thank you.
Hi, Rodrigo Thank you Mike. Thank you very much for your question.
Right.
Free cash flow for the second half.
First.
At the end of Q2 was close to $233 million.
We are still seeing capex about cash generation in Q3 basically to the to.
To the high drilling and completion activity and also the investment on upgrading facilities in.
In Q4 under the current plan free cash flow.
It will be positive again.
So that is related with your first question.
Related ocular moura.
That we put to complete two wells that were London and <unk>. The other one in Missouri kind of one eight.
Most of then where Abbott is well over 2500 remitted on 44 stations.
We are tightening and they are performing for a percent of all overhead <unk> and they've been producing for 60 days.
So.
Super Happy with the news.
Regarding the equation I think we added about quitting today through enabled operator.
It will be too early to give you announce it on what exactly we would do in terms of infrastructure 40 of our equation, but where we are at the moment evaluating the result, we will continue monitoring those well after the first 60 days, but it is very encouraging I am sure we will come with the plans.
Okay.
Thank you.
Okay.
Thank you one moment for our next question.
Our next question comes from the line of Walter <unk> from Santander.
Hello, Good morning.
Miguel Alejandro Thank you for taking my question.
We are seeing an encouraging improvement in productivity in all of our blocks.
Fundraising.
One I.
I would like you to.
Develop a little bit more on that.
Or what explains the improvement in productivity shut tissue loss.
Terrific.
Or.
Changing techniques drilling and completions wherever.
Is that imply.
The productivity curve.
It's changing the outlook for the clinical body in terms of EUR per well.
Productivity looking for.
On.
Linked to that.
The Capex, we're focused on dose for the blocks rather.
Okay.
We'll be part of aspirational.
On the call by even the near future.
Thats It from me thank you.
Thank you very much Walter for your question and I Love that question because <unk> results.
The <unk>.
<unk> knew that we had have during this year I mean, the result of Buckhead.
Compared with our original protection.
Understanding.
Just to give you first a recap for everybody and were helped by the way you'll remember in <unk> by the way.
We are drilling our first two wells to the casino more or less a year ago.
Those two wells are performing 30% above the highlighted by low oil tycoon.
Then we drill.
Bye bye.
<unk>, but one well on the very eastern side of the block, one senior well Atlanta and local Athena.
Really looking for the limit of that look and we ended up having a well.
Good economical way today that is performing 7% below bajada del Palo Este <unk> cool after 90 days of production.
And probably the.
The biggest and most important news related to this quarter is bajada del Palo Este, two one well on the center overheard Palo Alto land.
In legacy net.
End of 2008 country meet their 44, only 47 stages with Dana in April and is producing 70% about highlighted by lower crude update 80 days.
This is a super well is producing 3000 barrels per day.
IP 30.
I mean, it will be broadly the run between the reservoir that we have drilled in the area.
So.
Back to your question.
Hello, Bello OSD and award.
$4, representing a two day, one and development block. So of course anything that is related to acceleration not surely will be done in those three blocks.
I mean, we did treatment capacity.
The connection between these two loci seamless for us because it's just internal pipeline that we have to.
Too late so yes, the focus of any acceleration program.
We'll include Bajada del Palo Este on it.
So that is the answer.
I don't know if I'm missing anything.
No.
And the follow up this would imply a lower lifting cost sorry.
Carter.
It's pretty special as per our borrowing.
Taking these higher productivity curves in.
In the future.
We are not updating our tycoon.
I mean this is a you know.
No.
We have our place.
On a statistical nature.
So therefore, we continue having the same.
Type quarter for all this block. So we are not planning to do any update of the cycle for the moment, even though yes. I mean, there are few with words.
Perfect. Thank you very much youre welcome.
Thank you one moment for our next question.
Our next question comes from the line of Regis Cardoso from Credit Suisse.
Let me go hi, everyone. Thanks for taking my questions.
A lot of topics I wanted to touch on.
Quick one first is how do those compare guidance with the actual production and EBITDA so far.
In the first half of this year.
It appears your.
Probably lagging behind that guidance, most likely your production and EBITDA will increase in the upcoming quarters, but is it still the case that you believe.
The guide is.
<unk> is in place.
That's the first question.
Second question would be.
Going back to the previous one you just answered Mcgill about the order of the development of the assets.
You said youre thinking about everything around the bajada del Palo <unk>.
As one one fuel grade one cluster.
But does it imply I mean.
Or are the better opportunities does it in any specific window in any specific fuge prioritize.
To start with luck casino in Bajada del Palo <unk>.
And then going to the others or can you do.
Different targets simultaneously so that will be the second question and then maybe if I. If I may just a quick third one.
How would you expect the share of exports to grow in Europe .
Sales and how would you think that will affect your realization price in the future. I mean do you think this would capture more of the oil.
Oil price upside say Brent prices were to go up again.
And is exporting still.
Preferred route say if oil prices were to come down just to understand how do you balance.
<unk> prices.
With the growing share of exports. Thanks.
Hi, Rishi as answering your question.
Regarding the first part of your question.
The guidance that we are coming in line with guidance.
On a realized price of $60 per Nevada, and when you look at currently our already yes.
<unk> also was around $65 per bottle.
Of course, the cargo that we basically who then.
<unk> in Q2.
It would be accounted in Q3 with higher Brent prices, So I mean.
For the for the whole year.
Have a positive impact in our P&L.
Regarding development.
Again, I mean, just restating, what I said before we're helped by the way the outfit.
By the way is for us will be one development cluster on the main developmental assets.
As soon as we have I mean, we the newly solo Bajada del Palo Este too.
I would have said, we should expect that 40 nanometer node update also will be coming but of that plateau.
Bajada del Palo Este, we are developing developing like casino on organic growth.
When in <unk> by the way, we are as sharp focus in legacy enough for the moment.
So this will be the main <unk> that will be development developing in an acceleration plan.
Yeah.
You have further question. The other question was related to.
Exports.
And power centers.
When you look at Q2.
<unk>.
Our export percentage of our <unk>.
<unk> was around 49%.
On the realized price of <unk> was around $68 per barrel.
You should expect that this 49.
Going up to 55 or 60%.
The fact that we are going to have we're going to be moving one cargo from Q2 to Q3.
As you know the brand is performing better and our discounts.
Lower I mean, we moved from a discount of $6.
We expect Q3 to be around five we already so five in this quarter. So I mean, we are planning.
Prices for export around the same dollar level debt.
But we have last quarter, but yes, if you blend performed better it could be better.
It could be a slightly better. So this is where we have seen.
Okay understood. Thanks, so much we can all have a good one.
Thanks <unk>.
Thank you one moment far next question.
Our next question comes from the line of Oregon, a cobalt from the lines.
Yes.
Hi.
Hey, Dan.
The rest of the team for taking my question I have two questions.
The first one has to do with our lifting cost.
<unk> been guiding lifting cost.
Now the current rebound.
Now and it was great to see that happening this quarter. So just to understand is this acceleration over the last couple of quarter.
Beyond the transfer of the asset.
Thank you.
There is something else that is explaining the accelerated reduction in lifting costs.
The first question.
Jordan Oriana thank for the question.
Hum.
Lifting costs, yes.
Yes, we are coming from on a running rate of seven $5 by Novartis and.
That was before the investment of our conventional assets.
We saw <unk> 40 in Q1.
We're seeing 48 now.
Of course, these 48 48, taking full impact of the transfer of the conventional assets.
Oscar will continue increasing unconventional production.
Yes, we still see some potential.
One upside.
That will be more related to the production growth that really reducing the opex side.
But at the moment, we are keeping the guidance as it is.
But he is very encouraging so long the lifting cost site.
Thank you that's very clear and one last one.
I noticed in your presentation that.
We will be transferring some of the.
The capacity that you are currently using <unk>.
The Airbus have or the exports to Chile.
Then I'll come to light a dialogue.
Kind of keeping the two alternative ground. So just perhaps to understand the rationale if there is any.
Do you see any upside potential.
Keeping the two out open.
Give us any.
What is driving the decision of moving volumes from one area to the other pricing wise in terms of contracts and any additional color on that on that Andrew.
I appreciate it thanks.
Thanks.
No there is no competition between the two demands.
The demand of Chile will be covered as sue about commoditize no update one block of mortality is in line is recovering now through the recruiting that we did for less candida.
So there is no competition between the two volumes.
And basically the outline that we have there.
I would hope that we have in table export.
Is the one that we have mentioned so.
No one of them is going to ship what is the volume that we have one.
And of course, I mean, the importance of it by allowing me so with more efficient.
Perfect. Okay. Thank you very much we saw an impact in this quarter on their own.
On Chile, reducing the tracking that we have towards the end of the quarter.
That's also a positive impact.
Okay.
Thank you and congratulations for these key milestones.
Capacity. Thank you.
Welcome.
Thank you at this time I would now like to turn the conference back over to Miguel <unk> for closing remarks.
Well. Thank you very much everybody on looking forward to see you all soon the 26.
The master quota.
Have a good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Yeah.
[music].
Okay.
[music].
Okay.
[music].
Sure.
[music].
Yes.
Yes.
[music].
Okay.
[music].
Yes.
[music].
Yes.
[music].
Okay.
Okay.
Yes.
[music].
Yes.
Okay.
[music].
Okay.
[music].
Yes.
[music].
Sure.
[music].
Yes.
Yes.
Okay.
Okay.
Yes.
Okay.
Sure.
[music].
Okay.
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Okay.
Right.
Yes.
Sure.
Okay.
Right.
Okay.
Okay.
Okay.
Yes.
Okay.
Sure.
Yes.
Right.
Okay.
Okay.
Okay.
Yes.
Thanks.
Okay.
Okay.
[music].
Okay.
Yes.
Okay.
Thank you.
Thank you.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Hi.
Yes.
Sure.
Okay.
[music].
Yes.
Yes.
Okay.
Sure.
Okay.
Okay.
Yes.
Okay.
Yes.
Yes.
Yes.
Okay.
Okay.
Yes.
Yes.
Thanks.
Sure.
Good day, and thank you for standing by welcome to Vince.
Three earnings webcast conference call.
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 this session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one.
<unk> again.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Alejandro cab Nicole This strategic planning and IR. Please go ahead.
Thanks. Good morning, everyone. We are happy to welcome you to <unk> second quarter 2023 results conference call I'm here with me <unk>, <unk>, Chairman and CEO <unk> <unk> CFO of <unk> with a CFO .
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 <unk>.
However, during this conference call, we may discuss certain non <unk> financial measures such as adjusted EBITDA and adjusted net income reconciliations of these measures to the closest IRI measures can be found in the earnings release that we issued yesterday. Please check our website for further information.
Our company Vista is as of yesterday, our strategy capital already ablate organized under the laws of Mexico, registering the Bolsa Mexicana de Valores, and the New York Stock Exchange.
<unk> EBITDA in there was that make you kind of evaluate and be Isd in the New York Stock Exchange I will now turn the call over to Miguel.
Thanks Ali good morning, everyone and welcome to this earnings call.
I am pleased to share with you our results towards the second quarter of 2023.
<unk> made substantial progress in the delivery of our strategic pillars.
We significantly increased our well inventory.
Secured enough evacuation capacity to deliver on our 2020, CCAR strategic plan and strengthen our balance sheet.
Leave us well prepared for a strong profitable growth in the second half of the year and in the coming years.
During the first half of 2023, we focused our drilling and completion and therefore in finalizing the payload in bajada del Palo Este and aggregate Mora.
Leading to fewer tires during the Q2.
Total production increased 4% year over year for a total of $46 6000 Boe per day during the quarter.
Production was up 6% on in their annual basis, and 20% to 22% of our pro forma basis adjusting from the divesture of the conventional assets.
Total revenues in Q2, 2023 were $231 million or 22% decrease year over year, driven by oil inventory buildup, which we explained in the following slide.
<unk> software or realization prices.
Lifting cost was $4 $8 <unk> for the quarter, reflecting our successful strategy to fully focus on our higher margin shale oil assets.
Capital expenditure was $179 million, including the drilling of 10 west and the completion of <unk> during the quarter as well as the execution of our key facilities project.
In Q2, 2023, adjusted EBITDA was $152 million.
We recorded negative free cash flow of $85 million, driven by the acceleration of Capex and lower cash from operating activities.
The leverage ratio at quarter end was a solid cedar 0.5 times adjusted EBITDA.
Adjusted net income was $57 million implying.
Implying a quarterly adjusted EPS of Cedar point $6 per share.
We will now deep dive each of our main operational and financial metrics.
Total production during Q2 2023 was $46 six <unk> per day.
Up 4% in debt annually, driven by strong production from our shale assets.
Oil production was $39 to sell some barrel of oil per day up 6% year over year.
On pro forma basis, adjusting from the comfort of conventional asset total production grew 20% year over year and oil production grew 22% year over year.
Sequentially, we recorded a slight decrease in production driven by three factors.
Firstly, the transfer of conventional asset means a loss of $5 5000 barrels of oil equivalent per day.
Secondly, evacuation capacity limited our production growth. Although this has been unlocked in June .
14 oil via pipeline to Chile.
Suddenly as we focus on our pilot in annular more <unk> by the way.
<unk> inlet was done on a what I would ask quarter.
The three drivers we factor into 2023 plan and guidance. So we'll expect to meet our production guidance of 55000 barrels of oil per day.
For the year in the following slide we will deep dive into our shale oil development and will explain how we have shipped back to bajada del Palo Este and how that will drive growth in the coming quarters.
I will start with some details on our successful results in aggregate more of them are held by the way the pilot in.
In aggregate Mora with dining through whereas in but I will have.
More than one landing one well in <unk> and one well in EDA carbonate.
Cumulative production of the path was performing 4% about our bajada del Palo Este quota after 60 days of production.
These are the first two wells we drill in this block located in the north of a competitor.
Based on these successful results, we added up to 100 west to our inventory.
In Bajada del Palo Este weekday in one well in the past <unk>, which is currently showing robust production.
Cumulative production performance, 72% above our highlighted by the way Tycho after 80 days on production.
This is the first well we drilled in this block and reconfirm, our 150, well inventory in bajada del Palo Este.
The two west in pad one on the western side of the block and the single well in battery on the eastern part of the block continue delivering solid production performance as shown on the chart on the right.
Successful result in <unk> by the way the pilot enable us to attain our model each according known amount of minority enabling block to the south.
This is a concession where we hold 85% working interest with the remaining 15% carried by Gus you better have your annual Ken the oil and gas company AUM by Daniel Kemp growing we estimate and inventory of up to 50 wells in this book.
The successful activity because by the way and in a more of a pilot lead to the addition of 300 <unk> two our inventory for a total of 1150 well across all back more to asset.
As I will explain later during the presentation. This is SaaS one of the key factors that leave us well prepared for a profitable growth acceleration beyond our current strategic plan.
After concluding the pilot we moved back to Bajada, Palo Este, where we have made solid progress in new well drilling during Q2 2023, we finished drilling and completed but <unk> 16, and also drilled by Bajada del Palo <unk> 17, which is current.
And the completion.
A two part consists of four well each rabin develop as acute.
A pilot, we're running seeking to optimize well productivity.
This means we will gain both pads simultaneously during the coming week, which also resulted in lower production in Q2 2023.
We are currently drilling.
Well, but <unk> hundred 18, <unk> thousand 19, <unk> is expected to be completed in time by the end of Q3 and Bajada del Palo <unk> 19 in Q4, leaving us well on track to tie in <unk> in the second semester of 2023 as per our guidance.
We are on track to upgrade our oil treatment plan by the end of Q3 2023.
This will increase our trimming capacity to 70000 barrels of oil per day in line with the requirements of our production plan through 2026.
During Q2, we secured enough missed any evacuation capacity to meet our production targets through 2026.
At the end of May with therapy.
In oil to Chile through the Odessa OTC byline.
We started operating after more than a decade being shut.
To do this we reverted the byline.
Slow from less co leader nor was through the <unk> system.
Current flow to Chile is 47000 barrels oil per day, and could increase up to $5 7000 barrels per day over the following months.
In Q2, we secured our participation in the back of Mortal noted by Laing.
With an 8% working interest this will give us access to increase evacuation capacity to Chile to 12, 5000 barrel oil per day, including the current flow.
We expect thereby commoditized noted by Laing to be operational in Q4 2023 at that time, we plan to rebuild at the existing non thereby by line from less conductor back to the original direction of flow.
Adding to our existing capacity not available the new locomotive Pan Nordic capacity means that by year end 2023, we forecast to CAD 57000 of oil.
Oil per day of pipeline capacity.
These can be complemented by up to 11000 barrels of oil per day of trucking capacity.
If we consider the capacity already contracted in all delivery expansion to port oral solids, we forecast to have 89000 barrels of oil per day by year end 2025, or Henry's house in barrels of oil per day, if you're tracking is included.
This means we have already secured initiative evacuation capacity to deliver on our 2020 production target.
We have room for further acceleration.
I cannot stress enough the importance of this significant milestone.
On his contribution to support our growth plans.
Total revenues in Q2, 2023 were $231 million, which is 22% below the same period last year.
This decrease was a result of two factors suddenly the normalization of our crude oil stock from lowes in previous quarter, which combined with our production being rerouted to Chile led to less volume available in the terminal for export to the Atlantic.
Delay our last cargo of the quarter formulation to the first week of July and therefore, we exported three cargoes during the quarter is that we originally expected.
Secondly organization prices.
Soften during the quarter realized oil price for the quarter, I would add $64 $3 per barrel down 18% year over year and 3% sequentially.
Yes, I would analyze domestic Brian was $63 one dollar per barrel wider realized price of the export market was $68 $6 per barrel.
<unk> market accounted for 48% of the OE volumes and 51% of revenues.
Supported one 6 million barrels of oil composed by three categories through the Atlantic.
152000 barrels by body language Chile.
We remain focused on our export driven strategy.
55% of last 12 months of revenue coming from international market.
We expect to increase this to about 60% in Q3 2023.
Gas prices decreased 16% sequentially to $3 $9 per million Btu, mainly driven by lower export volumes to Chile accounting for 10% of our total gas volumes at a price of $7 $6 per million Btu.
We have very good news on the cost side.
After a quarter of operating only our shale oil asset.
The costs dropped to $4 $8 per Boe.
Thanks Sam.
One on in that annual basis, and 25% on sequential basis.
This reflects the cost benefit of the transaction, we announced in the previous quarter.
We remain well on track to deliver on our five five dollar per <unk> guidance for the full year.
Adjusted EBITDA for the quarter was $151 8 million.
Adjusted EBITDA margin was a robust 66% during the quarter.
I mean their annual basis, DC said drop of only three percentage points. Despite an 18% decrease in realized oil prices, which was possible even our rebased cost structure. Following the transaction to fully focus on shale assets.
The decrease in adjusted EBITDA reflects softer prices the focus on drilling pilot during the first semester and inventory buildup.
<unk> mentioned.
Additionally, in this quarter, we have no time is under this JV with <unk>, which generated $10 million of other income in Q2 2022.
We expect strong results in the second semester, the drilling and completion pace have already pickup and will allow us to tie into us.
Palo Este West in Q3, both in oil production and revenues having.
Having normalized inventories on flow to Chile, we plan to port volumes accumulated to fight cargos, including exports to Chile in Q3.
Finally, we plan to tie in Threep back under the Trafigura, JV, which will generate $90 million of other income in Q3 2023.
During Q2 2023 cash from operating activities was $89 3 million.
Reflecting the payment of annual income tax of $36 million.
A change in working capital of $70 million.
And then advanced payment for transport infrastructure of $5 million.
Cash flow used in investing activities was 174 million.
In language Capex of $179 million for the quarter.
This acceleration in Capex deployment set the stage for growth in the coming quarters.
During Q2, 2023, we recorded negative free cash flow of $85 million.
Wish we were born for $13 5 million and repaid $22 5 million corresponding to an installment of our syndicate loan.
You also refinanced.
$48 million.
A maturity in 2024 to 2026.
In Q3, we plan to repay the last installment of our syndicated loan when she'd like to win.
After this event, we will have no remaining debt maturities in 2023.
Cash at the end of the period was $223 million that reduction be savvy than of the previous quarter reflects our tactical decision to refinance our investment plans.
Liquidity available at a very competitive cost in the local bond market.
During Q2 2023, we have continued to strengthen our balance sheet.
Gross debt currently stands at $651 million.
Over the past quarters, we have tactically access the local debt market in Argentina at a very competitive interest rates.
This is not only allow us to bridge finance, our capex acceleration, but has also reduced our cost of debt, which as of quarter end was 3%.
Our financing strategy is focused on reducing cross border debt, which we have successfully reduced from 54 of our total debt in 2020% to 22% of our total debt at quarter at quarter end.
The average life of our debt is three years, our gross leverage ratio is a very healthy <unk> eight times adjusted EBITDA.
Our solid financial status leaves us in a good position for an acceleration in growth going forward.
To conclude this call I will recap on today's key messages and announced our upcoming Investor day, where we will provide an update to our strategic plan.
In Q2, 2023, we made robust progress in <unk> by the way.
Considering our progress in drilling and completion activity. We are on schedule with two time 12 wells during Q3.
This will boost production and drive an increase in adjusted EBITDA in the second semester in line with our annual Award program.
We are well on track to meet 2023 production and cost guidance.
Successful results in our pilot in <unk> by the way.
Maura had led us to a 10 drilling inventory to 1150 ready to drill with.
This provides significant upside potential to our existing strategic plan.
Which was designed at that time.
With our inventory was less than half of that site.
To grow beyond our current strategic plan, we need more evacuation capacity, which we have achieved this quarter, we have secured mid teen and export evacuation capacity to deliver well about our 2020 seed production target base.
Based on our current capacity under contract we have in place we forecast to have 100000 barrel of oil per day of evacuation capacity by the end of 2025.
Finally, we have a solid balance sheet with a very healthy leverage ratios manageable debt maturities at a very competitive cost and relatively low share of cross border depth.
On the basis of our strong position I am extending an invitation to a retail investor they hosted by myself and the rest of this debt executive team.
During this event, which will take place on September 26, we will provide an update on our strategic plan and set new targets for 2020, we.
We will provide further information on the event through our.
Usual investor relation channels.
To wrap up and before we open the call.
Two questions.
I want to thank our employees for their relentless work during the quarter and also since our investor for their continued support.
We will now move to Q&A operator, please open the line.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.
Our first question comes from the line of Bruno Montanari from Morgan Stanley .
Good morning, Thanks for taking my questions. Thank you Miguel Thank you Alejandro So two questions on my end one just to confirm.
Today, you have no more restrictions to export more to Chile is that correct.
With any wave equation capacity desktops.
<unk>.
Was achieved.
And wanted to know also if you have faced any problems with the rain. We have been reading that there has been some restriction because of the rain. So just wondering if that affects your production and exports.
Now at the beginning of the quarter and then my second question is about the acceleration.
Very clear let me go based on the presentation that you are in a very good position to potentially accelerate the growth, especially in the in the coming few years.
So two items there one is there anything you can do already in 2023 that would perhaps make you.
And above a little bit above the 55000 barrels per day target and two.
What would you say the acceleration.
More on adding new equipment or doing things more efficiently and being able to drill complete and tie in the beds faster than what we were doing today. Thank you very much.
Hi, Bruno Thank you very much for the question.
Starting with the first one you're correct I mean, we don't have any restriction with it by Atlantic.
At the moment the by line.
To Chile was shut down for 70 days.
That by line past below Ariva under Levered bet move and thereby line was a bit of therapies that.
For the <unk> side.
To have a check on the by line.
The momentum is very.
I mean is very happy with the quality of the crude oil that we are sending so im sure.
We will play some catch up during the year, but that doesn't change the plan that we have for the year.
And basically you know we don't depend also we don't depend only from Chile, we have.
Exit through the Atlantic So I don't see any issue with this slide.
And that we have with Chile in thermal that validation for the topic of 2023.
Our current plan leave us with a spare drilling and fracking capacity for Q4.
We have done also our homebuilding demo Weber equation on <unk> capacity. So we will have a payout treatment an evacuation capacity.
But at the moment, we are not going to announce anything so let me the news to announce in September in the Investor day, but thank you anyway for the question.
Thank you very clear.
Thank you one moment for our next question.
Our next question comes from the line of Rodrigo on the store from Latin secure.
Good morning, everyone. Thanks for the update and got a question for you. So the program unit strategic capital spending percentages initiatives, we have outlined.
Our expectation for cash flow generation over the coming quarters.
And then another one on <unk>.
I mean, following the successful results from the final project.
Are you planning to invest in the necessary infrastructure to connect live now and if you have an estimate on the required capex for that thank you.
Hi, Rodrigo Thank you Mike. Thank you very much for your question.
Regarding the.
Free cash flow for the second half.
First.
Cash at the end of Q2 was close to $233 million.
We are still seeing capex, our cash generation in Q3 basically to the to.
To the high drilling and completion activity and also the investment on upgrading facilities in Q4 under the current plan free cash flow.
It will be positive again.
Okay. So thats resonating with your first question.
<unk> Mora.
First let me tell you that we are super happy with but.
But that we've put to complete two wells that we're landing in the casino and the other one in Missouri kind of one eight.
Both of them were Robert as well over 2500 remitted on 44 stations.
There we are tightening and they are performing for a percent of all overhead <unk> and they've been producing for 60 days.
Super Happy with the news.
Regarding your question I think we added about quitting today through enabled operator, and they will be too early to give you announce it on what exactly we will do in term of infrastructure for evaluation by where we are at the moment.
Relating the result, we will continue monitoring those well after the first 60 days, but it is very encouraging I am sure we will come with a plan soon.
Okay.
Thank you.
Okay.
Thank you one moment for our next question.
Our next question comes from the line of Walter <unk> from Santander.
Hello, Good morning.
Miguel Alejandro Thank you for taking my question.
We are seeing an encouraging.
The improvement in productivity in all of our blocks.
But by the way.
And I want I would.
If you could develop a little bit more of them that are.
What explains the improvement in productivity shut tissue loss.
It <unk> look or.
Sure.
Changing techniques drilling and completions wherever.
Is that imply that.
The productivity curve.
It's changing the outlook for the clinical body in terms of EUR per well.
Productivity looking forward.
<unk>.
Linked to that.
The Capex, we're focused on dose for the blocks rather.
Okay.
We'll be part of hazard ratio.
Our analytical by even the near future.
Thats It from me thank you.
Thank you very much Walter for your question and I Love that question, because <unk> heard Palo Este results.
The.
The new that we have during this year I mean, the result of Buckhead.
Compared with our original protection.
Understanding.
Just to give you first a recap forever they value and will help <unk>, you'll remember in my head evaluated with really our first two wells to the casino more or less a year ago.
Those two wells are performing 30% above the highlighted by low oil tycoon.
Then we drill.
Bye bye.
But one well on the very eastern side of the block one single well Atlanta and local Athena.
Really looking for the limit of that block and we ended up having a well.
Good economical way today that is performing 7% below bajada del Palo Este <unk> cool after 90 days of production.
And probably the.
The biggest and the more important news related to this quarter is by Harold Palo Este, two one well on the center or helped by the developed land in legacy net <unk> of 2800 meter 44, only 47 stages with Dana in April and is producing 70.
We're seeing about by highlighted by the way stay tight crude update 80 days.
This is a super well is producing 3000 barrel per day of <unk>. So it.
It will be broad leader ranked between the reservoir that we have drilled.
In the area.
No.
But to your question, but.
The <unk> below <unk> and our <unk>.
<unk> represent a two day, one and development block. So of course anything that is related to acceleration naturally will be done in those three blocks.
No I mean, we did treatment capacity.
Connections between these two loci seamless for us because it's just internal pipeline that we have to.
Too late so yes, the focus of any acceleration program.
We'll include Bajada del Palo Este on it.
So that is the answer.
I don't know if I'm missing anything.
No.
And the follow up this.
It would imply a lower lifting cost sorry.
Carter.
It's pretty special as per our borrowing.
Taking these higher productivity curve in.
In the future.
We are not updating our type curves.
I mean this is a you know.
No.
We have our place.
On a statistical nature.
Therefore, we continue having the same.
Tight quarter for all this block. So we are not planning to do any update of the cycle for the moment, even though yes. I mean, there are few with words.
Perfect. Thank you very much youre welcome.
Thank you one moment our next question.
Our next question comes from the line of Regis Cardoso from Credit Suisse.
Let me go hi, everyone. Thanks for taking my questions.
The topics I wanted to touch on.
Quick one first is how do you compare guidance with the actual production and EBITDA so far.
In the first half of this year.
It appears your.
Probably lagging behind that guidance, most likely your production and EBITDA will increase in the upcoming quarters, but is it still the case that you believe the guide is.
<unk> is in place.
That's the first question.
Second question would be.
Going back to the previous one you just answered Mcgill about the order of the development of the assets.
You said youre thinking about everything around the bajada del Palo.
As one one fueled right one cluster.
But does it imply I mean.
Or are the better opportunities does it in any specific window in any specific fuge prioritize.
To start with <unk>.
How did it Paolo.
And then going to the others or can you do.
Different targets simultaneously so that will be the second question and then maybe if I. If I may just a quick third one.
Would you expect the share of exports to grow in Europe .
Sales and how would you think that will affect your realization price in the future. I mean do you think this would capture more of the oil price upside say Brent prices were to go up again.
And is exporting still.
Preferred route say if oil prices were to come down just to understand how do you balance.
Realization prices.
With the growing share of exports. Thanks.
Hydration is answering your question.
Regarding the first part of your question.
The guidance, we were coming in line with guidance.
On a realized price of $60 per Nevada, and when you look at currently our price.
It is also worth around $65 per barrel.
Of course, the cargo that we basically call then.
<unk> in Q2.
It would be accounted in Q3 with higher Brent prices, So I mean.
For the for the whole year.
Have a positive impact in our P&L.
Regarding development.
Again, I mean, it's us restating, what I said before we're helped by the way the outfit.
But how that valuation for us will be one development left it on the main developmental assets.
As soon as we have I mean, we did newly solo Bajada del Palo Este too.
I would have said, we should expect that paulino nomadic or no update also will be coming but of that plateau.
<unk>, we are developing developing like casino in organic growth.
When in <unk> by the way, we are sharp focus in legacy enough for the moment.
So this will be the main horizon that we will be development developing in a.
Isolation plan.
You have another question. The other question was related to.
Export.
1% or so.
When you look at Q2.
<unk>.
Our export percentage of hour.
Production was around 49%.
And the realized price of April was around $68 per barrel.
You should expect that this 49.
Going up to 55 or 60%.
The fact that we're going to have we're going to be moving one cargo from Q2 to Q3.
Uh huh.
As you know the brand is performing better and our discounts are lower I mean, we moved from a discount of $6.
We expect Q3 to be around five we already saw five in this quarter. So I mean, we are planning.
Prices for export around a similar level debt.
But we have last quarter, but yes, if you blend performed better it could be better.
It could be a slightly better. So this is where we have seen.
Okay understood. Thanks, so much for you all have a good one.
Thanks <unk>.
Thank you one moment for our next question.
Our next question comes from the line of Oregon Cobalt from the lines.
Yeah.
Hi.
And then the rest of the team for taking my question I have two questions.
Really the first one has to do with our leasing costs.
<unk> been guiding lifting costs.
Now the current downturn.
Alright time, now and it was great to see that happening this quarter.
To understand is this acceleration over the last couple of quarter.
Beyond the transfer of vehicles.
That's helpful.
There is something else that is explaining the accelerated reduction in lifting cost.
First question.
Jordan Oriana thank for the question.
Regarding lifting cost.
Yes, we are coming from on a running rate of seven $5, Nevada and that was before the lease investment.
Our conventional assets.
We saw <unk> 40 in Q1.
We are seeing for eight now.
Of course, these 48 48, taking full impact of the transfer of the conventional assets.
Oscar will continue increasing unconventional production.
Yes, we still see some potential.
As an upside.
That will be more related to the production growth that really reducing the opex side.
But at the moment, we are keeping the guidance as it is.
But yes, very encouraging result on the lifting cost site.
Thank you that's very clear and one last one.
I noticed in your presentation that.
We will be transferring some of the.
The capacity that you are currently using <unk>.
It does have or the exports to Chile.
And then I'll come over to Dan.
Keeping the two alternative route so just perhaps to understand the rationale is there any do you see any upside potential.
Keeping the two out open.
There is any.
What is driving the decision of moving volumes from one area to the other pricing wise in terms of contracts and any additional color on that on that Andrew he very much appreciate it. Thanks.
Thanks.
No there is no competition between the two demands.
The demand of Chile will be covered as sue about commoditize no update one about the Montana pit is in line is recovering now through the recruiting that we did for less Candida. So there is no competition between the two volumes.
And basically the outline that we have.
The outlook that we have in table eight port.
Is the one that we have mentioned so.
No one of them is going to ship what is the volume that we have one.
Two other and of course, I mean, the importance of it by allowing me so with more efficient now.
Perfect. Okay. Thank you very much and we saw an impact in this quarter on the on Chile, reducing the tracking that we have towards the end of the quarter.
That have also a positive impact.
Okay. Thank you and congratulations for these key milestones.
<unk> capacity. Thank you.
Welcome.
Thank you at this time I would now like to turn the conference back over to <unk> for closing remarks.
Well. Thank you very much everybody on looking forward to see you also on the 26th.
On an investor call.
Have a good day.
This concludes today's conference call. Thank you for participating you may now disconnect.