Vista Energy, S.A.B. de C.V. (VISTAA) Earnings Call Transcript & Summary

Good morning, and welcome to the Vista Investor Day. Today's call is being recorded. [Operator Instructions] I would now like to turn the conference over to Vista's Strategic Planning and Investor Relations Officer, Mr. Alejandro Chernacov. Please go ahead.

Good morning, everyone. We are happy you could join us today. I'm extremely pleased to be hosting our second Investor Day. Today, we will update you on our company's performance and our new targets for 2024 to 2026. Before we go into the agenda for the day, let me very briefly remind everyone 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. However, during this presentation, we may discuss certain non-IFRS financial measures such as adjusted EBITDA. Reconciliation of historical measures to the closest IFRS measures can be found in our annual report and earnings release is publicly available. During today's presentations, we will also be using the term previous targets to refer to targets previously set in our strategic plan disclosed during our 2021 Investor Day. We will refer as new or updated targets to the targets set by the updated plan that we will present today. Please visit Slide 2 in the presentation filed today for the full text of our safe harbor statement. Today, our CEO and management team members will present an update to Vista's 2024 to 2026 strategic plan. We'll kick off with Miguel Galuccio, Chairman of the Board, CEO and Founder of Vista, who will be showcasing the company we have built during our first 5 years of operations. He will then describe our forward-facing strategy to deliver even higher growth and value with a larger, more efficient and more sustainable company. Next, Gabriela Prete, our sustainability and QHSE manager, will talk about how we are reinforcing our 2026 Scope 1 and 2 net zero ambition even as we project to deliver higher growth. She will show you how we are progressing with the decarbonization of our operations and the execution of our nature-based solution project. Juan Garoby, our Chief Operating Officer and Vista's Co-Founder, will then walk you through our operational excellence achievements and their contribution to growth, efficiency and value. Juan will give the floor to Matias Weissel, our operations manager, so he can tell you more about how we prepare the company to deliver higher growth, and explain our updated operational plan, which includes a material ramp-up in new well activity and our new production and cost targets. Next, Pablo Vera Pinto, Vista's Chief Financial Officer and Co-Founder, will describe our solid financial performance during our first 5 years of operations, which led to a robust balance sheet that lays a strong foundation for future growth. He will review our capital allocation priorities and explain why we consider them fundamental to maximize shareholder return and build a higher growth, higher returns company we now envision for 2026 and beyond. Finally, I will share our financial projections through 2026, including new targets, uses of cash and sensitivities to crude oil prices. We will close the day with a Q&A session. And before we get started, just a few housekeeping items. One, we expect our presentation to be 50 minutes long in total. After that, we will move to Q&A. Two, dial-in participants will have a chance to ask live questions during the Q&A session. You will also be able to submit your questions to me by typing them in the question box under the video screen. Three, lastly, you will find today's slides and the video to replay on demand on our website vistaenergy.com. I'll now leave you with Miguel.

Thank you, Ale. Hello, everyone. I'm very pleased to welcome you to our second Investor Day. During today's presentation, I will be discussing how we have created shareholder value EBITDA, making the company we envisioned 5 years ago a reality. We have succeeded in establishing a highly efficient, lower carbon intensity, profitable and cash flow generating company capable of delivering even more value than we projected back in 2018. In the second half of 2021, we hosted our inaugural Investor Day in which we unveiled Vista's strategic plan to deliver superior shareholder value from 2022 to 2026. As a result of the robust execution, we are well on track on exceeding those targets. Moreover, given the increased scale of proven quality of our Vaca Muerta shale assets, the outstanding team we have consolidated, the drilling and completion performance, the treatment and evacuation capacity we have secured, we are now in prime position to significantly raise the bar for future shareholder value creation. With this in mind, I will share an updated accelerated version of our strategic plan through 2026. The numbers speak for themselves. We have built the company we envisioned 5 years ago. We are well on track to deliver the growth in production and adjusted EBITDA we projected in April 2018, even with the significant volatility experienced by our sectors in them. Production have more than doubled, and we anticipate reaching our target of 65,000 BOEs per day by year-end. We also expect to reach an annualized run rate of $900 million adjusted EBITDA during the second half of 2023, with adjusted EBITDA margins that are already above 65%. This remarkable delivery now fully focused Vaca Muerta have allowed us to expand our P1 reserve valuation by 5x since 2018. Our successful derisking of the original assets as well as the expansion of our assets based through accretive business development activity have quadrupled our Vaca Muerta acreage expanding potential for future growth. We believe Vista is facing a more positive context as global energy demand will continue to grow driven by population increase and improving living standard in emerging market in a complex geopolitical landscape. Therefore, the need for growing supply of energy that is, first, reliable; second affordable; and third, lower carbon, have never been stronger. To excel in an environmental performance is a mandate. Our laser focus on reducing Vista carbon footprint, along with our ambition to reach net zero by 2026, provide us with a clear competitive advantage. The foundation of our strategic plan are fit for this context and have not changed since our 2021 Investor Day. A deep ready-to [ drill ] short cycle well inventory, our peer-leading operating performance and robust balance sheet, and last, a sustainable focused culture. Over the past decade, Vaca Muerta's production grew at a compound rate of 56% per annum. This has offset the production decline of all other Argentinian players combined and boosted light oil exports. Vaca Muerta represents almost 50% of the country oil production in the first half of 2023 and 70% of its oil exports. Vaca Muerta shifted the country's energy paradigm from a view of scarcity to one of abundance. It has proven it can generate significant incremental effort, potentially creating a virtuous cycle of foreign currency inflows and growing investment, and contributing to a healthier macroeconomic perspective for Argentina. After an initial period of incorporating the technology required for unconventional development, progressing along the learning curve and adopting best practices, the average well productivity in Vaca Muerta now exceeds its shale peers in United States. Additionally, Vaca Muerta carbon footprint intensity is considerably below the global average and also below that of most of the oil and gas producing country. Therefore, Vaca Muerta have the potential to provide growing volumes of reliable, affordable and lower carbon energy to the world. Over the past 5 years, we have multiplied by 4 our derisked Vaca Muerta acreage. The significant expansion in our high-quality asset base was driven by 2 factors: Firstly, the derisking of the originally acquired Vaca Muerta acreage, even beyond Bajada del Palo Oeste which was our original development target. The outstanding execution of our technical and operational teams have derisked our high-quality assets, spanning Bajada del Palo Oeste and Coiron Amargo Norte. These shale oil blocks were part of the initial business combination and today hold 134,000 net acres and an inventory of 750 wells. Secondly, we executed accretive business development transactions, which enabled us to increase our shale oil asset base, adding or Aguila Mora, Aguada Federal and Bandurria Norte. This transaction added 72,000 net acres and 400 wells to our inventory, building further [indiscernible] and optionality into our premium asset portfolio. In addition, earlier this year, we closed an agreement to transfer the legacy conventional assets. This allow us to fully focus on the development of our shale assets, leading to a company with lower costs, higher margins and greater cash flow generation. We remain fully committed to developing our premium asset base to its full potential. Juan Garoby, Co-Founder and COO; and Matias Weissel, our operations manager, will provide further insight on these topics. Let's focus on the 5 key milestones achieved since our December 2021 Investor Day that underscore my confidence in accelerating activity going forward. We are well ahead in operational results for the first 2 years of our plan disclosed in 2021. I want to stress that this outstanding performance was driven by everyone at Vista, a team that is fully focused on results is committed to people and innovate to excel. We've strengthened our balance sheet consistently reducing leverage ratios, extending maturities and lowering the cost of our debt. We secured drilling and completion capacities to increase new well activity. Importantly, we put the right contracts in place with the right partners and adequate incentive to ensure accelerated value creation through our One-Team model. We have contractually secured 100,000 barrels per day of evacuation capacity and are expanding treatment facilities to increase production well above 2021 Investor Day target. Finally, we have consolidated our export-oriented strategy by becoming the largest exporter of light crude oil in the country with a consistently increasing share of exports. In summary, we are extremely well positioned to raise the bar for Vista's future targets. We are stepping up activity to maximize total shareholder return. Our new production target for 2026 is is 100,000 barrels of oil equivalent per day, a 25% increase relative to the target set by 2021 strategic plan. Our new adjusted EBITDA target for 2026 at $1.7 billion is 55% higher than one we set in 2021, driven by additional production volumes, a higher share of oil exports and lower lifting costs. The updated target of our strategic plan are based on maximizing efficiency of the drilling and completion equipment we have been running since 2018, which significantly reduced the risk of execution. Consistent with our 2021 plan, we expect to maintain total cumulative cash flow of $1 billion at an updated realization price of $65 per barrel. In line with our capital allocation priorities, we have allocated excess cash generation to additional growth, which driven by consistently higher return of our drilling and completion activities generate incremental total shareholder returns. We are reaffirming our ambition to become net zero by 2026. We expect to reach that target by lowering our carbon intensity to 7 kilos of CO2 equivalent per BOE and offsetting the remaining emissions through the carbon credit generated by MBS projects executed by our subsidiary, Aike. The updated strategic plan is expected to generate more than $500 million of free cash flow per year by 2026, assuming realized oil prices of $65 per barrel. By the end of 2026, we forecast to have remaining inventory approximately of 900 wells. This means we expect to have the balance sheet, the inventory and execution capabilities in place to continue growing profitably to generate superior total shareholder returns. 5 years ago, we envisioned a 65,000 BOE per day company. Today, our vision is to become 150,000 BOE per day company by 2030. I will now turn the floor to the team to provide more details on our updated strategic plan.

Thank you, Miguel. Good morning, everybody. Over the past 2 years, we have made significant progress in decarbonizing our operations. We now have 1/3 of the Scope 1 and 2 carbon emissions intensity of 2020, having recorded a reduction from 39 kilograms of CO2 equivalent per BOE to 14 kilograms of CO2 equivalent per BOE in the fourth quarter of 2022. Emissions reduction in our operation is the result of solid execution of operational decarbonization projects, which include installing vapor recovery units, blanketing gas in our storage tanks, improving operational parameters in the glycol dehydration process, and replacing gas with compressed air instrumentation. We plan to further reduce our Scope 1 and 2 GHG emissions by continuing to execute investment projects prioritized through our carbon abatement curve. Ongoing projects include full rollout of compressor instrumentation, electrification of our compression systems, incorporation of renewable energy to power our field operations, as well as electrification of our trading rig. Given the level of progress in our decarbonization efforts and the expected results of ongoing projects, we have lowered our 2026 carbon intensity target by 22%, from our previous target of 9 kilos of CO2 equivalent per BOE to a new target of 7 kilograms of CO2 equivalent per BOE. I want to emphasize that all our decarbonization projects and in line with the capital allocation defining our 2021 Investor Day, and also have a positive internal rate of return with our carbon price set at $50 per ton. As mentioned by Miguel, we are well on track to deliver on our Scope 1 and 2 net zero ambition even after having raised our production target by 25% from 80,000 to 100,000 BOEs per day for 2026. Today, we reinforce our Scope 1 and 2 net zero road map which combines the significant reduction of operational carbon footprint I just explained with a portfolio of our own nature-based solutions to offset remaining emission. In 2022, we launched our new venture called Aike to design, manage and execute Vista's portfolio of nature-based solutions a solution also recently made available for third parties. Our carbon offset inventory model shows that, by the end of 2026, we should have enough carbon credits from the MBS projects we are currently executing to offset all residual emissions leading to a net zero operation. After 18 months of operation, Aike is already running MBS projects that span over 19,000 hectares in 7 different locations distributed across 4 provinces in Argentina. We purchased 6,000 hectares of land in the province of Corrientes where we have already planted more than 2 million trees over 2,200 hectares. We have also signed a binding commitment to acquire 5,000 hectares for a forest conservation project in the province of Salta where very evident and imminent deforestation risk existed. In addition, we have signed sustainable farming and livestock agreements covering a total of 8,000 hectares in the province of Cordoba, Santa Fe, and Salta. Generating our own carbon credits gives us all full confidence in their quality and allows us to also get involved to ensure all our projects generate positive and sustainable social environmental impact both from a community and a biodiversity angle. It also represents actionable and cost-effective path to reach net zero in a short time frame. Argentina's abundant natural resources, biodiversity and diverse ecosystems are ideal for the execution of MBS projects ranging for afforestation and reforestation on the graded lands and conservation of pristine native forest through the implementation of sustainable practices in the agricultural and cattle farming sector. Aike strives to ensure a cross-cut social environmental management with aims of conserving restoring and preserving local biodiversity whilst positively engaging with local communities. Aike is staffed with leading local experts capable of transforming land and forest into efficient carbon sequestration project, which will provide us with a credit inventory forecasted in our models. Let me share with you a brief video portraying our initial land market afforestation project in province of Corrientes. [Presentation]

Hello, and welcome to the operations segment of our strategic update. In this section, I will discuss how we achieved operational excellence and how we expect this to continue driving further growth, efficiency and value. As a result of our solid operational performance and focus on the development of our assets in Vaca Muerta, we doubled production and quadrupled reserves since we started operations in 2018. Our strong production growth also resulted in over-delivery on our 2022 production target by 6% vis-a-vis the plan disclosed in our previous Investor Day. A safe and healthy work environment constitutes one of our top priorities. We're very proud that we have achieved this growth level with a total recordable incident rate consistently below 1 since 2020, in line with best industry practices. Our laser focus on operational efficiency allowed us to significantly reduce the time it takes to construct and put on production a full well pad. Today, it takes just 88 days to deliver a full well pad, a material improvement from 130 days back in 2019. This was mainly driven by increases of 75% in drilling speed and 25% in completion speed. Several factors have contributed to these efficiency gains. We developed a culture of being relentless in achieving results. We hired and trained an extremely experienced operational team in developing Vaca Muerta since its origins. We constantly innovate in our processes. We implemented off-line operations, ROP optimization processes, batch drilling, and sand and water logistics optimization, among others. We deployed the latest technology available, for instance, rotary steerable drilling, rig automation, sandboxes, [indiscernible]. We developed a novel One-Team contracting model, which provides alignment with and incentives for key suppliers covering drilling, completion and production. These efficiency gains resulted in a reduction of 23% in drilling and completion costs between 2019 and 2022. Through the combined effect of scale and efficiency, we have cut in half total operating unit cost from $32 per BOE in 2018 to $16 per BOE in the second quarter of 2023. During this period, we achieved 65% savings in lifting cost per BOE. Firstly, cost reduction was initially driven by implementing a new operational model after acquiring the assets, with constant focus on savings and efficiency. The transfer of the conventional assets earlier this year allowed us to focus exclusively on shale operations, further reducing cost. Secondly, by doubling total production, we have further diluted this cost per BOE and gain scale, negotiate better contracting term. Development cost reduction was also very significant, 40% over the same period of time. This was mainly achieved through the combination of 2 factors: well cost reduction, as explained earlier, and 50% increase in our well EUR to 1.5 million BOEs. The average production performance of the 84 wells we have tied in to date has confirmed so far our EUR estimation. This performance confirms our success in establishing Vista as a globally competitive low-cost producer. We have tied in 82 new wells in our development hub since 2019. These wells have consistently shown solid productivity, performing 4% above our type curve for the first 90 days and 8% above our type curve for the first 2 years of cumulative production. This performance has driven shale production growth from nil in 2018 to 43,000 BOEs per day in August 2023. During our first 5 years, we have built a high-quality asset portfolio with an inventory of 1,150 wells through the successful derisking of our acreage and accretive asset acquisitions. The successful results in our first 2 4-well pads completed in 2019 combined with the geological models run for the block allowed us to confirm our initial view of 400 wells inventory in Bajada del Palo Oeste. This only considered 2 landing zones at La Cocina and Organico. In 2021, we added another 150 wells to our inventory by derisking the lower carbonate, a third landing zone in the same block. The acquisition of Aguada Federal and Bandurria Norte blocks added 300 additional wells to our inventory. In 2022 and 2023, we drilled pilots in [ Bajada Palo Oekte ] and Aguila Mora. Based on the successful results of the wells drilled, we added 300 more wells, including 50 in Coiron Amargo Norte, an area that neighbors Bajada del Palo Este for a total of 1,150 wells. The size and quality of our inventory provides significant growth potential. We have consolidated operations in our core development hub, which we operate as a single production cluster. This development hub includes 4 blocks, Bajada del Palo Oeste, Aguada Federal, Bajada del Palo Este and Coiron Amargo Norte. The growth plan through 2026 we are presenting today is entirely based on new activity in this core hub. Let me now give the floor to Matias Weissel, our operations manager, who will present our updated operational projections that reflects higher growth and lower costs through 2026.

Good morning, everyone. I'm here today to discuss with you how we plan to deliver on the targets of our high-growth, high-return strategic plan. We have made significant progress in securing drilling and completion, treatment and evacuation capacity. With the 3 drilling rigs and the completion set we currently have under contract and have operated for more than 4 years, we project we can increase new well activity from 31 tie-ins in 2023 to 46 tie-ins per year during 2024. At the end of this quarter, we'll finalize the expansion of the oil treatment plant in our development hub, which is expected to increase our treatment capacity by 23% to 77 barrels of oil per day. Our plan going forward is to continue implementing modular facilities expansions to cater and treat incremental production, leading to 100,000 barrels of oil per day of capacity by 2026. Importantly, our facilities expansion plan has the flexibility to add further expansions should we decide to accelerate production growth beyond our new targets. Finally, over the last year, we made significant progress in securing evacuation capacity. As disclosed in our last earnings call, we have been contractually awarded [ 31,500 ] barrels of oil per day incremental capacity in the Oldelval expansion and 37,400 barrels of oil per day of capacity in the OTE port facility expansion. We recently initiated exports to Chile through the OTASA-OTC pipeline and expects to increase our capacity for our 8% stake in the Vaca Muerta Norte pipeline. Combining our current capacity available under open access and newly contracted future capacity, we have secured 100,000 of oil per day by the end of 2025, which will allow us to evacuate the production we are targeting under our updated plan. With the aim of accelerating growth, we plan to increase CapEx to fund new well activity starting in the second half of 2023. We're adding 2 new wells to be tie-in during the fourth quarter of 2023, for a total of 31 tie-ins for the year. We are also drilling an additional pad, which will be completed and tied in during the first quarter of 2024. Finally, as I just mentioned, during this semester, we're executing 2 projects to expand our treatment capacity, to accommodate the production growth of the coming years. In summary, we're increasing our 2023 CapEx guidance from $600 million to $725 million. We expect to substantially increase new well activity to 46 tie-ins per year starting 2024. Between 2024 and 2026, we therefore expect to put on production 138 new wells, 44 more than in the previous plan, an increase of 33%. Our updated CapEx plan calls for $900 million to be invested in 2024 as we frontload our treatment capacity expansion. In 2025 and 2026, we plan to invest [ $1800 ] million per year. After doubling production in the first 5 years of operations, we now expect to double production again in a shorter period of 3 years. Our new production target for 2026 is 100,000 BOEs per day, implying a 22% CAGR on 2023 production and 25% higher than in our previous target of 80,000 BOEs per day for 2026. Production growth is expected to generate further efficiency gains, reducing lifting cost from $5.5 per BOE in 2023 to $4 per BOE in 2026. This implies a significant improvement of 33% compared to the $6 per BOE target we set during the previous Investor Day. We also want to share with you a perspective beyond the time frame of this updated strategic plan. By 2026, we expect to hold significant remaining inventory that underpins further growth. We project to have more than 900 wells in our inventory by the end of 2026. Approximately 70% is still in our core development hub and the remaining wells in Bandurria Norte And Aguila Mora. This leaves us well positioned to continue building an ever larger company, which we envision could be producing 150,000 BOEs per day by 2030 as explained by Miguel earlier today. I will now leave you with our CFO, Pablo Vera Pinto, who will present our strong financial performance in our first 5 years of operation and share insights into how we have prepared our company to raise the bar of our 2026 targets.

Hello, everyone. To finalize today's presentation, Alejandro and I will share with you our path to continue delivering superior total shareholder return, with most targets well above the ones we presented 2 years ago. Our updated strategic plan is built on strong foundations, supported by a robust growth trajectory since inception -- in only 5 years, we have built the second largest Vaca Muerta shale oil operator. During the first half of 2023, we were responsible for 14% of the shale oil produced in the basin. Argentina, driven by the production growth of Vaca Muerta, has become a structural exporter of Medanito oil, which is now well established as a light, low-sulfur crude oil in international markets. In 2020, we were first movers in exporting Medanito oil via tankers out of Bahía Blanca to clients in South America, North America and the Caribbean. And this year, we were part of the consortium responsible for reopening crude oil exports via pipeline to Chile. Driven by our outstanding production growth, Vista is now the top exporter of Medanito crude oil, on track to deliver an estimated 9 million barrels to export market during 2023. By the end of this year, our exports will have tripled vis-a-vis 2020 and should represent up to 55% of our total crude oil sales volume. And we expect this share to continue growing through 2026. Apart from strong growth, more importantly, we have delivered exceptional returns. Our adjusted EBITDA quadrupled between 2018 and 2022, reaching $765 million last year, 39% higher than the target of $550 million set in our previous Investor Day. Additionally, our adjusted EBITDA margin of 67% in 2022 was 4 percentage points above our target, positioning Vista as an industry leader in terms of profitability. Our return on average capital employed metric showed significant expansion in the last 2 years. ROCE reached 40% in 2022 and exceeded by 8 percentage points, the average of our industry peers. Our solid financial performance has strengthened our balance sheet. Our current debt profile provides us with more flexibility to support future growth. We reduced our net leverage ratio from 3.5x adjusted EBITDA in 2020 to 0.5x in Q2 2023, and improved our debt maturity profile with yearly principal repayments projected to represent not more than 10% of EBITDA through 2026. The progress achieved in reshaping our debt profile was relevant in 3 major aspects. First, we significantly reduced cross-border debt from 56% of total debt in 2019 to 22% in the second quarter of 2023. Second, we reduced the average interest rate on our debt from 8.9% in 2020 to 3% in the second quarter of this year. And third, we extended the average life of our debt from 2.5 years in 2021 to 3 years in Q2 2023. As a result of this progress, Moody's and Fitch upgraded our local credit rating to AAA, up from our initial rating of A+. Our total shareholder return focused strategy is based on the same capital allocation priorities we presented in our 2021 Investor Day, but delivering more growth, even lower carbon intensity and a stronger financial profile, all of which will provide us with increased strategic flexibility. Our confidence in delivering future growth is supported by the cost efficiency and productivity consistently achieved in our past drilling campaigns. We have also secured the needed evacuation capacity to further grow production and exports. Benefiting from our vast ready-to-drill inventory, we will continue to prioritize investments in high-return, short-cycle projects to generate profitable export-driven growth. We reduced greenhouse gas emissions from operations by 64% and launched Aike, our now fully operational NBS venture. By continuing to invest in operational decarbonization projects as well as in nature-based carbon offsets, we can reaffirm our ambition to become Scope 1 and 2 net zero by 2026. Maintaining a strong balance sheet has been and will continue to be a priority. Our evolution in terms of debt profile with extended maturities, lower cost of debt, and our reduced share of cross-border obligations are a consequence of our prudent and proactive financial management. We understand flexibility as a competitive advantage. We believe that quickly identifying opportunities and being able to swiftly allocate the cash generated to its best use at each point in time generates industry-leading shareholder returns. As we have done in recent past, we plan to allocate cash generation to incremental organic growth projects, selective, highly accretive M&A activity, share buybacks or dividends. Since 2021, we have executed $29 million in share buybacks, and we have acquired Vaca Muerta blocks, Aguada Federal in Banduria Norte in 2 transactions, which expanded our development acreage and granted us further development optionality. In that respect, our priorities remain unchanged. Alejandro will now present our updated projections.

Hello again. I will now talk about our updated financial projections through 2026. We expect total revenues to grow driven by the increase in production volumes sold to the export market. According to our projections, revenue should double to $2.35 billion in 2026, assuming a realized oil price of $65 per barrel in real terms. This is 42% of our previous target of $1.65 billion for such year. More importantly, we expect our export-driven growth to allow us to lower cost through scale, supporting even higher profitability going forward. Our new financial projections significantly raised the bar on previous targets. We now expect to double adjusted EBITDA to $1.7 billion by 2026, generating 55% higher adjusted EBITDA than the previously expected $1.1 billion. We expect to reach our previous 2026 adjusted EBITDA target 2 years earlier in 2024. We also expect adjusted EBITDA margin to be 72% in 2026, 5 percentage points higher than our previous target of 67%, which was already reached in 2022. We also project to deliver higher returns on the capital we employ. As Pablo just explained, we have an industry-leading ROCE. We expect to increase ROCE by 4 percentage points to 40% in 2026. We project to deliver these results while maintaining a healthy balance sheet, with gross leverage ratio target for 2026 maintained at 0.4x total debt to EBITDA. We are focused on executing a high-growth, high-return strategic plan, delivering superior total shareholder return. Based on our updated projections, we plan to generate $5 billion in operating cash between 2022 and 2026, compared to $3.4 billion in the previous plan. This additional cash will enable us to increase CapEx to $3.8 billion, up from $2.3 billion in the previous plan. It has also enabled us to fund $140 million in asset acquisitions and $168 million of upfront payments in evacuation capacity, neither of which were included in the projections of our previous Investor Day. More importantly, our updated targets maintain the cash generation target at $1 billion for the period, to be accumulated between 2024 and 2026. By the end of 2026, we expect to have a company generating north of $500 million of cash flow per year, which leaves us in an excellent position to deliver on our 2030 vision. Our projections assume a realized oil price of $65 per barrel. So assuming a realized average oil price of $75 per barrel for the next 3 years, we forecast cash flow generation to be $1.6 billion. On the other hand, assuming an average realized oil price of $55 per barrel, we forecast $400 million of cash flow generation through 2026. So for each dollar per barrel variation in realized oil price, cumulative cash flow varies $60 million through 2026. These sensitivities are evidence of both the inherent upside and the resilience of our strategy and of our company. With this, we conclude today's presentation. We will now move to Q&A.

We will take a 2-minute break before we start the Q&A session. [Break]

We will now begin the question-and-answer session. [Operator Instructions] And our first question today comes from Bruno Montanari with Morgan Stanley.

Good morning, everyone. Thanks for hosting this event, and congratulations on the execution and the new targets, which look very robust. I have 2 questions, if I may. First one, since 2018, we have seen a major evolution in Vista's well productivity, which over the years led to upgrades on the shale well type curves. So I wanted to know if you believe the company reached a state of art, if you will, in the type curve or if there could be additional upside surprises in terms of productivity? And the second question, looking at the 2026 target, could you provide us a bit more color on the equipment requirements to reach 100,000 barrels per day, specifically, if you plan to add more drilling rigs and when that would be necessary. And also given that the company has been able to execute above and beyond expectations, do you see potential upside to the 100,000 barrels per day figure?

Bruno, thank you for your question. I will start answer probably the first part of your question related to the productivity and well types, and then I'm going to let Matias to answer about production and probably additional equipment that we will require. As shown in the presentation that we just did, our well type currently are performing 8% above type curve. The type curve that we have today is 1.5 million barrel of oil per day. This is after 720 days or 2 years. We are seeing also a performed -- robust performance on [ gas lift ], which is built in production after 12 -- in 10 years, confirming that this was not only a very good technical decision from the point of view of productivity and also lifting costs. And with that, I will let Matias to answer the second part of your question.

Thank you, Miguel. Well, our plan is to move forward with 36 wells per year. If we construct the curve until 2026, we'll be moving forward from 55 BOEs per day and 7 BOEs per day in 2023 to 70%, 85%, and 7 BOEs per day. We are feel -- we feel very confident in BPO, in Bajada del Palo Este. That's the reason why we're drilling and performing vis-a-vis with the type curve. We have the treatment capacity. We have a plan that is focused on modular facilities. So we have the capacity in order to keep on growing beyond 100,000 BOE per day capacity of treatment evacuation.

Our next question comes from Walter Chiarvesio with Santander.

Congratulations for the performance so far. I have 2 questions related to each other. The first, related to the longer term, let's say after 2026, the first one, and I know that, as you mentioned, your commitment to the best allocation of capital in the company. But if you have to be more accurate or what do you envision the company in terms of cash flow management, I guess that you have either 2 options with this strong cash flow in the future, you see that distributing dividends will -- if you think there could be some specific dividend policy in the future? Or either you envisions to accelerate growth even above what you just mentioned in the presentation, if you have to say, what do you think your vision could be after 2026? And related to that, what are the challenges after 2026 in terms of CapEx, evacuation needs, if we need more of the plans that we are seeing for the country? And also in your facilities, investment facilities, because according to my math is that you need to accelerate drilling wells more than 45 per years after 2026 to reach your target. Those are my 2 questions. Thank you.

Thank you very much, Walter, for your question. And again, I will probably answer the first part related to cash or capital allocation, and then I will let Juan Garoby to comment on our plans 2026 onwards and requires in facilities and equipment. We expect to generate around $500 million in 2026. And the capital allocation or our capital allocation remain exactly the same. First of all, grow due to our deep pool of inventory that we have in terms of well, and now we are giving an indication what we could do 2026 onward. Second, deliver action, and third, and not in any specific order, shareholder return. Specifically in shareholder return, we've been having a policy of -- not the policy, we've been doing buybacks all the way up to here, and we will continue doing so. But also depend on the context, and we believe the context will be positive for us, at some point of time we will have a dividend policy when that really apply. And we continue and we will be always looking at that. With that, I will let Juan to comment on 2026 onwards in terms of production plan, CapEx and equipment.

Thank you, Miguel. We have, at the moment, we have secured all the contracts required to get to 2026 and these 100,000 barrels production. Going forward, if we were to increase production even further and reach 150,000 barrels by 2030, we would require 2 additional rigs, and we will also require to negotiate additional contracts with -- for evacuation and build additional facilities to treat that production. But at the moment, we have all the contracts in place, 2 drilling rigs and 1 spudder rig, and we have all the facilities planned and evacuation contracts in order to achieve those 100,000 barrels per day in 2026.

Just a follow-up. Do you think that the possibility of bringing new rigs depends more on the industry conditions or the macroeconomic condition of the country in general?

We do what we have today for our plan, as we mentioned before, and the plan be contracted under the current situation that we are today. So for us, additional spudders is something that we have in hand. Due to our special relationship on this One-Team approach that we have with Nabors and with Schlumberger, we have been able to secure the equipment that will require to execute the plan towards 2026. I will say, generally speaking, the service industry also is looking for a change in the term of context for importation and also repatriation of dividends, as you probably know. And of course, that is bringing certain constraint that is not affecting us at the moment, but I think it's affecting the industry overall in Vaca Muerte.

Perfect. Thank you very much for your answers.

And our next question today comes from Alejandro Demichelis with Jefferies. Please go ahead.

Congratulations with the new targets. Just a follow-up question on the infrastructure side. On that kind of 2030 path on infrastructure, do you think that can be achieved with the infrastructure that is in the country at the moment? Or do we need to see some of the new projects really materializing for you to get to that number?

Thank you, Ale. I will leave Mati probably to take over the question in terms of treatment, and then Pablo can give you an overview on evacuation, where we are today and where we're going.

Thank you, Miguel. In terms of internal upstream capacity of oil, we have several projects on the portfolio and in the field. For example, during the next 3 years, we are commissioning the second and the first stage revamp of [indiscernible] facility, central facility, that we're going to gain around 90,000 barrels of oil per day of capacity, overall capacity. Then we have a concept, this is a modular facility that's called [ Baterias ] for unconventional resources that fit-for-purpose design facilities. We are just commissioning 1 by the end of the next quarter of next year, that's called [ Bateria #3 ], and this is clue to be linked to the Vaca Muerta Norte oil pipeline. If we need more, we are going to put above 2026 other 2 batteries that will be linked to all the pipeline that goes to Atlantic, to the Pacific Ocean, are clue for us for the exports.

Good. Thank you, Alejandro, for your question. In complementing what Matias just said, to get to our 2025 target, we will add the open access capacity we're already using now, plus the Oldelval and OTE expansion that we're already funding. Those projects are progressing quite well. To that, you need to add our exports to Chile that will start flowing through Vaca Muerta Norte in the coming weeks, in a few months. And with that, we have secured our capacity for 100,000 barrels per day target in 2025. If we want to grow beyond that, which is our vision, we will most likely need to add a new evacuation pipelines and potentially a new export port. As you may know, there are ongoing discussions among industry players to build that new trunk pipeline and to build a new deep sea port that will give us access to larger ships, probably to VLCCs, and that will be a very important part of our plan after 2026. It will probably provide us with lower discounts and access to new markets. We believe the government and all industry players are very well aligned in making those expansions happen. It's not something that is urgently needed, but it's something we are discussing and will most likely be part of our plan.

On the drilling and completion side and on the listing cost side, evolving from here, because if I look at your new CapEx targets, so $720 million for next year, 46 wells tied in, that's about $15 million per well, yes?

Yes. We -- I mean, as we said in the presentation, we don't see an issue on the development costs. And in the lifting cost, we've been very upfront that we believe we will land in 2026 in $4 per barrel. Lifting cost, why? You know where we come from. We have a huge reduction, both in terms of CapEx and reserve, but we have faced inflation during the last 2 years. We believe we have reached a point where the CapEx is fixed for the wells. And I will see in a change of context of the evaluation or whatever happens next in Argentina, we see probably more of a positive effect than the negative effect.

We have no further questions via phone. I would like to turn the conference back over to Mr. Alejandro Chernacov, who will be reading additional questions from the webcast.

We have a few questions from online -- from the online platform. I'll start with the first one that comes from Alejandra Aranda from Itau, which is, what are the risks in terms of equipment? What could delay the plan? And what could make you accelerate? Do you rely on imports to execute the plan? Those are -- that's the question from Alejandra.

All right, Alejandra, thank you for the question. And I will probably tackle the first part of the question, and then I will let Juan to discuss where we are with the term of equipment and how we are going to tackle what we put in the plan. First of all, we said internationally, we have a very contracted view in terms of -- on Brent, we've been vocal about that and we don't see any changes in the medium term. So that, of course, is encouraging us. And we, today, don't see any showstoppers from Argentina politics. As you know, we are going through election today. But when you take the views of the 3 candidates related to Vaca Muerta, in particular Vaca Muerta oil, I think it's very consistent. All of them see Vaca Muerta as a solution and not as a problem, and they are very keen on tapping in to the proceeds that come from exportation. And of course, they are very aware that the only way to move forward and continue growing in Vaca Muerta and continue incentivizing the activity, we will require some flexibility for some of them immediately. For some of them, it will take probably a few months in terms of access to cross-border proceeds. So therefore, I mean, we believe our plan in the medium term 2026 is a very realistic one. And we are very keen on what we can do from here to 2030. Juan, probably you could comment about the rigs and equipment that we will require.

Yes. On the operational side, we see no risk on equipment to achieve the plan. We have already contracts in place for 2 drilling rigs and 1 spudder rig. The frac set is already contracted as well. So with this capacity, we'll be able to drill 46 wells per year. That is what we have in our plan. As far as importation, only spares and some parts that will be required to maintain those equipments will have to be imported, but nothing major to achieve this plan. As we said before, to accelerate further after 2026, we will need to contract 1 or 2 additional rigs, but that is beyond 2026.

Alejandra, also related to your comment, if we will have the cash to accelerate, definitely, I mean, as it's shown in the presentation, we will accumulate around $1 billion of cash from now to 2026. That has not changed from our previous plan. And we will be generating about $500 million in 2026. So definitely, we will have the cash to accelerate. We will have the resources to accelerate because we will just consume a very small part of our portfolio. So the decision to use that cash further -- to further grow our activity will mainly depend of the context.

Thank you, Miguel. I will move to the second question from the online platform, which comes from an anonymous investor and says, Vista has an inventory of more than 20 years and the management and the skills to continue drilling Vaca Muerta even further. In case that there is evacuation availability, what are your thoughts around making a JV with another player, which should, let's say, pay the CapEx and OpEx costs and share incremental production above the guided plans?

All right. Thank you very much for your question. And we've been very innovative on that front. So I will let Pablo, who leads the business development as part of his role of CFO, to answer this question.

Perfect. Thank you, Migue. We have a strong track record of generating value through business development activity. Just to give 2 examples, we entered into a quite creative structure with Trafigura to accelerate our growth and improve their returns on our investments. We also acquired at very competitive terms additional blocks, including Aguila Mora, Bandurria Norte and Aguada Federal, and that has expanded our portfolio and generated value in the long term. That activity will continue being part, it's part of our DNA. And when we look specifically at Bandurria Norte at Aguila Mora blocks, those 2 developments are not part of our core strategic plan that we just presented. So they provide upside to accelerate even beyond or to provide growth after 2026. We think it will make sense to entertain discussions around JVs in either 1 of those 2 blocks or potentially even both blocks, and that is definitely a way to generate more value to make it tangible in the medium term and to improve our returns. So yes, that will probably be part of our plan going forward.

Any more question, Ale?

One more question from an anonymous investor again, and says, how do you expect development costs to evolve in the next few years?

As you know, development cost has 2 parts. One is the ultimate recovery per well, and there is the type curve that Matias has just explained, where we do see some area for improvement, but we think we're probably at the point where we're okay with that type curve as of today. The other area is well cost, where we do see a opportunity to further reduce well costs. We will -- we do have a continuous improvement process that we put together from the very beginning. And we -- also the normalization of the macro may help us in reducing well costs as well as it has played against us in the last 2 years. So we do see a room for improvement in well cost, and that will further reduce the development cost by probably 5% to 10% in the coming years.

Thank you, Juan. I think we have a last question, again from an anonymous investor, that refers to, can you give more detail on the plan to decarbonize operations?

Thank you, Ale. Yes, we will continue to deploy a defined portfolio of projects like we have been doing since 2021. This has helped us to reduce our carbon intensity from 39 kilograms of CO2 equivalent to an exit point of 14 by the end of 2022. Going forward, we will aim to live at the top of the quartile among the oil and gas industry, reaching 7 kilograms of CO2 equivalent per BOE. We have, again, to continue deploying this set of the projects, those include, for example, the electrification of the compression systems, the electrification of the drilling rigs, which is pioneering initiative in Argentina. We will also continue introducing vapor recovery units for all our new facilities, eliminating blanketing gas and also including air instrumentation for the rest of the facilities. All these projects have got a positive internal rate of return setting, obviously, the carbon tax that we have decided to put at $50 per ton of CO2 emitted, and the abatement cost in average is around $30 per ton, which is extremely competitive when compared with the global market. 2

Thank you, Gabi. Okay. And with this, we have a last question, that is, how will the upcoming change in government potentially affect Vista?

Well, I think I mentioned that before. I mean, as you know, I mean, we are well established here, and Vista is not what it was 5 years ago. So it's a company that is the second largest producer [ unconventional ] oil, in Vaca Muerta today. And therefore, of course, everything that we think and is taking in consideration for the country moving forward. We have contact with the 3 candidates to President of Argentina, and we -- and they have been very explicit on what they think and on the importance of Vaca Muerta for Argentina moving forward. To help the country macroeconomic-wise, exporting is a key priority. And when you look at what Argentina can export today above what we are exporting today in terms of scale, in terms of actionability, Vaca Muerta oil is probably first in the list. And of course, in that sense, everybody want to incentivize what we are doing. And when I mean we, not just Vista, but the whole industry. Therefore, they are very positive on what will require to accelerate further our development. And so I'm positive about what will be the next chapter of Argentina and Vaca Muerta in the next 5, 6, 7 years.

Okay. Thank you, Miguel. With this, we conclude the presentation. So for concluding remarks, Miguel, please?

Thank you very much, first of all, for escorting us all the way to here have been very successful year. And I would like to take the opportunity not just to thank you, but to thank all the people that work at Vista that have made this possible. This will have required not only hard work but also a lot of innovation and professionalism in everything that we do every day at the field and also in our offices. Thank you very much, everybody, and have a good day.

Thank you. The event has now concluded. Thank you for attending today's presentation. You may now disconnect.