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

Hello, and thank you for standing by. Welcome to Vista's Third Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. Now it's my pleasure to turn the call to Vista's Strategic Planning and IRO, Alejandro Chernacov. Please proceed.

Thanks. Good morning, everyone. We are happy to welcome you to Vista's Third Quarter of 2026 Results Conference Call. I am here with Miguel Galuccio, Vista's Chairman and CEO; and Pablo Vera Pinto, Vista's CFO, Juan Garai, Vista's CTO and Matthias Weisel, Vista's COO. Before we begin, I would like to draw your attention to our cautionary statement on Slide 2. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by these remarks. Our financial figures are stated in U.S. dollars and in accordance with International Financial Reporting Standards, IFRS. However, during this conference call, we may discuss certain non-IFRS financial measures such as adjusted EBITDA and adjusted net income. Reconciliations of these measures to the closest IFRS measure can be found in the earnings release that we issued yesterday. Please check our website for further information. Results shown in this presentation are adjusted to exclude a 16.3% noncontrolling interest in Bandura Sur Participaciones S.A., holder of 30% nonoperated working interest in Banduria Sur block, of which 25.1% is finally attributable to Vista. Our company is Associidadaonimaursat de Capital Varia organized under the laws of Mexico, registered in the Bolsa Mexicana de Valores and the New York Stock Exchange. Our tickers are Vista in the Bolsa Mexicana de Valores and VIST in the New York Stock Exchange. I will now turn the call over to Miguel.

Thanks, Ale. Good morning, and welcome to this earnings call. The third quarter of 2026 was marked by the robust operational and financial performance. Organic production growth and the full consolidation of Equinor asset led to a record quarterly production. Combined with strong oil realization prices and focus on cost efficiency, this led to a solid adjusted EBITDA and free cash flow generation during the quarter. Total production was 169,000 BOEs per day, 33% above previous year. Oil production was 147,000 barrels per day, up 34% vis-a-vis the previous year. Total revenues during the quarter were $1.23 billion, an outstanding growth of 75% compared with Q3 2025. Lifting cost was $4.7 per BOE, 6% above the previous year. Capital expenditure was $460 million, sequentially flat. Adjusted EBITDA was $841 million, an interannual increase of 78%. Net income was $293 million, significantly above Q3 of 2025, which was $27 million after excluding the nonrecurring gains of $288 million corresponding to the PETRONAS acquisition. Earnings per share were $2.6 during the quarter. Free cash flow was $334 million, mostly as a consequence of the significant boost in adjusted EBITDA generation. Finally, our net leverage ratio at quarter end was 1.12x adjusted EBITDA on a pro forma basis, reflecting LTM figures for the acquired assets. The ratio was 1.04x adjusted EBITDA, marking a significant reduction year-over-year and reflecting a very solid balance sheet. Total production during Q3 averaged 169,000 BOEs per day, reflecting an interannual increase of 33% and a sequential increase of 8%. We connected 25 new wells during the quarter, currently running operation at a run rate of 100 wells per year. The cumulative 9 new wells tied in during the last 12 months provide a substantial drive to production growth in the period. The consolidation of our working interest in Banduria Sur and Bajo del Toro also drove growth. As the consolidation was as of May 1, we have 3 months of production from this asset in the third quarter compared to 2 months in the previous quarter. Quarterly oil production averaged 147,100 barrels per day, 34% higher year-over-year and 9% above the previous quarter. Gas production increased 29% on an interannual basis and 8% sequentially. Total revenues during Q3 were $1.23 billion, a material growth of 75% compared to the previous year, driven by a solid increase in oil and gas production and higher oil prices. On a sequential basis, revenue increased by 7%, driven by higher production, which offset lower oil realization prices. Oil exports increased 56% year-over-year, reaching 9.9 million barrels in the quarter, representing 73% of our oil sales volume. During the quarter, exports reached $935 million. Realized oil prices were $84.2 per barrel, 30% above Q3 2025 and 6% below the previous quarter. The sequential decrease is mainly explained by the decrease in Brent from $97 to $91 per barrel. We sold 100% of our volumes at export parity prices, both domestically and internationally. In Q3, lifting cost was $4.7 per BOE, an increase of 6% compared to the previous year. This reflects the impact of inflation on peso-denominated goods and services amid flat FX rates. Selling expenses were $3.6 per BOE, a 14% decrease year-over-year, mainly driven by the dilution of ship-or-pay cost on a per barrel basis in the Duplicar pipeline as we continue to ramp up production volumes. During Q3, adjusted EBITDA was $841 million, 78% higher interanually, driven by a strong expansion of revenues amid flat unit costs. On a sequential basis, adjusted EBITDA increased 4% as production growth offset lower realized oil prices. Adjusted EBITDA margin was 68%, an expansion of 1% point compared to the same quarter of last year. Similarly, netback increased 34% year-over-year to $54.1 per BOE. In Q3 2026, cash flow from operating activities was $773 million, maintaining working capital flat amid the larger operation and including income tax payment for $50 million. Cash flow used in investing activities was $439 million, driven by accrued CapEx of $460 million and a decrease in CapEx-related working capital of $20 million. Free cash flow was very strong at $334 million during the quarter. Year-to-date, free cash flow, excluding M&A payment, was $563 million. Cash flow from financing activities was negative $164 million, reflecting net capital debt repaymen of $60 millio share buyback of $55 million and interest payment of $24 million. Our cash position continues to grow standing at $775 million at the end of Q3. Finally, our net leverage ratio stood at 1.12x adjusted EBITDA, a strong reduction from 1.41x in the previous quarter. on a pro forma basis considered in the last 12 months of adjusted EBITDA for the acquired assets, net leverage ratio was 1.04x at quarter end, improving from 1.25x in the previous quarter. To conclude this call. And before we move to Q&A, I will make some closing remarks. During Q3, we delivered robust production growth on the back of strong execution and solid productivity of news and also the full quarter consolidation of Anduriasul and Bajoltoro. Production growth in combination with the high oil prices and flat unit costs led to a strong adjusted EBITDA and free cash flow generation. This allow us to strengthen our cash position and continue reducing our net leverage ratio. Tonally, we made very good progress on our annual work program and are well on track to deliver our 2026 items. Before we move to Q&A, I would like to thank all the employees for their outstanding work during the quarter and also our investor for their continued support. Operator, we can now move to Q&A.

[Operator Instructions] Our first question comes from the line of Milan Carvallo with JPMorgan.

Good morning, everyone. Congrats on the results, and thank you very much for the opportunity to make my question here. So Vista has delivered solid production growth in 2026, and we saw the company delivering 152,000 barrels per day in September. So given that we have been using a reference of pipeline capacity of 162,000 barrels per day. I started to receive a few questions from our clients. Is there a risk that is the production will exceed the available pipeline capacity? And if you could also touch on how is the latest status on the progress of Venmo's project. There could be a delay? And what would be the implications for Vista here?

Milene, thank you for your question. And yes, as you mentioned, in September, our production was 152,000 barrels per day. Our current pipeline capacity is at 180,000 barrel per day, and let me give you a bit of detail on that. So at this point, we have 36,000 or 20% of the air capacity available to us. The breakdown is as follows 78,000 barrels per day correspond to Oldelval, 72 duplicate and 32 to Vaca Muerta or this pipeline capacity includes 33,000 of truck reduction agent, which, at the moment, what we have been public in our materials is only 9,000 of that. But we feel at this time, our confidence that really we can add another 24,000 due to drug production agency. Related to plc, we also have fine-tuned what is duplicate of the value open access after the Equinor acquisition. With that, we have at around 2,000 barrel per day capacity to what we have mentioned before. And to last point on Vamos, well, memos mechanical completion is scheduled for the end of the year. So we will start feeding the pipeline in, and you can expect that we have commercial operation for the semester. Initially, we have 80,000 pipeline capacity, and we will not get the full amount during the second -- the first semester. So you have to expect the 50,000 really will come in the second semester. So in short, we don't see any bottleneck for our growth plan at the moment. Thank you for the question, Milene.

Our next question is from Leonardo Marcondes with Bank of America.

Number one actually with leverage now at very comfortable levels. I mean do you still see room for further M&A in Argentina?

Thank you, Leo, for your question. I mean taking advantage that short of voice, and we have the full team connected. I will pass this question to Pablo Brait.

Thank you, Miguel. Leo, thank you for your question. We expect our net leverage ratio to continue coming down. It should reach 1x by the end of the year and that will give us flexibility to be prepared to take advantage of opportunistic M&A deals that may come up. We think we're in a very good spot if any opportunities arise, and as you know, we are very focused on the core acreage in the oil window of Vaca Muerta. So far, and we expect that to continue being the case. We have been very disciplined and only focus on that window of the basin. At this point, we are not actively involved in any process. But obviously, we remain alert. We always look forward to deals that could generate incremental value as the ones that we have completed in the past.

Our next question comes from Bruno Montanari with Morgan Stanley.

I have one on my side. I remember the company discussing the possibility of testing different landing zones within the core acreage. . So I was wondering how have those tests evolved and how we should think about the potential production upside from that initiative?

Thanks, Ron. Very good question. I will pass this on to Matthias. -- the CEO will be a.

Yes. I take it Miguel, thank you, Ron, for your question. It's a good one. we have some lending zones that remain untested as shown in our public disclosure. So just to give you some color in BahalPaloese, we haven't tested the upper carbonate -- if you consider the neighboring blocks, like Gander and Amargacica, they are currently developing more landing zones. And that makes sense because these are all the blocks in full-field development for a longer time than Basal pale Adding some color in Baja Palette, we are also studying the Orenco that we know is present at least in the western part of the block, close to allot. Adding to that, in glamor in 2023, we piloted on pad. We only tested landing zones, but we know that there are present for landing zones in that area. If you see the neighborhood in areas and activity, for example, Vaalco major. So to give you some sense of potential of this upside here in Bachelor at our interest, we have wells in embotory with 14,000 acres. And in glamor, we have 21,000 acres, but only with 100 wells in inventory. So we are looking forward to that. Overall, the way that we develop our assets is progressive sally. So if you're in a core we are, you have many landing zones. The best way to develop these targets is to prerate the richer organic content which is typically the deepest sums. So that's the reason why we start moving upwards. And typically, you would expect upsides being reflected in the oil inventory as you continue drilling and testing. So I am quite confident that you will see more well sale to inventory in the next years for the company.

Our next question comes from Alejandro Demichelis with Jefferies.