Vista Oil & Gas SAB de CV

NYSE:VIST

Earnings Call Transcript 2022-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the Vista's Second Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to your speaker today, Alejandro Cherñacov. Please go ahead.

[Alejandro Cherñacov]

Thanks. Good morning, everyone. We are happy to welcome you to Vista's second quarter 2022 results conference call. I'm here with Miguel Galuccio, Vista's Chairman and CEO; Pablo Vera Pinto, Vista's CFO; and Juan Garoby, Vista's COO.

Before we begin, I would like to draw your attention to our cautionary statement on Slide 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 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. Reconciliations of these measures to the closest IFRS measure can be found in the earnings release that we issued yesterday. Please check our website for further information.

Our Company, Vista Energy is a sociedad anónima bursátil de capital variable organized under the laws of Mexico, registered in the Bolsa Mexicana de Valores and the New York Stock Exchange. The tickers of our common stock are VISTAA in the Bolsa Mexicana de Valores and VIST in the New York Stock Exchange. The ticker of our warrant is VTW408A.

I will now turn the call over to Miguel.

[Miguel Galuccio, Chairman and Chief Executive Officer]

Thanks, Ale. Good morning, everyone, and welcome to this earnings call. I'm delighted to share with you our results of the second quarter of 2022, during which we have continued to deliver a strong operational and financial performance. During Q2 2022, total production averaged [44,800] boes per day, a 12% increase year-over-year. Oil production was up 70% year-over-year, boosted by a solid well performance in Bajada del Palo Oeste and especially in our two-well pilot in Bajada del Palo Este.

Total revenue in Q2 2022 were $294.3 million, a 78% increase compared to Q2 2021, driven by higher production and stronger realized oil prices. Lifting cost per boe was $7.8 for the quarter, sequentially flat, reflecting our success in containing cost pressure. Capital expenditure was $151.4 million, including the drilling of two pads and the completion of three pads during the quarter.

Our production growth kept us with the strong realization prices and continued focus on efficiency has driven up adjusted EBITDA to $202.1 million for the quarter, doubling year-over-year and implying a solid adjusted EBITDA margin of 69%. During Q2 2022, we recorded positive free cash flow of $62.6 million, driven by robust adjusted EBITDA generation. Net leverage ratio at quarter end was 0.6x adjusted EBITDA. Adjusted net income was a solid $82.3 million, implying a quarterly adjusted EPS of $0.9 per share.

We will now deep dive in our main operational and financial metrics. Total production during Q2 2022 was 44,800 boes per day, up 12% inter-annually. Oil production was up 70% year-over-year and continues to be driven by our flagship development in Bajada del Palo Oeste. Total shale oil production, which also includes Bajada del Palo Oeste and Aguada Federal now represent 74% of our total oil production.

Production growth during the quarter was boosted by the tie-in of our two-well pilot in Bajada del Palo Este in February, and pad number 12 in Bajada del Palo Oeste in May. With 47 wells tie-in today, producing an average 5% above our type curve, we continue to see solid performance in our core development in Bajada del Palo Oeste.

During Q2, we completed and tie-in pad number 12 and 13. We are currently completing pad number 14, which we plan to tie-in during the coming weeks. We are on track to drill and complete two additional pads, number 15 and 16, which we plan to put on production in the second semester. This will increase the number of new wells in this block by 20, during 2022. So by year-end, we expect to have 60 wells on production.

In Aguada Federal, we completed and tie-in our first two wells issuing corresponding to pad Aguada Federal 2. We drilled two wells in pad Aguada Federal 3, a 4-well pad with two wells drilled by previous operator. We are planning to complete and tie-in this pad in the second half of the year. The construction of the pipeline linking Aguada Federal to Bajada del Palo Oeste is currently underway. The pipeline is scheduled to be ready by Q4 and will enable us to have an integrated operation, reducing lifting costs and environmental footprint.

In Bajada del Palo Este, the two wells we tie-in late February under our ongoing pilot process continue to show outstanding results. After 120 days of production, the average production of both wells is 15% above our Bajada del Palo Este type curve on normalized basis. This initial pilot result confirm the top quality of the Western part of this block, and now we are planning to drill additional three wells to further de-risk the average in the Eastern part of this block later this year. On the basis of this updated annual work program, we are increasing our annual guidance from 24 to 32 new well tie-ins for this year.

Total revenues in Q2 2022 were $294.3 million, a 78% increase year-over-year, driven by oil production growth and substantial improvement in realized oil prices. Realized oil price for the quarter averaged $78.4 per barrel, up 43% year-over-year and 22% quarter-over-quarter. This reflects improvements in the domestic market where the average was $63.2 per barrel and international market with an average of $99.6 per barrel.

Sales to export markets accounted for 42% of oil volumes and 53% of oil revenues, having a exported three cargos in the quarter or 1.5 million barrel of oil in total. Going forward, we expect to maintain this level effect for volumes for the reminder of the year.

Realized gas prices increased 11% year-over-year to $3.9 per million BTU mainly boosted by winter prices, which positively impacted May and June. Plan Gas price was $4.1 per million BTU and industrial prices were $4.5 per million BTU. In April, we exported 10% of our gas volume to Chile for a realized price of $5.4 per million BTU.

Moving to Slide 7. Total lifting cost for the quarter was $31.7 million, lifting cost per boe was $7.8 up 7% year-over-year. We maintained lifting cost flat quarter-over-quarter, despite cost pressure and peso-denominated services due to the appreciation of the Pesos in real terms. We are actively implementing tactical cost saving initiative to contain the impact of the peso appreciation. We expect the production grow in the second semester to continue dilutive fixed cost, allowing us to deliver the total lifting cost of $7.5 per boe for the full-year in line with our guidance.

Adjusted EBITDA for the quarter was $202.1 million implying an inter-annual growth of 97% and sequential growth of 59%. This reflects a strong revenue growth and our successful efforts to maintain a stable lifting cost. Adjusted EBITDA margin came very strong at 69%, an improvement of 7 percentage point vis-à-vis Q2 2021. Netback was $49.5 per boe, a 76% inter-annual increase and sequentially this translate into a $70 improvement, capturing the full upside of the realized oil price increase. This cash flow during Q2 2022 was a robust $62.6 million, a 76% increase year-over-year, driven by a strong adjusted EBITDA generation.

Cash flow from operating activities was $165.5 million, impacted by the annual payment of income tax for $32.8 million. Cash flow used in investing activities was $102.9 million, mostly driven by the drilling and completion activities in our two development projects, Bajada del Palo Oeste and Aguada Federal, which accounted for approximately $100 million. Other investment including gathering and alternative facilities plus two new wells in our conventional block for a total CapEx of $151.4 million.

Cash from investing was lower than accrued CapEx, reflecting an increase in working capital. Cash flow used in financial activities stood at $19.4 million, reflecting the issuance of a $43.5 million bond issuance. This bond matures in two years, pay a 6% coupon and will be used to refinance part of our short-term dollar debt maturities. We have already paid $45 million of principal of our syndicated loan, 50% issuer and 50% issue date.

We are also planning to repay the $50 million bullet bond that mature on August 8. After such date, we expect our gross debt to be approximately $528 million, well below our original guidance of $575 million for [ERN]. Going forward, our plan is to maintain debt around such level by year-end. Although, depending on market conditions, we make opportunistically tap the local debt market.

Net leverage ratio stood at very healthy 0.6x adjusted EBITDA at the quarter end. During Q2 2022, we have made good progress in the execution of our carbon footprint reduction projects. We are currently optimizing the glycol dehydrators in our main compressor stations. Three out of four compressor have identified and our annual plan have already been upgraded. We are installing vapor recovery unit in three key gathering and processing facilities in our Bajada del Palo cluster, a project that is scheduled for completion in Q3 2022.

We are also executing a project to connect Coirón Amargo Norte, one of our conventional block to the main electricity degrees therefore replacing the use of natural gas as main energy source. The total CapEx allocated to these projects is $5 million. Through the execution of this plant, we forecast to reduce our greenhouse gas emissions intensity to 18 kilos of CO2 per boe for the year 2022. This implies the 25% reduction compared to 2021. It also leaves us well on track to achieve our target of reducing our intensity to nine kilos of CO2 per boe by 2026 in line with our net-zero ambition.

Based on our solid operational result coupled with a positive pricing environment, we are upgrading our 2022 guidance. We are adding eight new wells tie-ins, four in Bajada del Palo Oeste, two in Aguada Federal and two in Bajada del Palo Este. This raise our target to a total of 32 new well tie-ins for the year. This new activity will positively impact the production of the second half of the year and especially boost our 2023 entry point. We are raising our annual average production guidance to above 47,000 barrels of oil equivalent per day, and forecasting an increase in our exit rate to approximately 52,000 barrel of oil equivalent per day.

As discussed, we are successfully containing FX pressure on lifting costs. We expect production growth in the coming quarters to dilute lifting cost driven lifting costs below current levels. This allow us to confidently maintain our original lifting cost guidance at an average of $7.5 per barrel for the year. We are raising our adjusted EBITDA guidance from $625 million to $750 million for the year based on higher production and realized oil prices.

We are assuming an average realized oil price of $73 per barrel for the second half of the year. CapEx guidance has increased from $400 million to $500 million based on additional new well activity. As I explained earlier, our plan to fully repay our series 2 bond due in August should leave gross debt at approximately $528 million. We are updating our growth debt level guidance to between $525 million and $550 million by year end.

During Q2 2022, we have delivered a strong financial performance, driven by production growth and higher realized oil prices. EBITDA has doubled year-on-year, adjusted net income came very strong at $82 million, which implies an adjusted EPS of $0.9 per share for the quarter. We continue to make great progress in our Bajada del Palo Oeste development. We have extended our core development to Aguada Federal with a driven and completion plant that is set to deliver 16 well tie-ins during the year.

In Bajada del Palo Este, we continue to see very encouraging pilot resource. Our first two wells continue to outperform the type curve of our core development block. We remain focused on our de-carbonization plan. We are currently executing several projects which will deliver a 25% year-over-year reduction in greenhouse gas emissions intensity during 2022.

We have updated our guidance, reflecting a balanced capital allocation of incremental operating cash flow to additional growth and further debt reduction. Our plan is to remain flexible on this front in the coming months to strategically allocate our cash to grow and deliver – depending on price and funding need for all evacuation infrastructure projects that are key to deliver on our export focus growth plan. We remain ensure, we successfully executed our first share buyback program. We purchased a total of 2.8 million shares.

I will take this opportunity to thank our investors for their continuous support and our incredible team at Vista for their hard work and commitment.

And with that, operator, please open the line for Q&A.

[Operator]

Thank you. [Operator Instructions] Our first question comes from Guilherme Levy from Morgan Stanley. Your line is open.

[Guilherme Levy, Morgan Stanley]

Hi. Good morning, everyone. Thank you very much for taking my questions and congratulations on the results. My first question is on lifting costs. This line appears to be well under control and the company expects to see cost dilution, even pushing this line further down. So I was just wondering if you can comment on what other strategies is the company pursuing in order to deal with rising prices both in the global industry, but also domestic prices in Argentina.

And the second question, what should we expect in terms of exports as a percentage of total sales into the coming quarters and in the long-term? I was just wondering because in the guidance slide, you have included a realization price of $73 per barrel in the second half of the year. So I was just curious, what are the components for that calculation, which bring – what brink level is the company using, what domestic price and also the percentage of exports? Thank you very much.

[Miguel Galuccio, Chairman and Chief Executive Officer]

Thank you, Guilherme for your question. So starting with the lifting costs, as you know, I mean, we are, yes, having pressure on the cost side. Nevertheless, we continue keeping the guidance of $7.5 per barrel for the end of the year, even though we cut the Q1 of $7.8 and in Q2 of $7.8 as well. So the reason for that is the following: even though we have that pressure, that come mainly from two elements. One is a clear element of inflation and the other one probably less visible. There's a dimension on our increase that also related to the fact that we are – we have the startup of Bajada del Palo Oeste and we have also the new development in Aguada Federal and of course that also bring a new dimension to our lifting cost that was just focus on Bajada del Palo Oeste.

Nevertheless, we see toward Q4 that the additional production that is going to come from our activity is going once again to play a delusion to that cost. And we believe we will probably be landing close to $7 lifting costs in Q4 and therefore, we feel comfortable, we feel confident that we can keep the guidance as it is today.

Related to the export question, as you saw we are forecasting three cargos for Q3. So that is an additional $1.5 million is in line with what we have forecast so far. From these two cargos, we have – for these three cargos, we have sold already two, we have three or one with [indiscernible] $113 per barrel. We have not triggered the second one. And we have a third one to be sold probably in September. We see Q4 with at least three cargos. Therefore, I mean, we basically maintaining the same level.

We've seen same level of volume in exporting in Q4 that we are seeing mainly in Q3. As you know, oil in Argentina, and we are increasing production and we are not the only one. Therefore, one of our market is fully served. There's no other thing to do with the Medanito crude oil in Argentina. So I mean, the only option for the country for us for the industry is transported. So we continue seeing that trend going in the same direction.

[Guilherme Levy, Morgan Stanley]

[Indiscernible] their guidance at $73 and how we see long-term exports?

[Miguel Galuccio, Chairman and Chief Executive Officer]

Yes. We continue seeing the guidance at $73. This is composed with approximately an international price of $90, a local price between $60 and $65. This is the levels that we are today. And in term of percentage of the production that serves the local market and percentage on a production that we export. We are today probably an average of 40%. We see 2024 around 50%, 2026 around 60%. Again, as everywhere increase and we see the plan of the rest and our plan that is quite aggressive, as more Medanito production coming to place from Vaca Muerta, more volumes the country will have to export and we play a part on that.

[Operator]

Thank you. [Operator Instructions] Our next question comes from the line of Alejandro Demichelis from Nau Securities. Your line is open.

[Alejandro Demichelis, Nau Securities]

Yes. Good morning, gentlemen. Congratulations on great results. Couple of questions, if I may. First one, just to follow-up on the export question. How you are seeing the export approvals because we have seen some delays on some of the approvals, so wanted to understand how much visibility you get for those approvals? And then the second question more strategically is it seems that with the updated guidance, you are already more or less around the 2026 plan that you gave us late last year. So once you understand a bit better, how you seeing that kind of long-term plan now, given that you are already kind of spending as much as you wanted to spend probably by 2026 your EBITDA is around the level of 2024 that you guided before. So try to understand how you are seeing the longer term?

[Miguel Galuccio, Chairman and Chief Executive Officer]

Yes. Thank you, Alejandro for your question. The first part [indiscernible] the permits process works is a following. I mean, one, the local market is fully supply and for us is mainly – Trafigura mainly in a portion rising as well. We ask for permit to the Secretary of Energy, and then usually we get the permit. I mean, it could be a week of delay or days of delay. But again, I mean, in line, when I said before, one the local market is fully supplied and today is fully supplied. There's nothing else to do. I mean, it's in the best interest of the country to get those proceeds and it's in the best interest of the industry to get those proceed. It’s becoming today important also for the country. Vaca Muerta is one of the main promise in term of bringing profit to Argentina. So therefore, I mean, so far we have not have any problem with the permit.

Related to your second question. Yes, definitely we are ahead of guidance. Clearly, we have a relief from the oil price. The rest of the element that we have guide in term of production, in term of the percentage of production that is going to be export, in term of lifting costs, and so we are spot-on, on our budget. Therefore, we continue delivering on the promise and yes, we are having an extra cash. The first assessment that we did this year was related to CapEx, clearly in this environment with the rich portfolio of projects, locations, well that we have in hand. We decide to make a move to increase the activity at the end of the year.

And as I said in the call, being able to enter 2023 with the higher starting point, but definitely it will play in the economics of year. So that is the first move that we did. We have used CapEx this year for share buyback, okay. It was for us a way of getting back to our shareholders something in the current environment. And we will look at the next year, what is the main thing that we can do in case, again, we have extra cash and what is the most sensitive things that we have to do for 2023. But it's not the decision that we have taken already and nothing that we can guide on it.

[Alejandro Demichelis, Nau Securities]

Okay. So in that parameter, how do you see buybacks given that you have finished already your program for this year?

[Miguel Galuccio, Chairman and Chief Executive Officer]

I cannot guide on that, but I mean, it's a program that is there to stay. So it makes sense in 2023 to have an additional program, we will do so.

[Alejandro Demichelis, Nau Securities]

That's great. Thank you.

[Miguel Galuccio, Chairman and Chief Executive Officer]

Very welcome, Alejandro.

[Operator]

Thank you. [Operator Instructions] Our next question will come from the line of Marcelo Gumiero from Credit Suisse. Your line is open.

[Marcelo Gumiero, Credit Suisse]

Thank you very much. Congratulations on the results. Very, very strong results. I have actually two follow-ups for today. The first one, on activity in 2022, as you mentioned, I mean, eight wells were added to the plan. My question is whether those additions were driven by – mostly by the good oil prices environment, I mean, for the second half of the year that you are considering? Or if those additions were actually also driven by, let's say, fastest execution during the first half of the year. And if we actually could expect more to come if, let's say, both domestic and international prices get better if there is any upside to the topics and any upside, of course, to your activity?

And if I may a second follow-up as well, on cash flow generation return to shareholders, you mentioned also during the call that I mean, part of the extra cash generated in the year will go towards reducing gross debt, right, repaying bonds. My question is, I mean, looking forward even for 2023, you also mentioned that in the previous question, what will be, let's say, the balance that you have in mind between, let's say, leveraging more and possibly or potentially accelerating buybacks or dividends or return to shareholder in general. And then if you could also mention what are the main hurdles for those shareholders returns, right? Thank you very much, guys.

[Miguel Galuccio, Chairman and Chief Executive Officer]

Thank you, Marcelo for the question. So let's start for the first one, it’s quite straightforward one. So let me go through what we have done so far in activity and what we are adding in the second half. So what we did in Q2 was we tie-in pad number 12 and pad number 13, okay. Both softened with very good result. And also in Aguada Federal, we compete and tie-in Aguada Federal, two wells that were already there when we bought the concession and we drilled another two wells in our Aguada Federal 3.

For the second half of the year, we plan to tie-in. So this one is nine tie-ins that up to this two tie-ins that we did in Q1. For the second half of the year, we like to tie-in pad number 14, 15 and 16. 14 is already drilled, we will drill in Bajada del Palo Oeste 15 and 16. And we will drill additional two wells in the pad that is Aguada Federal 3 and we will complete those four wells in Aguada Federal 3. So we are adding two additional wells to Aguada Federal that were not in our current program. And also we have two wells pilot to be drilled in Aguada, in Águila Mora that we have not drilled yet, that is toward the end of the year.

And the other thing that has not mentioned that complete the program is in Q1, which we drill two wells in Bajada del Palo Este and we have two additional wells to drill in Bajada del Palo Este in the second half of the year. So when you add all that, we are going to end up in the second part of the year with 21 tie-ins, and this is going to – it will be completing 32 tie-ins and this is – eight tie-ins about the original guidance that we did. And we will do that with the $100 million of CapEx. And this will be it for this year. So we will not be able, and we will not add more CapEx in activity to the one that we are guiding today, and is what we are going to execute.

Related to the additional CapEx, I see pretty much everything that you mentioned is on the table. So we clearly, have an aim to return to shareholders. We've been clear on that on our Investor Day. We are being clear on that in every quarter earning call review that we are having. And of course, additional with, again, with the rich portfolio that we have of wells and with well performance that we are having, and the core and oil prices, additional activity is always on the table.

Buyback program has served us very well. It was very well received by our shareholders. So definitely we'll be on the table for next year. Dividends is something that, yes, it could be on the table. You know, the restriction that we have today in the country, we don't believe that restriction will be there forever. So it's something that at some point of time we can consider. And something that you didn't mention, but I think it's important is additional infrastructure, okay. We are clearly we are going to invest to add capacity to our evacuation set, why because we are increasing OldelVal pipeline is going to be beat and built in the next year. So we will be there. We will invest and we will be praying.

One other thing that I think is important is the new decree that was passed last month, that was issued by the Ministry of Economy, that decree give access to [indiscernible] okay. Something that we didn't have before and it will be a sort of U.S. dollars. So that also went in the play of what we do our cash and the ability that we have to represent and so on, it will play a role is going to give us an additional level of freedom when country side what we do with our cash.

[Marcelo Gumiero, Credit Suisse]

All right. Thank you very much.

[Miguel Galuccio, Chairman and Chief Executive Officer]

You are very welcome, Marcelo.

[Operator]

Thank you. [Operator Instructions] Our next question will come from the line of Andres Cardona from Citi. Your line is open.

[Andres Cardona, Citigroup Inc.]

Hi, good morning. All congratulations on the results. I have two questions. The first, and maybe following up with the previous question. You were talking about the needs to develop infrastructure. So I wonder what are they like. We see the very strong results you're having at Bajada del Palo Oeste. You guys are getting some early positive results at Bajada del Palo Oeste, and you may also have some early production at Aguada Federal. The question is if the facilities are ramping up as fast as production could do over the next 12, 18 months. And if you have all in place to secure, this production will flow. And the second question has to do with the CapEx at Bajada del Palo Oeste for pads number 12 and 13. I remember there was an increase at the previous pad. So I would like to understand if we are seeing an stabilization on how it's performing?

[Miguel Galuccio, Chairman and Chief Executive Officer]

Yes. Thank you very much for your question, Andres. Look at the first part, related to facilities. Well, I would say – I will take two different – there's two different part of the facilities that I think go for different channels. The first one is the facilities related to us on a normal development that we do in Bajada del Palo Oeste, Aguada Federal, Bajada del Palo Este.

We are ahead of creating the capacity that we need to serve that production, one because of operational the other one because of ESG. So we have been very diligent in the sense of creating that capacity that allow us today to basically accommodate our plan and the future plan. So we have not bottleneck, let's put it that way in term of development, our main Bajada del Palo Oeste, where we have more of the activity. We are connecting Aguada Federal with Bajada del Palo Oeste, that is giving us additional flexibility that’s why we are adding more wells in Aguada Federal and of course, we will be ahead of doing whatever we have to do to develop both Aguada Federal and Bajada del Palo Oeste by the way that it give us a very good surprise since the well that we drill there has confirmed that the Western side of our – our Eastern side of Bajada del Palo Oeste is good. And our Western side of Bajada del Palo Oeste has certain potential.

Now there's other part of the evacuation that is the connection between our facilities and the port in the Atlantic, in this case in Bahía Blanca, and there, we have three main projects ongoing, one is OldelVal. As you know, we have today by line with the full capacity of 280,000 barrel per day that we are already as an industry using, and will be a public tender where producer will beat additional capacity, and we will be part of that group. And that expect to take place the tender in the next quarter, okay. So as far as it goes, if the tenders come into place, we will have [indiscernible] of that process and we will get additional capacity. And this will be a use of capital as I mentioned before, that we have to do.

Then we have oil tanking that also have a project to upgrade oil storage. And also, they are basically bringing the channel and creating facilities to be able to upload tanks of the double of the capacity that we are doing today. That also is expected to take place during the second semester of this year. And there's additional infrastructure projects that I'm going, for example, export to Chile, that is for Coirón Amargo Norte pipeline. There's a pipeline there that have 150,000 barrel per day capacity that need to be reactivated. And also that will bring to the industry and to the country additional export capacity. So these are pretty much what's going on. Our part, we have it on hand, on the rest, we are participating.

Related to question on CapEx, as we are facing inflation, we are been facing inflation on the OpEx, we need also on CapEx. We see that stabilize using your own words. We don't see further increase on the actual CapEx that we have. We see potential of further reaction on one project that it is becoming in place because we have executed already is our own sum plan. So we will start to see the impact on that in the future quarters. I'm sure for the second half of the year, we will start to see some of that, that it could bring a meaningful production to our completion cost. And I think it's very important. And this project is coming along very well. So we have not have any issue of performance and the plan is already starting up. I hope I answer your question, Andres.

[Andres Cardona, Citigroup Inc.]

Yes. Thank you, and congratulations, again.

[Miguel Galuccio, Chairman and Chief Executive Officer]

Thanks.

[Operator]

Thank you. [Operator Instructions] Our next question comes from Constantinos Saprias from Pointe Des. Your line is open.

[Constantinos Saprias, Pointe Des]

Hi. Good morning. This is Constantinos Saprias from Pointe. Thank you for taking my question. On your results, I guess my question today is related to completion activity. Some industry research indicates that a significant portion of the frac pumps are way past their maintenance schedule and must enter repairs soon. Do you see that as an issue for your activity? Thank you very much.

[Miguel Galuccio, Chairman and Chief Executive Officer]

Hi, Constantinos. Thank you for your question. The short answer is no. We don't see an issue on pump maintenance. As you know, I mean, early on in our operation, we decide to have, I would say the strategic partnership with service providers in this case for drilling and completion. We are having a good neighbor and we have it with [indiscernible]. We started our operation with less than four frac stages per day. Today, we are performing at around 10. So we are doing many things differently that we did at that stage, but maintenance is key. I mean, and it's a business that we know very well.

So the plants has been maintained, has been served – are flowing in Argentina and coming to Argentina without any problem. So I mean the short question to your answer, and this is a business I know very well because I've been in that business, so no, I don't see any issue with that. And as we said, we are with the top service provider in the industry. So that is their shop, not our shop, but of course, we always keep an eye on how they maintain their equipment. You should not expect any issues that delay our plans.

[Constantinos Saprias, Pointe Des]

Excellent. Thank you. Thank you very much.

[Operator]

Thank you. [Operator Instructions] Our next question will come from Oriana Covault from Balanz. Your line is open.

[Oriana Covault, Balanz Capital]

Hi. Thanks for taking the question. This is Oriana Covault with Balanz. I had two follow-ups. First one, regarding your export mix. We noticed that you've had consistently achieved a higher export mix than your local peers that are as well focused on [indiscernible]. So I don't know if you have any thoughts that you could share on how do you manage to achieve this?

[Miguel Galuccio, Chairman and Chief Executive Officer]

So Oriana, yes, I mean, I don't know what you mean – peer, but the fact that we achieve, I mean, in Northern export, you have to have additional volume and in Northern to have additional volume, you have to grow. It's not only you have to grow is the velocity in which you grow. So we basically, been since the last four or five years serving our offtakers, again, Trafigura mainly and Raizen. One is to ourself, we do that for the last five years, every quarter, every month. The rest is what is basically the volume that we have managed to put and service because we have invested and we have growth, and that is what we support. As we grow more, we support more because there are no more refineries in Argentina putting into activity. So the market of Argentina is cut.

So every time, if tomorrow, if next year we produce 60,000 barrel per day, we will still sell in the same amount of volume to Trafigura and Raizen, and we will have additional 10,000 to export, okay. So that is pretty much the game. If you invest and you have the capability to grow, particular, we're talking about Medanito of course. Then the rest is to export market. And by the way, I mean, our competitors, other industry is doing the same. I will let – we don't have a refinery business. So if we have a refinery, then we will have to serve first our refinery. This is not the case with upstream player.

[Oriana Covault, Balanz Capital]

Perfect. That's very clear. Thanks. And maybe just following up on CapEx. We noticed, and I think you partly addressed it, but I wanted just to make sure that this implied CapEx for conventional well drilling that seemed to have been a bit up or under inflationary pressure during the second quarter. How are you seeing the market as inflation numbers have been rising and what is the scope that Vista has taken to address this higher inflation that could be translated into higher CapEx?

[Miguel Galuccio, Chairman and Chief Executive Officer]

Yes. As I mentioned before, we have inflation in CapEx term. And we have – I mean, that inflation come also, let's face it with the increase in oil prices. So that is normal in the industry. I think we can handle pretty well. First of all, we have long-term contract. This help a lot when you have inflation because you are not talking about what is going to happen in a service that you have on call. Service on call, people is going to try to charge you whatever. But the fact is that we have long-term contract with those companies. So we are not talking about what is happening with inflation today. We are talking what is happening with the next three years. So those contract, those services are secure. This is an inflation mitigator to.

Second part of the inflation we have to take and one thing that we continue doing, and to be honest with you to my surprise extremely well since we have managed to come to continue having innovation and cost saving initiative that have impact in our operation. Looking back, we used to drill those well in 35 days. We have a record well that we drilled in 12-day. So this kind of innovations and initiative that are cost saving initiative, even though we are approaching the technical curve, we continue having it.

As I mentioned before, one that is coming in line is the fact that we manage to create a source of some close by to where we operate. This will start to have an impact in our well cost. Potentially it could be a half a million dollar impact in a well cost. When you look at the inflation for this year, it probably was, I don't know, in those orders, therefore, I mean, we have inflation, but we continue to having a cost saving initiative. So to be honest with you, the inflation is there, is in hand. Nothing, we will do anything that we can do to reduce that gap at the minimum.

[Oriana Covault, Balanz Capital]

Perfect. Thanks. And just one last one on my side. I noticed that your quarterly production in Aguada Federal and Agua Amarga from prior quarter seem to have dropped significantly. So just to understand if you could share some color what this transitory impact and what drove this? Thank you.

[Miguel Galuccio, Chairman and Chief Executive Officer]

Yes. Thank you, Oriana for your question. Yes. What you saw is real. So once what we did was to close Aguada Federal wells in a protocol that is normal protocol for us, that is to avoid a water heat something that we do. When we frac wells that are nearby, others with what we do in order to because basically when you frac the water can communicate with another well. The likelihood to avoid that is closing that well that is nearby the place where you are going to frac. Few days before that allow the well to build that pressure and the reservoir have less likelihood of being in communication of having interference. So what you saw in Aguada Federal was exactly that was our people, our operation, following that protocol, then you opened it up.

[Oriana Covault, Balanz Capital]

Thanks. Yes, so levels should go back to normal levels back to in third quarter. Okay. Thank you very much for taking my questions and congratulations on the good quarter. Thanks.

[Miguel Galuccio, Chairman and Chief Executive Officer]

You're welcome.

[Operator]

Thank you. And I'm not showing any further questions in the queue. I'll turn the call over to Miguel Galuccio for any closing remarks.

[Miguel Galuccio, Chairman and Chief Executive Officer]

Well, again, thank you for participating. Thank you for the support and coverage. We are very proud of the result of this quarter is probably due to the completion of many things that we've been working for the last few years. And we foresee that we will continue in that trend. So thank you very much for your support and have a good day everybody.

[Operator]

And this concludes our conference call. Thank you for participating. You may now disconnect. Everyone have a great day.