Vista Energy SAB de CV (VIST) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Vista Second Quarter 2021 Results Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Alejandro Chernacov. Please go ahead.

Thanks. Good morning, everyone. We are happy to welcome you to Vista's Second Quarter 2021 Results Conference Call. I am 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 Oil & Gas, is a sociedad anonima bursatil 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 VISTA 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.

Thanks, Ale. Good morning, everyone, and thank you for showing in this earning call. I am delighted to share with you our results of the second quarter of 2021, during which we have obtained understanding achievements across all key operations and financial metrics. We made good progress with respect to our 2021 guidance on the back of a strong execution in terms of drilling and completion phase in Bajada del Palo Oeste. Q2 2021 was our fourth consecutive quarter with total production growth, achieving a record of 39,900 BOE per day. This implies a 67% increase year-over-year. Oil production was up 101% year-over-year and 19% sequentially, boosted by the tie-in of pad #7 in Bajada del Palo Oeste in March. It is fair to say that Q2 2020 is a low comparison base, given the production shut-in in response to the drop in demand due to the COVID pandemic. This comment applies to most metrics compared on an inter-annual basis.

Total revenue were $165 million with tripled revenues year-over-year, but also performed robustly quarter-over-quarter, mostly driven by the increase in oil production and stronger realized oil prices. In hindsight, we made a good decision to ramp up activity in late Q3 last year. So we are now capturing higher oil prices across a stronger production base.

Lifting cost per BOE was $7.3 per quarter, a 15% reduction year-over-year, reflecting lower incremental costs in Bajada del Palo Oeste, which continued diluting our fixed cost base. Adjusted EBITDA was $102 million, confirming a turning point in our performance and achieving 62% adjusted EBITDA margins. Capital expenditure for the quarter was $75 million, in line with execution of our 2021 guidance and reflecting the completion of our third pad for the year in Bajada del Palo Oeste.

During Q2 2021, we generated positive free cash flow, driven by a robust cash flow from operation and making good progress in liability management. Cash at the end of the period was $237 million. Net debt stood at $368 million.

We will now deep dive into the main operation and financial metrics. So please turn to Slide 4. Total production during Q2 2021 was up 67% year-over-year and 17% quarter-over-quarter. Halfway through the year, this leave us ahead of our original 2021 guidance. Production growth was driven by our flagship development in Bajada del Palo Oeste, where we tied-in pad 7 in March. Given the high share of oil in this development, we see greater impact in the oil production metrics, which increased 101% year-over-year and 19% quarter-over-quarter. During Q2 2021, we executed work over projects in (inaudible), which drove a gas production increase of 10% quarter-over-quarter and 5% year-over-year, allowing us to comply with our Plan Gas commitments.

Total revenues in Q2 2021 were $165.3 million, a strong increase year-over-year, having doubled both production and realized oil prices. Sequentially, total revenue increased by 43%, driven by the additional production generated by the tie-in of pad #7 and higher oil and gas prices. Realized oil price in Q2 2021 was $54.9 per barrel, up 107% year-over-year and 21% quarter-over-quarter. The domestic market accounted for 83% of our total sales in Q2 2021, reflecting an improvement in domestic crude oil price to the $54, $55 per barrel range.

Sales to export market accounted for the remaining 17% of oil volumes, with a contract signed when Brent was trading around $63 per barrel. We still see pricing of exports oil with discounts to Brent of less than $2 per barrel. We are continuing with our strategy of building a sale book early on to lock-in revenues and fund investment activities. Most of our Q3 oil sale with a mix of domestic and export volumes have already been lock-in at an average realized price of approximately $56 per barrel.

Realized gas prices have increased 59% year-over-year to $3.50 per million BTU, boosted by the Plan Gas winter price of $4.1 per million BTU applicable to approximately 60% of our total volumes starting May 2021. Additionally, industry prices increased from $1.90 per million BTU in Q2 2020 to $3 per million BTU in Q2 2021.

Moving to Slide 6, we see our continuous improvement in terms of lifting cost per BOE. Total lifting cost per the quarter was $26.5 million, partially driven by increasing oil field activities, but also by the impact of a stronger peso in our operating contracts. We have seen this swing in FX in the past and they always have minor impact in our total costs. The graph on the right shows how the production increase in Bajada del Palo Oeste continues to absorb our fixed cost base, driving a reduction of 3% quarter-over-quarter to $7.3 per BOE.

In Q2 2021, adjusted EBITDA stood at $102.3 million. This implies an expansion of 9x year-over-year and a 75% growth quarter-over-quarter, reflecting the boost in revenues as described earlier and lower lifting cost per BOE. Adjusted EBITDA margin was 62%, reflecting an improvement of 12 percentage points quarter-over-quarter and 42 percentage points year-over-year. Netback for the quarter was $28.2 per BOE, $9 per BOE above Q1 2021 as stable costs per BOE allow us to capture the full increase in realized prices.

Moving to our financial situation, which I believe is also a highlight of this quarter, we were free cash flow positive, having generated $35.5 million in Q2 2021, with a CapEx level of $80.5 million. Cash flow from operating activities in Q2 2021 shows a sequential increase of 217% for a total of $116 million. This reflects an increase in cash flow generation, driven mainly by higher revenues.

Cash flow for investment activities was $80.5 million, in line with CapEx activities of $74.6 million. Approximately 85% of the investment was deployed in Bajada del Palo Oeste. Cash flow from financing activities was $37.8 million. During Q2 2021, we repaid a total of $30.6 million in bank loans, ensuring we successfully raised the peso equivalent of $71.4 million in Argentinian capital market. We issued $38.8 million bond in pesos dollar-linked due in 2 years with a 4% coupon and additionally a $32.6 million bond in peso inflation-adjusted due in 3.75 years with a coupon of 4%.

Additionally, during July, we will draw $24 million from available credit line with local banks. This cash raise with new debt is being fully utilized to repay all the debt. We have already repaid $45 million corresponding to our term loan and we will repay $50 million corresponding to our series 1 bullet bond. Under these assumptions, total debt as August 2 is forecasted at $534 million, which is $16 million lower than Q1 2021.

Our increasingly strong operating and financial performance during the last quarter has led to progressive normalization of financial ratios. We were negatively impacted 1 year ago when the lockdown restriction softened crude oil prices and sell volumes. In Q2 2021, net leverage ratio was 1.7x adjusted EBITDA. Based on our plan for the next 2 quarters, we are forecasting a net leverage ratio of approximately 1.1x adjusted EBITDA by year-end.

Our flagship development in Bajada del Palo Oeste continue to drive growth. The chart on the left of Slide 9 shows our total shale production since we started this project and the tied-in date of each pad. The tie-in of pad #7 at the end of the previous quarter boosted share production in Q2 2021. Pad 8 landed 2 wells in La Cocina and 2 wells in the Organico, with an average lateral length of approximately 2,600 meters and 54 average frac stages per well. Normalized drilling and completion cost per well was $9.5 million, in line with our previous pads. We are currently finishing drilling the 4 wells of pad #9, which will be completed and tie-in in late Q3.

I will now share a summary of our business development activity. In June 28, we signed an investment agreement with Trafigura for the joint development of 5 pads of 4 wells each in Bajada del Palo Oeste. The price tax paid by Trafigura is $5 million per pad, which equates to $55,000 per acreage. The working interest in said pad is 80% to Vista and 20% to Trafigura, with each partner paying its share of oil CapEx and receiving pro rata production. Trafigura will pay to Vista an operator fee that covers all direct and indirect costs associated with each production. Vista remains 100% title holder of the concession and operator of the block.

Previously, we have sold our remaining 10% of the Coiron Amargo Sur Oeste concession to Shell for $21.5 million. The implied valuation was about $13,000 per acreage, which is one of the highest multiples for a concession in Vaca Muerta history. Both deals have a strong strategic rationale. Proceeds have improved our financial position even further, allowing us to accelerate revenue development in Bajada del Palo Oeste. Also focusing our capital and team on our core project with the best economic allow us to generate higher returns at a consolidated level. Finally, the deal with Trafigura strengthens the relationship with our key domestic off-taker and one of the most important crude oil trader at a global level as well as bringing a new player into Vaca Muerta upstream.

I will now give you an update on ESG matters, where we have made good progress to reduce greenhouse emissions in our operation. As discussed in our previous call, during Q1 we finished a study which determined our base GHG emission. We cover scope 1 and scope 2 emissions, providing granularity at the asset level and identifying main offenders. This milestone was a significant achievement, laying the foundation for an actionable emission reduction plan. We are currently working on such a plan, which will be disclosed in our next sustainability report. This plan will set short, medium and long-term corporation reduction goals, consistent with the 2015 Paris agreement.

In Q2, we approved a plan for 2021, which will allow us to reduce 100% of the new emissions generated by the incremental production embedded in our 2021 activity work program. This plan is being executed and is forecasted to lead to a 30% reduction year-over-year in emission intensity down to approximately 29 kilogram of CO2 equivalent per BOE. Sustainability is vital to our business strategy and I am confident we are taking the right step to becoming a leading low-cost and increasingly a low-carbon energy producer.

We made further progress regarding our commitment to gender equality. In the first semester of 2021, 58% of our new hires were women, an improvement compared with the 50% achieved in 2020. Finally, we have continued to support social investment in the town of Catriel, Rio Negro. We have finished the first stage of a bicycle lane project that will stretch 8 kilometers. We have also assigned company premises in Catriel to be used as a COVID vaccination center.

Moving to Slide 12, I will present our updated guidance for the year. It's reflecting improved performance vis-a-vis the original plan. We have originally scheduled 16 new wells in Bajada del Palo Oeste for 2021. We have already tied in 12 of such wells and we are currently drilling the last well of the forecast, which will be completed during Q3. We have added 5 pad to the annual work program; it will be drilled during Q3 and completed during Q4. The rationale behind this decision is that we have a robust balance sheet, thanks to the higher production, better realized price and lower development costs, which allow us to add further activity without losing capital discipline and prepare us for a strong start in 2022.

We are updating our production guidance in a range of 37,000 to 38,000 BOEs per day to a range of 38,000 to 39,000 BOEs per day. This forecasted increase is driven by faster drilling and completion, which is enabling earlier timing in Bajada del Palo Oeste, coupled with above-expected well productivity and to a lesser extent by the contribution of the feedback at the end of the year. Lifting cost guidance has been revised from less than $8 per BOE to approximately $7.50 per BOE. Q1 and Q2 came in at $7.5 and $7.3 per BOE respectively and we forecast to remain within this range in Q3 and Q4 as incremental production continues to absorb our fixed cost base.

We are revising upwards our adjusted EBITDA guidance from $275 million to $325 million. Adjusted EBITDA has been positively impacted by the additional production, higher realization prices in Q2 and Q3 2021, and lower lifting cost per BOE. Based on the acceleration of Bajada del Palo Oeste development, we are increasing our CapEx guidance from $275 million to $310 million. Looking at the graph on the bottom left, it is clear that we are not allocating the entire increase in adjusted EBITDA to capital expenditure, reinforcing our commitment to capital discipline.

Finally, we are maintaining our guidance for gross debt at approximately $500 million and adding guidance for our net leverage ratio, which is forecasted at approximately 1.1x adjusted EBITDA at the end of the year, clearly marketing the successful execution of our deleveraging strategy. In short, our year-to-date performance is ahead of our original guidance, having achieved solid operational results in the executed projects, delivering strong financial results on a consolidated basis and capturing the upside of higher realized prices. Our updated guidance position us for a strong start in 2022.

To finalize this call and before we move to Q&A, I will recap on today's headlines. In Q2 2021, we have seen a strong performance across all key operational and financial metrics with a production record and a triple-digit adjusted EBITDA, reflecting a $400 million EBITDA run rate. Bajada del Palo Oeste continues to show with progress. We tie-in our third 4-well pad with solid drilling and completion metrics, which leave us ahead of the original scheduled plan and with robust production metrics.

In terms of cash flow in Q2 2021, we recorded a solid positive free cash flow. Also a successful liability management allow us to maintain a strong balance sheet. Following the repayment scheduled for August, we have no more material maturities in 2021. Recent acquisitions and the investor activities with a solid strategic rationality led us to an improved financial position, supporting the acceleration of Bajada del Palo Oeste development. With the Trafigura deal, we brought a new strategic player to the upstream Vaca Muerta.

Finally, as shown in the previous slide, we update our 2021 guidance by increasing our activity in Bajada del Palo Oeste production and also adjusted EBITDA. Before we move to Q&A session, I would like to thank our investors for their continued support and all the team at Vista for their usual hard work and commitment.

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

(Operator Instructions) And our first question coming from the line of Bruno Montanari with Morgan Stanley.

Good to see the continued growth performance in Bajada del Palo Oeste. I have 2 quick questions. One on M&A. Miguel, I wanted to pick your brain on what would make you perhaps pursue more transactions similar to Trafigura for the remainder of the acreage you have on your plate? Is it valuation sensitive? Is it strategy sensitive? So just wanted to understand what could prompt more deals, putting a value stamp on the assets. And my second question is about any developments on the new hydrocarbon law. What has been agreed, what is pending, timeline? So anything you could mention on that front would be super helpful.

Well, look, first of all, I mean, coming to the first question of M&A, we really like what we did with Trafigura and I think for that to happen, first of all we have to have partners that we like and see the thorough operation, we have built a super relationship with Trafigura management in Argentina and Trafigura management worldwide. We believe our business themselves are naturally complimentary within Argentina and we always have an ambition to do something else based on that relationship. So that will be the first point to consider, continue doing something similar with somebody else.

Now the business model that we put together with Trafigura, we really liked it. I think it's a business model that is super aggressive to shareholders. We said to both shareholders. In this case, the entry price of Trafigura about $5 million per pad, which adds to $25 million for 5 pads, that equates pretty much to $55,000 per acreage that is the value that you can create in one pad. Remember, Bajada del Palo Oeste has around 60,000 acreage. We have around 550 locations, which we have 450 acreage per pad. Trafigura is acquiring 20% of 5 pads and equivalent, as I said before, to 450 acreage per $25 million leading to the number that I gave you before.

So we really like that model. I think strategy wise we could do more. Yes, we have plenty of acreage and plenty of locations when it comes to account what we have in the portfolio today. When you look at our portfolio, we have a land bank of 132,000 acreage in Vaca Muerta, 62,000 from Bajada del Palo Oeste and we have also 21,000 from Aguila Mora and 50,000 from Bajada del Palo Oeste that we will start to develop early in our deal early this year. So yes, the short answer is yes, we can entertain to do a bit more on that.

Second part of your question is the hydrocarbon law, so poorly written concept and I would say in fact we have a very good hydrocarbon law in Argentina, it's 50-year-old. In 2014, the federal government passed some changes which basically created a framework for Shell project, which is also very good and been working very well. Now I think the aiming of this law is more a promotion to the industry. We have seen drafts of the versions of this new law and I think the more important or the key element of what we have seen is the guarantee of export organization vulnerability of part of the effort being able to remain [other or as FX proceed] and we believe that is super important to attract investment and also super important for the country to generate effects that help on the macroeconomic side.

So -- but my comment I think, yes, that's good win from the government to pass that promotion law and I believe for what I hear that somehow we should have some news in the next few weeks. The law also has other items, but I think this is the core one and the central one for Argentina from the agency side.

Our next question coming from the line of Marcelo Gumiero with Credit Suisse.

Congratulations on the results. I have 2 questions for today. The first one is for production in 2021. I mean we've seen a very fast-paced drilling completion activity in Bajada del Palo Oeste. We saw that you have updated your guidance for 2021 with 38,000 to 39,000 of barrels of oil equivalent per day for the year. I was wondering if we could see, I mean, even higher production for this year or, for example, another pad is due in 2021. I just -- I mean, to get a sense if we could -- the guidance is on a conservative mode. And the second question is more on the outlook for 2022, so next year. I was wondering, I mean, how do you see CapEx really in completion activity, et cetera, for the next year? It is more about cash flow generation or should we expect Vista to put a higher CapEx for production growth?

So in terms of production for 2022, first of all production for 2021, I think we just upgraded the guidance. So I mean, that is a fair projection of what we believe will be. So we have a greater range in 1,000 barrel per day and I think we should be there. Now we are doing 2 things that are related to the production of 2022. One is the increase of activity in Q4 and the increase of guidance for Q4 that will put us in a better position to start 2022 with a better starting point and also the fact that we will start building pad 11 in December. But also, I mean, for where it's located and is in the border between Bajada del Palo Oeste and Bajada del Palo Este that should have also an impact in our production in 2022.

We should continue growing in 2022 at the double-digit number, that's for sure. I think we probably will not be able to accelerate much more than we are accelerating today. We have to reduce our drilling speed or increase our drilling speed to [the level] since 2017. So we shouldn't expect that we are going to see much more increase in speed during the year. And also one thing that is important, we want to keep the trend of having free cash flow as we have this year.

In terms of CapEx, I believe we continue -- we decide to continue working with one rig and we will basically have a similar CapEx to the one that we have this year. Now of course, as we are becoming cash flow positive, there's a broader discussion related to what we will do with that cash for next year and going forward. And of course, here the main driver for us is to create a stakeholder value and for that, we will analyze different options and other options, okay, including increase in activity that will depend pretty much on the context and because I take for granted that we will continue having the same operational return that we are having today. And of course, we will analyze other things by paying dividend, buyback shares and other options that we should have on the table based on what is the option to create more stakeholder value. So I hope, Marcelo, I have answered your question.

Our next question coming from the line of Andres Cardona from Citigroup.

Congratulations on the results and the great milestone of posting a positive cash flow. Most of my questions have been asked, but I would like to understand the improvement in realization price for the third quarter to $56 per barrel. Is it driven by international prices or by an improvement in the domestic realization price?

So I will say that both things are linked here, as you probably know in Argentina. So when you look at what are the realization prices for us today, you have 2 elements of that. One, for Q2 you have the domestic market. In Q2, we saw 2.2 million barrels of crude oil at $54.5 per barrel in the local market. But also we managed to access to local market. In Q2, we sold 0.5 million barrel (inaudible) around approximately $63. Now that realized taxes of $63 was $56.2, okay. So the combination of those 2 prices is what we -- what you will see and we report after realized oil price of $54.9, okay.

Now the realization price of the -- through that we sold in the 4 markets, we have to discount the $2, more or less, because commercial is down and then we have to discount 8% of the export tax that basically give you the [shuffling] of $63 Brent to $56.2 that we will basically realize. I think that the dynamic going forward, I mean, we continue, we don't perceive it's going to change. The law will bring more visibility to what we can for and who. But I think the overall gain appear for the industry and also for Argentina in some extent is to increase production. As we have more companies like Vista that has grown levels of the one that we are carrying, we will have more fair Vaca Muerta crude oil to be exported.

And I think we are in that trend. We have seen other companies announcing investment plan towards incremental production. YPF, for sure, has been very open in that and it's moving increasingly [risk] activities within the area. More so, I would say, all the partners are following us and we have seen another international acreage also releasing news that they are going to increase production.

So I think as far as that continues, we should see more volume of export, more volume of Vaca Muerta crude oil waiting to be exported. In terms of demand, I think we will not -- I don't foresee that we will see a big increase in demand when you see macroeconomic number for next year. So it's going to be around the number that we have. So I'm positive for Q4 and I'm positive for next year. We enhance it to a secure market.

Our next question coming from the line of Alejandro Demichelis from Nau Securities.

Congratulations on great results. A couple of follow-up questions. Miguel, you mentioned that with the deleveraging with the -- what you're seeing in terms of cash flow generation for next year, all of the options are open in terms of dividends or buybacks or increasing activity. So to understand the framework for that, how should we think about say your target leverage is 1.1x, something you're comfortable with or are you looking to go below that over the medium term? That's probably the first question. Then the second question is, with pad 11 on the border between the 2 blocks, if that were to be successful, would that mean that you may start on the other block kind of trying to push for that development too?

Yes. Thank you, Alejandro, for that question and thank you for mentioning the 1.1x. So yes, as I mentioned to you, all options are on the table. I think there's one thing that we cannot exactly forecast in the context, even though we have a view on that, and that will play an important role. In terms of net leverage ratio, I mean, and as you know and most of the unconventional -- most of the oil companies are focused on unconventional, have a higher leverage ratio than the one that we are going to achieve at the end of this year. So as we said, with 1.1x, we feel comfortable. That doesn't mean that due to the context, we decided also to go a bit lower or a bit higher, okay. But again, it will depend on how we perceive that we can create more stakeholder value.

Coming back to pad 11, I think it's going to be a very interesting pad. As you know, every time that we move to the east we perceive that -- and we believe that we will have higher AP regularity and therefore not the same level of productivity. Now of course, with the reduction of costs that we have generated, I mean, today our total cost of development in Vaca Muerta is half of what it was in 2017. We are basically with a lifting cost of $7 and a development cost of $7. And as we continue, we may be below $14 per barrel of total development cost that mean development plus (inaudible). So therefore, if we refine (inaudible) that is close to what we are facing today or even a bit lower than we are facing today, I mean Bajada del Palo Oeste in the border could be higher clearly. So yes, we are excited about that, and that will allow us to have more booming acreage and therefore to continue bringing us (inaudible) what kind of model we can put in place to realize and to unlock that value and to accelerate our value generation activity. So I hope I have answered your question.

That's great. And just as a quick follow-up, what is your plan for Aguila Mora? Would you be looking to also add a partner or you feel you can go first on your own and then look for a partner?

I think for the first move that we are going to do that, I mean in both cases, we are basically drilling wells that we could (inaudible) went okay. After having that replaced we will evaluate to see if it makes sense (inaudible) to bring a partner alongside. But in 2 cases, we will -- in 2022, we will be (inaudible) look ourselves.

Our next question coming from the line of Regis Cardoso with Credit Suisse.

Miguel, I'm going to ask a quick one from my side, and I think it goes back to your answer on a previous question by Marcelo. But with a specific spin, I mean if you think of the uses of capital, and I wanted maybe to focus on the capital flow constraints that we have in Argentina, right, when we talk, for example, about paying dividends, there is of course, a difficulty in, let's say, buying the dollars to pay out to shareholders if you are generating that revenue locally in Argentina. So my question is, given that context, what do you think would be the best thing to do the uses of the cash to go forward as you have more -- as you have higher oil prices, you can accelerate the development? Would it make sense to raise any sort of external capital to invest in Argentina or that would just lock in that cash in the country? And then maybe finally, last one related to that, would it make sense for this as you speak opportunities elsewhere, for instance in Mexico where you already have a footprint to sort of have someone else to allocate the proceeds?

And I think your question, more of a question also give us food for thought. But look at, first of all, as you said and as I mentioned before, it will all depend on the context. Part of the context today we know and as part of the context it is going to change or it could change next year. When it comes to optionalities, just coming on your comment, we have today a structure with cash abroad. But give us the optionality to pay dividends, we feel that is what really makes sense for us to do for our stakeholders. As you know, I'm in front of our investors and stakeholders very actively. So of course, I have a feeling what they want and what they don't want and what they see or how they proceed. So I think that optionality, we still have it and if that law is put in place, also we will probably have been able to (inaudible) proceed of exports and also in line with that possibility.

Now I don't want to say that, that is the way that we go because it's not clear, and we have an equity story that today is working and is very attractive at the oil prices that we have today and again at the cost that we have managed to achieve for the development of Vaca Muerta. So I believe options will be open and then we will evaluate what is the best way to go. I don't think I can add too much to that the ratios. Do you have a second part of the question or that was all?

No, that was all. I think the second part was more on investing abroad. They understand that -- from your answer, I understand that you believe you have better returns in an equity story that is working in Bajada del Palo Oeste and Argentina, Vaca Muerta, right?

We've been looking abroad, Regis, and I mean, we are very active [DD-wise]. Today, it's not easy to find opportunities abroad. That are accretive to our shareholders are the ones that we have here in Argentina today. And that means with the development costs that we have, it will be difficult to find something different. Now again, back to your previous question, we also need to see the reaction of our share. So that also, it play a role in what we do with our cash, okay, in terms of deciding buyback of shares and so on, that will play a role.

Now coming back to the DD part, yes, we see opportunities that probably will take us somewhere else and we will have cash. Now we see in terms of return on investment, that all those opportunities that we see or will find in Latin America we just have a hard time to compete what we have here and with the quality of the results that we have here in Argentina.

Our next question coming from Martin from Balanz Capital.

Martin Arancet here from Balanz Capital. First of all, congratulations on a great quarter and thank you as always for the materials. I have 3 questions. Well, you already mentioned something about your export expectations. But I want to know what export sales mix should we expect for the second half of the year and whether you target or both for in 2022? Then we want to confirm how Vista will be booking the recent agreement with Trafigura. We imagine that the company will be booking a 100% of the CapEx, 80% of the volumes, 80% of the revenues and 100% of the operational cost. Apart from that, we -- you will receive the cash payment and the compensation fee for expenses, which might came as additional revenue line. Are we covered on that? Finally, is it the fifth pad for this year related to the Trafigura joint venture or will be additional to that?

So I will probably start with the second part and I'll cover Trafigura. I think that how we are going to book the agreement is quite simply in nutshell we consolidate our part. Our part is 80% of our CapEx, 80% of the OpEx, 80% of the production, and that is consolidated. Then there are $5 million that we plan to receive that is what Trafigura is paying, but you will find it that goes to other incomes, okay. So that's how we are going to consolidate that. So we consolidate our part of production, our part of operating, our part of CapEx and the $5 million goes to other income.

In terms of the pads from Trafigura, so roughly we know we will be -- it's Trafigura to be part of our pad #9. So pad #9, that is going to be tied-in probably end of September, okay. It's already a pad where Trafigura is participating and then it's also going to participate in pad #10. That are the 4 of 6 pads of this year, okay. And then we will see how take our decisions from rates of the pad that was driven by [higher value].

For the presentation of (inaudible) Q4, I'm positive by Q4, we will have -- we will have extra volumes that can be exported. I cannot put a number to that today, but I will be meeting today [for the group] and 2022, difficult to tell you, but as I mentioned before, I believe every value is increasing everybody. The YPF needs another in implementing production in Vaca Muerta. I think demand will be similar. We are today at 98% of the demand capacity that the refinery has. So we will see probably almost close to same demands to pre-COVID numbers. Therefore, I don't think that (inaudible) that we are expecting to see much more demand. So the loss in the rationality said that we should see additional volumes to be exported next year.

Our next question coming from the line of (inaudible).

(inaudible) I have 2 quick questions. One is regarding your early production facilities capacity, what is your current installed capacity? Are we talking something beyond 38,000 barrel a day? And what happens if this production level, if your facility capacity is maxed out? Should we expect that processing capacity to curtail your production or should we see an expansion in processing capacity? And the second question goes for lifting costs. Now that you have -- now that we have seen you're reaching scale and diluting fixed costs in Bajada del Palo Oeste, could we expect those listing costs to remain stable or was it a onetime loan, which could probably get a bit higher? And congratulations again.

So coming back to the first part of your question. So today, for 2022, this year also we have a plan that we would call internally drill to fill. That means that we are drilling to fill the capacity that we have. So for 2021, 2022, we have no problem. Our capacity is around 55,000 barrel per day. We will end up, as you know, with -- the guidance between (inaudible). So we should be in good shape for next year to continue drilling to fill in that capacity. And that capacity will give us some room to continue growing, okay. We have an additional 15,000 barrels per day that we can allocate in our existing facilities.

Your question on lifting cost is a very interesting one. I think we have a current lifting cost of around $7.3 per BOE. But when we look at specifically Bajada del Palo Oeste, you see that the unconventional that we have today has a lifting between $3 and $4 per BOE. So our model that continues to be growing our unconventional volumes, we should see in the long run that our listing cost will continue decreasing over a number, I don't want to give you a number, but we can say around 6, that is basically the result of the -- of fixed adding unconventional production and diluting our fixed costs that we have to run our full operation, unconventional operation and conventional operation. So you could expect that if we got -- we will continue decreasing mainly due to the addition of unconventional volumes.

I would like to follow-up a question. Capacity -- processing capacity is one thing, but if you expand beyond Bajada del Palo Oeste, shouldn't it -- wouldn't it impact on lifting costs due to higher distance towards the production facilities? And that's all.

Yes. Aguila Mora, in case we decide to go full development, will require additional facilities. That additional facilities are not going to be lifting. It's going to be CapEx. So additional CapEx to that development it has to be put in place. I think we are few years away from that to happen. Bajada del Palo Este is neighbor block to Bajada del Palo Oeste. Of course, if we were decide that we have the opportunity to do a full development of a Bajada del Palo Este, we will require new facilities. But the part that we are drilling now, the pad 11 for example, is like a 10, okay. So there's no problem to connect that pad to the facilities of Bajada del Palo Oeste or to our existing facilities. So that will not require any additional CapEx.

(Operator Instructions) I see no further questions at this time. I would like to turn the call back to Miguel Galuccio for closing remarks.

Thank you, gentlemen, for joining the call, and thank you for your comments, and thank you for your report. Looking forward to see you again in Q3. Have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.