Vista Energy SAB de CV (VIST) 2020 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Vista Oil & Gas First Quarter 2020 Results Conference Call.

(Operator Instructions)

Now it's my pleasure to turn the call to Alejandro Cherñacov, Strategic Planning and Investor Relations Officer.

Thanks.

Good morning everyone.

We are happy to welcome you to Vista's First Quarter 2020 Results Earnings Call.

I am here with Miguel Galuccio, Vista's Chairman and CEO; and with Pablo Vera Pinto, Vista's CFO.

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.

However, during this conference call, we may discuss certain non-IFRS measures such as adjusted EBITDA.

Reconciliations of these measures to the closest IFRS measure can be found in the earnings release that we issued today.

Please check our website for further information.

Our company, Vista Oil & Gas, is a Sociedad Anonima de Capital Variable organized under the laws of Mexico, registered on 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.

Good morning, everyone, and thank you for joining this earnings call.

This webcast is completely different to all the previous ones I have done.

We are going through an unprecedented health crisis.

I hope you and your families are healthy and staying safe as we go through this COVID-19 pandemic.

I would like to kick off by commenting on our response to COVID-19 with a special focus on our people, business continuity, and balance sheet strength.

The COVID-19 outbreak is currently causing a significant impact on the global economy, the oil industry, and our operation in Argentina and Mexico.

Vista's response has been firm and decisive, as it has been always, especially with regards to the health and safety of our employees.

In this respect, I would like to mention the currently 75% of our employees are working from home in accordance to our health protocol.

We have also opened a COVID-19 help desk to answer the questions and concerns that our employees might have.

The remaining 25% of our workforce is strictly devoted to essential oilfield operations, working on 7-day shifts to minimize travel to and from the field.

I will use this opportunity to highlight their effort to keep our operation running and thank them for doing so.

Please note that our business continuity plan implies a reduction of 65% of key personnel compared to a regular operating day.

We have also taken decisive steps to protect our cash position and in turn our balance sheet.

We stopped drilling and completion activities and scaled down our capital expenditure projects for the remainder of the year.

We are also working on reducing OpEx and G&A costs to lower activity levels.

We believe this will lead to a linear and more efficient organization that is fitter for the future.

We are in a tough business environment with low crude oil prices and an unprecedented drop in demand, but our strategy and the strength of our organization leave us well prepared to face this challenge; first, budgeting and CapEx decision-making process.

CapEx with flexible drilling and completion contracts enable us to take discrete investments decisions with short CapEx cycles, allowing us to start and stop as we see fit, helping protect our balance sheet.

Second, having spent more than $200 million over the past 2 years, we now have low investment commitment outstanding in our 35-year concessions, allowing for flexibility in our development plan.

Third, cost reduction efforts we began in April 2018 when we took over these assets have generated a low lifting cost operation at $10.00 per BOE.

And last but not least, our financial debt structure has low debt maturity within 2020.

I hope it comes across that we are well prepared for the coming quarters.

We now move onto the results of the first quarter of 2020, which were partially affected by the drop in prices and demand, mainly in March.

In late February, we tied in our third pad, targeting the Vaca Muerta formation in Bajada del Palo Oeste, which delivered impressive results in the first days of production.

One of the wells reached more than 2,600 BOE per day and with more room to continue growing.

In our continued quest to optimize our development costs in Bajada del Palo Oeste, we positively test 40 meter frac spacing in one of the wells.

Remember we are using 60-meter spacing in the rest of the wells.

We will go into more details regarding our Vaca Muerta project later during the presentation.

Our daily production averaged 26,500 BOE per day, slightly impacted by the shut-in of our Vaca Muerta production volume on March 20 due to low crude oil demand.

Lifting cost was $9.90 per BOE, 18% below Q1 2019, already showing partial impact of our cost reduction initiatives.

Revenues were $73 million and adjusted EBITDA was $25 million, both impacted by falling realized oil prices in March.

Cash at the end of the period stood at $205 million and net leverage ratio at 1.7 times adjusted EBITDA.

As shown in the previous slides, our total production for the quarter was 26,500 BOE per day, an annual increase of 3%.

This was mainly a result of the addition of volumes from our project in Bajada del Palo Oeste, which reached a daily production of 11,500 BOE in Q1 prior to their shut-in.

Due to the oil/gas mix of our shale production, the annual increase has more impact on our oil volumes, where the year-on-year increase was 13%.

We took a proactive approach and reacted quickly to the drop in crude oil demand on March 20.

In advance of emergency storage reduction, we shut-in our shale oil wells in order to continue producing our conventional assets.

Our third pad had not reached its peak when we shut-in.

Worth noting is the fact the shale reservoir provides a highly efficient short-term storage solution and that we expect flush production driven by pressure buildup as soon as we reopen these wells, partially recovering the lost days of production.

Finally, in the initial days of commercial reduction, we hired floating storage for 300,000 barrels for our May production at very competitive rates, as we foresaw that onshore storage capacity will become unavailable later on.

Our first quarter revenue totaled $73.3 million, 22% below Q1 2019, mainly driven by lower realized crude oil and natural gas prices.

Crude oil realization prices were $43.00 per barrel, 24% below Q1 2019.

Average sale prices were $55.70 per barrel for January and $48.20 per barrel for February but fell to $26.50 per barrel for March as the COVID-19 pandemic hit commodity prices, thus affecting our realized prices which were linked to Brent in March.

Average natural gas price was down 41% vis-a-vis the first quarter of 2019, mainly due to the current gas oversupply in the domestic market, which drove price decreases of 50% in the industrial segment and 35% in power generation.

We now move to OpEx.

As shown in the first chart, the total operating expenses for the quarter were $23.8 million, 14% below Q1 2019.

This year-on-year decrease was driven by cost reduction efforts conducted during 2019, but I would also like to highlight savings in the pulling activities, which we have quickly adjusted in March 2020 as crude oil prices and demand start to fall.

The second chart shows OpEx per barrel of oil equivalent, which was $9.90 for the quarter.

This is 18% below year-on-year mainly as a result of the cost savings I have just described, but also the increase of shale production volume in our Bajada del Palo Oeste block at the minimum incremental cost.

Moving on to slide 8, our adjusted EBITDA for the quarter was $25.3 million.

January and February, with the full production and with approximately $52.00 per barrel of average pricing, EBITDA margin was about 40%.

In March, the partial shut-in of the production and $26.00 per barrel of pricing drove us down, at an average EBITDA margin for the quarter of 34%.

I would like to stress the importance of our solid improvements in operating expenditure performance, which allow us to partially offset the price impact.

Cash flow from operating activities in Q1 2020 was $21 million.

Cash flow in investing activities was $69.1 million, driven by drilling and completion in our Bajada del Palo Oeste project and the payment of the acquisition of our less mainstream business.

With cash flow and financing activities at $13.8 million, our cash position stood at $205.3 million at the end of the period, leaving us with a solid cash position to face the following quarters.

We now move onto an update of our flagship Vaca Muerta project in Bajada del Palo Oeste.

As I mentioned earlier, in February we tied in our third pad.

The first chart shows the production of its 4 wells against our prior 2 pads.

Even though the well only produced for less than 30 days before being shut-in, they show promising productivity, and we expect them to keep performing in this way when we reopen based on pressure and water cut data.

Please note well 2063 in red, which reached 2,600 BOE per day.

It is also worth mentioning that pad 1 and 2 keep outperforming our type curve by 26%.

On the bottom right side, we are showing the lateral length, frac spacing, and number of fracs of each well of the third pad against the average of pad 1 and 2. Especially well 2064 of the third pad was drilled with a lateral length of 1,427 meters and completed with a reduced frac spacing of 40 meters.

As shown in the graph at the top right corner, higher density frac and shorter wells are providing similar productivity results on a per day basis to 60 meter well spacing.

This is true even when compared to well 2063, which I referred to earlier.

This, coupled with the CapEx per well savings of 15% per well achieved, as shown in our previous quarter earnings call, could provide for shorter drilling cycles, shorter payback times, and higher efficiency in terms of reduction of development cost per BOE in a lower price environment.

I will now recap our response to the unprecedented landscape generated by the COVID pandemic and let you know in more detail how we plan to move forward.

First, you should know that, in light of the current situation, we are withdrawing our 2020 guidance.

We have adjusted our strategy and focused on 2 guiding principles, cash preservation and value protection.

As I mentioned before, we have stopped drilling and completion activities and scaled down other CapEx projects as well, which will generate a reduction of 50% to 65% with respect to our original guidance.

OpEx and G&A savings following a detailed rightsizing plan will generate a reduction of 20%, with the objective of keeping lifting costs stable at $10.00 to $11.00 per BOE with the lower production.

We move into unprecedented times with more than $200 million in cash, which means we have enough liquidity to either restart drilling and completion activity in the short term or remain on hold until conditions for ramping up activities are there again.

In terms of value protection, I would like to share 3 highlights.

CapEx and cost savings will not only help us to preserve our cash at this critical time, they will also make our operation leaner and fitter for the future.

The continued success in lowering the development costs of our Vaca Muerta acreage will be key once we restart drilling and completion activities in Bajada del Palo Oeste, enabling us to produce solid return in a lower price environment.

I started this call talking about our people and their response in the field, and I also mentioned our outstanding performance in Vaca Muerta, which is also an achievement of our team.

I have no doubt that the reinforcing teamwork and culture is key to keep producing outstanding operational results, especially during these critical periods.

Because of this unprecedented landscape, our tactical decision required out-of-the-box thinking.

We shut-in our Vaca Muerta wells even before our third pad reached its production peak.

We did this anticipating demand and historic reductions and in order to protect our conventional production, as shale reservoirs provide highly efficient storage solutions.

We secured floating storage at very competitive rates for the main production volumes of our conventional assets, and we are actively working on tactical exports of light crude oil.

Despite a challenging and changing environment, I think we are well prepared for the coming quarters.

Our current view for the second half of the year is to reopen shale oil wells as demand recovers.

We also evaluate the drilling and completion of another 4 wells if the right demand and price conditions are in place.

Before we move to Q&A, I would like to say once again that our people are our most valuable asset, and as such we have implemented a strict health protocol prioritizing their well-being.

The COVID-19 pandemic has led to unprecedented events such as the fall of international oil prices to record lows, but we are well prepared thanks to our low operating costs and our solid financial position.

This will allow us to restart CapEx activity when the right market conditions are in place.

Finally, I would like to highlight once more the outstanding productivity of our wells in Bajada del Palo Oeste, which keep reinforcing our low development cost strategy for our Vaca Muerta project.

I hope it has come across today that we continue to prove the value of our assets.

To conclude the first part of the call, I would like to thank our investors for their continued support and interest in our company.

I would also like to thank the entire team at Vista for their hard work and commitment, especially in these unusual times.

We will now open this call for Q&A.

(Operator Instructions) Our first question is from Bruno Montanari with Morgan Stanley.

I have a few questions.

First one, regarding the shut-in strategy, I understand the option of short-term storage, which is an interesting one.

But I'm curious on how long you can do this for.

So the question is, if you have to shut-in for longer, is there a risk that production could take longer to return or that the reservoir might not respond as initially expected?

So is there a scenario that you have to restart the wells even if market conditions are not favorable?

And second question may be more macro, but there still seems to be quite a bit of confusion with the pricing environment for both oil and natural gas in Argentina.

So do you have a feeling on when the market will have more clarity on the policy agreement for the coming quarters?

Thank you, Bruno, for your question, and also I hope you and your family are remaining safe.

So look, starting with the first question, yes, definitely we moved very early with the storage.

Looking for the budget in order to enter storage, the big advantage that we had at that time was basically when we look at today we secured that for probably half of the price that everybody is paying today, okay?

We are paying between 2,500 and 3,000 barrel -- $30,000 per day, so very competitive.

One more thing that we did, as I mentioned in the presentation, was to preserve value.

And for us to preserve value, we need to put things in context.

We have 12 unconventional wells and we have 1,000 conventional wells, okay?

Once the unconventional are in natural flow, the other ones require artificial lift and many of them are on the water flat.

So therefore, for the OpEx and as we know, or most of the reservoir engineers know, every time that we shut-in a conventional well, it's hard to predict.

In many cases, we don't recover the production.

And to recover the production, it costs us a lot of money.

So we decided to do something that we know how to do.

That was to shut-in those 12 wells.

We have experience shutting in wells, unconventional wells.

We did it for CASO x-1 for Amargo Sur Oeste.

We shut-in the well, and we started that well after a few months with flush production of 30%.

So even our reservoir engineer said if in a few months we restart the production, we almost can recover the production that we lost for the year, okay?

So it just proves that unconventional reservoirs in the stage that we are, okay, and we in the very early stage of their production, continuing the natural flow can be used as a short term storage, okay?

So we have no doubt.

We had a similar experience in Aguila Mora 4 years ago, so we shut-in that well for a longer period of time.

It was more than a year, and we also looked at the recovery.

We have done a lot of research on that.

So yes, we can shut-in those wells for a longer period of time.

Moving forward, we always have the option to export, okay?

As we said today, we take it as a tactical option.

And of course, what is going to happen in the second half of the year will depend on what happens, as you mentioned, in terms of (inaudible).

One thing that is factual, and I hope you have noticed, is that the price of gas stations has not dropped, okay?

So today gasoline prices in Argentina are the same that they were in January and February when we saw crude oil production at $51.00, $52.00 per barrel.

Therefore, what today the government is doing is trying to look what could be good, I will say, to implement to maintain -- basically to protect a workforce and also to create a bridge for when the demand picks up again.

As you know, quarantine in Argentina has been very restrictive, okay?

But we have just the first step of a more [flexibilization] announced 2 days ago.

And we were commenting before the call that we already see the impact of that flexibilization in the demand of gasoline in several points.

So not only it is critical for the government in how we go through this, also it's very important to be prepared where the demand comes back.

I hope I have answered your question.

If you have additional questions, happy to answer too.

(Operator Instructions) Our next question comes from Regis Cardoso with Credit Suisse.

Well, this time my question is just really one.

And if you could sort of try and explain the most detailed you can, how do you plan on preserving liquidity to getting through the debt maturities?

Because it appears that this is a shock for the entire oil industry and for many others, now in times of pandemics, that will likely make some victims along the way, even if it's not a permanent long-term problem.

So my question really is how do you guarantee Vista will be one of the survivors out of this crisis?

All right.

Thank you, Regis, for the question.

It's a very good question, and I'm very happy to answer and I'm very secure about how we are going to transition all this.

So as I mentioned during the presentation, we focused in preserving cash, and we know how to do so, preserving cash and protecting value, okay?

Preserving cash, when I say that we know how to do so, we have a very low cost operation.

As you know, we basically acquired an asset that a few years ago had a lifting cost of around $18.00 per barrel.

We took it down in this quarter below $10.00, to single digit.

And we plan to maintain that $10.00 even with lower production, okay?

And if it's something where we have delivered, it's on that.

Of course, we have delivered on unconventional and in productivity too.

So we have a low cost operation, and we have also very low G&A that we are reducing farther down.

Just to give you a note on that, I have cut total management -- total compensation 40%, okay?

So G&A also is already low and is going to be lower.

Our operation is cash flow positive, okay, at very low realization prices.

So today this is the case.

I mean we have -- with $10.00 and low G&A, we have an operation that we can run with cash flow negative or low cash flow positive.

We have flexible capital commitments, so we designed our CapEx commitment and our ramp-up in terms of unconventional with flexible contracts where we can -- as I mentioned in the previous call, we can really reduce CapEx very quickly and then very little CapEx due to the contracts.

We are renegotiating those contracts today because, as I mentioned in the presentation, I think and our view is that we can come out of this leaner and fitter.

And therefore, we have an opportunity too to even go lower.

The other thing that we have proved during all this period of time is that we really can reduce development costs.

When you look pad 1 and pad 2 today are producing 21%, 22% of our light crude, and when you look at the results of pad 3, where we went longer and also high density and when you look at the production, we shut-in the well of 2,600 barrels of oil per day with 30% water cuts.

So the results are incredible.

It's showing us that we can go also to lower development costs.

We tried a well that basically was shorter.

This well was 1,400 meters.

That well was drilled with 36 frac stages, 40-meter space, and basically delivered the same production that was in pad 1 and pad 2 with lower CapEx.

Therefore, also it's a test that is demonstrating that really we can go lower in development costs.

We are sitting on $200 million of cash with very low maturity during 2020.

We have just $50 million that today we are assessing a way of doing that.

We can pay out or we have other options as well.

So that debt is with -- most of that debt is through local banks.

We are in very close contact with them.

So we don't have an issue for 2020.

Our view of 2021 is that it's going to encounter us sitting on cash with a company that is, again, prepared to ramp up again.

And of course, we have a -- I will say we follow your forecast and the other people's forecasts, and we have a prediction that is going to encounter 2021 with a price environment that will allow us to basically restart our growth story.

I don't know if I have answered your question.

Or if you have any more specific thing that you want to know, happy to answer too.

Very clear, though if I may just a few follow-ups.

What do you believe are the operating costs you have so that we can understand how much volume, given demand is uncertain and prices or the combination of the two, would be required for you to break even?

And I'm asking this because I believe you are doing a good job in cutting cost, so maybe looking at previous cost is not necessarily a good proxy of what we should expect for 2020, 2021.

So costs and then debt maturities or if you could roll over those debts, or if you're still working on OPIC, if you're working on new debt, something that would definitely take liquidity out of the way, if there is any update on that front.

And then still on the liquidity sort of thing, how low can you bring down CapEx?

You mentioned it's very flexible.

Can it be zero?

Zero might be too extreme, but can it be very low?

And if you do, let's say if you do very close to zero CapEx, what would be the impacts to decline rates and for how long could you actually remain at very low CapEx levels?

Thank you.

Starting with your OpEx, well, low OpEx is -- we are spending around today $9 million per month, okay?

This is very low OpEx.

This is OpEx plus G&A.

OpEx alone is around $7 million, okay?

So that is how low is our OpEx today.

In terms of maturities -- no, in terms of CapEx, okay, we already spent in Q1 $75 million.

The rest of the year, we can go as low as $20 million additional.

So that is how low we can go in CapEx, okay?

That is for the rest of the year.

So we don't have a really big CapEx commitment.

In terms of maturity, I think I explained this year we have $50 million of maturities with local banks, okay?

I think we are today looking at options, but we feel comfortable we can roll over that maturity, and also we can pay it, okay?

So we have the option.

We are sitting on $200 million cash.

The other question was decline.

Well, yes, without pulling units, you will decline on the conventional.

Remember we have more than 10,000 barrels of production shut-in, so we don't have a problem of decline.

If we decline, we open a well that is natural flow basically to maintain in production at much lower lifting costs than the one that we have in the conventional production.

So I don't see a problem with that.

So I will say, Regis, we feel comfortable.

I am sure we will navigate this year, okay?

Of course, we are not here to navigate.

We are here to grow.

Our story is a growth story, and what we have focused on is how we can be -- how we can even reduce farther our development cost and an OpEx cost in order to deliver even better return in 2021 when demand and prices are back.

Very clear, Miguel.

Sincerely hoping that this time of crisis will be behind us soon and that we can all go back to the growth path, which for Vista, I mean, you have done a brilliant job so far.

Thank you, Regis, and thank you for the questions.

And our next question comes from Frank McGann with Bank of America.

I just wanted to hear your views on what you're thinking about long-term breakevens and the potential to cut costs, potentially in the more challenged oil environment globally.

Even when things improve, there's still some uncertainty, excess capacity on the service side and things.

So I was just wondering how you are seeing that and the opportunities to cut cost to bring down your breakevens.

And then even in the U.S., the expectation that shale will be as competitive going forward even when things improve is -- there's a view that shale will be forever challenged.

And do you see Vaca Muerta and your own assets as being somewhat more resilient as you look out longer term?

And how do you see yourselves, as well as perhaps Argentina as a whole, positioned to be able to continue to develop infrastructure and develop Vaca Muerta?

Frank, thank you for your question.

Look, at -- in terms of breakeven, we are not giving recommendations, but I will tell -- data, but I will tell you that in both events.

So today we are dealing with between $12 million and $11 million.

You have seen our productivity.

So today we are both, in lifting cost and in development cost, I will say between $10.00 and $12.00 per barrel.

So what we are aiming is, in both of them, to be in a single-digit environment.

And with that, I think Vaca Muerta really will be protecting on low price environment.

And let's qualify low, a normal low, not the low that we are today.

We see the productivity.

We are still surprised about the productivity.

Clearly, our strategy of completion is going clearly in the right direction.

Therefore we feel comfortable that we can get to single-digit development cost.

In term of lifting cost, when you look at our lifting cost, it's a mix of unconventional and convention.

So going in single digit for unconventional, us unconventional production becomes more important in our mix.

I think it's super achievable.

I believe there also we are considering a technology that is not well developed in Argentina.

That is gas lift.

So that will allow us also to be less dependent of pulling and pumps and so on, and I think it's going to give an edge also to continue reducing operation cost.

Long term, I think it's very important, your question on maintaining solid capacity in the country.

This kind of special moment and situation like the pandemic, it will put Argentina a test on their capacity to maintain that equipment.

Now again, I will repeat what I said to Bruno, that the government has decided not to reduce the price at the gas station is quite a statement, okay?

It's a statement that clearly is toward trying to protect the workforce and protect the business during this period of time.

Of course, we are all looking how that is going to translate in crude oil prices and how somehow demand is going to be managed, okay?

Now again, we understand they are working on it.

We understand they are very advanced on working on that.

And if they maintain the price at gas station at the same level they are today, clearly they have to do something with that, okay?

So I feel positive about that.

Back to infrastructure, besides services, clearly this is a setback, okay?

We were looking to build more infrastructure.

Everybody was on the same page.

I think now everybody is assessing how we come up out of this and what are the different scenarios.

Again, I'm positive on 2021.

I'm positive even probably end of this year.

As I mentioned in one of the questions, we are just measuring the flexibilization of the very strict quarantine that we put in place in this first few days.

It's very interesting to see in the demand, just this very little flexibilization, how many percentage points have impact on the demand.

So look, I don't want just to say that we have grown in that sense through the wars, but I feel positive that we can transition this and can retain the key service companies in the country.

And we will be ready to ramp up again toward beginning of next year, even end of this year, if the demand and the pricing come back.

Our next question comes from Pedro Medeiros with Citigroup.

Miguel and Vista and all the Vista team, okay, congratulations on managing through these difficult times.

I just have some quick follow-ups from the previous question.

So the first one is, Miguel, would you mind giving some guidance on the working capital side of the business, okay?

Are there any measures that you guys are taking that would release more capital in the short term or in the medium term?

You still have a good amount of trade receivables there.

So I just wanted to understand the dynamic and the official contribution to cash flow from that side of the business.

My second question is actually for me to understand this process.

How is the process to resume an unconventional well that was shut, okay?

So do you have any investments needed to resume production?

Do you need to re-frac the wells?

So any insight you could give through those operations I would appreciate.

And the third one is kind of a different way to think about breakeven, and it's really more short-term guided.

Would you have a price range or a minimum selling price that would give you confidence today to resume your unconventional wells production that were shut?

Pedro, thank you for the questions.

So in terms of CapEx, look, what I said before, we have a spending in the first quarter of $75 million.

We have reduced in our low case scenario -- of course this is something that we will assess quarter by quarter -- to an additional $20 million on CapEx, okay?

So that is how low we are going on CapEx.

We are taking the opportunity to -- we believe in the long term.

We have long-term relationships with service companies.

So of course we are today discussing contracts, and that is more than the rate that today we have on the standby.

And I believe we are making it from both sides, for them to stay put and for us to come back with basically a lower cost structure and an even better contract that we have, assuming that the content that we are going to have when we restart is going to be a contest of lower prices compared with the ones that we came in.

So in terms of working capital, we are basically extending the payables, okay, from 30 to 40 days to 50 to 60 days, okay?

But again, we are not going to do anything crazy, okay?

We are in a good position.

We are looking to restart operations, and we are not today in a moment that we are going to panic and not think on how we are going to come out of this, okay?

We've been through crises.

I've been through several, wars and one pandemic as well.

And we will stay cool, doing what we have to do, okay?

And I think we know how to do that.

In terms of restarting unconventional wells, it probably will sound more simple for you than you commented.

The well doesn't have to be re-fracked, okay?

We just have to open the wells.

We have a protocol of choke management.

So for example, the well that was producing 2,500 meter -- 2,600 barrels of oil per day was choked, okay?

So it's still a few months for that well to be fully open.

So we will have to start with, again, a smaller choke at the beginning and go through the protocol to open up those wells step by step in terms of choke management.

But in terms of cost, it's managing a choke and open a valve, okay?

So that's why unconventional for us is so good and so low cost in natural flow wells.

And we have all our wells in natural flow, even though at the end of the day some of them have already more than a year naturally flowing.

I think there was another question that was related too.

Yes, it was -- well, thank you so much for the answers, the previous answers.

The last question was around if you could give some insights on a range, or what would be the minimum selling price that you would have confidence on resuming your unconventional wells that were shut down.

Oh, look, we want to come back to normal prices.

We are seeing the same curve that you are seeing.

I see it in the [production basis], so I see a lot of information and see what has happened in the rest of the world.

To be honest with you, it's more complex than pricing today.

We need to see the demand and we need to see a sustainable demand with prices at the level that we want to be seeing in order for us to really decide to restart the operation and start to burn CapEx again, okay?

So I would say today we are looking to what is going to happen with the demand and when the demand is going to be sustainable again.

We know Argentina very well.

I've been related to the business here for many years.

We know the demand is there, okay, and we know how solid it is, and also we know how fragile it is, because Argentina is not in a position where, if we don't drill, okay, we will sustain our local self-sufficient for too long, okay?

So also there's a risk for the country to import, and the government is very sensitive to that.

So I will say when the demand comes back and if it -- some of this measurement they are thinking of, okay, that help us basically to come out of this with better prices sooner than later, and for what they are looking at also maybe a leg of that potential decree that will allow or could allow to lower export duties, that also will help, okay?

All that measurement will help.

The question here is for me, for Argentina, if we can accelerate the ramp-up back to the new normality, whatever it is.

And for me, the fact again that they have not touched the price of gasoline in the gas stations and the fact that they are advanced working on an instrument, even though it's not done so I'm not going to say anything about that, show me that they are basically betting to economy, betting to recovery, betting to activity more than taking advantage of that situation of the low crude oil prices.

And our next question is from Antonella Rapuano with Santander.

I was wondering if you see any bottleneck in terms of storage capacity, also considering that these demand conditions could last longer than expected.

And a second question is regarding the recovery on demand that you just pointed out.

I was wondering if you could give us some magnitude of this recovery that you have seen in the past weeks.

Thank you, Antonella, very good questions.

So look, in terms of storage capacity, as we said today, all the storage capacity has been used, okay?

When you measure in volume the storage capacity of the country, we probably can store for a little bit more of demand, of production, okay?

So therefore, all the storage capacities have been used.

Today the storage game is what we have done.

It's to have offshore storage, okay?

And again, we moved earlier.

We were the first in moving there and we took advantage of that.

In case this continues, do we have the option to do that again?

Yes, we do, okay?

For sure it's going to be more costly.

Nevertheless, I think that that option is open.

In terms of the recovery, as I mentioned before we are basically following the demand very closely, okay?

I cannot give you a number.

I think it's too early to give you a number.

It has been few days.

But of course we have information and we saw the demand.

Even we feel it, the one that we are active when you go out, but we saw several points coming up in terms of demand in the gas stations in these few days.

I think it's too early to give you a number.

I prefer not to do so even though I have a number in mind.

Thank you.

And I'm not showing any further questions in the queue.

I would like to turn the call back to Miguel Galuccio for his final remarks.

Look, guys, girls, thank you very much for the questions.

Thank you very much for being present today.

Again, I hope you and your family are safe, and we all go through this and come up with a good outcome as soon as possible.

So thank you very much for participating.

All the best.

And with that, ladies and gentlemen, we thank you for participating in today's program and you may now disconnect.