Vista Energy SAB de CV (VIST) 2022 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Vista Second Quarter 2022 Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

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 2022 results conference call. I'm here with Miguel Galuccio, Vista's Chairman and CEO; Manuel 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 adapted 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 their closest IFRS measures 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 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 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.

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. While production was up 70% year-over-year, boosted by a solid well performance in Bajada del Palo Oeste and especially in our 2 wells pilots 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. The 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 2 pads and the completion of 3 pads during the quarter.

Our production growth, coupled with the strong realization in 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 $0.90 per share.

We will now deep dive in our main operational and financial metrics. Total production during Q2 2022 was 44.8 thousand 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 represents 74% of our total oil production.

Production growth during the quarter was boosted by the tie-in of our 2-well pilot in Bajada Del Palo Oeste in February on Pad #12 in Bajada Del Palo Oeste in May. With 47 wells tie-in to date, 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 #12 and 13. We are currently completing Pad #14, which we plan to tie in during the coming weeks. We are on track to drill and complete 2 additional pads, #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 2 wells issuing corresponding to pads Aguada Federal 2. We drilled 2 wells in pads Aguada Federal 3, a 4-well pad, which was drilled by previous operator. We are planning to complete and tie in this pad in the second half of the year. The contraction 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 Oeste, the 2 wells we tie-in in late February under our ongoing pilot projects continued to show outstanding results. After 120 days of production, the average production of both wells is 15% above our Bajada Del Palo Oeste type curve on normalized basis. This initial pilot results confirmed the top quality of the western part of this block. And now we are planning to drill additional 3 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 the 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 exported 3 cargoes in the quarter or 1.5 million barrels oil in total. Going forward, we expect to maintain this level of export volumes for the remainder 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 $7.80, up 7% year-over-year. We maintained lifting costs flat quarter-over-quarter despite cost pressure and peso-denominated services due to the appreciation of the pesos in real time. We are actively implementing tactical cost-saving initiatives to contain the impact of the peso appreciation. We expect the production growth in the second semester to continue dilutive fee costs, allowing us to deliver a 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 a 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 points vis-a-vis Q2 2021. Netback was $49.5 per BOE, a 76% inter annual increase and sequentially, this translates into a $70 improvement, capturing the full upside of the realized oil price increase.

Free 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 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 2 development projects, Bajada Palo Oeste and Aguada Federal, which accounted for approximately $100 million.

Average investment, including gathering and debottlenecking facilities plus 2 new wells in our conventional blocks 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 issue. This will mature in 2 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 CDK loan, 50% in June and 50% in July. We are also planning to repay a $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 year-end.

Going forward, our plan is to maintain debt around such level by year-end, although depending on market conditions we might opportunistically tap the local debt market. Net leverage ratio stood at a 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, 3 of the 4 compressors identified in our annual plans have already been upgraded. We are installing vapor recovery units in 3 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 Vaca Muerta Norte, one of our conventional blocks to the main electricity grid 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 plan, we forecast to reduce our greenhouse gas emissions intensity to 18 kilos of CO2 per BOE for the year 2022. This implies a 25% reduction compared to 2021. It also lifts us well on track to achieve our target of reducing our intensity to 9 kilos of CO2 per BOE by 2026, in line with our net fee ambition.

Based on our solid operational result captured with a positive pricing environment, we are upgrading our 2022 guidance. We are adding 8 new well tie-ins, 4 in Bajada Del Palo Oeste, 2 in Aguada Federal and 2 in Bajada Del Palo Oeste. 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 barrels of oil equivalent per day.

As discussed, we are successfully containing FX pressure on lifting costs. We expect production to grow in the coming quarters to dilute fixed costs driven lifting cost 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 is 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, to lift gross debt at approximately $528 million. We are updating our gross debt level guidance to between $525 million and $550 million by year-end.

During Q2 2022, we have delivered 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 $0.90 per share for the quarter.

We continue to make great progress in our Bajada Palo Este development, which have extended our core development to Aguada Federal with a drilling and completion plan that is set to deliver 6 new well tie-ins during the year. In Bajada Palo Este, we continue to see very encouraging pilot results. Our first 2 wells continued to outperform the type curve of our core development block.

We remain focused on our decarbonization plan. We are currently executing several projects, which will deliver a 25% year-over-year reduction in the greenhouse gas emissions intensity during 2022.

We have updated our guidance, reflecting a balanced capital allocation of the 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 action depending on price and funding mix for all evacuation and construction projects that are key to deliver on our export focused growth plan.

We remain in tune, 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 continued 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 Instructions) Our first question will come from Guilherme Levy from Morgan Stanley.

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 Brent level is the company using? What domestic price? And also the percentage of exports?

Thank you, Guilherme, for your questions. 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 was $7.8 as well. So the reason for that is the following, even though we have that pressure that come mainly from 2 elements. One is a clear element of inflation. And the other one, it probably less visible, is there is a dimension on our increase that also related to the fact that we are -- we have the start-up 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 in Bajada Del Palo Oeste. Nevertheless, we see towards Q4, that the additional production that is going to come from our activity is going once again to play a dilution to that cost. And we believe we will probably be landing close to $7 lifting cost in Q4. And therefore, we feel comfortable or we feel confident that we can keep the guidance as it is today.

Related to the export question, as you saw, we are forecasting 3 cargoes for Q3. So that is an additional 1.5 million is in line with what we have forecasted so far. From these 2 cargoes, we have -- for these 3 cargoes, we have sold already 2, we have triggered 1 with Brent at $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 3 cargoes. Therefore, I mean, we basically maintaining the same level. We've seen the same level of the volume 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, our market is full -- is fully served. There's no other things to do with the Medanito crude oil in Argentina. So I mean, the only option for the country, for us, for the industry is to export it. So we continue seeing that trend going in the same direction.

I think Guilherme also asked me if you remember the guidance at $73 and how we see long-term exports.

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

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

Congratulations on great results. A couple of questions, if I may. First one, just to follow up on the export question. How are you seeing the export approvals because we have seen some delays on some of the approvals. So I 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're already more or less around the 2026 plan that you gave us late last year. So I want to understand a bit better how you're seeing that kind of long-term plan now given that you're 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 trying to understand how you're seeing the longer term.

Yes. Thank you, Alejandro, for your question. The first part, I -- quite straightforward. So the word payment -- the pyramid process works is as following. I mean, one, the local market is fully supplied, -- and for us, it's mainly Trafigura mainly and in a portion risen as well. We asked for permit to the Secretary of Energy. And then usually, we get the permit. I mean, it could release a week of delay or days of delay. But again, I mean, in line what I said before, one, the local market is fully supplied and today it's 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 the best interest of the industry to get those proceeds, is becoming to very important also for the country. Vaca Muerta is one of the main formation in terms of bringing proceed to Argentina. So therefore, I mean, so far, we have not had any problem with the permit.

Related to your second question, yes, definitely, we are ahead of guidance. Clearly, we have a lift from the oil price. The rest of the element that we have guided in terms of production, in terms of the percentage of production that is going to be export, in terms of lifting costs and so on, we are spot on, on our budget. Therefore, we continue we continue delivering on the promise. And yes, we are having an extra cash. The federal adjustment that we did this year was related to CapEx.

Clearly, in this environment, with a rich portfolio of projects, locations wells that we have in hand, we decided 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 a higher starting point. But definitely, it will play in the economics of the 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 more sensible things that we have to do for 2023. But it's not a decision that we have take already and nothing that we can guide on it.

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

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

Our next question will come from the line of Marcelo Gumiero from Credit Suisse.

Congratulations on the results. Very, very strong results. I have actually 2 follow-ups for today. The first one on activity in 2022. As you mentioned, I mean, 8 wells were added to the plan. My question is whether those additions were driven by -- mostly by the good oil price environment in the -- 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 CapEx 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 or 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, deleveraging more and possibly are potentially accelerating buybacks or dividends or return to shareholders in general. And if you could also mention what are the main hurdles for those shareholders' returns, right?

Thank you, Marcelo, for the question. So let's start for the first one, it is 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 #2 and Pad #13, okay, both of them with very good results. And also in Aguada Federal we completed tie in Aguada Federal 2 wells that were already there when we bought the concession. And we drill another 2 wells in Aguada Federal 3.

For the second half of the year, we plan to tie in -- so this one is night tie-ins that -- so there is 2 tie-ins that we did in Q1. For the second half of the year, we plan to tie in Pad #14, 15 and 16. 14 is already drilled. We will drill in Bajada Del Palo Oeste 15 and 16, and we will drill additional 2 wells in the pad that is Aguada Federal 3, and we will complete those 4 wells in Aguada Federal 3. So we are adding 2 additional wells to Aguada Federal that were not in our current program.

And also, we have 2 wells pilot to be drilled in Agua Amarga and Aguila Mora that we have not drilled yet. That is towards the end of the year. And the other thing that I have not mentioned that complete the program is in Q1, which we drilled 2 wells in Bajada Del Palo Este. And we have 2 additional wells to drill Bajada Del Palo Oeste 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 8 tie-in about the original guidance that we did. And we will do that with the $100 million of CapEx. And this it will be it for this year. So you will not be able and we will not add more CapEx in activity to the one that we are guiding today and it's what we are going to execute.

Related to the additional CapEx, I think pretty much everything that you mentioned is on the table. So we clearly got an aim to return to shareholders. We've been clear on that on our Investor Day, we're being clear on that in every quarter earning call review that we are having. And of course, additional with -- again, with a rich portfolio that we have of wells and with the well performance that we are having and the corn 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 restrictions that we have today in the country. We don't believe the 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, it's additional infrastructure, okay? We are -- clearly, we are going to invest to add capacity to our evacuation -- total evacuation set. Why? Because we are increasing, OldelVal pipeline is going to be big and build in the next year. So this is -- 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 [Muerta] 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 with our cash and the ability that we have to repatriate and so on, it will play a role. It's going to give us an additional level of freedom when it comes to decide what we do with our cash.

Our next question will come from the line of Andres Cardona from Citi.

Congratulations on the results. I have 2 questions. The first and maybe following up with the previous question, you were talking about the need 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 it 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 #12 and 13, I remember there was an increase in the previous pads. So I would like to understand if we are seeing a stabilization on how it's performing.

Yes. Thank you very much for your question, Andres. Look at the first part related to facilities. Well, I would say I will take 2 different -- there's 2 different parts of the facilities that I think go for different channels. The first one is the facilities related for us -- to us on a normal development that we do in Bajada Del Palo Oeste, Aguada Federal and Bajada Del Palo Este. We are ahead of creating the capacity that we need to serve that production, one, because of operational, there is one because of VIST.

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 plans. So we have not bottleneck, let's put it that way, in terms 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 where 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 blocks at Aguada Federal and Bajada Del Palo Oeste that it can give us a very good surprise, since the well that we drilled there have confirmed that the western side of our Bajada Del Palo Oeste -- our eastern side of Bajada Del Palo Oeste is good and our western side of Bajada Del Palo Oeste has certain potential.

Now the other part of the evacuation that is the connection between our facilities and the port in the Atlantic, in this case, in Bahia Blanca. And there, we have 3 main projects ongoing. One is on the valves. As you know, we have today, a pipeline with a full capacity of 280,000 barrels per day that we are already as an industry using and will be a public tender where producers will meet additional capacity, we will be part of that group, and that's expected to be -- 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 2 stages of that process, and we will get additional capacity and this will be a use of CapEx, as I mentioned before, that we will have to do.

Then we have oil tanking that also have a project to upgrade oil storage. And also they are basically digging the channel and creating facilities to be able to unload 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 are ongoing, for example, export to Chile, that is for Vaca Muerta Norte pipeline. There's a pipeline there that has 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 is 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, been facing inflation on the OpEx, we did also on CapEx, we see that stabilize using your own words, we don't see a further increase on the actual CapEx that we have. We see potential further reduction on one project that is becoming -- that is becoming in place because we have executed already. It's our own sun 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 reduction to our completion cost, and I think it's very important. And this project is coming along very well. So we have not had any issue of performance. And the plan is already starting up. I hope I answered your question, Andres.

Our next question comes from K. Papalias from PUENTE.

This is Konstantinos Papalias from PUENTE. 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 in those soon. Do you see that as an issue for your activity?

Hi, Konstantinos, thank you for your question. The short answer is no, we don't see an issue on pump maintenance. As you know, I mean, we -- early on in our operation, we decided to have -- I will say the strategic partnership with service providers. In this case, for drilling and completion, we are having with [Genever] and then we have it with Cumbre with start of operation with less than 4 frac stages per day. Today, we are performing at around 10.

So -- and we are doing many things differently than we did at that stage. But maintenance is key. I mean, and it's a business that we know very well. So the pipes have been maintained, have been served spare parts 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 a 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 issue with that delay our plans.

Our next question comes from Oriana Covault from Balanz.

This is Oriana Covault with Balanz. I have 2 follow-ups. And first one regarding your export mix. We noticed that you had consistently achieved a higher export mix than your local peers that are as well focused on light oil. So I don't know if you have any thoughts that you could share on how do you manage to achieve this.

So Oriana, yes, I mean, I don't know what you mean high achieve over peer, but the fact that we achieved -- I mean in order to export, you have to have additional volume. And in order to have additional volume, you have to grow. It's not only you have to grow, it's the velocity in which you grow. So we basically been since the last 4, 5 years, serving our off-takers, again, Trafigura, mainly and Risen. One this too our self and we do that for the last 5 years, every quarter, every month.

The rest is what is basically the volume that we have managed to put and surface because we have invested and we have grown. And that is what we export. As we grow more, we export more because there are no more refineries in Argentina putting into activity. So the market of Argentina is capped. So every time, if you tomorrow -- if next year, we produce 60,000 barrels per day, we will still selling the same amount of volume to Trafigura and Risen, 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, particularly, we're talking about Medanito, of course, then the rest is to export market. And by the way, I mean, our competitor or the industry is doing the same. I will add, we don't have a refinery business. So if you we have a refinery, then we will have to serve first our refinery. This is not the case with Vista, Vista is a pure upstream player.

And maybe just following up on CapEx. We noticed -- and I think you've partly addressed it, but I wanted just to make sure that this implied CapEx for unconventional 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?

Yes. As I mentioned before, we have inflation in CapEx terms, 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 have handled pretty well. First of all, we have long-term contracts. This helps 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 contracts with those companies. So we are not talking about what is happening with inflation today. We are talking what is happening with the next 3 years. So those contracts, those services are secure. This is an inflation mitigator too.

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 initiatives that have impact in our operations. Looking back, we used to drill those well in 35 days. We have a record well the other day that we drilled in 12 days. So these kind of innovations and initiatives that are cost-saving initiatives, 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 managed to create a source of sun close by to where we operate. This will start to have an impact in our well cost. Potentially, it could be a $0.5 million impact in the 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 cost-saving initiatives. 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.

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

Yes. Thank you, Oriana, for your question. Yes, what you saw is real. So once -- what we did was to close Aguada Federal wells for -- in a protocol that is normal protocol for us that is to avoid a water hit, something that we do when we frac wells that are nearby, others, 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're going to frac, a few days before. That allow the well to build up pressure and the reservoir have less likelihood of being in communication, of having interference. So what you what you saw in Aguada Federal was exactly that, was our people, our operations following that protocol. Then you open it up.

Yes, yes. That -- so levels should go back to normal levels back to in third quarter. Okay. Congratulations on the good quarter.

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

Once again, thank you for participating. Thank you for your 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.

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