Vista Energy (Vista Oil & Gas, S.A.B. de C.V.) — FY2020 Form 20-F
Reporting period: Fiscal year ended December 31, 2020; filed April 28, 2021. This is an annual report, not a standalone fourth-quarter filing. Financial statements are audited, prepared under IFRS, and presented in U.S. dollars. Vista is an independent oil and gas producer operating primarily in Argentina, with smaller interests in Mexico.
Business context and operating performance
- Vista’s main growth asset is its Vaca Muerta shale acreage in Argentina. At year-end it reported 128.1 million barrels of oil equivalent (MMboe) of proved reserves; 70% were in shale, 78% were oil, and approximately 100% were in Argentina.
- Average net production was 26,594 boe/d in 2020, down from 29,112 boe/d in 2019. Fourth-quarter 2020 production was 30.6 Mboe/d, 2.1% above fourth-quarter 2019; Vaca Muerta production was 14.6 Mboe/d in the quarter.
- Oil generated 86% of 2020 revenue, natural gas 12%, and NGL 1%. The business is therefore particularly exposed to crude-oil prices.
Financial results and liquidity
Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $273.9 million | $416.0 million |
| Gross profit (margin) | $2.4 million (1%) | $87.8 million (21%) |
| Operating profit/(loss) | $(70.0) million | $14.6 million |
| Net loss | $(102.7) million | $(32.7) million |
| Adjusted EBITDA and margin | $95.6 million (35%) | $170.9 million (41%) |
| Cash flow from operations | $93.8 million | $134.3 million |
| Capital expenditures | $223.9 million | $224.1 million |
| Cash, bank balances and short-term investments at year-end | $202.9 million | $260.0 million |
| Borrowings at year-end | $539.8 million | $451.4 million |
| Net debt, as defined by Vista | $336.8 million | $191.4 million |
Adjusted EBITDA and net debt are non-IFRS measures; Vista cautions that they are not substitutes for IFRS profit or operating cash flow and may not be comparable with other companies. The balance sheet reported current assets of $267.8 million and current liabilities of $333.7 million, a current ratio of approximately 0.80, versus 1.93 at year-end 2019. The company reported no default or event of default under its credit agreement as of the report date.
Changes versus the prior year and unusual items
- Revenue fell 34%, principally reflecting lower realized prices and reduced gas production. Average realized oil price declined 30%, to $37.2/bbl from $53.0/bbl; realized natural gas price declined 39%, to $2.0/MMBtu from $3.3/MMBtu. Oil sales volumes were broadly stable at 6.37 million barrels.
- Operating expenses declined to $88.0 million from $114.4 million; operating cost per produced boe fell to $9.0 from $10.8, which management attributed partly to renegotiating more than 20 oilfield-service contracts.
- Gross margin compressed sharply as lower prices and production were not offset by cost reductions. Interest expense rose to $47.9 million from $34.2 million, mainly due to higher average debt.
- Vista recorded a $14.4 million impairment loss on long-lived assets, mainly associated with commodity-price assumptions and a higher discount rate. A $16.5 million gain from changes in warrant fair value partially affected financial results; warrants are treated as a liability under IFRS.
- Proved reserves increased to 128.1 MMboe from 71.0 MMboe in 2019, largely due to Vaca Muerta extensions and discoveries. Proved undeveloped reserves rose to 74.9 MMboe from 52.1 MMboe.
Management commentary, outlook and risks
- COVID-19, weak demand and the oil-price shock led Vista to pause drilling and completion activity in Argentina in March 2020 and shut in 12 Vaca Muerta wells for about two months; the wells reopened in May. Vista later restarted drilling and completion activity in the third quarter.
- Management said it reduced 2020 capital expenditure by about 30% versus its original budget, used floating storage to avoid selling oil at depressed prices, and exported approximately 2.8 million barrels during 2020. It reported lower Vaca Muerta well costs and an updated type curve, but these are management estimates, not guaranteed outcomes.
- No formal 2021 production, revenue, earnings or capital-spending guidance is provided in the supplied filing text. Management said it might defer planned 2021 investment depending on oil demand and prices. The company reported an award under Argentina’s Plan Gas IV for 0.86 million cubic meters per day at an average annual price of $3.29/MMBtu for four years from January 2021, with an associated commitment to invest approximately $45 million.
- Key risks include oil and gas price and demand volatility; COVID-19 and operational disruptions; Argentina’s inflation, currency depreciation, exchange controls and possible restrictions on exports or domestic prices; regulatory and political changes in Argentina and Mexico; substantial capital needs; debt service and financial covenants; and reserve-estimation, environmental, litigation and concession-renewal uncertainties.
- Management concluded that the company had adequate resources to meet obligations for the foreseeable future and prepared the statements on a going-concern basis. This assessment depends on forecasts and assumptions, including commodity prices, spending, liquidity and debt-covenant compliance.
Important facts for investors to verify
- Reconcile the reported $202.9 million of cash, bank balances and short-term investments with the $201.3 million of cash and cash equivalents presented in the cash-flow statement, including liquidity and accessibility under Argentine exchange controls.
- Review debt maturities, interest-rate exposure, covenant headroom and subsequent refinancing or repayment activity; current borrowings rose substantially during 2020.
- Assess whether Vaca Muerta production, well productivity, type-curve assumptions and development costs support management’s stated economics and the planned development of proved undeveloped reserves.
- Check the independent reserves reports and the assumptions behind the 128.1 MMboe estimate, including oil and gas prices, development timing and the large undeveloped-reserve share.
- Monitor the $14.4 million impairment, further impairment sensitivity, the Plan Gas IV award and investment commitment, and any changes to export, pricing, tax or foreign-exchange rules.