Vista Energy 4Q24: Solid Expectations Despite Short-Term Cost Headwinds

Despite a temporary increase in operating costs, Vista Energy’s solid credit metrics, expanding production, and new pipeline capacity reinforce growth potential

Executive Summary

• We maintain our Outperform recommendation on Vista Energy. We view Vista as an attractive option for investors seeking exposure to Argentina's energy sector. The company’s robust credit metrics, solid profitability, and leading market position support its financial and business risk profile. We expect improving macroeconomic conditions in Argentina to benefit Vista’s operations. Additionally, its focus on expanding unconventional, lower-cost production and investing in infrastructure should further strengthen its credit profile and drive outperformance in its bonds over the next 9–12 months.

  • We find VISTAA (Caa1/BB-) 7.625% 2035 notes attractive. These bonds, yielding 7.6% for a 6.0-year duration, are preferred over the similar-duration YPF (Caa1/B-/CCC) 7.000% 2033 notes, which yield 7.4% for a 5.3-year duration. Additionally, Vista faces fewer sovereign and political risks than YPF and benefits from a unique growth opportunity, further enhancing its appeal.

• Vista’s 4Q24 results were mixed but largely in line with expectations. Adjusted EBITDA declined 11.9% sequentially to $273 million, coming in slightly below market estimates, primarily due to temporary trucking costs that should ease with new pipeline capacity in 2Q25. Despite this, the company maintained strong production and reserves growth, supported by solid execution in well tie-ins and midstream expansion. Financially, Vista remains well-positioned with low leverage and high margins, benefiting from its low-cost production model. Net oil revenues at export parity prices accounted for 73% of total revenues.

• From a credit perspective. The results reflected a higher debt balance, primarily driven by the $600 million issuance in December, along with increased interest payments and taxes, while LTM EBITDA declined 1.3%. However, liquidity improved significantly, strengthening the company’s ability to meet maturities and capital expenditures in 2025. Leverage metrics remained solid, despite gross leverage rising 0.5x to 1.4x as of December 2024, while net leverage remained stable sequentially at 0.7x. Notably, cash interest coverage declined 7.4x QoQ to 9.9x as of December 2024.

• Crude oil segment. Vista’s 4Q24 crude oil revenues grew 3.1% QoQ and 53.4% YoY to $435 million, representing 95% of total net revenues in 2024. The increase was driven by higher oil production, which rose 15.7% QoQ and 51.6% YoY to 73.5 kbpd, with shale oil production improving 16.5% QoQ to 70.3 kbpd. The average realized oil price declined 1.9% QoQ to $67.1/bbl, mainly due to a 3.2% drop in export prices to $66.6/bbl, while domestic prices remained stable at $67.8/bbl. Despite this, Vista continued to narrow its discount to Brent, achieving a $6.9/bbl (9.3%) discount, compared to $10.3/bbl (13.0%) in 3Q24 and $15.1/bbl (18.2%) in 4Q23.

• Natural gas segment. Vista’s natural gas revenues, which accounted for 3% of total net revenues in 2024, declined 24.8% QoQ but increased 26.7% YoY to $15.2 million in 4Q24. Natural gas production rose to 11.4 kbpd, reflecting growth of 27.4% QoQ and 51.9% YoY. The sequential decline was driven by a 7.1% drop in export prices to $6.5/MMBtu and a 45.7% decrease in domestic realized prices to $1.9/MMBtu. Vista’s realized natural gas prices underperformed Henry Hub prices, which averaged $3.0/MMBtu in 4Q24, up 33.0% QoQ and 1.4% YoY.

• On the macro front. Argentina faced significant macroeconomic challenges in 2023 and 2024, with the economy remaining in recession as GDP contracted in seven of the last eight quarters. However, market consensus anticipates a strong recovery, projecting growth of 3.3% in 1Q25, 6.8% in 2Q25, and 3.8% in 3Q25. Despite the downturn, unemployment has remained stable below 8% and is expected to stay in the low-7% range in the coming quarters. Inflation, a persistent challenge in recent years, has shown meaningful improvement, falling below 100% for the first time in two years. Market expectations indicate a continued decline, with quarterly inflation projected to fall below 30% by the end of 3Q25 and to around 27% by 2Q26.

• Debt and cash flow. Vista ended the quarter with total debt of $1.5 billion, up $524 million sequentially. Net debt rose $16 million QoQ to $780 million. Funds from operations totaled $187 million, down $96 million from $282 million in 3Q24.

• Reserves growth. P1 reserves grew 17.8% YoY in 2024, adding 56.7 MMboe to reach 375.2 MMboe. This resulted in a reserves replacement ratio of 323% and a reserve life of 14.7 years. The company’s reserves have grown at a 36.7% CAGR over the past six years, expanding 6.5x since 2018. Over the same period, crude oil reserves increased 9.4x to 322.6 MMbbl, while natural gas reserves rose 2.2x to 52.7 MMboe.