President Javier Milei's bold economic plan for Argentina centers, in no small part, around deregulating the country's oil and gas sector. The president recently appointed former central bank president Federico Sturzenegger as Minister of Deregulation and State Transformation, with the directive to help steer more private investment toward Argentina's energy sector. These measures are expected to result in a $10 billion trade surplus in Argentina's oil and gas trade by the end of this decade, according to S&P Global estimates.
For investors seeking exposure to Argentina's energy market, here's a closer look at one stock with a major stake in the country's key Vaca Muerta oil shale that recently earned a bullish rating from Bank of America.
About Vista Energy Stock
Founded in 2016, Vista Energy (VIST) was formed through the merger of two Mexican energy companies, Petrobal and Carrizalejo. Based out of Mexico City, the company primarily focuses on the exploration and production of natural gas (NGV24) and crude oil (CLV24) within Mexico, Argentina, Brazil, and Colombia. The company's market cap currently stands at $5.01 billion.
The U.S.-traded shares of VIST stock have been on a tear in 2024 so far, soaring 66.8% on a YTD basis.
Over the last three years, VIST has gained more than 1,000%, and the stock is fresh off a new all-time high of $52.47. However, priced at 10.17 times forward adjusted earnings, VIST is reasonably valued compared to its energy sector peers.
Vista's Q2 Production Update
In its Q2 earnings report, released on July 11, VIST reported growth in both revenue and earnings, but fell short of Wall Street's estimates. Revenues for the quarter came in at $396.72 million, up 65.6% from the previous year, with oil sales rising by 69.1% to $374.69 million. Adjusted EPS rose by 21.3% on a YoY basis to $0.74. However, analysts were looking for adjusted EPS of $1.14 on revenue of $382.35 million.
Vista said its oil production shot up by 46% from the previous year to 57,204 boe/d, while natural gas production grew by 17% over the same period to 1.26 MMm3/d. However, natural gas liquids (NGLs) production declined to 139 boe/d from 553 boe/d in the year-ago period. Also, average realized crude oil prices rose by 12% to $71.8/bbl in the quarter.
Vista Energy is actively enhancing its production efforts, having drilled and completed 25 wells so far in 2024. Its main oil pipeline in Argentina, Oldelval, is set to double its capacity, aligning with the oil boom in Vaca Muerta. This expansion is expected to be completed by the end of the year.
Vaca Muerta, one of the world's largest unconventional hydrocarbon reserves, has the potential to significantly boost Argentina's oil output in the years ahead. Vista holds six blocks in Vaca Muerta, covering 205,000 acres licensed until 2050. The company currently operates 108 producing wells, with the potential to develop up to 900 wells, likely extending beyond 2030.
Since 2018, Vista has increased its reserves sixfold, with a production life of 13 years as of 2024. The company has 308.4 million barrels of oil equivalent (MMboe) of proved reserves in Vaca Muerta and an additional 10.1 MMboe in Mexico's Macuspana basin.
Vista Energy anticipates raising its production from 68,000 barrels of oil equivalent per day (boe/d) to 70,000 boe/d in 2024, keeping it on track to meet its long-term production goal of 100,000 boe/d by 2026.
To ensure smooth operations in the turbulent Argentine market, Vista has hired an experienced management team with expertise in the local dynamics of the oil and gas sector. The executive team is mostly made up of former executives at YPF Sociedad Anónima (YPF), the state-controlled oil company - including CEO Miguel Galuccio, who served as CEO of YPF from 2012-2016.
Strong Balance Sheet
Vista's balance sheet reflects a strong fundamental base upon which the company can grow its operations for years to come. The company ended the latest quarter with a cash balance of $328.24 million, up from $213.25 million at the start of the year. The cash balance was higher than its borrowings of $205.08 million.
While oil exploration and production is a capital-intensive process, Vista's cash generation capabilities are impressive. In Q2 2024, the company generated net cash from operating activities of $281.15 million, a considerable jump from the previous year's figure of $89.28 million.
What's the Analyst Forecast for VIST Stock?
Analysts consider VIST stock a “Moderate Buy” overall, with the number of “Strong Buy” ratings doubling over the past month. Out of 6 analysts in coverage, 4 have a “Strong Buy” rating and 2 have a “Hold.”
Most recently, Bank of America started coverage on VIST last week with a “Buy” rating and a $70 price target, with analyst Leonardo Marcondes writing that "the combination of existing high-quality assets in Vaca Muerta with management's expertise makes Vista's (VIST) organic growth extremely attractive."
The mean price target of $59 for VIST implies expected upside of 20.3% from current levels, while BofA's new Street-high target of $70 represents a premium of 42.7%.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
