Vista eyes upping drilling, completion activity in Argentina's Vaca Muerta

Vista Energy, the third-biggest oil producer in Argentina, is considering stepping up drilling and completion activity in the Vaca Muerta shale play this year to take advantage of high crude prices that have boosted its earnings and cash reserves, CEO Miguel Galuccio said April 28.

"We are currently evaluating additional activity in our high-return, short-cycle shale oil projects for the second semester," Galuccio said in a conference call with investors, adding that a decision will be made as soon as the middle of this year.

The focus of this potential new activity will be on its blocks in Vaca Muerta's oil window, which are driving its production and export growth.

The Mexico City-based company increased its total oil and natural gas production 29% to 43,900 boe/d in the first quarter of this year from 34,100 boe/d in the year-earlier quarter, led by a 35% surge in oil output to 35,600 b/d from 26,400 b/d over the same period, while gas rose 9% to 1.24 million cu m/d from 1.14 million, according to a company presentation.

There are several drivers of this potential activity, as well as the growth in crude production and exports.

The first is the high price of Brent, the international reference price followed in Argentina. Brent has shot up about 64% over the past year to $105/b, while hikes in domestic pump prices have pushed up domestic crude prices, which are kept down by government price controls, 41% to $64/b over the same period.

Vista took advantage of the higher Brent price to export 1 million barrels in the first quarter of this year, and now plans to increase that to 1.5 million barrels in the second quarter and sustain that level per quarter through the end of the year, Galuccio said.

He added that the company is selling the sweet light crude from Vaca Muerta, called Medanito, at $1/b discount to Brent.

"All the movement in prices is positive," he said.

Spare pipeline capacity

The second driver of Vista's export and production growth forecast is that there is 10% to 15% spare capacity in the 265,000 b/d pipeline that takes crude from Vaca Muerta to Bahia Blanca, a port on the Atlantic coast, Galuccio said.

The pipeline operator, Oldelval, plans to add another 15,000-20,000 b/d of capacity to the line by the end of the year before building a second pipeline to double the transport capacity out of Vaca Muerta in 2024, with the first stage of that new capacity to come on line in 2022, Galuccio said.

"If those plans go ahead as planned, we should be OK to continue exporting what we plan to export," he said.

Galuccio said the company is sticking with its forecast of increasing average oil and gas production to between 46,000 boe/d and 47,000 boe/d this year, up 20% from 38,845 boe/d in 2021. The company is investing $400 million this year to make this happen.

The executive did not say if the potential added activity could increase these targets, saying that current plans call for the tie-in of 24 wells this year.

Even so, Galuccio said that the tie-in of its first two wells in Bajada del Palo Este, a block where it is investing $51.9 million in a five-well pilot program, "showed robust production levels" at average peak production of 2,400 boe/d per well.

He said the results prove the continuity of the Vaca Muerta play into that block from the adjacent Bajada del Palo Oeste, which is the source of most of its oil production.

Vista said in December that it plans to invest $2.3 billion over the next five years to double its oil and gas production to 80,000 boe/d, allowing it to export 60% of its oil production in 2026.