Vista Oil & Gas: Oil Price Increase, Production Increase, And Large Partners

Summary

With many investors looking for oil and gas plays to profit from recent increases in the oil price, Vista Oil & Gas will likely receive more and more attention.

The company expects to report a total of 24 shale oil wells, 20% production increase, 2022 EBITDA of $550-$575 million, and capital expenditures of $375-$400 million.

Under my best case scenario, Vista’s fair price should be close to $19, which is much higher than the current price mark.

IvelinRadkov/iStock via Getty Images Vista ( VIST ) is expected to benefit from the current crude oil price. Management is also reporting double digit production growth and significant increase in the amount of proven reserves. In my view, if management signs more agreements with large oil and gas operators in Latin America, FCF will likely trend north. There are some risks because Vista operates in certain emerging markets. However, management increased its guidance for the 2022 EBIT, and market estimates are also quite beneficial. Putting everything together, Vista is a buy. Vista Oil & Gas

With many investors looking for oil and gas plays to profit from recent increases in the oil price, Vista Oil & Gas will likely receive more and more attention.

For the year 2021, Vista reported 21% increase in the developed reserves, and 56% increase in the proved undeveloped reserves. With these business growth figures, in my view, most analysts will likely increase their FCF expectations for the near future: Quarterly Report For The Period Ended December 31, 2021 The increase in production is also quite significant. Vista reported 46% increase in the total boe/day, and 66% increase in crude oil production. The change in the petroleum industry outlook is really transforming Vista’s operating performance: Quarterly Report For The Period Ended December 31, 2021 With these levels of production acceleration, the expansion of both EBITDA and free cash flow makes a bit more sense. Notice that quarterly adjusted EBITDA increased three times, and the EBITDA margin increased from 45% to more than 59%: Presentation To Investors The quarterly FCF also increased from -$28 million in Q4 2020 to more than $62 million in Q4 2021. If the acceleration in the FCF continues in 2022, we could expect a significant increase in the valuation of Vista: Presentation To Investors The guidance for the year 2022 is optimistic. The company expects to report a total of 24 shale oil wells, 20% production increase, 2022 EBITDA of $550-$575 million, and capital expenditures of $375-$400 million: Presentation To Investors Beneficial Market Estimates Even Before The Recent Increase In The Oil Price

Considering that most analysts produced their estimates before the recent increase in the oil price, market estimates seem quite beneficial. Most investors expect sales growth of 33% and 11% in 2022 and 2023 respectively.

Taking into account the numbers for 2022 and 2023 as well as sales growth from 2018, the median sales growth stands at 25%. Yes, the company is an oil and gas play offering sales growth of a growth stock.

The company’s EBIT margin is also quite significant. Market estimates include a median operating margin of 24% and an average margin of 19%. Finally, investment analysts believe that the net income of 2022 and 2023 will be positive and equal to $182 million and $234 million respectively: marketscreener.com With respect to the FCF margin, investors are expecting 9% in 2022 and 2023. These figures appear quite substantial if we take into account that the capex/sales ratio is close to 40%-35%. The median capex/sales ratio is equal to 43%. Take a look at the numbers delivered by other analysts. My numbers are not that far from those of other analysts: marketscreener.com More Agreements With Large Companies Like Trafigura Should Make Vista Worth $19 Per Share

In my view, Vista will receive a lot of attention and financing if management continues to sign agreements with large multinationals like Trafigura or Shell ( SHEL ). Under this case scenario, Vista will sign more agreements like the farmout agreement signed in 2021, or the sale of interests to Shell: On June 28, 2021, the Company, through its subsidiary Vista Oil & Gas Argentina S.A.U. entered into a farmout agreement with Trafigura, whereby it undertook to develop, initially, 5 pads made up of 4 wells each in Bajada del Palo Oeste area. Source: Quarterly Report For The Period Ended December 31, 2021 The Company, through its subsidiary Vista Argentina, signed an assignment of rights agreement with Shell Argentina S.A., a subsidiary of Royal Dutch Shell […]

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