Miguel Galuccio was about to turn one year after his departure from YPF, which was officialized in March 2016. Time in which he remained distant, far away, which does not necessarily mean inactive.
He was in contact with those who had been his closest collaborators during his nearly four years of management in the reestablished oil company. Juan Garoby, with whom he studied the career of Petroleum Engineering at the ITBA, had been its director of Non-Conventional, first, and of Drilling and Terminations, afterwards. Alejandro Cherñacov, your manager of Investor Relations.
And Pablo Vera Pinto, director of Business Development, and one of his key bishops in negotiations and international agreements with first class companies such as Chevron, Dow and Petronas. He was the only one who was still in YPF. At least, when the call was made. The last day of Vera Pinto in the company was on February 22. A few days later, in Recoleta, the meeting was held.
Blank paper, one Friday night. With Ocean’s style movie climate 11. The pencil strokes. “What can we do and think about which countries?” The slogan. Colombia can be, suggested Cherñacov. After his departure from YPF, he was CFO of Jagercorp Energy, a small exploration and production company listed on the Canadian Stock Exchange, and he had seen that from the land of Juan Valdez could come a lot more than coffee. Vera Pinto had her eyes on Mexico. And Garoby, in Ecuador, Peru and Brazil.
The sketch was assembled in boxes. “It’s an opportunity” and “It’s not an opportunity”, the axes. At that point in the night, the paper was no longer a sketch. It was a project. And it was underway. Unstoppable, uncontainable.
Like everything pushed by the enthusiasm of a startup. Half a year later, on August 10, Vista Oil & Gas raised US $ 650 million in its exit to the Mexico Stock Exchange, the third highest in the Aztec site since 2015. And the second largest SPAC (Special Purpose Acquisition Company) of history.
He raised $ 250 million more than the bankers originally planned. Galuccio’s stellar return to the stage. “The new trick of the Wizard”, titled a newspaper.
Mexico Beautiful and beloved
The paper was no longer blank. The sheet had, clearly, defined -between marks and deletions- where there were opportunities and where not. The next step was to organize the capital structure. Galuccio opened his contact list. In particular, between investment funds.
The team came to the offices of Riverstone, a private equity fund focused on the energy industry. On a global scale, Riverstone accumulated $ 35,000 million committed in 130 transactions.
Between Riverstone, Galuccio and his team came the idea of forming an SPAC, a type of society that had been successful in the US market, but that was not yet authorized in the Mexican Stock Exchange. Thus, the challenge was to create a new asset class in that country. The proposal was well received by Mexican authorities, interested in channeling capital into the promising hydrocarbons market, open to private investors after the rupture of Pemex’s state-owned monopoly of more than 70 years.
The very night of the opening to the Stock Exchange, Galuccio went on the air on Radio Fórmula, from that country. “For resources and after the new Hydrocarbons Law, Mexico is, gravitationally, one of the most important markets in Latin America,” he said.
The Frackers
In Argentina, I would not do something so small. It was Galuccio’s response that Friday night in Recoleta, when, on paper, the name of his country was written. For now, Mexico was the obligatory market: not only because it would be the place where the IPO would be made, but also because of the process of opening up to private capital that its oil industry was experiencing. Argentina, on the other hand, was the future.
“In the presentation of the IPO, there were four clear ideas. Four countries in which we wanted to focus. And we were clear that, if it was Argentina, it had to be with a considerable minimum scale, the same as for any other country, “explains Vera Pinto.
It is a November morning and receives Magazine TRAMA with Chernacov in the brand new offices of the company, on the 12th floor of the tower Al Rio, Vicente López. A wide, bright environment, one of the most modern in the Buenos Aires marketcorporate and that, according to Vera Pinto, served to show the people who joined after the acquisitions (Pelsa and Apco) that the Vista project “is serious”.
“The place where we saw the opportunity was Vaca Muerta. And what we proposed was that Vaca Muerta was at a turning point, “he says. «We could finish (or not) in Argentina. But what was quite clear was that, if we came to the country, it would most likely go to Vaca Muerta, “he adds.
In the prospectus of his IPO, Vista said that the main deposit of Argentina had, at that time, acquisition costs per acre of US $ 6,000 to US $ 7,000, against more than US $ 25,000 of the US Permian.
“We knew the value that the deposit had,” he stresses. He quotes a book: The Frackers, from the American journalist Gregory Zuckerman, about the phenomenon of shale in his country. «I read it in mid-2016.
He was one of my biggest promoters at the pool. There are stories of shale titans that, at some point, were pick and shovel. One is a trucking company that saw wells giving and giving. And when I talked to the technicians (and we have very good at Vaca Muerta), I saw that it was better than in the United States. That, at some point, it would work , he is excited.
The magnetism of the site could tempt to concentrate all efforts on it and lose sight of the objective with which the company was born: to be an independent oil company of Latin America. “It’s a constant tension and it’s good that it’s like that,” answers Vera Pinto. «But Vaca Muerta is a possible play. It is not wrong to concentrate there.
But, also, it exposes to risks: if, in five years, the problem of evacuation is not solved, it will not be possible to produce all the potential, “he concedes. It is not the only open flank. «It is exposed to the volatility of Argentina. This year was a very clear example. Less than 12 months ago, debt could be financed at 7% or less. Today, double. Or, directly, there is no financing, “he says.
“Any project in Mexico is much more fundable than in Argentina. Even in the current political situation, “Chernacov intervenes. “It’s another type of market, much deeper, bigger. Colombia, in macro terms, is very well regarded and approved by investors. The challenge, there, is to find the opportunity, with a logical and upside price of development , distinguishes. “What happens in Argentina is that you see good opportunities, and Vaca Muerta is clearly one of them. The challenge is how to finance them, “he adds.
Chernacov describes Vista’s investor as someone who does not despair of country risk movements, and who looks at the long term. «Our investor is dedicated to oil, he defines. However, he admits that he receives consultations due to the uncertainty of the country context. But it retakes its typification. «Vista’s shareholders are value investor. They understand history, what we are trying to achieve. They trust us. And they know what they ask. They do not call every time they see something in a newspaper. They expect quarterly results, analyze them and make some specific consultations .
“They are investors who also know a lot about shale,” he continues. They have money to invest, not in Argentina, but in energy .
That is, the fate of the project is played in the field. There, the figure of Garoby gains dimension. «It’s our Messi. Life is going in the wells, “say their partners.
At a glance
A particular characteristic of ours is the speed to decide. When I worked at YPF with Miguel, what impressed me most was how short the team was, “says Vera Pinto. That same spirit is what they moved to Vista. “Somebody starts an argument with Miguel or us and, in less than 24 hours, we can make a decision,” he describes.
There are no memos. Neither, chains of mails or organizational charts, they say. «80% of the time of a VP or a senior executive in a company is to draw, redraw and negotiate ravioli. We set out to get out of that logic. We want to discuss projects and how we shape the teams that carry them out, “says Vera Pinto. “We want this culture to prevail. That people understand that their prize will be given to achieve a project and not to see what raviol occupies, “he adds.
We work in a very compact way. There are no silos. Sometimes, you can fall for that. But we have the alarms mounted, “he says.
A premise of Galuccio (Chairman and CEO) is that there are not more than two people between top management and the field workers. «It shows in our organization: it is very flat, says Vera Pinto.
The operation is led by its founding partners, Garoby (COO), Vera Pinto (CFO), Chernacov (Investor Relations) and Gaston Remy (CEO of Argentina), who are reported by a team of 20 managers. We do not want to lose the spiritistrepreneur. We all do everything, pick and shovel. There is no pool of secretaries. We are hands-on, “he adds.
This year, Vista bought Petrolera Entre Lomas (Pelsa) from Pampa, and Apco, from Pluspetrol, operations that, together, totaled some $ 800 million. “To close it, we had taken a bridge loan, of U.S. $ 260 million, that had been given to us by the same banks that organized the IPO,” Cherñacov explains.
That bridge-loan granted by Citibank, Credit Suisse and Morgan Stanley was key to finalize the acquisition, underline in Vista. “It was a year, with a relatively high rate and that became more expensive as the quarters went by. “When we closed the deal, we said: ‘We have to get this out of us already’,” they say.
We moved quickly. The banks joined us in record time. We had a lot of support from Citibank, Santander, Galicia and Itaú. They believed in the team and the opportunity. They saw the benefit of extending the loan, in better conditions, “he adds. On July 20, Vista signed a new five-year loan of US $ 300 million. The loan provided additional liquidity, and improved the maturity profile of its debt.
The main asset
“We seek to capitalize on the 25 years of experience in the oil and gas business of our president and CEO, Mr. Miguel Galuccio,” reads the prospectus of the issuance of shares of Vista Oil & Gas. Among the risks, investors are warned that the ability to successfully complete their business plan “will depend completely” on the efforts of their key personnel, “particularly, Mr. Galuccio.” If he leaves the company, he warns, “there will be a negative impact” on his future.
Although the top management – and Galuccio himself – try to lower its profile, the fact is that the former CEO of YPF is much more than an inevitable reference for Vista. Clearly, your leader is one of your main assets. Someone whose mark is marked in the project, without needing to be in the day to day.
Miguel is someone who manages to be very close without being physically next to him. It does not have an office here. But I talk to him, if not every day, every other day. Sometimes, up to three times a day: 10 minutes, one hour or five seconds per call , describes Vera Pinto. The same goes for the rest of management.
Galuccio’s is not a distant figure, it comes and goes. When it is, it is very intense, it is defined. He describes sessions at home, in which he reviews and solves topics for eight hours, non-stop. “And he’s very agile in technology: he always answers the phone or answers on WhatsApp,” they say. It demands reciprocity.
When it comes, get in, do a dive for a week or 10 days. That is helping a lot because he is saying very clear things that he is processing and maturing. It is disruptive when it needs to be and orders us. But, on the other hand, if we had it every day here, maybe an overlap would be generated. That’s why I say he made an intelligent decision. “