Pampa Energia(PAM) - 2022 Q2 - Quarterly Report

Financial Statements Consolidated Statement of Comprehensive Income For the six-month period ended June 30, 2022, the company reported a significant increase in revenue to $99,523 million from $61,211 million in the prior-year period. Profit for the period from continuing operations rose to $18,705 million, compared to $13,767 million in 2021. Total comprehensive income for the period nearly doubled to $69,191 million, driven by higher profit and substantial positive exchange differences on translation Key Income Statement Figures (Six-Month Period) | Metric | 06.30.2022 ($M) | 06.30.2021 ($M) | Change | | :--- | :--- | :--- | :--- | | Revenue | 99,523 | 61,211 | +62.6% | | Gross Profit | 38,264 | 25,868 | +47.9% | | Operating Income | 31,248 | 24,446 | +27.8% | | Profit of the period from continuing operations | 18,705 | 13,767 | +35.9% | | Profit of the period | 18,705 | 6,638 | +181.8% | | Total comprehensive income of the period | 69,191 | 36,833 | +87.9% | Earnings Per Share (Six-Month Period) | Metric | 06.30.2022 | 06.30.2021 | | :--- | :--- | :--- | | Basic and diluted earnings per share from continuing operations | 13.37 | 9.45 | | Basic and diluted loss per share from discontinued operations | - | (2.61) | | Total basic and diluted earnings per share | 13.37 | 6.84 | Consolidated Statement of Financial Position As of June 30, 2022, total assets increased to $529,835 million from $396,653 million at year-end 2021, primarily driven by growth in property, plant and equipment, and investments in associates. Total liabilities also grew to $277,914 million from $212,613 million, mainly due to increased borrowings. Consequently, total equity rose to $251,921 million Key Balance Sheet Figures | Metric | 06.30.2022 ($M) | 12.31.2021 ($M) | Change | | :--- | :--- | :--- | :--- | | Total Assets | 529,835 | 396,653 | +33.6% | | Total Non-Current Assets | 375,999 | 281,011 | +33.8% | | Total Current Assets | 152,292 | 115,642 | +31.7% | | Total Liabilities | 277,914 | 212,613 | +30.7% | | Total Non-Current Liabilities | 224,737 | 177,506 | +26.6% | | Total Current Liabilities | 53,177 | 35,107 | +51.5% | | Total Equity | 251,921 | 184,040 | +36.9% | Consolidated Statement of Changes in Equity Total equity increased from $184,040 million at the end of 2021 to $251,921 million as of June 30, 2022. The growth was primarily driven by the profit for the six-month period of $18,705 million and other comprehensive income of $50,486 million. This was partially offset by treasury share acquisitions amounting to $1,171 million - The main drivers for the increase in equity during the first six months of 2022 were the profit for the period ($18,469 million attributable to owners) and other comprehensive income ($50,337 million attributable to owners)[26] - The company acquired treasury shares for a cost of $1,171 million during the period[26] Consolidated Statement of Cash Flows For the six-month period ended June 30, 2022, net cash generated by operating activities was $25,178 million, a decrease from $33,163 million in the prior year. Net cash used in investing activities increased significantly to $21,246 million, driven by higher payments for property, plant, and equipment. Net cash used in financing activities decreased to $4,252 million. Overall, cash and cash equivalents increased slightly to $13,172 million at the end of the period Cash Flow Summary (Six-Month Period) | Metric | 06.30.2022 ($M) | 06.30.2021 ($M) | | :--- | :--- | :--- | | Net cash generated by operating activities | 25,178 | 33,163 | | Net cash used in investing activities | (21,246) | (9,896) | | Net cash used in financing activities | (4,252) | (19,265) | | (Decrease) Increase in cash and cash equivalents | (320) | 4,002 | | Cash and cash equivalents at the end of the period | 13,172 | 11,946 | Notes to the Financial Statements Note 1: General Information Pampa Energía is a fully integrated power company in Argentina, with significant operations in electricity generation, oil and gas exploration and production, petrochemicals, and holding interests in electricity transmission and gas transportation. The company operates in a volatile Argentine economic context characterized by high inflation (36.2% in H1 2022), currency depreciation (21.9% in H1 2022), and exchange restrictions. International events, such as the conflict in Ukraine, have also increased energy price volatility - The company is a major player in Argentina's energy sector with an installed generation capacity of 4,970 MW, representing about 12% of the country's total[31] - In the oil and gas segment, production for H1 2022 reached 9.5 million m3/day of natural gas and 5.1 thousand boe/day of oil[32] - The company operates in a challenging domestic economic environment with cumulative inflation of 36.2% and a 21.9% peso depreciation against the US dollar in the first six months of 2022[36] Note 2: Regulatory Framework The regulatory landscape saw several key developments in H1 2022. For electricity generation, remuneration for the spot market was increased by a cumulative 43% from June 2022. In oil and gas, the government established currency access systems (RADPIP and RADPIGN) to ease foreign exchange access for companies with incremental production, though this was not yet regulated. For transmission, subsidiaries Transener and Transba received tariff increases of 67% and 69% respectively, effective February 2022. Foreign exchange controls (MLC access) remained stringent and were extended - Generation: SE Resolution No. 238/22 provided a cumulative 43% increase in spot generation remuneration from June 2022[43] - Oil and Gas: PEN Executive Order No. 277/22 established systems to ease access to the Foreign Exchange Market (MLC) for beneficiaries with incremental oil and gas production, but it has not yet been regulated[51][55] - Transmission: Subsidiaries Transener and Transba received significant remuneration increases of 67% and 69% respectively, effective from February 1, 2022, compared to August 2019 levels[56] - Foreign Exchange: Regulations requiring BCRA's prior authorization for certain foreign currency transactions and debt refinancing plans were extended until December 31, 2022[57][58] Note 5: Group Structure The company's structure underwent changes, with the results from the sale of its controlling stake in Edenor in 2021 classified as discontinued operations. The company also accepted an offer to sell its 28.5% stake in Refinor, classifying it as an asset held for sale. An impairment loss of $1,242 million was recognized on this investment before its reclassification. The company also transferred its interests in Venezuelan mixed companies, with the consideration being contingent. Key investments in associates and joint ventures like CIESA, Citelec, and CTB continue to be significant contributors to results - The company accepted an offer to sell its 28.5% stake in Refinor and has classified this interest as 'assets held for sale'[74] - An impairment loss of $1,242 million (US$ 11 million) was recognized on the Refinor investment prior to its classification as held for sale[83] - On May 6, 2022, the company transferred all rights and obligations for its interests in mixed companies in Venezuela. The consideration is contingent upon future payments received by the assignee[92] Share of Profit from Associates and Joint Ventures (H1 2022) | Entity | Share of Profit ($M) | | :--- | :--- | | Total Joint Ventures | 7,785 | | CIESA | 3,672 | | CTB | 3,657 | | Citelec | 419 | | Total Associates | (924) | | Total | 6,861 | Note 6: Risks The company's management makes critical accounting estimates, particularly regarding the impairment of non-financial assets. Due to a strategic shift to focus on unconventional gas reserves, the company rescheduled activities at the Rincón del Mangrullo block. This led to a re-evaluation of the asset's recoverable amount, resulting in the recognition of an impairment loss of $3,682 million (US$ 29.4 million) as of June 30, 2022. Financial risk management policies remain unchanged from the previous year - The company recognized an impairment loss of $3,682 million (US$ 29.4 million) on its Rincón del Mangrullo block assets[98] - The impairment was triggered by a strategic decision to reschedule future drilling and workover activities to focus investments on unconventional gas reserves, leading to a recategorization of 2.7 MMBoe of reserves to contingent resources[98] Note 7: Segment Information For the first six months of 2022, all operating segments showed positive performance. The Generation segment was the largest contributor to operating income with US$166 million, followed by Oil and Gas at US$68 million. Petrochemicals and Holding/Others also contributed positively. The Oil and Gas segment saw the largest increase in capital expenditures during the period Segment Performance (Six-Month Period Ended June 30, 2022) | Segment | Revenue (US$M) | Operating Income (US$M) | Profit of the Period (US$M) | | :--- | :--- | :--- | :--- | | Generation | 331 | 166 | 81 | | Oil and Gas | 247 | 68 | 48 | | Petrochemicals | 284 | 23 | 19 | | Holding and others | 12 | 13 | 20 | | Total Consolidated | 874 | 269 | 167 | Increases in PPE and Intangible Assets (H1 2022) | Segment | Amount (US$M) | | :--- | :--- | | Oil and gas | 148 | | Holding and others | 31 | | Generation | 30 | | Petrochemicals | 2 | | Total | 211 | Note 12: Financial Assets and Liabilities Total borrowings increased to $183,792 million as of June 30, 2022, from $147,795 million at year-end 2021. During the period, the company issued its first green bond (Class 8 CB) for $3,107 million to finance the expansion of the PEPE III wind farm. Post-period, the company issued Class 11 CBs and launched an exchange offer for its Series T CBs due in 2023, successfully exchanging approximately 81.4% of the outstanding principal for new Class 9 CBs and cash - On January 18, 2022, the company issued its first green bond (Class 8 CB) for $3,107 million, with proceeds allocated to the expansion of the PEPE III wind farm[139][140] - The company successfully launched an exchange offer for its 2023 Series T CBs, with an 81.4% participation rate. This resulted in the issuance of US$292.8 million in new Class 9 CBs due 2026 and a cash payment of US$122.1 million[142][143][144] Borrowings Breakdown | Category | 06.30.2022 ($M) | 12.31.2021 ($M) | | :--- | :--- | :--- | | Non-Current | 175,046 | 139,630 | | Corporate bonds | 166,301 | 133,662 | | Current | 8,746 | 8,165 | | Total | 183,792 | 147,795 | Note 13: Equity Components As of June 30, 2022, the company's capital stock was $1,384 million. The company continued its share repurchase activities, acquiring 0.4 million ADRs for US$8 million during H1 2022 under its programs. A new US$30 million repurchase program (Program 12) was approved in May 2022. Basic and diluted earnings per share from continuing operations for the six-month period was $13.37, up from $9.45 in the prior year - The Board approved a new share repurchase program (Program 12) for up to US$30 million on May 11, 2022[151] - During H1 2022, the company acquired 0.4 million ADRs for US$8 million. An additional 0.4 million ADRs were acquired after the period end for US$8.3 million[151] Earnings Per Share Calculation (Six-Month Period) | Metric | 06.30.2022 | 06.30.2021 | | :--- | :--- | :--- | | Earning for continuing operations attributable to equity holders ($M) | 18,469 | 13,499 | | Weighted average amount of outstanding shares (M) | 1,381 | 1,428 | | Basic and diluted earnings per share from continued operations | 13.37 | 9.45 | Note 17: Assets and Liabilities in Currencies Other Than Pesos The company holds significant assets and liabilities denominated in currencies other than the Argentine Peso, primarily the U.S. dollar. As of June 30, 2022, total assets in foreign currencies amounted to $99,874 million, while total liabilities were $213,449 million. This resulted in a net liability position of $113,575 million, exposing the company to foreign exchange risk Foreign Currency Position as of June 30, 2022 | Category | Amount ($M) | | :--- | :--- | | Total Assets in Foreign Currencies | 99,874 | | Total Liabilities in Foreign Currencies | 213,449 | | Net Position Liability | (113,575) | Note 18: Termination of Hydroelectric Concessions With several hydroelectric concessions approaching expiration (HIDISA and HINISA in 2024, HPPL in 2029), the Secretary of Energy created a special team in March 2022 to evaluate the status of these concessions. This team, which includes representatives from various government and regulatory bodies, is tasked with submitting a status report within two years for the concessions expiring in 2024. This process introduces uncertainty regarding the future of these assets - The Argentine Secretary of Energy has created a team to evaluate the status of hydroelectric concessions under national jurisdiction, including the company's HIDISA, HINISA, and HPPL, as their expiration dates approach[171] - The concessions for HIDISA and HINISA expire in 2024, and a status report is due within two years from March 2022[173] Note 20: Subsequent Events After the reporting period, on August 8, 2022, the company reopened its Class 11 Corporate Bonds, issuing an additional $8,963.9 million. These bonds accrue interest at a variable BADLAR rate and mature on January 15, 2024 - On August 8, 2022, the company issued an additional $8,963.9 million of its Class 11 CBs, which mature in January 2024[175]