Pampa Energia(PAM) - 2022 Q3 - Quarterly Report

Unaudited Consolidated Condensed Interim Financial Statements Review Report on the Consolidated Condensed Interim Financial Statements Introduction The report reviews Pampa Energía S.A. and its subsidiaries' consolidated condensed interim financial statements for the nine and three-month periods ended September 30, 2022, including the statement of financial position, comprehensive income, changes in equity, cash flows, and selected notes - The review covers consolidated condensed interim financial statements of Pampa Energía S.A. and its subsidiaries for the nine and three-month periods ended September 30, 2022[2] - Balances and information for fiscal year 2021 and its interim periods are an integral part of these financial statements[3] Board's Responsibility The Board of Directors is responsible for preparing and presenting the financial statements in accordance with International Financial Reporting Standards (IFRS) and International Accounting Standard 34 (IAS 34) - The Board of Directors is responsible for preparing and presenting financial statements according to IFRS and IAS 34[4] Scope of Review The review was limited to procedures under International Standards on Review Engagements ISRE 2410, which is substantially less in scope than an audit, thus no audit opinion is expressed on the financial position, comprehensive income, or cash flows - The review scope was limited to ISRE 2410 procedures, which is less extensive than an audit, and therefore no audit opinion is expressed[5] Conclusion Based on the review, nothing suggests that the consolidated condensed interim financial statements were not prepared, in all material respects, in accordance with IAS 34 - The review found no material issues indicating non-compliance with IAS 34 in the financial statements[7] Report on Compliance with Current Regulations The report confirms that Pampa Energía S.A.'s financial statements are recorded correctly, comply with General Companies Law and CNV provisions, arise from properly kept accounting records, and the Summary of Activity has no observations. Additionally, accrued debt to the Argentine Integrated Social Security System was $306.9 million as of September 30, 2022, none of which was claimable - Financial statements are recorded and comply with General Companies Law and CNV regulations[9] - Debt to the Argentine Integrated Social Security System was $306.9 million as of September 30, 2022, with no claimable amounts[9] Glossary of Terms Definitions of Key Terms This section provides non-technical definitions for various terms used in the financial statements, including regulatory bodies (BCRA, CAMMESA, CNV, ENRE), financial instruments (ADR, CB), and company names (CIESAS, Citelec, Edenor, TGS, Transener, Refinor, etc.), to aid reader understanding - Glossary provides definitions for terms like ADR, BCRA, CAMMESA, CNV, Edenor, IFRS, NYSE, TGS, Transener, and US$[12][13] Unaudited Consolidated Condensed Interim Statement of Comprehensive Income Comprehensive Income for Nine-Month Periods For the nine-month period ended September 30, 2022, the company reported a significant increase in revenue and profit compared to the same period in 2021, driven by higher gross profit and other comprehensive income, despite increased selling and administrative expenses Comprehensive Income (Nine-Month Periods) | Metric | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :-------------------------------- | :----------------------- | :----------------------- | :----------- | | Revenue | 168,748 | 103,740 | +62.66% | | Cost of sales | (104,797) | (62,652) | +67.27% | | Gross profit | 63,951 | 41,088 | +55.64% | | Operating income | 61,408 | 44,956 | +36.59% | | Profit of the period | 42,762 | 19,345 | +120.02% | | Other comprehensive income | 99,356 | 37,513 | +164.85% | | Total comprehensive income | 142,118 | 56,858 | +149.95% | | Basic and diluted EPS (continuing operations) | 30.74 | 18.62 | +65.09% | | Total basic and diluted EPS | 30.74 | 15.98 | +92.36% | Comprehensive Income for Three-Month Periods For the three-month period ended September 30, 2022, the company also saw substantial growth in revenue and profit compared to the prior year, with a notable increase in other financial results contributing to the overall profit Comprehensive Income (Three-Month Periods) | Metric | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :-------------------------------- | :----------------------- | :----------------------- | :----------- | | Revenue | 69,225 | 42,529 | +62.77% | | Cost of sales | (43,538) | (27,309) | +59.41% | | Gross profit | 25,687 | 15,220 | +68.77% | | Operating income | 30,160 | 20,510 | +47.05% | | Profit of the period | 24,057 | 12,707 | +89.32% | | Other comprehensive income | 48,870 | 7,318 | +567.89% | | Total comprehensive income | 72,927 | 20,025 | +264.18% | Unaudited Consolidated Condensed Interim Statement of Financial Position Assets As of September 30, 2022, total assets significantly increased to $681,898 million from $396,653 million at December 31, 2021, primarily driven by substantial growth in property, plant and equipment, investments in associates and joint ventures, and financial assets Assets Overview | Asset Category | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Property, plant and equipment | 282,322 | 170,390 | +65.69% | | Intangible assets | 11,028 | 3,956 | +178.77% | | Investments in associates and joint ventures | 134,244 | 79,500 | +68.86% | | Total non-current assets | 486,398 | 281,011 | +73.19% | | Inventories | 24,802 | 15,888 | +56.10% | | Financial assets at fair value through profit and loss | 84,731 | 47,026 | +80.18% | | Trade and other receivables (current) | 67,816 | 40,892 | +65.84% | | Total current assets | 193,684 | 115,642 | +67.50% | | Total assets | 681,898 | 396,653 | +71.93% | Equity and Liabilities Total equity increased significantly to $323,881 million from $184,040 million, mainly due to higher voluntary reserves and other comprehensive income. Total liabilities also rose substantially to $358,017 million from $212,613 million, driven by increases in borrowings and income tax provisions Equity and Liabilities Overview | Category | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Equity attributable to owners of the company | 322,664 | 183,431 | +75.90% | | Total equity | 323,881 | 184,040 | +75.98% | | Provisions (non-current) | 21,065 | 14,444 | +45.84% | | Income tax and minimum notional income tax provision | 47,823 | 19,287 | +147.96% | | Borrowings (non-current) | 195,733 | 139,630 | +40.19% | | Total non-current liabilities | 278,502 | 177,506 | +56.89% | | Borrowings (current) | 41,788 | 8,165 | +411.78% | | Trade and other payables (current) | 26,956 | 18,561 | +45.23% | | Total current liabilities | 79,515 | 35,107 | +126.49% | | Total liabilities | 358,017 | 212,613 | +68.39% | Unaudited Consolidated Condensed Interim Statement of Changes in Equity Equity Changes for Nine-Month Period Ended September 30, 2022 The company's total equity significantly increased from $184,040 million at December 31, 2021, to $323,881 million at September 30, 2022, primarily driven by a substantial increase in voluntary reserve and other comprehensive income, alongside profit for the period Equity Components (09.30.2022) | Equity Component | 12.31.2021 (Millions ARS) | 09.30.2022 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Share capital | 1,382 | 1,380 | -0.14% | | Voluntary reserve | 54,528 | 99,274 | +82.06% | | Other comprehensive income | 51,432 | 93,540 | +81.88% | | Retained earnings | 44,454 | 99,376 | +123.56% | | Equity attributable to owners of the company | 183,431 | 322,664 | +75.90% | | Total equity | 184,040 | 323,881 | +75.98% | Equity Changes for Nine-Month Period Ended September 30, 2021 For the nine-month period ended September 30, 2021, total equity increased from $148,878 million at December 31, 2020, to $170,464 million, primarily due to profit for the period and other comprehensive income, despite a significant decrease from the sale of a subsidiary Equity Components (09.30.2021) | Equity Component | 12.31.2020 (Millions ARS) | 09.30.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | Total equity | 148,878 | 170,464 | | Profit for the nine-month period | N/A | 19,345 | | Other comprehensive income for the nine-month period | N/A | 37,513 | | Sale of subsidiary (Non-controlling interest) | N/A | (31,928) | Unaudited Consolidated Condensed Interim Statement of Cash Flows Cash Flows from Operating Activities Net cash generated by operating activities decreased to $50,724 million for the nine-month period ended September 30, 2022, from $55,957 million in the prior year, primarily due to a significant increase in changes in operating assets and liabilities, despite higher profit from continuing operations Cash Flows from Operating Activities | Metric | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Profit of the period from continuing operations | 42,762 | 26,474 | +61.52% | | Adjustments to reconcile net profit | 30,750 | 24,998 | +23.01% | | Changes in operating assets and liabilities | (22,788) | (6,566) | +247.05% | | Net cash generated by operating activities | 50,724 | 55,957 | -9.35% | Cash Flows from Investing Activities Net cash used in investing activities significantly increased to $(48,687) million for the nine-month period ended September 30, 2022, from $(25,066) million in the prior year, mainly due to higher payments for property, plant and equipment acquisitions and public securities Cash Flows from Investing Activities | Metric | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Payment for property, plant and equipment acquisitions | (38,018) | (13,119) | +189.79% | | Payment for intangible assets acquisitions | (3,312) | (359) | +822.56% | | Payment for public securities and shares, net | (16,874) | (5,251) | +221.35% | | Net cash used in investing activities | (48,687) | (25,066) | +94.24% | Cash Flows from Financing Activities Net cash used in financing activities decreased substantially to $(2,954) million for the nine-month period ended September 30, 2022, from $(30,395) million in the prior year, primarily due to a significant increase in proceeds from borrowings and a decrease in payment of borrowings Cash Flows from Financing Activities | Metric | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Proceeds from borrowings | 33,211 | 4,766 | +596.83% | | Payment of borrowings | (17,453) | (18,800) | -7.16% | | Payment of borrowings interests | (12,642) | (11,581) | +9.16% | | Net cash used in financing activities | (2,954) | (30,395) | -90.28% | Notes to the Unaudited Consolidated Condensed Interim Financial Statements Note 1: General Information This section provides an overview of Pampa Energía S.A.'s operations as a fully integrated power company in Argentina, detailing its segments (electricity generation, oil and gas, petrochemicals, and holding/others) and the volatile economic context, including high inflation, peso depreciation, and energy market dynamics General Information of the Company - Pampa Energía S.A. is a fully integrated power company in Argentina, operating in electricity, oil & gas, petrochemicals, and holding segments[29] - Electricity generation capacity is 4,970 MW (~12% of Argentina's total), with an additional 361 MW expansion underway[30] - Oil and gas production for the nine-month period ended September 30, 2022, was 9.9 million m3/day of natural gas and 5.2 thousand boe/day of oil[31] - Petrochemicals segment holds 92-99% domestic market share in styrene, synthetic rubber, and polystyrene[32] - The company has significant interests in electricity transmission (86% market share via Transener) and natural gas transportation (via TGS), and a 30.1% indirect interest in OCP (oil pipeline in Ecuador) and 28.5% direct interest in Refinor (refinery)[33] Economic Context - Argentina's cumulative inflation (IPC) reached 66.1% and the peso depreciated 43.4% against the U.S. dollar during the first nine months of 2022[35] - The Néstor Kirchner Gas Pipeline project is underway, aiming to increase transportation capacity by 24 million cubic meters of gas per day, with the first stage expected by June 2023[37] - CAMMESA experienced payment delays exceeding 90 days to generators and hydrocarbon producers by August 2022, affecting the electricity distribution company's payment chain[38] - A subsidies segmentation system for electricity and natural gas utility residential customers was established, aiming for gradual subsidy reduction for higher-income segments[38] Note 2: Regulatory Framework This section details significant regulatory changes impacting the company's operations across electricity generation, oil and gas, and transmission segments, as well as foreign exchange regulations. Key updates include increased spot generation remuneration, seasonal programming adjustments, new natural gas pricing, currency access systems for incremental production, and tightened foreign exchange controls by the BCRA Generation - Spot generation remuneration values increased by a cumulative 43% from June 2022, and the utilization factor application was abrogated[41] - Seasonal programming updates included increases in energy prices for general non-residential demand (36.6%) and WEM's residential demand (26.1%) from June 1, 2022[44] - A new MATER system was approved, allowing renewable energy sales to GUDI and distribution utility companies[49] - Pampa was assigned a 41 MW dispatch priority for the extension of PEPE III wind farm[52] Oil and Gas - Natural gas prices at the Transportation System Entry Point (PIST) were updated, reducing government subsidies but not impacting the company's collectible price[53] - New currency access systems (RADPIP, RADPIGN) were established to ease MLC access for incremental oil and natural gas production, but are not yet regulated[54][58] - Pampa was cleared to export 1,492 MMm3/d of gas to Chile on a firm basis for October 2022 – April 2023[59] Transmission - Transener and Transba received tariff increases of 67% and 69% respectively, effective February 1, 2022[60] - Transener is requesting further tariff updates from September 2022 due to economic conditions, with a public hearing scheduled for November 30, 2022[61][62] Regulations on Access to the MLC (Foreign Exchange Market) - BCRA extended prior authorization for MLC access for financial debt principal cancellation and refinancing plans until December 31, 2023[63] - New regulations introduced BCRA intervention in import monitoring (SIMI) and restrictions on CEDEAR holdings and foreign asset transactions for MLC access[64][65] - SIMI and SIMPES were replaced by SIRA and SIRASE, tightening import and foreign service payment regulations[66] Note 3: Basis of Preparation These unaudited consolidated condensed interim financial statements for the nine-month period ended September 30, 2022, were prepared in accordance with IAS 34, expressed in million pesos, and approved by the Board on November 7, 2022. The functional currency is US dollars, but presentation is in pesos as required by CNV. They are based on historical cost, modified by fair value measurement of financial assets, and should be read with the December 31, 2021 annual statements - Financial statements prepared under IAS 34, expressed in million pesos, and approved on November 7, 2022[68] - Functional currency is US dollars, but presented in pesos as per CNV requirements[69] - Prepared under historical cost convention, modified by fair value measurement of financial assets[70] - Unaudited, but management estimates all necessary adjustments are included; results may not be proportional to the full year[71] Note 4: Accounting Policies The accounting policies applied in these interim financial statements are consistent with those used in the consolidated financial statements for the fiscal year ended December 31, 2021. New accounting standards and amendments effective January 1, 2022 (IFRS 3, IAS 16, IAS 37, and Annual Improvements to IFRS Standards) have been adopted but had no impact on the company's results or financial position - Accounting policies are consistent with the prior fiscal year ended December 31, 2021[74] - New standards (IFRS 3, IAS 16, IAS 37, Annual Improvements) adopted as of January 1, 2022, had no impact on results or financial position[75] Note 5: Group Structure This section details changes in the company's group structure, including the sale of Edenor, the sale of a 28.5% interest in Refinor, and the acquisition of additional interests in Greenwind and Autotrol Renovables S.A. It also provides information on subsidiaries, associates, and joint ventures, and updates on specific investments and oil and gas participations Acquisition and Sale of Equity Interests - Results from the sale of Edenor's controlling stake (September 30, 2021) are disclosed under "Discontinued operations"[76][77][78] - Agreed to sell 28.5% interest in Refinor for US$5.7 million, recognizing an impairment loss of $1,242 million (US$11 million) before taxes[79][80] - Acquired an additional 50% interest in Greenwind for US$20.5 million, recognizing a $3,120.7 million (US$23.3 million) profit on the previous interest[82][83] - Greenwind acquisition contributed $606.7 million (US$4.2 million) in revenues and $126 million (US$1.2 million) in net earnings for the August 12 - September 30, 2022 period[86] - Acquired 100% of Autotrol Renovables S.A. (Wayra I Wind Farm project holder) for $7.3 million (US$50 thousand)[89] Interest in Subsidiaries, Associates and Joint Ventures Participation in Key Entities | Company | Main Activity | 09.30.2022 Direct/Indirect Participation % | 12.31.2021 Direct/Indirect Participation % | | :-------------------------------- | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Autotrol Renovable S.A. | Generation | 100.00% | - | | Greenwind | Generation | 100.00% | 50.00% | | Refinor | Refinery | 28.50% | 28.50% | | TGS | Gas transportation | 3.764% (direct) + 25.50% (indirect) | 3.764% (direct) + 25.50% (indirect) | | Citelec | Investment | 50.00% (direct) + 26.33% (indirect in Transener) | 50.00% (direct) + 26.33% (indirect in Transener) | Investment in Associates and Joint Ventures | Investment Category | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Total associates and joint ventures (non-current assets) | 134,244 | 79,500 | +68.86% | | Result from investments in associates and joint ventures | 13,610 | 8,131 | +67.38% | Evolution of Investments | Evolution of Investments | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | At the beginning of the year | 79,114 | 46,068 | | Share of profit | 14,852 | 8,131 | | Exchange differences on translation | 46,868 | 14,788 | | At the end of the period | 134,244 | 70,122 | Investment in CTB - CTB repaid US$72.4 million of its syndicated loan during the nine-month period, with a final US$2 million repaid post-closing[99][100] - CTB issued Class 6 CB for US$25 million (0% fixed rate, maturing May 2025) and Class 7 CB for $1,754 million (BADLAR + 2.98%, maturing November 2023)[101] - CTB issued Class 8 CB for $4,235 million (BADLAR + 1.00%, maturing February 2024)[102] - CTB's combined cycle project aims to increase installed capacity from 567 MW to 847 MW, with commissioning expected by end of December 2022[104][105] Oil and Gas Participations - A new investment schedule for the Sierra Chata block commits Pampa (45.55% interest) and Mobil Argentina S.A. to execute 14 horizontal wells by July 26, 2023[108] - Pampa transferred its interests in Venezuelan mixed companies to Integra Petróleo y Gas S.A., with collection contingent on change of control approval[109][110] Note 6: Risks This section addresses critical accounting estimates and judgments, particularly regarding impairment of non-financial assets, and financial risk management. Management continuously evaluates estimates based on past experiences and current circumstances. An impairment loss of $3,682 million (US$29.4 million) was recognized for the Rincón del Mangrullo block due to rescheduling of drilling activities and recategorization of reserves. No significant changes in financial risk management policies were noted Critical Accounting Estimates and Judgments - Management's estimates and judgments are continuously evaluated and consistent with 2021 annual financial statements[111][112][113] Impairment in the Value of Non-Financial Assets - Impairment loss of $3,682 million (US$29.4 million) recognized for the Rincón del Mangrullo block due to rescheduling of drilling and recategorization of 2.7 MMBoe reserves[115] Financial Risk Management - Company is subject to market risk (exchange rate, interest rate, price), credit risk, and liquidity risk[116] - No significant changes in risk management policies since last year[117] Note 7: Segment Information Pampa Energía S.A. manages its operations across five segments: Electricity Generation, Electricity Distribution (discontinued), Oil and Gas, Petrochemicals, and Holding and Other Business. The segment information is presented based on individual net results in U.S. dollars, with detailed consolidated profit and loss and financial position data provided for the nine-month periods ended September 30, 2022 and 2021 Business Segments Overview - Business segments include Electricity Generation, Electricity Distribution (discontinued), Oil and Gas, Petrochemicals, and Holding and Other Business[118][119][120][121][122][123] - Segment results reflect Greenwind consolidation from August 12, 2022[119] - Electricity Distribution segment (Edenor) was classified as discontinued operations as of September 30, 2021[120] Consolidated Profit and Loss Information (Nine-Month Period Ended September 30, 2022) Consolidated Profit and Loss (09.30.2022) | Metric (US$ Million) | Generation | Oil and Gas | Petrochemicals | Holding and Others | Consolidated | | :----------------------------------- | :--------- | :---------- | :------------- | :----------------- | :----------- | | Revenue - local market | 500 | 290 | 308 | 16 | 1,114 | | Revenue - foreign market | - | 112 | 155 | - | 267 | | Gross profit | 222 | 221 | 58 | 16 | 516 | | Operating income | 273 | 153 | 40 | 16 | 481 | | Profit (Loss) of the period | 201 | 53 | 38 | 55 | 346 | | Total Assets | 2,261 | 1,185 | 183 | 1,176 | 4,629 | | Total Liabilities | 826 | 1,262 | 145 | 372 | 2,430 | Consolidated Profit and Loss Information (Nine-Month Period Ended September 30, 2021) Consolidated Profit and Loss (09.30.2021) | Metric (US$ Million) | Generation | Distribution of energy | Oil and Gas | Petrochemicals | Holding and Others | Consolidated | | :----------------------------------- | :--------- | :--------------------- | :---------- | :------------- | :----------------- | :----------- | | Revenue - local market | 501 | - | 211 | 215 | 15 | 942 | | Revenue - foreign market | - | - | 29 | 131 | - | 160 | | Gross profit | 235 | - | 134 | 52 | 15 | 436 | | Operating income | 275 | - | 119 | 39 | 40 | 473 | | Profit (Loss) of the period | 189 | (75) | 27 | 24 | 35 | 200 | | Total Assets | 1,670 | - | 1,157 | 176 | 1,067 | 3,861 | | Total Liabilities | 525 | - | 1,324 | 166 | 264 | 2,070 | Note 8: Revenue Total revenue for the nine-month period ended September 30, 2022, significantly increased to $168,748 million from $103,740 million in the prior year. This growth was primarily driven by substantial increases across all segments, particularly petrochemicals, oil and gas, and electricity generation Revenue Breakdown | Revenue Category | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Generation sales subtotal | 60,837 | 46,988 | +29.47% | | Oil and gas sales subtotal | 49,277 | 22,792 | +116.20% | | Petrochemicals products sales | 56,712 | 32,535 | +74.31% | | Holding and others subtotal | 1,922 | 1,425 | +34.88% | | Total revenue | 168,748 | 103,740 | +62.66% | Note 9: Cost of Sales Total cost of sales for the nine-month period ended September 30, 2022, increased to $104,797 million from $62,652 million in the prior year, primarily due to higher purchases of inventories, energy and gas, increased salaries and social security charges, and significant property, plant and equipment depreciation Cost of Sales Breakdown | Cost Component | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Purchases of inventories, energy and gas | 47,236 | 28,722 | +64.46% | | Salaries and social security charges | 7,253 | 3,943 | +83.93% | | Property, plant and equipment depreciation | 18,261 | 13,157 | +38.79% | | Canons and royalties | 8,421 | 4,559 | +84.71% | | Total cost of sales | 104,797 | 62,652 | +67.27% | Note 10: Other Items of the Statement of Comprehensive Income This section details significant changes in selling expenses, administrative expenses, exploration expenses, other operating income and expenses, financial results, and income tax. Notable increases were seen in selling and administrative expenses, while other operating income benefited from the Argentine Natural Gas Production Promotion Plan. Financial costs increased, but other financial results showed a positive swing due to foreign currency exchange differences and fair value changes. Income tax expense decreased despite higher profit before tax, influenced by tax inflation adjustment effects Selling Expenses Selling Expenses Breakdown | Selling Expense Component | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Transportation and freights | 2,695 | 464 | +480.82% | | Taxes, rates and contributions | 1,308 | 770 | +69.87% | | Total selling expenses | 4,945 | 1,752 | +182.25% | Administrative Expenses Administrative Expenses Breakdown | Administrative Expense Component | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Salaries and social security charges | 4,493 | 2,200 | +104.23% | | Fees and compensation for services | 2,742 | 2,003 | +36.89% | | Compensation agreements | 1,578 | (33) | N/A | | Total administrative expenses | 12,389 | 6,301 | +96.62% | Exploration Expenses Exploration Expenses Breakdown | Exploration Expense Component | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Geological and geophysical expenses | 23 | 18 | +27.78% | | Decrease in unproductive wells | - | 32 | -100.00% | | Total exploration expenses | 23 | 50 | -54.00% | Other Operating Income and Expenses Other Operating Income and Expenses Breakdown | Other Operating Item | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Argentine Natural Gas Production Promotion Plan (Income) | 6,794 | 4,545 | +49.48% | | Commercial interests (Income) | 2,653 | 2,160 | +22.82% | | Total other operating income | 10,345 | 8,864 | +16.72% | | Provision for contingencies (Expenses) | (205) | (1,326) | -84.54% | | Provision for environmental remediation (Expenses) | - | (1,489) | -100.00% | | Readjustment of investment plan (Expenses) | (1,011) | - | N/A | | Total other operating expenses | (4,209) | (4,623) | -8.80% | Financial Results Financial Results Breakdown | Financial Item | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Financial interest (Income) | 110 | 33 | +233.33% | | Total financial income | 597 | 619 | -3.55% | | Financial interest (Costs) | (14,547) | (10,160) | +43.18% | | Total financial costs | (18,127) | (14,128) | +28.31% | | Foreign currency exchange difference, net (Other financial results) | 4,710 | 1,087 | +333.30% | | Changes in the fair value of financial instruments (Other financial results) | 1,969 | 1,741 | +13.10% | | Result from exchange of corporate bonds (Other financial results) | (1,941) | - | N/A | | Total other financial results | 4,108 | 2,813 | +46.04% | | Total financial results, net | (13,422) | (10,696) | +25.49% | Income Tax Income Tax Breakdown | Income Tax Component | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Current tax | 25,899 | 1,235 | +1997.00% | | Deferred tax | (18,559) | 6,533 | -384.26% | | Total income tax - Loss | 5,224 | 7,786 | -32.89% | | Profit before income tax | 47,986 | 34,260 | +40.07% | | Income tax at the statutory tax rate (35%) | 16,795 | 11,991 | +40.07% | | Effects of valuation of property, plant and equipment, intangible assets and financial assets | (52,802) | (18,541) | +184.79% | | Effect for tax inflation adjustment | 25,215 | 11,651 | +116.42% | Note 11: Non-Financial Assets and Liabilities This section details the composition and changes in non-financial assets and liabilities, including property, plant and equipment, intangible assets, deferred tax assets and liabilities, inventories, and provisions. Significant increases were observed in property, plant and equipment, and intangible assets, partly due to acquisitions and exchange differences. Deferred tax assets increased substantially, while provisions for contingencies and asset retirement obligations also rose Property, Plant and Equipment Property, Plant and Equipment (Original Values) | Property, Plant & Equipment (Original Values) | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | Equipment and machinery | 239,198 | 149,670 | | Wells | 142,499 | 89,091 | | Work in progress | 37,679 | 13,625 | | Total at 09.30.2022 | 497,572 | 311,688 | | Net book values at 09.30.2022 | 282,322 | 159,563 | | Net book values at 12.31.2021 | N/A | 170,390 | - Includes $791 million of financial costs capitalized in property, plant and equipment for the nine-month period ended September 30, 2022[138] Intangible Assets Intangible Assets (Original Values) | Intangible Asset (Original Values) | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | Intangible identified in acquisitions of companies | 5,602 | 717 | | Goodwill | 5,098 | 3,555 | | Total at 09.30.2022 | 11,951 | 4,530 | | Net book values at 09.30.2022 | 11,028 | 3,814 | | Net book values at 12.31.2021 | N/A | 3,956 | Deferred Tax Assets and Liabilities Deferred Tax Assets and Liabilities | Deferred Tax Component | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Deferred tax assets | 42,371 | 17,180 | +146.63% | | Deferred tax liabilities | (15,288) | (8,505) | +79.76% | | Deferred tax assets, net | 27,083 | 8,675 | +212.20% | Inventories Inventories Breakdown | Inventory Component | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Materials and spare parts | 14,394 | 8,972 | +60.43% | | In process and finished products | 9,863 | 6,118 | +61.22% | | Total inventories | 24,802 | 15,888 | +56.10% | Provisions Non-Current Provisions | Provision Component | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Contingencies (Non-Current) | 15,738 | 10,859 | +44.93% | | Asset retirement obligation and decommissioning of wind turbines (Non-Current) | 3,166 | 2,007 | +57.75% | | Environmental remediation (Non-Current) | 2,161 | 1,485 | +45.52% | | Total non-current provisions | 21,065 | 14,444 | +45.84% | Evolution of Provisions | Evolution of Provisions | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | At the beginning of the year | 10,887 (Contingencies) | 8,660 (Contingencies) | | Exchange differences on translation | 4,515 (Contingencies) | 1,456 (Contingencies) | | At the end of the period | 15,751 (Contingencies) | 10,264 (Contingencies) | - International arbitration claims with Petrobras Operación S.A. and Petrobras International Braspetro B.V. are ongoing[146] Income Tax and Minimum Notional Income Tax Provision Income Tax Provision | Income Tax Provision | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Income tax (Non-current) | 44,964 | 16,163 | +178.19% | | Minimum notional income tax (Non-current) | 2,859 | 3,124 | -8.50% | | Total non-current | 47,823 | 19,287 | +147.96% | - A provision is held for additional income tax liabilities due to inconsistencies in the tax inflation adjustment mechanism[148][149] Note 12: Financial Assets and Liabilities This section details the company's financial assets and liabilities, including significant increases in financial assets at amortized cost and fair value through profit and loss, trade and other receivables, and borrowings. Current borrowings saw a substantial increase, while the company also engaged in corporate bond issuances and an exchange offer. Fair value measurements for financial instruments are also provided Financial Assets at Amortized Cost Financial Assets at Amortized Cost | Financial Asset | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Term deposit (Non-current) | 14,813 | 10,311 | +43.66% | | Total non-current | 14,960 | 10,821 | +38.25% | | Documents to collect (Current) | 1,899 | 537 | +253.63% | Financial Assets at Fair Value Through Profit and Loss Financial Assets at Fair Value Through Profit and Loss | Financial Asset | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Government securities (Current) | 55,578 | 28,464 | +95.26% | | Shares (Current) | 21,399 | 12,363 | +73.09% | | Total current | 84,731 | 47,026 | +80.18% | | Shares (Non-current) | 4,299 | 2,998 | +43.40% | Trade and Other Receivables Trade and Other Receivables | Receivable Category | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | CAMMESA | 19,699 | 9,180 | +114.59% | | Receivables from oil and gas sales | 17,458 | 7,120 | +145.20% | | Receivables from petrochemicals sales | 10,246 | 7,280 | +40.74% | | Argentine Natural Gas Production Promotion Plan | 6,879 | 1,479 | +365.11% | | Total current | 67,816 | 40,892 | +65.84% | Impairment of Financial Assets | Impairment of Financial Assets | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | At the beginning of the year | 963 | 1,352 | | Impairment | 100 | 91 | | Reversal of unused amounts | (50) | (402) | | At the end of the period | 1,051 | 1,101 | Cash and Cash Equivalents Cash and Cash Equivalents | Cash & Equivalents Component | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Investment funds | 11,773 | 8,649 | +36.12% | | Total | 14,259 | 11,283 | +26.37% | Borrowings Borrowings Breakdown | Borrowing Category | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Corporate bonds (Non-current) | 178,186 | 133,662 | +33.32% | | Financial borrowings (Non-current) | 17,547 | 5,968 | +193.99% | | Total non-current | 195,733 | 139,630 | +40.19% | | Bank overdrafts (Current) | 10,049 | 1,156 | +769.30% | | Corporate bonds (Current) | 24,345 | 3,976 | +512.35% | | Total current | 41,788 | 8,165 | +411.78% | | Total borrowings | 237,521 | 147,795 | +60.71% | Evolution of Consolidated Loans | Evolution of Consolidated Loans | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | At the beginning of the year | 147,795 | 135,805 | | Proceeds from borrowings | 33,211 | 4,766 | | Payment of borrowings | (17,453) | (18,800) | | Exchange differences on translation | 67,016 | 22,311 | | At the end of the period | 237,521 | 140,605 | - Issued Class 8 CB for $3,107 million (Badlar rate + 2%, 18-month maturity), the first green bond to finance PEPE III wind farm expansion[158][159] - Issued Class 11 CB for $12,690 million (BADLAR rate + 0%, maturing January 2024) and reopened it for an additional $8,963.9 million[160][161] - Completed an exchange offer for Series T CBs, resulting in a $1,941 million (US$14 million) loss disclosed under "Other financial results"[162][163][164][165] - Took on new short-term financing with domestic financial entities totaling $8,663.2 million, net of cancellations[167] Trade and Other Payables Trade and Other Payables | Payable Category | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | Change | | :----------------------------------- | :----------------------- | :----------------------- | :------- | | Suppliers (Current) | 20,332 | 15,807 | +28.63% | | Related parties (Current) | 3,140 | 1,524 | +106.04% | | Total current | 26,956 | 18,561 | +45.23% | | Compensation agreements (Non-current) | 944 | 379 | +149.08% | | Finance leases liability (Non-current) | 1,478 | 954 | +54.93% | Fair Value of Financial Instruments Financial Instrument Assets at Fair Value | Financial Instrument (Assets) | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | Government securities | 55,578 | 28,464 | | Shares | 25,698 | 15,361 | | Investment funds (Cash & Equivalents) | 11,773 | 8,649 | | Derivative financial instruments | 177 | 16 | | Total assets at fair value | 106,378 | 61,736 | - Fair value of derivative financial instruments is calculated from market price variations[170] - Fair value of shares (Level 3) is determined using the income-based approach (net present value of expected future cash flows, mainly dividends)[170] Note 13: Equity Components This section details changes in share capital, including the suspension of Program 11 and approval of Program 12 for treasury share acquisitions, and a capital stock reduction by canceling 2.8 million shares. It also explains the calculation of basic and diluted earnings per share, noting no significant dilutive shares as of September 30, 2022 Share Capital - Capital stock as of September 30, 2022, is $1,384 million, including $4 million of treasury shares[171] - Program 11 for treasury share acquisition was suspended, and Program 12 (max US$30 million) was approved[172][173] - Acquired 0.9 million ADRs for US$18.2 million during the nine-month period[175] - Capital stock reduced by canceling 2.8 million shares, registered on September 14, 2022[176] Earning per Share Earnings Per Share | EPS Metric | 09.30.2022 | 09.30.2021 | Change (YoY) | | :----------------------------------- | :--------- | :--------- | :----------- | | Basic and diluted earnings per share from continuing operations | 30.74 | 18.62 | +65.09% | | Total basic and diluted earnings per share | 30.74 | 15.98 | +92.36% | - No significant potential dilutive shares, so basic and diluted earnings per share are equal[179] Note 14: Statement of Cash Flows' Complementary Information This section provides complementary information for the statement of cash flows, detailing adjustments to reconcile net profit to cash flows from operating activities and changes in operating assets and liabilities. It also highlights significant non-cash transactions, such as the acquisition of property, plant and equipment through increased trade payables and capitalized borrowing costs Adjustments to Reconcile Net Profit to Cash Flows from Operating Activities Adjustments to Reconcile Net Profit | Adjustment Item | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Income tax | 5,224 | 7,786 | -32.89% | | Accrued interest | 14,392 | 10,928 | +31.70% | | Depreciations and amortizations | 19,204 | 13,879 | +38.37% | | Share of profit of joint ventures and associates | (13,610) | (8,131) | +67.38% | | Impairment of property, plant and equipment, intangible assets and inventories | 4,260 | 172 | +2376.74% | | Adjustments to reconcile net profit to cash flows from operating activities | 30,750 | 24,998 | +23.01% | Changes in Operating Assets and Liabilities Changes in Operating Assets and Liabilities | Change Item | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | Change (YoY) | | :----------------------------------- | :----------------------- | :----------------------- | :----------- | | Increase in trade receivables and other receivables | (23,810) | (2,844) | +737.20% | | Increase in inventories | (2,481) | (2,863) | -13.20% | | Changes in operating assets and liabilities | (22,788) | (6,566) | +247.05% | Significant Non-Cash Transactions - Acquisition of property, plant and equipment through an increase in trade payables amounted to $(5,519) million[182] - Borrowing costs capitalized in property, plant and equipment amounted to $(791) million[182] Note 15: Contingent Liabilities and Assets This section outlines updates on the company's contingent liabilities and assets. Labor claims related to the "Compensating Fund" are ongoing, with some appeals dismissed and one adverse judgment received. Environmental claims include a proceeding for alleged damages near a petrochemical plant and another for collective environmental damage in Mar del Plata. Administrative claims involve a complaint against the Federal Government for owed amounts related to gas prices and a contractual breach. A significant contingent asset is an arbitration award against Petroecuador, which was partially upheld, though Petroecuador filed an extraordinary protection proceeding Labor Claim - Compensation Fund - Federal extraordinary appeal regarding plan underfunding was disallowed; petition in error filed[185] - Appeals Chamber upheld judgments dismissing complaints by non-covered former employees seeking plan inclusion[185] - Adverse judgment received regarding the ineffectiveness of the IPC index to maintain "constant value" of plan benefits[185] Environmental Claims - Ongoing proceeding for alleged environmental damages near Puerto General San Martin petrochemical plant[185] - Ongoing proceeding for alleged collective environmental damage in Mar del Plata, with an agreement reached with three co-defendants[185] Administrative Claims - Complaint filed against the Federal Government for owed amounts related to gas prices under PEN Executive Order No. 1,053/18, following dismissal of an amparo[188] - Administrative litigation complaint against the Federal Government for contractual breach during January-March 2016 is ongoing[188] Civil and Commercial Claims - Arbitration award against Petroecuador partially upheld in favor of Pampa Bloque 18, despite Petroecuador filing an extraordinary protection proceeding[188] Note 16: Related Parties' Balances and Transactions This section details balances and transactions with related parties, including trade and other receivables and payables, as well as sales, purchases, fees, and other operating income/expenses. Significant balances include trade receivables from TGS and trade payables to SACDE. Operations include substantial sales of goods and services to Refinor and TGS, and purchases of goods and services from SACDE and TGS Balances with Related Parties Balances with Related Parties | Related Party | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | TGS (Trade receivables - Current) | 798 | 611 | | TGS (Other receivables - Non Current) | 2,797 | 2,394 | | SACDE (Trade payables - Current) | 1,939 | 1,001 | | TGS (Trade payables - Current) | 1,166 | 311 | Operations with Related Parties Operations with Related Parties | Operation Type | 09.30.2022 (Millions ARS) | 09.30.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | Sales of goods and services | 6,188 | 3,559 | | Purchases of goods and services | (14,221) | (4,594) | | Dividends received | 854 | 1,962 | - Purchases of goods and services include $8,201 million for infrastructure works contracted to SACDE[191] Note 17: Assets and Liabilities in Currencies Other Than Pesos As of September 30, 2022, the company had a net liability position of $(129,735) million in currencies other than pesos, primarily US dollars, compared to $(88,942) million at December 31, 2021. This was driven by significant US dollar-denominated borrowings and provisions, partially offset by US dollar-denominated financial assets and receivables Assets and Liabilities in Other Currencies | Category | 09.30.2022 (Millions ARS) | 12.31.2021 (Millions ARS) | | :----------------------------------- | :----------------------- | :----------------------- | | Total assets in other currencies | 109,083 | 84,186 | | Total liabilities in other currencies | 238,818 | 173,128 | | Net Position Liability | (129,735) | (88,942) | - The net liability position in other currencies is primarily driven by US dollar-denominated borrowings and provisions[194] Note 18: Termination of Hydroelectric Concessions The Secretary of Energy (SE) created a team to evaluate the status of hydroelectric concessions under national jurisdiction, including HIDISA, HINISA (expiring 2024), and HPPL (expiring 2029). A status report for HIDISA and HINISA is due within two years, and IEASA is tasked with the technical audit of power generation equipment - SE Resolution No. 130/22 created a team to evaluate national hydroelectric concessions, including HIDISA, HINISA (expiring 2024), and HPPL (expiring 2029)[197][199] - A status report for HIDISA and HINISA concessions is due within two years[199] - IEASA is entrusted with the technical audit of power generation equipment[200] Note 19: Documentation Safekeeping In compliance with CNV General Resolution No. 629/14, the company has stored non-sensitive work papers and information corresponding to non-statute-barred periods in data warehouses managed by Administración de Archivos S.A. (AdeA) and Iron Mountain Argentina S.A. A list of stored documentation is available at the company headquarters - Company stores non-sensitive work papers and information in compliance with CNV General Resolution No. 629/14[201] Note 20: Subsequent Events This section details the "2023-2028 Plan for Ensuring and Boosting Federal Hydrocarbon Production," which amends the GasAr Plan. Key guidelines include extending the term until December 31, 2028, defining injection commitments and priorities, setting firm export quotas for natural gas and LNG, and establishing verification for incremental activity plans - Executive Order No. 730/22 amends the GasAr Plan, establishing a new "2023-2028 Plan for Ensuring and Boosting Federal Hydrocarbon Production"[202] - The plan extends until December 31, 2028, and aims to consolidate a new 70 MMm3/d flat block and develop demand for incremental volumes[203][204] - It establishes injection priority based on chronological order and competitive price, and sets firm export quotas for natural gas and LNG once domestic supply is met[204][205] - Provisional payment percentage for calculated compensation is increased from 75% to 85%[205]