Pampa Energia(PAM) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Adjusted EBITDA for Q2 2023 was $222 million, down 13% YoY due to soft domestic demand, lower commodity prices, and Peso depreciation, but up 8% QoQ due to winter season and PPAs [3] - 87% of Q2 EBITDA was dollar-linked, with Power and E&P contributing almost equally, though oil and gas led due to petchem and TGS [4] - CapEx in Q2 increased by 59% YoY, driven by PEPE VI wind farm construction and E&P shale drilling, partially offset by PEPE IV commissioning [4] - Free cash flow in Q2 was $44 million, impacted by expansionary CapEx and higher debt service, but improved working capital due to better collection days [19] - Net cash flow for the quarter was $103 million, ending with a cash position of $872 million [20] Business Line Data and Key Metrics Power Generation - Adjusted EBITDA for power generation was $98 million in Q2, flat YoY but down 9% QoQ due to Peso depreciation, thermal outages, and lower demand, offset by wind farms and Barragan's PPA [5] - Q2 dispatch rose 17% YoY, driven by Barragan, new CCGT, and wind farms, but offset by lower dispatch at other plants due to reduced national power demand [6] - Availability for take-or-pay capacity payments reached 95%, below last year's 98%, but above the increased availability of 74% [7] - PEPE IV wind farm was fully commissioned in mid-June, adding 81 MW of green capacity, with PEPE VI 17% advanced and expected COD in Q3 and Q4 of next year [8][9] E&P (Exploration and Production) - Adjusted EBITDA for E&P was $97 million in Q2, down 4% YoY but up 58% QoQ, driven by gas seasonality [11] - Total production averaged 67,000 BOE per day, up 4% YoY, with crude oil representing 8% of production but 17% of segment revenue due to increased exports [12] - Gas sales grew 4% YoY, averaging 10.6 million cubic meters per day, driven by exports to Chile and higher demand from CAMMESA [14] - Lifting costs grew 50% YoY and 7% QoQ, but productivity from new wells slowed the growth rate to 11% YoY and 9% QoQ, with lifting costs at $6.5 per BOE [12] Petrochemicals - Petrochemical EBITDA was $10 million in Q2, down almost 50% YoY due to lower international prices and exports, but up 43% QoQ due to better prices and SBR demand [32] - Sales volume increased 17% YoY, driven by reforming products, with 41% of total sales volume exported [32] Market Data and Key Metrics - Gas exports to Chile were a significant driver, with Pampa authorized to export until April 2024, and potential for multi-year contracts in the future [52] - The Nestor Kirchner pipeline began operations, contributing to a record production of 16.5 million cubic meters per day, with 4.8 million cubic meters per day from Pampa [27][29] - Sierra Chata and El Mangrullo blocks showed strong performance, with Sierra Chata's daily production ranging from 750,000 to over 1 million cubic meters [17][18] Company Strategy and Industry Competition - The company is focusing on shale development, particularly in Vaca Muerta, with the acquisition of Rincon de Aranda aiming to replicate success in El Mangrullo [13] - Pampa is studying participation in a new tender for up to 3 GW of thermal capacity, prioritizing critical demand locations [10] - The company is diversifying its E&P segment, aiming to expand oil production through Rincon de Aranda, with a pilot plan starting in Q1 2024 and expected completion by end of 2025 [56] Management Commentary on Operating Environment and Future Outlook - Management highlighted the historic achievement of reaching record gas production levels, driven by the Nestor Kirchner pipeline and strong performance in Sierra Chata and El Mangrullo [27][29] - The company expects gas exports to Chile to remain a significant driver, with potential for multi-year contracts and increased regional demand [52] - Pampa is cautious about the macroeconomic environment in Argentina, particularly regarding the thermal power generation tender, due to uncertainties in the economic scenario [54] Other Important Information - The company raised $147 million net from local markets, contributing to a strong cash position and reduced leverage ratio [20][24] - Pampa is well-positioned for upcoming elections, with a strong balance sheet and diversified portfolio, minimizing potential risks from political uncertainty [80] Q&A Session Summary E&P Business - Q: What should be expected for Q3 gas volumes? A: Gas volumes are expected to remain strong, driven by exports to Chile and thermal generation demand, with record production levels achieved due to the Nestor Kirchner pipeline [26][27][29] Power Generation - Q: What caused the margin contraction in power generation? A: Margin contraction was due to Peso depreciation and lagging legacy capacity remuneration, partially offset by special prices for CCGTs [35][36][37] - Q: Will Pampa participate in the thermal power generation tender? A: The company is studying participation but remains cautious due to macroeconomic uncertainties [38][54] Financial Position - Q: Are there difficulties accessing dollars? A: Access to dollars has tightened, but critical imports for CapEx have not been significantly delayed [49] - Q: How was the $93 million bond repayment funded? A: The repayment was funded through $56 million of new debt, leveraging the 60-40 rule to access official FX [50] Rincon de Aranda Development - Q: What is the timeline and CapEx for Rincon de Aranda? A: The pilot plan will start in Q1 2024, with an estimated $200 million CapEx, aiming for plateau production of 20,000 barrels per day in a couple of years [42][56] Petrochemicals - Q: What drove the petrochemical EBITDA changes? A: Lower international prices and exports reduced EBITDA YoY, but better prices and SBR demand improved it QoQ [32] General Outlook - Q: How is Pampa preparing for upcoming elections? A: The company feels well-positioned with a strong balance sheet and diversified portfolio, minimizing risks from political uncertainty [80]