Q3 2021 Pampa Energia SA Earnings Call

Sales and EBITDA were dollar leak.

The adjusted EBITDA amount.

Our longer too.

$62 million, 27% year on year.

Due to the.

The same reasons detailed before upset by higher EMP at peak.

Quarter, EBITDA increased by 9%, mainly due to the seasonality and higher pet Chem volumes sub.

Offset by increased raw material costs in Petcare and outages.

Yep loose power units.

Thanks to the strong investments and production growth oil and gas is balancing back activity a share for the first time in three years.

Capex almost doubled year on year.

In Q3, but.

Remains similar quarter over quarter, mainly because of the planned us amaranth expansion offset by the commissioning of <unk> second CGT back in July 2020.

Moving on.

To power generation as seen on slide seven we posted an adjusted EBITDA of $26 million in Q3 slightly lower year on year, mainly due to the outages that we said before Andy and I'll speak to that and that's a 10 year PPA.

Offset by higher B to b cells, and higher thermal dispatch, especially at Loma.

In the legacy units the 29% best thought they'd receive last February was diluted by deflation the.

We have a relationship.

On quarter EBITDA increased marginally due to the better b to b cells and seasonality.

Set by the retracted spot price update.

As part of that really is 59% of our capacity, but only represented 24% of our power generation EBITDA, which will keep shrinking unless recognition of prior adjustments keep up with devaluation.

This essential unit to the grid continue being on the base it will be challenging to maintain them properly.

However, recently the government approved a price improvement for thermal legacy units, especially those with low load factor.

That improvement is temporary payable between September and May I don't think we feel it should keep the exports made by the company.

Moving to pampas operating figures power generation in Q3 was 14% up year on year, surpassing nationwide demand.

We recorded highest UGG dispatch of Loma de Novo number once the CGT due to the better gas supply plus increased.

Thermal dispatch with alternative fuels.

First by the plus units of the gist and low water input.

P GP pump before.

Quarter on quarter, if Yahoo, rose, 18%, driven by seasonality, but upsets, but the formation of the chip.

The power generation business model relies on capacity payments. So the most important is to keep the availability as highest possible, especially for PPA.

The ability of it.

Pretty good rates in Q3 reached 95% slightly lower year on year, mainly due to me we left it in a shop loose units.

Partial outage.

Regarding our expansions the closing to CTG and so now that <unk> is more than 60% of that we continue working on the same doorway cooling tower boilers Andi burgers.

Also we are finishing the civil works and commissioning the high voltage field.

Around 17 Congress people work in two shifts.

With all the coffee protocols in place to achieve the skewed by the second quarter of 2022.

Moving to the EMP, we posted an adjusted EBITDA.

Of $104 million in Q3, a remarkable growth year on year and quarter over quarter, driven by planned Goss winter season, and demand recovery offset by more royalties and resumption of activity.

Our total lifting cost increased 36% year on year and 26% quarter on quarter.

It's playing by higher production output.

However, lifting costs per unit stood at $6 per Boe.

11% more than last year, but similar to Q2.

This is mainly thanks to among Lucius high productivity.

Our global production increased 23% year on year, and 20% quarter over quarter.

Again, mainly driven by Congress Windsor, and the local demand recovery to pre pandemic levels.

As a result, we average more than 57000 barrels of oil equivalent per day.

92% you discussed.

On the other side, which represented 22% of the segment's revenue in the quarter volumes sold increased by 40% year on year, and 31% quarter on quarter to $5 9000 barrels per day.

Mainly explained by the local reman upset by lower exports.

An oil price driven by the rent was 50% increase compare to the last year, but we may see in a quarter over quarter.

Regarding gas is showing the slide 10.

Our volumes sold average.

326 million cubic feet per day.

Order roughly 25% up.

Year on year on quarter on quarter.

For the reasons explained it before.

Going back to our production performance as I say before we reach an all time high record in September again, among crucial let the quarter's growth contributing close to 70% of or overall gas.

Block is.

Wholly owned and operated by US with outstanding productivity boosted by the increased treatment capacity.

Our average price.

After the quarter was $4 $4 per million Btu, 76% up year on year and four yet at 14%.

Increased quarter on quarter.

Again explained by the planned gas from their peak.

The b to B and spot prices out of this GSA also reflected the seasonality be similar to <unk>.

<unk> levels.

As you can see why below the year to these cells were are more diversified.

Similar to the country's breakdown gosh retailers are also part of the tongue Goss and they have priorities during the winter increasing their share to 49%.

Also we are growing as you can see our b to reshape.

Regarding our young P operation Sunday, we strengthened our investment by recording $62 million.

During the quarter, while it was marginal last year. This quarter was real eight Tiger wells, mostly completed 16 wells of which 15 are tight and one is shell from Sierra Chata.

Look that reached the maximum production rate of 28 million cubic feet per day.

Tell me one of the most productive gas wells Buckeye want.

Also as I said in a previous call. We are expanding the gas treatment plant is among russo reaching above 310 million cubic feet per day by the first half of next year.

Meanwhile, we drilled 14 wells and completed 10 automotive a shallow.

Okay.

Moving to the petrochemical business with posted an adjusted EBITDA of $7 million in the Q3 similar year on year.

Higher raw material costs, and playing us impact compensated for the significant rise in commodity prices and industrial demand recovery.

Quarter on quarter EBITDA half.

Driven by higher raw material costs offset by increased sales of reforming product.

The year on year and quarter on quarter total sales volume increase was significant especially reforming product.

In addition, roughly 50% of the quarter sales were exporting.

Although cash and debt.

We are raising our capex to accommodate planned gas commitments, we must highlight another quarter with solid cash flow position at generation.

Driven by the outstanding operating performance from our core businesses and improve margins in the upstream.

During Q3.

The free cash flow resulted in roughly an.

$8 million.

In comparison last year's quarter.

Represented $68 million also due to the higher working capital.

Notice that this quarter working capital and others were positive.

Most of these plays by improved collections from cancer are shown in slide 14.

Delays have.

223 days compared to the maximum of 46 days achieved in Q1 of this year.

In addition, we repaid a net.

$60 million of principal debt and bought back shares for $5 million.

So in total we generated $44 million of net cash achieving 507, <unk> and $7 million of cash position by the end of the quarter.

Moving onto the slide 14. This is my shows consolidated figures.

We and our affiliates ownership, but let's focus only on the restricted group.

That reflects the bomb perimeters.

Yeah.

As we began the call our balance sheet, he's just tregoning despite a conflict.

We continued to reduce the cross dock, having cancer most of the peso maturities during the quarter for $65 million posting $1.5 million.

As of September 2021.

Almost 100%.

The debt is denominated in dollars.

From the 96% Jim.

The dollar debt bears an average interest rate of seven 8%.

The Irish life remain similar for seven years.

I said before cash increased 10% quarter on quarter to fly her in 7 million $2 million.

Therefore, net debt decreased by $125 million to 917.

A remarkable reduction just in a single quarter.

Given the lower debt and higher EBITDA, the net <unk> ratio improved from one seven to $1 four times quarter on quarter.

In the next 12 months, the company faces less than $20 million of maturity.

Therefore, we expect to keep strengthening our balance sheet.

As a result S&P.

Our standalone waiting to be minus.

Yeah.

So this concludes our presentation.

Before.

We would like to open the Q&A session Mike.

<unk>.

Yes.

Yeah.

Yeah. Thank you for thank you for waiting.

The floor is now open for questions. If you have a question. Please send us through some chop, we don't read in Amsterdam in the order receipt.

Also please make sure your name and company are are they spoke maybe slate changed have you see it for the audience. Please note what are your hand once your question. He sponsors should any party coupons need as you saw senator Chuck message or raise your hand lease hold while we poll for questions.

Our first question is from Frank Mcgann.

From Bank of America.

How much additional upside do you see in gas over the next few years to what extent could this be held only limited by transportation capacity.

Hi, Frank.

Thank you for.

Joining me nothing in Nicole.

We've exceeded that.

Yeah.

Then.

Transportation capacity.

Going out for menu innovation will be.

Yeah.

Most or completely fall next next winter.

So.

We have been saying we talked about this in the previous conference call.

It is crucial for the country to increase.

Its infrastructure and stress flotation capacity.

They seem to through wouldn't affect us a little sense.

Throughout the country.

Hum.

The government is fortunately working on that.

Perfect we hope.

It will be.

Launching soon but.

We have no.

Meredith from win.

Will that happen, but definitely we got country.

In order to.

Continue to increasingly gas production of milk in innovation.

And there's a need to build.

The new infrastructure.

Infrastructure and.

This makes a lot of sense for the country.

This new pipeline.

The country will be replacing.

Expensive imports that we do.

Gas from Bolivia that cost.

<unk> doubled from.

The local producers producers are.

Are receiving.

We will import less LNG.

Which cost.

At least four or five times.

The more expensive and while we are also important.

During the winter.

This low oil and fuel load.

Meeting for all these imports and.

Dollars that are scary scars.

In the country.

So.

Regarding the additional upside for for a company like us.

And given this new pipeline.

It's constructed.

It could come from exports to Chile, and now that the transportation capacity out of the innovation has continued to fall.

It makes sense too.

Allow it.

For exports.

To Chile.

Yeah.

One of the.

Okay.

Not only our own on the summer months, but through.

I think that that will be the next step up.

Growth for the industry.

So I'm going to do numbers, because we don't have committed on the wrong.

Our growth.

On winter of 2020 to be some myths. This winter will be roughly about 30%. So next winter we will be.

Delivering 11 million cubic meters per day, starting in May.

Bsw's, an average of $8 5 million cubic meters. So.

Desperate data we deliver this winter.

We have been.

Up.

Started studied at seven a.

Indeed in September.

Nine five.

Unfortunately.

Or originally we were thinking that our production was going to slow down during the summer months.

Thanks to.

The export from electricity and other countries go into to Brazil.

Yeah.

We are able to maintain the production. So we currently are.

Selling the same level that we.

Gas that we sold during the winter.

We're keeping a plateau of nine points.

Mm 395.

Neither.

Gas per day, and we think this is inflation.

We'll stay throughout the summer and broadly into next May win.

Sure.

Hmm.

Our production will jump again too.

Millions.

Okay.

Thank you Ruth our next question comes from Afghanistan mandate from mono.

His first question is about our results were a grade on the oil and gas side, but lifting costs have been increasing as of late.

$6 per barrel a survival. This is almost $1 per barrel versus one year ago is this related to the production ramp up for have crossed surcharges related to global supply chain, how should we think about this going forward.

There is a second question, but lets answer the first one.

Hi, as again, how are you so basically yes.

The important increase nor proportionate.

There is more fixed cost and also we are this is the first year is upon us.

And last year, we did nothing it was truly a.

No activity compared to <unk> and then there's a lot of increases in salaries and wages. So in real terms in dollars and increased.

Second question.

And the second question is very related to the first one also are you proceeding cost increases some breaks on drilling equipment that you should be using next year or are you already contracted for that.

Yeah.

We are already contracted on we've seen a slight increase.

In cost, but nothing out of normal.

Yeah.

Thank you. Thank you <unk>. Our next question comes from and if I'm right on that from now it's very related to the first question on our Frac.

Could you give us an update of what you're seeing in the gas market and bottlenecks to further develop their segment and timing of next lung gossaert wrong or further uncertainties that you can explore to continue increasing volumes or should we view that 11 million three meters per day of Windsor at steady state for the near future.

Could you share development costs, and what IRR cost are you using for any new projects.

Well.

So it's assess are we should be viewing it depends if we get.

The new pipeline do you mean pipeline that the Congress pushing.

To make it happen.

We could see by 2020 free I always say 2024, given the timing of a building.

Ah Ah better on high there.

Winter production.

<unk> for you see you saw in the presentation, we expect to get 11 million by 2022, but in order to increase from that we are still link depends on the expansion and the main pipeline.

What do you think about that without about the bottlenecks.

Yeah.

Okay.

The reason why we were so aggressive in this surround.

Because we are too.

One is that we understand that.

Until the.

The new pipeline is working.

The gas market from the reorganization will be very much constrained.

Why we wanted to be.

I agree with you.

Sure.

The second reason why we were very aggressive because of the quality.

Of our portfolio.

And the reason why we are so competitive.

We have.

I'm not comfortable giving.

But.

And tell you that.

That's a comfort level.

Yeah, our expectation is that we have but our portfolio.

We are still able to continue developing shale.

Dave you guys reserve instead of shale gas most of our.

Colleagues in the industry in order to.

Hmm.

To maintain production or two gross or two slightly growth as production has been.

Going after.

Or developing shale.

Gus why we have the four journals.

Of having within our portfolio of steel.

Good reserves or digest.

Yeah.

Which are favored.

Favorable in economic terms to be serviced.

Mr V shape.

That's why we have we are being slow to Richard's so going forward. After the growth that we were having in 2022.

Yeah.

And until new.

Our new infrastructure is built.

The only jobs to continue growing as I said is through exports.

To Chile to increasing our market share of exports to Chile.

That is the situation.

Thank you. Our next question comes from Konstantinos <unk> from point that Gordon.

Morning, and congratulations on the result, thank you could you share your expectations on the anytime passed by the maturity of the 180 megawatts PPA of Loma de La <unk> Interbody.

Hi, Konstantinos how are you so theres two ppas that mature this year, one very small.

In July of this year and then the big one.

No matter, what the combined pro forma basis, it's a $60 million.

For Europe decreased so they will be doing around $15 million per year.

D a.

As we speak.

I am in spot energy.

Thank you <unk>. Our next question comes from you.

<unk> from Morgan Stanley.

I wanted to understand the current appetite.

Or to invest in new M&A any empty if the company could take advantage of the current macro environment to expanded shale acreage at a more attractive valuation even in shale gas exploration is not a priority at this point.

David can you repeat the question.

Sure.

Yeah.

Sorry, I wanted to understand the current appetite to advising you M&A opportunity and M. P. If the company could take advantage of the current macro environment to expand its shale acreage at a more attractive valuation even.

Any shale gas exploration is not a priority at this point.

I would say that we are very comfortable with.

Gas reserve on the portfolio.

On natural gas that we have and we don't need to increase.

Those reserves.

It could be different on the on the oil side.

We.

As always been.

<unk> continues to be we are.

A ways.

Searching for opportunities nothing has nothing concrete has.

Has materialized.

But are we still looking for opportunities on the oil oil side.

Yeah.

Oil oil reserves.

In Argentina.

Thank you girls.

Darius long question about M&A from Michael Shannon.

They're related to to the last one on.

What opportunities to invest or acquire gas related assets given the improving outlook is the probability of the new pipeline increasing.

Based on support from money transfer from an interest of the IMF.

Yeah.

The part of the them on air with Yonker, we were not.

Doesn't make sense.

For us.

To increase our portfolio of <unk>.

Natural gas.

Yeah.

Not even if the.

The pipeline is there.

And we can significantly increase our production we have.

And we have.

The reserves of excellent quality.

Probably the most.

<unk>.

Competitive on the open innovation.

So we don't see a need to increase our portfolio there.

Regarding EMEA and then if I have no clue, what the IMF.

Thinks about this but I would say that the.

So obviously.

It will cover the.

The <unk>.

Macro of Argentina.

Okay.

The cost of building this pipeline will be repaid.

Okay.

Immediately early in a year to.

Two years, obviously, it will depend on what.

Uh huh.

What price.

The.

With regards sold in Argentina, and what what is the import parity that we will be replacing but im sure.

Alright.

Within.

Correct.

Pricing.

Gets repaid.

Very very quickly so.

Although I cannot tell you for sure.

I would say that.

Okay.

So anyone that analyzes the situation, it's it's an obvious.

<unk> needs to be struggling.

Yeah.

Thank you our next.

Question on there was another question from <unk> Fernandez from Bala.

The second question is related to the cash position with a 2022 cash flow also expect it to be pretty good. What are you thinking about cash usage has few fans regarding buybacks that 'twenty 'twenty three bonds or possible investment during the next year.

Okay.

Regarding our cash position we have.

First we'll be increasing our <unk>.

Investments within our.

Our core business is so in order to.

Increase our gas production by 30% next year that is.

Significant.

The capex that we will be doing we will also.

We hope to our fleet.

Yeah.

Third we are eager too.

Expanding our.

Wind farm.

<unk> bye.

Deciding between 60 to 80 megawatts.

Capacity.

And started construction.

As soon as possible.

Hum.

And regarding repurchase of our own assets, you know that we do that on our opportunistic.

Situations so.

Yeah.

The committee certain opportunity to repurchase our our own debt.

Sure.

Our own shares we would probably go back to that and we have been we have not been doing so.

Recently because.

Because of the.

Okay.

<unk>.

It goes both our debt and our share has been recently going up so with stock repurchase of shares and we haven't been repurchasing.

Our own dead for a while.

But we might resume.

Anytime if there is an opportunity.

Thank you goes all our next question comes from Anthony <unk> from Bank of America. She has two questions. The first one you can manage it there was a temporary price increases or some thermal capacity between September of Mei and linked with exports by Congress and you tell us more.

About this please and this is not only for thermal is also far hydrops.

Yes, It was just published.

A few days ago.

Yes.

Thanks.

For the legacy capacity game in power generation.

Yeah.

Machines that had a low dispatch.

Yeah.

Collecting the full price of capacity they were collecting the if I'm not brought in 70% of the full price of capacity because of their low dispatch, 66% to 60% of it.

The price of the capacity.

They have eliminated this reduction factor so.

On the delayed on.

Thank you.

Proactive.

Redraw since September.

So.

From September to May.

This reduction in the price of capacity cuts.

Disappear.

In our case, our central time, you've got womens in the North Sea.

Central.

<unk> be a winner in the south of the promise of one off items, which are still to providers that have low low dispatch.

Yeah.

That roughly to give you an idea.

He has a one $1.2 million per month of of additional.

Revenues.

On the other news was this a new fund.

Related to export of electricity too.

To Brazil.

And as long as governments that continues.

And with them that they will continue throughout all.

The summer and into.

Until next may exporting electricity to Brazil.

Part of that profit share with the <unk>.

So capacity so.

So I think.

Is $10 per megawatt hour that is that goes to these fun.

<unk>.

And the fund is shared among the.

The units that cab dispatch and there should be an enduring good months.

And for example for us.

Month of September that better with an additional $1 $2 million or so of revenue. So in total bowls.

These are in this to this.

Q.

Two new <unk> regulatory changes added.

In September to $5 million.

Overall revenues.

Thank you girls. Our second question from Ann Millner is a 2022 I'll note. Let me mention that we don't give any guidance. We can give you on what we have in about yet.

The question is what are your current Capex forecast for next year.

How do you expect the power and oil and gas market to evolve next year to the extent it is possible to provide any kind of any commentary.

And what do I do.

Hi, how are you. So this year has been a very.

Ah interesting year next year, we expect to maintain a little bit lower.

For the EMP Capex M. P. This year is forecasted to end at about $200 million next year.

Uh huh.

We'll be close to that but a little bit lower.

Because a lot has been done this year as the first year.

Power generation will remain very similar yeah, a little bit higher this year was $40 million next year. We are expecting to do 60 is this just mid teens.

Theres no expansions and this and this is not including by then.

And that says it's a compare this year total H $260 million.

More or less of Capex next year, we are expecting something a little bit lower than that are pretty similar.

Sure.

Thank you Lee.

Our next question comes from Lauren Yeah, My shoulder from Metlife offering prestige deliberate deliberating. What's next for Pampa do you expect to keep leverage below one five times and consistent basis.

Okay. So the answer would be no.

Central Bank Burns, we feel comfort that was below two five.

Bob.

Oklahoma both unity for.

Men.

Yeah.

That ratio go we're coring groups are leaving.

Okay.

Thank you Nicole.

Our next question comes from Gardena got Nader from credit Suisse.

This is related to the legacy remuneration are in addition to the turnkey transition Larry.

Remuneration, we got August this month.

Do we have do we have any update for price adjustment scheme for legacy capacity generation any views on generation dispatch you can share for next quarter, given hydro situation in Latin America and possible impact from linear.

Yes.

You bet.

Sure.

Yeah.

No we're not envisioning.

What do we have just received.

Yeah.

Regarding.

Right.

There is one of our legacy capacity.

It'll be all until next.

February.

That is.

When.

Yeah.

And then the next February.

We should be getting the price adjustment us remember this year, we got it to a 9% increase.

Slightly below 2000 to any inflation.

Yeah.

This February we will be collecting.

Something similar to 2021 inflation.

The most.

Most global scenario, but.

It's.

First in an expectation of the skin.

Oh.

Guidance from.

And the regulator.

Thank you goes our next question is an additional question from Alexander <unk> from Banca <unk>.

Follow up how much do you believe we could export to Chile, and what kind of prices are you getting.

Okay.

How much more.

Okay.

We are currently exporting.

One 5 million meters.

Of natural gas per day to <unk>.

That's on a firm basis.

Then.

Interim dividend, how do you think.

Spot, yes, spud gas we.

We are selling around.

In addition, our <unk>.

In average in James.

<unk> everyday but around half a million.

Mm cubic meter of gas.

Gas additional gas to <unk>.

<unk>.

Between 182 million cubic meters per day is what we are currently selling to.

Good evening.

Yeah.

Pension going forward.

Okay.

Happen until then.

Yeah.

Probably.

Next spring in Argentina could.

It could be two to double those those exports but.

It's not something that would happen in the short term, but we are at.

Full production capacity these days.

Until may of next year, where we are.

Mohan.

Full capacity of production.

Hi.

Thank you Bruce.

This hold while we poll for more questions.

Mhm.

Our next question comes from.

Liliana young from HSBC could you. Please disclose capex plans per business segment keep in mind that this is not a guidance. This is the latest budget that we have.

Hi, Lee how are you so because some people are seeing that the cruise ships as far basically this year, we are ending $260 million of Capex business at the restricted group 200 from.

From EMP next year, we are.

Estimating something a little bit lower than that around 100 and.

On 80 90 non dairy.

Different from this year, but a little bit lower.

Our generation is a little bit higher this year was $40 million just my opinion my Tina's Capex remember that we ended all our expansions in the restricted group next year Theres. Some special maintenance Capex that we have to do so we will ramp up from $40 60, and then the rest it's very small just update Ken.

So overall this year to 50 next year around to score a around.

Around those.

There are similar at Nova.

Thank you Leah please hold while we poll for more questions.

Our next question and final one is from island for Mesa from Lorraine.

How do you feel about your current netback level should we expect further deterioration of the lifting cost.

[noise].

No we are not expecting the duration of the lifting costs and we are comfortable.

Shown by the aggressiveness.

The loss.

The round of the plan gas meeting, we are very comfortable with the net debt levels.

We're having no that progresses.

Thank you. This concludes the Q&A session I will turn to leader for final remarks.

Well. Thank you so much for joining us on this exciting quarter gross Bobby equal would you like to make some remarks.

Gary.

George.

Yes.

<unk> just a goodbye.

Well hi, everybody.

We will say goodbye, yes, LR mentioned.

E.

Very great engineers and disposition.

I am stepping down only on my executive function by mistake.

And the board zones also take weight off my four fleets and the well essentially.

I don't know what I'm going to do.

So it's the analysts estimates likely kind of sabbatical and.

I'm quite confident that the pump is taking shape.

So that's.

Why you felt comfortable to do maintenance more than seven point impact so.

I know that legal and OLED will make a great job.

Emotional here so.

Yes.

Regeneration.

Or for new transactions as I OLED will come.

Hopefully soon.

So thank you very much for everyone.

Eric.

Alright, <unk> ex Florida and now in March. Thank you. So much any questions just let us know bright us.

Thus, we are a little free.

This concludes today's presentation. Thank you for joining you may disconnect at this time goodbye.

Okay.