Q4 2022 Pampa Energia SA Earnings Call
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Speaker 1: Should any participant need assistance, please send us a chat message.
Speaker 1: Before proceeding, please read the disclaimer that is located on the second page of our presentation. Let me mention that the forward-looking statements are based on Pampa Nergías' management beliefs and assumptions, and information currently available to the company. They involve risks, uncertainties, and assumptions because they are related to future events that may be related to the company's future events.
Speaker 1: Now I'll turn the via conference over to Lydia Wang, investor relations and sustainability officer of Pampa Nergia. Please go ahead.
Speaker 2: Thank you, Maí.
Speaker 2: Thank you, Mahi.
Speaker 1: Hello everyone and thank you for joining our conference call. I will try to make it short and skip some parts already explained in the earnings release so we have plenty of time for Q&A with our CEO , Mr. Gustavo Mariani, and our CFO , Mr. ? I'm Mignhm Guvalis mercury Sp cola viné Nicholas Carlos
Speaker 1: This quarter marks the end of 2022 and it's always helpful to look back and review what's been going on with PAMPA in the last five years since we have HeathAXOdas.
Speaker 1: The challenges posed in this period did not prevent us from growing and delivering grant milestones.
Speaker 1: Our core businesses, gas and power, grew significantly in the last five years.
Speaker 1: In 2022, we raised our peak gas production to more than 11 millimeters per day and currently working to ramp it up to 16 million in 2023 thanks to the planned gas last tender.
Speaker 1: More than doubling our 2017 watermark and proudly becoming the company that grew the most its gas output since the pandemic.
Speaker 1: Power generation did not stay quiet either. We became the largest independent power producer by investing in every tender of B2B, whether efficient thermal or green energy, adding more than 1.3 GW in full capacity to reach 5.1 GW by 2022.
Speaker 1: In 2023, 323 million more are coming online as we are inaugurating the PEPF-4 and we commissioned two weeks ago.
Speaker 1: Maragan with YPF more than 12 years after the CCGT project started.
Speaker 1: Our way of managing help us to gain efficiencies and be savvy over CAPEX.
Speaker 1: So we invested in equity assets that increase our VDA and made it resilient.
Speaker 1: We made good use of our robust cash flow by enhancing our PowerGeek portfolio.
Speaker 1: strengthening our liquidity, substantially reducing our leverage, and returning value to shareholders with shared bio-vats. 2022 was a great year in PAMPA's history. We look forward to delivering outstanding results to become a leading, efficient energy producer. Thank you!
Speaker 1: So now let's focus on the quarter-speed and the first which gas made it to the headlines again, as expected.
Speaker 1: The adjusted VBA amounted to $183 million, 7 percent less year on year, mainly because of lower PPA income, and some contracts mature in Loma in late 2021, and Barregan in April last year, as well as Loma's gas-to-win number 5 outage.
Speaker 1: higher people in dollar terms and lack regulated tariffs affecting transeneranteges.
Speaker 1: However, the off-peak gas exports to Chile, the higher I spot.
Speaker 1: power and reforming outstanding results of said decreases.
Speaker 1: 83% of our AVBA was dollar linked.
Speaker 1: Quarter on quarter, the drop is explained by seasonality in gas and power demand and price.
Speaker 1: As you see in the right below.
Speaker 1: The gas prices helped oil and gas to lead the consolidated adjusted VDA, which took 56% of our VDA. CapEx in Q4 was 13% higher year-on-year, just mainly because EMP is reeling and completing activities surges in off-peak season to achieve
Speaker 1: We posted an adjusted EDA of $86 million.
Speaker 1: down 19% year on year and 4% quarter on quarter.
Speaker 1: We leave you to the end of some PPAs, the outages at Loma number 5 unit and higher Same amount of lifepasses that would be at ten dollars per place expenses.
Speaker 1: upset by weather.
Speaker 1: spot prices, higher dispatch, and lower maintenance costs.
Speaker 1: dispatch rose 11% year-on-year while the national power grid dropped 1%.
Speaker 1: This is mainly due to the last year's overall holes at Loma and Chinelva.
Speaker 1: More gas for
Speaker 1: Well, thank you guys for
Speaker 1: of standing water input.
Speaker 1: in PGP Guilfou and capacity factor at wind farms.
Speaker 1: partially upset by LOMAS number 5 uni-rotage and less liquid and Bolivian gas.
Speaker 1: Availability is essential to collect take or pay capacity payments, especially for PPA.
Speaker 1: contributed most of the ABDA.
Speaker 1: In Q4, we reach an outstanding rate close to 97%, just above the 95.5% recorded last year.
Speaker 1: Again, this is way above the grid recorded 69% ability rate.
Speaker 1: It would have been higher if it wasn't for Loma's number 5 outage.
Speaker 1: Regarding our expansion at Centenada Arragán, the closing to combined cycle was commissioned just two weeks ago, substantially improving the power plant's efficiency and therefore its low factor.
Speaker 1: In addition, Camesa granted clearance to the steam turbine up to 260 megawatts, priced with a 10-year PPA with off-date on Camesa.
Speaker 1: With the existing gas turbines, the total install capacity climbs to 827 MW, becoming one of the country's most efficient and biggest thermal plants.
Speaker 1: Moving on to wind farm extensions, we acquired Arauco, 100 megawatts.
Speaker 1: wind farm located in the province of La Rioja in mid-December building a 20-year Pro resume is runner,
Speaker 1: The total price was 170 million dollars and doesn't have leverage, the asset.
Speaker 1: The transition was an excellent opportunity to keep boosting our wind portfolio and invest with resilient assets.
Speaker 1: Regarding PFS4, the project is now 86% advanced.
Speaker 1: We completed the cable installation, transformation, and testing.
Speaker 1: All the wind turbine components are right now in the facilities, and we have commissioned already 36.
Speaker 1: However, due to the climate condition and among other factors, we estimate to complete the COD by the end of Q2 this year.
Speaker 1: due to the climate condition and among other factors, we estimate to complete the COD by the end of Q2 this year. Also,
Speaker 1: Last month, we announced a new project, PEPES VI, which kick off already.
Speaker 1: We aim to add 300 milliwatts investing more than $500 million.
Speaker 1: The first phase will add 95 million MA AWAPs by the third quarter of 2024 with an investment of almost $190 million.
Speaker 1: Keep in mind that PEP expansions are
Speaker 1: So on slide 8, let me briefly comment on the empty figures.
Speaker 1: We posted an adjusted EDA of $72 million in the quarter, 57% higher year-on-year because of the plant gas deliveries, gas export prices, and higher oil and gas oil demand and prices.
Speaker 1: offset by lesser gas export volume and increased costs related to the growing activity and payroll.
Speaker 1: However, quarter on quarter, EBITDA is down 39 percent. This is primarily due to decisionality.
Speaker 1: Our lift and cost likely grew yearly but was down quarter on quarter due to seasonality. Efficiency wise, the lift and cost per BOE performed in the opposite way recording $7 million per bull.
Speaker 1: in the quarter, 3% down compared to last year.
Speaker 1: percent down compared to last year.
Speaker 1: Our total production average almost 62,000 barrels per day.
Speaker 1: So meaning crude oil represents 9% of our output, still it reached 22% of the segment's revenue mostly because of export prices linked to brand and export volumes.
Speaker 1: which tripled compared to last year. In December , we successfully extended the Plangas contract until December 2028.
Speaker 3: Furthermore,
Speaker 1: Regarding the tender tapping the first stage of the new gas pipeline to be online on July 23.
Speaker 1: Pampa got awarded 4.8 million out of the 11 million km per day at a similar price.
Speaker 1: previous tenders until 2028. This is an excellent news as it contributes significant organic growth and long-term visibility to our root cause.
Speaker 1: Therefore, by this winter we will more than double the maximum record register in 2020, producing almost 16 million Gm per day by investing $1.1 billion cumulative between 2020 and 2023.
Speaker 1: Besides the upcoming new capacity in the main pipeline, our shale gas campaign will support a significant crump up in production for the first time in our history.
Speaker 1: In Q4, we drilled two wells and completed five wells to Caca Muerta at Sierra Echaca.
Speaker 3: Confirm and it's great potential for shell development.
Speaker 1: Most of the $490 million CapEx in EMB is destined to drill.
Speaker 1: and complete 24 wells to Baca Muerta in Enangrutio and Sierra Chatalux.
Speaker 3: Still, currently, Taigas is our main primary.
Speaker 3: Currently, Tygasp is our main primary production source.
Speaker 1: So as we engage in Shell Gas Campaign to increase our share, this year we will connect to your horizontal walls. Frederick Lane C cowardice
Speaker 1: in Mangrove and keep drilling in Triennial Camp that it's not operated by us.
Speaker 1: Our gas production in Q4 was 6 percent up year on year but 11 percent down quarter on quarter due to seasonality averaging 9.5 million km per day and outpacing in Y levels that only grew 2 percent. For more information, visit www.cctexas.gov
Speaker 1: 72% of the quarter's production came from El Mangroso, where we commissioned the second gas treatment plant last November .
Speaker 3: with a capacity of 4.8 million km per day, replacing temporary facilities and covering subsequent winter ramp up.
Speaker 1: Therefore, a mangrover can produce up to 14 million cubic meters per day.
Speaker 3: The average gas price of the quarter was $3.9 per minute to you.
Speaker 1: 24% up year on year due to export prices but
Speaker 1: 20% down, quarter on quarter because of seasonality.
Speaker 1: Regarding the sales breakdown, Q4 is fairly distributed. We retail in off-peak and lesser exports year on year, but it still represents 13% of our output.
Speaker 1: Q4 is fairly distributed. We retail in off-peak and lesser exports year on year, but still we present 13% of our output with higher prices.
Speaker 3: exports will remain under the corporate until
Speaker 3: winter, even winter, since we obtained permits.
Speaker 1: that will last until June of this year. In 2022, thanks to the outstanding work of our technical team and the Shell Gas productivity at Sierra Chata, we will be able to provide a
Speaker 1: will last until June of this year. In 2022, thanks to the outstanding work of our technical team and the Shell Gas Productivity at sonor Katyal realm, IT Vice staffer and mult
Speaker 1: We recorded a 14% increase in our proven research, amounting to 179 million barrels of oil equivalent. Although we helped the production record.
Speaker 1: Record in 2022, the replacement ratio was 2 times.
Speaker 1: and the Irish life was kept at eight years.
Speaker 1: The additions reflect the excellent results of shell gas pilots to Baca-Morta formation that we did in Sierra Chata and in Manrutio, tripling shell reserves certified last year. The petrochemical business at EVDA grew by Pro Rue
Speaker 1: 3% of the total sales volume was exported.
Speaker 1: As you can see left below.
Speaker 1: after we reorganized the production strategy in 2019, we could smoothly navigate the volatile commodity prices producing at maximum capacity close to historical rewards.
Speaker 1: In spite of intensive EMP capex,
Speaker 1: In Q4, we recorded a free cash flow of $101 million. This is driven by the outstanding performance of all the free businesses.
Speaker 1: Working capital reviews decisionality let Kamesa pay at a higher frequency, upset by debt service and an income tax increase.
Speaker 1: early paid of 15 million dollars. The increased debt considered the dollar link that will raise the local market.
Speaker 1: In addition, in Q4 we acquired the Arraoco wind farm that we previously – –
Speaker 1: talk about it and we have to make a first installment of 128 million dollars. This is Australia in everything.
Speaker 1: So in summary, net of everything we generated
Speaker 1: $15 million of net cash flow this quarter, achieving $7 million cash by the end of the year.
Speaker 1: Moving on to slide 14, we show.
Speaker 1: the consolidated figures of our financial position, including our affiliates at ownership,
Speaker 1: of our financial position, including our affiliates at ownership. Let's so
Speaker 1: on the restricted group that reflects the bond perimeter. We posted a gross set of 1.6 billion dollars similar to last quarter. 84% is dollar-denominated bearing an average interest rate of 5.4%, taking advantage of the domestic liquidity.
Speaker 1: First, we find our leverage resources. We show a five-year serial coupon link.
Speaker 1: for an additional $50 million, plus a $100 million TESOL bond at $1.2 billion.
Speaker 1: The net leverage and net debt kept going down, recording $913 million and 1.2 times multiple.
Speaker 1: The average life also decreased to 3.6 years.
Speaker 1: BAMBAM does not face relevance, that maturity is until 2027, so this is thanks to the successful BON.
Speaker 1: exchange made in August of last year. So this concludes the presentation. Now I will turn the floor to Margarita, who will poll for questions.
Speaker 1: in the chat. Thank you so much.
Speaker 1: Thank you. The floor is now open for questions. If you have a question, please send us through zoom chat. We will read and answer them in the order received. Also, please make sure your name and company are correctly displayed to introduce you to the audience.
Speaker 1: Should any participant need assistance, send us a chat message or raise your hand. Please hold while we poll for questions.
Speaker 1: Thank you for waiting. The first question comes from Frank McGann from Bank of America. He has six questions. The first one is how they see gas production quarter by quarter in 2023 with the start up of the new pipeline.
Speaker 4: Hi Frank, thank you for your question.
Speaker 4: This year we've been producing during the summer less than we expected, basically.
Speaker 5: because
Speaker 4: of lack of infrastructure to evacuate the gas from the Nalkeana Basin. Although we were expecting to be producing...
Speaker 4: above 10 million cubic meters of natural gas per day. We are currently being able to sell less than 9.5.
Speaker 4: We think this will continue first quarter and second quarter of this year.
Speaker 4: I hear myself. Can you mute?
Speaker 5: Okay.
Speaker 4: So within this situation of –
Speaker 4: of lack of capacity from the Burkina Basin will continue the remaining of the first quarter and the second quarter as well. The new pipeline is online.
Speaker 4: By midwinter, we expect to be able to
Speaker 4: jump our production to 16 million cubic meters of natural gas per day.
Speaker 4: So, that is how we're expected out during the third quarter. In the fourth quarter, during our spring, and with the new pipeline.
Speaker 4: working, we expect our production, our sales to be in the range of 12 to 13 million cubic meters.
Speaker 4: per day. So a significant increase from this
Speaker 5: again, included during the
Speaker 1: Thank you, Gustavo. The second question from Frank McGahn is what is the latest you are hearing about the start update for the Nestor Kirchner pipeline?
Speaker 4: It's funny that we are talking about a pipeline of this size, such a huge infrastructure.
Speaker 4: project and then we are talking about days, not weeks, not months, but days. To answer the question, the latest that we are hearing is that...
Speaker 4: Everybody is working to be on time, on the schedule, so to have the five lines ready by the end of June .
Speaker 4: That is, so far, I hope there is no...
Speaker 4: Nothing unexpected that changed that, but up to this moment what we're hearing is that the pipeline might be on time.
Speaker 4: I would like to take the opportunity of this question to highlight some numbers that
Speaker 4: I've been looking at the
Speaker 4: this weekend and they surprised me. As I said at the beginning, there is the
Speaker 4: capacity to produce gas from the Nokina Basin is capped by infrastructure.
Speaker 4: That is why we are selling less than we expected, while Kamesa has been burning liquid fuels and we are burning gas importing from Bolivia all through the summer.
Speaker 4: We are selling less than we expected while CAMESA has been burning liquid fuels and we are burning gas importing from Bolivia all through the summer.
Speaker 4: We can check how much natural gas has been...
Speaker 4: How much liquid?
Speaker 4: how much liquid, that means fuel oil, gas oil.
Speaker 4: And car on car co coal.
Speaker 4: and imported gas from from Boli in total.
Speaker 4: So I'm counting October , November , December , and January . Those are real months. And this situation will continue February , March.
Speaker 4: April and then in May we'll start the winter. So far, Camisa has burned liquid in an equivalent to almost...
Speaker 4: 11.6 million cubic meters of natural gas per day. At what price?
Speaker 4: liquids are much more expensive than local natural gas. So, Kamesa has been burning these liquids at an average of 21.5% in 2020.
Speaker 4: million dollars per million of BTU.
Speaker 4: per million of BTU.
Speaker 4: the gas the summer price for natural gas
Speaker 4: is $3 and Kamesa is burning fuels.
Speaker 4: I'm doing the average of gas from Bolivia, fuel oil, gas oil, and coal.
Speaker 4: That makes an average of $21.5 per million of BTU.
Speaker 4: That makes an average of $21.5 per million of BTU. So what does this mean?
Speaker 4: eleven blank white members
Speaker 4: cubic meters of natural gas per day at $21 per million of BTU for seven months
Speaker 4: That is a...
Speaker 4: to $1.9 billion. So that is how much.
Speaker 4: The country is spending to import all this.
Speaker 5: All these fuels.
Speaker 4: And why we are doing this? Because we lack infrastructure capacity to have our own production coming from the New Guinea basin. Once the new pipeline is ready, the country will be able to replace all this consumption of liquids with local natural gas.
Speaker 4: And why we are doing this, because we lack infrastructure capacity to have our own production coming from the New Guinea basin. Once the new pipeline is ready, the country will be able to replace all this consumption of liquids with local natural gas. Thanks, thanks all.
Speaker 4: Thanks to the PlanGaz, Argentina is going to be able to buy it from producers at $3.
Speaker 4: Argentina is going to be able to buy it from producers at $3.00.
Speaker 4: 3 dollars per million cubic meters per day.
Speaker 4: So this quantity of gas at this price for seven months
Speaker 4: This quantity of gas at this price for seven months, it's...
Speaker 4: 250 million dollars. So instead of 1.9 billion, 250. With one other important difference, 1.9 billion is
Speaker 4: currency real dollars that the country is spending, while the 250 are Argentine dollars, so really it's paid in pesos at the official exchange rate. So that is how much, that is the huge gap and that is the huge...
Speaker 4: saving that the new pipeline will bring. That means
Speaker 4: The total cost of the pipeline was around, I think, was around $1.8 billion. So what I'm trying to summarize is that in less than $1.8 billion, the total cost of the pipeline was $1.8 billion.
Speaker 4: One summer, the cost of the infrastructure of the new pipeline gets repaid for the country. I do not know how important this new pipeline means for the country.
Speaker 4: not only for us as producers, but also for the macro numbers of Argentina.
Speaker 1: Thank you, Gustavo. The third question about Frank is about what is the upside to output in 2024 next year?
Speaker 4: Well, so far for 2024 we don't have anything new, so a new jump in production. Maybe, if the
Speaker 4: second phase of the Gasolupto Nestor Kishner of the
Speaker 4: Nestor-Kicher pipeline gets auctioned and the construction is ongoing. So then there's going to be a new round of planned gas in order to fulfill that second crunch. Let's hope that happens this year.
Speaker 4: Obviously, if that happens, we will participate as we have always been participating in the past rounds and maybe we will be able to increase further our production.
Speaker 4: But even though if there is no, if the construction of the second crunch is not done by
Speaker 4: It's not undertaken by the winter of 2024. Our output will grow in 2024 despite that, just because the first transfer will be online. So not during the winter, because during the winter we will be selling the reality.
Speaker 4: near 16 million kilometers of natural gas per day but during the rest of the during the the summer months during our spring summer and early fall a Kamesa will be able to replace all its consumption
Speaker 4: with local natural gas. And so we, together with the rest of the industry, will be able to can have a very long-term global warming process.
Speaker 4: replace those liquids. So if there is no infrastructure in wintertime our production will be similar to 20...
Speaker 4: But in the summer, our sales will be higher than...
Speaker 5: and the first and second quarter of 2023.
Speaker 1: Thank you, Gustavo. The fourth question, Frank, is about how are you seeing cost pressures with high inflation and a slow devaluation of the Argentine PISSE.
Speaker 4: We have been seeing a peso appreciation this year, so we do see dollar inflation in our costs.
Speaker 4: And there's not much that we can do against this movement of the microbiome. So we are seeing it.
Speaker 5: but there is not much that we can do as a...
Speaker 5: operations to prevent that from happening.
Speaker 1: Mostly productivity-wise, in terms of productivity efficiency. But unfortunately... Let me mute.
Speaker 1: But in order to retain talent, the payroll has to go.
Speaker 1: Let's consider that since 2018 to 2020 there has been a big decrease in dollars in terms of the salary. Let's consider that since 2018 to 2020 there has been a big decrease in dollars in terms
Speaker 1: It's logical to have a ramp up. Thank you, Busan, Leah. The fifth question, Frank, is about TGS LNG project. If the TGS LNG project goes forward, what would be the upside for volumes, both over the medium and long term?
Speaker 1: What would this mean in terms of capex, both for upstream developments and possible participation with an equity stake in a project?
Speaker 4: Frank, TGS is still working on the engineering of this project.
Speaker 5: Thank you.
Speaker 4: Basically, it's too early to tell, it's too soon to speculate about CAPEX plan in terms of TGS and for PAMPA regarding this project. Hopefully by mid of this year we will have more clarity.
Speaker 4: I hope that at some point of this year we will be in a position to decide whether to move forward or not.
Speaker 4: Once we do so, I'll be happy to share these figures with you, but currently it's too early to go.
Speaker 5: would be too speculative.
Speaker 1: Thank you, Guus. The last question of Frank is about with significant opportunities in coming years, will you be able to finance this with your existing cash flow? Is equity financing an option?
Speaker 4: Thank you for the question, Frank.
Speaker 4: I'll go back. I think this was Lida's first slide in the presentation.
Speaker 4: I want to go back here because I think this shows the...
Speaker 4: tremendous freecast load generation of our portfolio capacity of our portfolio capacity.
Speaker 4: As you can see here in the first two charts,
Speaker 4: In the past five years we have increased our
Speaker 4: capacity to produce natural gas by 120%. That obviously meant a huge amount of...
Speaker 4: of CAPEX. Also in Power Generation we grew our
Speaker 4: capacity by 44% from 3.7 Giga to 5.4.
Speaker 4: from 3.7 gigas to 5.4 again
Speaker 4: a huge amount of capex in order to do so. But, and then I go to the bottom of the...
Speaker 4: huge amount of capex in order to do so. But, and then I go to the bottom of the slide.
Speaker 4: While we did – so, while we grew our production capacity by so much, we were also being able to do so while reducing our net indebtedness, as you can see in the middle of the board. We have reduced our net indebtedness by so much, we were able to do so while reducing our net indebtedness by so much, we were able to do so while reducing our net indebtedness
Speaker 4: net in-depthness by 25%. We have
Speaker 4: deafness by 25%. We also have repurchased our own bones.
Speaker 4: We have repurchased like 30 million dollars of nominal bonds.
Speaker 4: At the bottom right, in the past five years, we have reduced the number of
Speaker 4: ADRs outstanding from 83 million to 55 million. So we have reduced our stock outstanding by 34%. We have spent in share purchases more than $600 million.
Speaker 4: So between share repurchases and dev repurchases, we have spent around 1 billion dollars.
Speaker 4: and dev repurchases we have spent around 1 billion dollars.
Speaker 4: I think this slide shows the cash flow generation capabilities of our portfolio. We have been increasing our production capacity tremendously and we have also been able to repurchase our own stock and debt.
Speaker 4: So, going forward, going back to your question, I think yes, there are a lot of opportunities that we can take advantage of and our portfolio generates the needed cash flow to do so.
Speaker 5: and but yeah.
Speaker 6: But if
Speaker 4: We may decide to finance ourselves increasing in deadness as we will probably be doing this together, taking advantage of the...
Speaker 4: cheap financing available in the local market, in the peso market, we might do so. Regarding equity financing, is it an option? Yes, it's always an option.
Speaker 4: At today's share price of our stock, we are more tended to...
Speaker 4: repurchase our own stock, we wish to new stock. So it's always a possibility, certainly not at these prices.
Speaker 1: Thank you, Ruth. Our next question comes from Bruno Montanari from Morgan Stanley . He has three questions. The first one is the balance of risk and opportunities in Argentina seems to be migrating more towards the oil side of the industry recently.
Speaker 1: Would PAMPA be interested in being more active on the oil investments to increase production now that the gas website seems to be well mapped out? Yes. In which blocks could the company intensify developments?
Speaker 5: Hi Bruno, thank you for your question.
Speaker 4: We are studying several alternatives.
Speaker 4: We do want to increase and to balance a little bit more our power.
Speaker 4: production towards oil. As you know today we are probably 90% natural gas and 10% oil so we want to have a more balanced portfolio.
Speaker 4: And in order to do so, we are starting several alternatives and discussing with our partners. One possibility is increasing –
Speaker 4: increasing exploration and production in Rincon de Randa, which is one block that that we own, but we need to reach and agree with our partner. And there is a couple of other alternatives that we are studying.
Speaker 4: Nothing concrete that I can tell you at this moment.
Speaker 1: Thank you, Guus. The second question of Bruno is although an increase in lifting cost was expected, the company seems to have been able to offset some of the inflation impact on EMP cost. What are the trends for lifting cost going forward?
Speaker 6: AM.
Speaker 4: As you well mentioned, the –.
Speaker 4: Inflation in dollar terms put pressure here as well. But basically what I think what explains is the fact that we have been building new infrastructure and we do still have spare capacity in that infrastructure that we have been building.
Speaker 4: building over the past few months.
Speaker 4: Having a high utilization rate of this new infrastructure, I hope that as our production continues to grow, lifting costs will continue going down.
Speaker 1: Thank you, Guus. The last question of Bruno is can you comment on Pampas' strategy to deal with a potential material devaluation of the Argentine Tesla happening in a very short timeframe? What would be the impact in terms of margin of EMP and power generation?
Speaker 1: and how would the company protect its cash balance and cash flows?
Speaker 7: Firstly, most of our incomes are dollar linked.
Speaker 7: Firstly, most of our incomes are dollar linked. I think the biggest impact on our income is on our income.
Speaker 7: Our cash flow will depend.
Speaker 7: on the amounts that we are owed by CAMES and also regarding PlanGAR.
Speaker 7: but it should not be a big impact....
Speaker 7: and we're cash balance, we are mostly invested in dollar link assets or already seen in US dollars. I think we are already protected from that scenario.
Speaker 2: Thank you, Niko.
Speaker 1: The next question is from Matias Gattamino from BCP Securities. His question is regarding the remaining amount of the 2023 bond.
Speaker 5: So this is Mat Phillyd.
Speaker 7: It's like a different new maturity than last year. So the current regulation applies.
Speaker 7: That means that we have access to the official effects for 40% and we have to refinance the other 60%.
Speaker 7: We can do this as early as...
Speaker 7: 45 days before the maturity.
Speaker 7: days before the maturity.
Speaker 7: this is not a big majority so it's very manageable for us and we are analyzing different alternatives
Speaker 7: that will depend among other things on market conditions at that time.
Speaker 1: Thank you, Nico. Our next question comes from Rafael Nagano from Freddie Swiss. Is there any additional value being discussed on the Petro Ecuador case? So could you share with us how much?
Speaker 1: And do you see any risk of reverting pay of the $37 million provision due to the injunction from Pedro Ecuador given you only received part of this amount so far?
Speaker 7: No, the full amount of this award, including interest, is 37 million. We already collected almost 21 million dollars and there are still 15 million dollars spending.
Speaker 7: The protection action presented by Petroquador has been rejected.
Speaker 7: So, I see very little chance of that being reverted, and now we are following the necessary steps to collect the other 50 million spending.
Speaker 1: Thank you, Nico. Our next question comes from Alejandra Aranda from Banko Itau. Our first question is...
Speaker 1: kind of already answered, is about the plans of volumes in the upstream business in the first and second half of this year and what to expect in terms of cost for this segment, the EMP segment. Let me know if you have any questions for December .
Speaker 4: infrastructure capacity to
Speaker 5: to
Speaker 4: to extract the gas from the Neuquina Basin to our volume to remain below 10 million cubic meters of natural gas per day. Once a new pipeline is ready during the winter, our production should jump to around 16 million cubic meters of natural gas per day.
Speaker 4: the Neukina Basin to our volume to remain below 10 million cubic meters of natural gas per day. Once a new pipeline is ready during the winter, our production should jump to around 16 million cubic meters of natural gas per day.
Speaker 4: By the end of the year during our spring going back probably to 13 Hopefully 14 Between 12 and 14 million cubic meters of natural gas per day That's what we are expecting
Speaker 4: expecting in terms of
Speaker 4: expecting in terms of sales this year.
Speaker 1: Thank you, Guus. The second question of Alejandra is regarding nonconventional renewable energy. How should we think about nonconventional renewable energy investments or acquisitions going forward? Do you have a target in terms of this generation source that you would like to reach in the next few years?
Speaker 4: No, we don't have a target, but we would like to grow as much as possible with profitable projects. We have shown that by...
Speaker 4: Last year we acquired from our partner 50% of their stake. Their stake was 52% of Candid Mayawat's wind farm. Then it was the
Speaker 4: We also are about to complete, last year we have been investing in PPE4.
Speaker 4: Maggie is showing here an 81 megawatt expansion. Maybe 36 megawatts are online.
Speaker 4: showing here an 81-megawatt expansion, already 36 megawatt are online. So that adds.
Speaker 4: So, we increased last year 130 megawatts our capacity. And we also bought
Speaker 4: So, we increased our renewable capacity by 230 megawatts.
Speaker 4: And we have launched a project that is comprised of a total of 300 megawatts. The first phase we are doing 100 that is already —
Speaker 5: underway and we hope to
Speaker 4: that this new park will be ready by
Speaker 4: this new park will be ready by...
Speaker 4: quarter of 2024. But again, we don't have a goal, but we would like to probably avoid it for the watch and the check.
Speaker 4: quarter of 2024. But again, we don't have a goal, but we would like to...
Speaker 4: to complete this three-kanimera water expansion within the next couple of years.
Speaker 1: Thank you, Bruce. The last question of Alejandra is regarding the LNG project. Could you comment on where TGS is regarding project study and what do you need in terms of legislation and incentives to move forward with this project?
Speaker 4: That's a very good question Alejandro. TGS is working on the engineering of the solar
Speaker 4: That's a very good question Alejandro. TGS is working on the engineering of this project site guildulsor. SEE H Dunn Lay Doug
Speaker 4: It's quite complex and takes longer than we had originally expected. But we are working with several international companies to help us on the engineering of the project. Regarding the law, yes, this has been a...
Speaker 4: been mentioned in the media, this
Speaker 4: This is a project where Argentina is going to compete against in a market that is quite competitive.
Speaker 4: This is a project where Argentina is going to compete against in a market that is quite competitive.
Speaker 4: Obviously, the spot market of LNG is not the same as long-term contracts. Long-term contracts are at a much cheaper price than what we have been seeing on the moon.
Speaker 4: spot energy market. We need to be able to...
Speaker 4: build a project that is very competitive, internationally wise.
Speaker 4: build a project that is very competitive, internationally wise. The project that we are envisioning is a...
Speaker 4: rather small project vis-a-vis the huge projects that you see in other parts of the world so there is a problem of scales that makes it less competitive.
Speaker 4: So it's important.
Speaker 4: It is important both the
Speaker 4: stated earlier.
Speaker 4: fiscal incentives that we hope this new
Speaker 4: law will provide as well as the certainty regarding the export permits that
Speaker 4: Given our history, it's important going forward. I think it's...
Speaker 4: I think it's not going to be that relevant because...
Speaker 4: Thanks to Baca Muerta, Argentina knows that we have enough reserves for several centuries going forward. So it makes no sense as it has happened in the past to restrict export of natural gas.
Speaker 4: So what is more important than I think about the law is
Speaker 4: So what is more important, I think, about the law is the need.
of fiscal incentives to make it competitive with other international LNG projects.
Thank you, Guus. Our next question comes from Christian Serra and Ezequiel Fernandez from Valence. They have three questions. The first one is, can you explain a bit how the process and new rules for gas exports into Chile are in place?
what type of authorizations you need to get, how much in advance you have to apply for this, and how we determine to who has priority of gas exports among all Argentine EMPs. Stephanie, are you there yet?
Hey.
that relates to the volume that each producer has been able to win in the several rounds.
of the plant gas. So that is, so your success in the plant gas is what determines the quotas of the plant gas.
VBX for chorus.
There is also a floor price at which you cannot export gas to Chile below that price. I'm not sure, but I think it's around currently around $7.50 or $8.00 per store price that you would accept stock as a strategy. It's interesting that but I'm passionate about
The policy of Argentina is that
First, local gas is to consume in Argentina, and so if there is –
First, local gas is to consume in Argentina, and so, if there is –
what has been happening this summer and will also happen during the beginning of the winter until the new pipeline is ready. and probably even after the new pipeline is ready.
is that the production capacity of the Neukina Basin exceeds the evacuation capacity of the E
of the New Guinea Basin towards Argentina. That's why we will have capacity.
That's why we will have capacity to…
not only as we are doing now during the summer and during the winter while the new Nesler-Kishner pipeline is ready, but also it may happen that even with the new pipeline that will bring
an increase in evacuation capacity from the Nokina basins of 11 km of natural gas per day. It could be the case that the increase in production in the Nokina basin is even higher than that. So, we might be able as a country to continue exporting gas to Chile throughout the winter. I think that answers the question.
Thank you, Ruth. The second question of violence was regarding the LNG project that was already answered. The third and last question is about the cash flow generation. What are you thinking about the cash uses?
aggressive CAPEX plan in the past few years. We have a CAPEX plan for power generation of around 250 million dollars that is comprised of maintenance CAPEX and
the build up of our sixth wind farm, the PEPE 6. We think we will be spending around $150 million, around that figure this year. That is how the $250 million for power generation is comprised.
And for EMP, we will be certainly doing the most aggressive capex plan over the past few years in order to be able to increase our production from 11 to 8 meters of net loss.
natural gas per day to 16 million cubic meters of natural gas per day.
That is something we are already working on and we need to achieve. I think we will be able to.
something we are already working on and we need to achieve. I think we will be able to achieve that figure by eddily up to this point and possibly become someone. That's that.
once the new pipeline is on land pipe early this winter.
paths.
how we are going to finance that through our own gas flow generation and, as mentioned before, taking advantage of...
for our financing capabilities in the local peso market. Thank you, Guus. Our next question comes from Alejandra Andrade from JP Morgan. The first question regarding the 2023 bond was already answered. The second question is, capex,
Barragán and PEPE 4's PPA in terms of EDITA on a full year basis.
Hi, Ludovic. In Sinaloa, Rarang's PPA, it's annually we'll have $100 million more or less. And the PEPF-4, it's 81 milliliter of fuel capacity. We'll have around $22 million of the PPA.
In Santa Barbara, PPA, it's annually we'll have $100 million more or less. And the PEPF-4, it's 81 milliliter of total capacity. We'll have around $22 million of ABDA per year.
The 100 million that Barragán will add, that's full – 100 percent of Barragán. Full company. We own 50 percent of that. Correct. Thank you, Liz and Guus. The next question comes from Juan Jose Munoz from VPG Q and A 2012.
Do you foresee any changes in PlanGAS once the new administration is elected?
Hi, Juan Jose. No, certainly not. I think.
Hi, Juan Jose. No, certainly not. I think I...
I think every time there's been a change in administration, the market and all this.
always have been fears of changing contracts.
Fortunately, we have been seeing the...
Fortunately, we have been seeing the...
In the last couple of changes in administration, is that contract has had been respected.
both on electricity PPAs and on the plant gas.
both on electricity PPAs and on the plant gas. So – twice as fast and super fast.
And I think we are seeing the benefits of that. I think in Plan Gas the country has seen the benefit of that, of how competitive.
the The auction has been how aggressive producers were in terms of pricing So I think the Government officials and politicians are understanding
that there is a reward once there is trust, that contract will be respected.
It's important to highlight that at the beginning of this administration and the fear
by the end of past administration what was going to happen when Argentina
files for default on the sovereign bonds, what is going to happen with the PPAs. Unfortunately, what happened was that despite the fact that Argentina defaulted on its sovereign debt, they have respected all this contract. And I think that that's a very good antecedente. How do you say it? Thank you So much. Yes, you're welcome. Thank you. Thank you. Resto ned talk.
Thank you, Guus. Our next question comes from Solidar Candelaria from Banco de Creto y Securities. I wanted to know if the administration of Barragán will be changed, the operation, which means to YPF from June 2023.
That is a reason that every four years we swap the administration of the plant.
We have been talking about it. It's really not a big issue. We both know how to...
to do so. We have an excellent relationship.
analyzing how to do the engine administration basically because it's not cost effective to move all the systems from one company to the other.
the engine administration basically because it's not cost effective to move all the systems from one company to the other.
We have to figure out what is the best way to do it. We will certainly reach the best solution available.
So that is my answer. The answer is yes. Administration goes to YPF the next four years. And it has been. In the same way that it has been the past four years.
Despite who has the administration, it's a share and teamwork. So we are convinced it's going to be the same way the next.
It's a share and teamwork, so we are convinced it's going to be the same way the next four years.
Thank you, Guus. Our next question comes from Daniel Guarviola from BPG. We would like to know your thoughts on the possibility of distributing dividends.
the typical controls that make it
of naked.
We could have, because of the Creto 277, which allows us access to the official exchange rate thanks to our increase in production. So we could have access to the
dollars at the official exchange rate in order to pay this year. But I think we are going to use that extra access in order to today.
dollars at the official exchange rate in order to pay this year. But I think we are going to use that extra access in order to do the – In.
liability management of the 2020-23. Also this year we have, as I mentioned earlier, a huge CAPEX plan. So for the first time in the past few years we are going to be free cash flow negative.
and we are going to finance that in the local market. So I don't, especially here because of all these reasons, it's not a good moment to think about dividends.
As we always say, we have a huge or very profitable investment opportunities.
As we always say, we have a huge or very profitable investment opportunities.
being asked by our shareholders to pay dividends. So we are comfortable with continuing with this policy. Thank you, Guus. Our last question comes from Florencia Machorda, which is the impact of recent adjustment to legacy remuneration.
The reason I just meant – I think you are referring to – the issue of privacy, of requirements, trust has lots of evidence whether congressional
to the one that dollarized a portion of the remuneration. So going forward, it's not gonna be a hundred percent peso-enominative, but I think something like three-
It's a small percentage, I don't recall whether it's 30-25% or...
So, a portion of the current remuneration is going to be defined in dollars. Taking into account what we are – our projections are all going to be here, unfortunately.
of the current remuneration is going to be defined in dollars. Taking into account what we are our projections of.
inflation and the valuation of the official exchange rate for the rest of the year, the impact is of around $50 million from what we have projected in our budget at the end of last year. So it's a.
It's positive, it's not huge. It's rather marginal. Thank you, Guus. This concludes the question and answer section. So we'll turn to Lita for final remarks. Thank you so much for joining us.
Happy to assist you. Have a nice day.