Q3 2023 Pampa Energía SA Earnings Call
<unk> economic and industry conditions.
Other operating factors could.
Also affect the future results of pump on it here.
And could cause results to differ materially from those expressed in such forward looking statements.
Now ill turn the video conference over to Lida, Wang Investor Relations and sustainability officer of complex. Yes. Please go ahead.
Okay.
Thank you, Rick and Hello, everyone and thank you for joining our conference call I will make a quick summary of Q3, you may find more details in our enriched release today, we are having our Q&A weight, our CFO Nicolas kneeling and.
Now, Russia jewelry, our head of the a b and Peter will review later, our head of corporate finance.
Let's start with the quarter's figures highlighted by the ramp up.
In gas production and set a new all time high milestone growing shelter contribution incremental share of efficient and green PPA.
And we'll be keeping Hansen, our balance sheet by increasing our liquidity there.
Adjusted EBITDA amounted to $244 million in Q3, similar year on year. Thanks to the additional output company for the planned gas and contributions from new Ppas, such as wind farms and morale CCG T. Partially upset by a drop in commodity prices.
It's affecting crude oil Brent and pet Chem.
And especially depreciation impacting spot energy however.
However, the EBITDA grew 10% quarter on quarter.
Mainly explained by the higher gas production.
It is worth noting that more than 85% of the quarter's EBITDA was dollar lake.
And the share now is led by.
By E&P.
Mainly due to natural gas.
Capex in Q3 was 40% higher year on year, mainly because of the ramp up activity in A&P, which is concentrated in shale gas drilling and completion of wells plus the construction of the six wind farm.
Set by the commissioning of that before last quarter.
Moving onto power generation as seen on slide four we posted adjusted EBITDA of $91 million chiefly because as 2% higher year on year, mainly explained by the new Ppas at our wind farm and <unk>.
And Brian and lower maintenance and material costs.
Upset by a decline in the spot <unk> prices the.
The divestment of various Cerredo windfarm and a partial outage in July.
Loma La Lata.
Plus higher labor costs.
Compared to last quarter power was 7% below.
This is explained by the divestment of Microsoft radar are higher costs labor costs.
Offset by the increase in spot prices, because we'd be granted 23% increase in pesos. Another 28% update was clear from November onwards, accumulating 150% increase year to date.
Who did this but since you freed rose 32%.
Year on year led by Ron <unk>, our more hydro could you be Google for a new wind farms that we built and acquire offset by less thermal dispatch due to the lower power demand.
The outage at Loma, La Lata mentioned before and the exiting of might is that right.
Take or pay capacity payment, especially from Ppas as play most of our EBITDA.
It is driven by availability and in Q3 would reach almost 94%.
The low last year's 96% and this is because of noma.
TCE number five.
And the overhaul that we did in Hanover programmed overhauls.
However, this wave above the Greek 73% of elevated rate.
Moving on to 56 expansion the projects progress is 94%.
We are working on the facilities until works for the high voltage gestation and testing the vanquish form it back.
Also the main components for the 31, one mills arrived in by 11, <unk> and the construction of the towers is underway in Argentina.
The estimated <unk> for the first phase of 95 <unk> for the next year.
Q3, and the second phase.
45, <unk> will be by next year's Q4.
It is worth highlighting that picked before enter.
NRG will be sold on the B to B BPA.
Now moving to the E&P business, we posted adjusted EBITDA of I'll refer to $2 billion. In Q3. This is way above last quarter's figures and 12% higher year on year.
The increase was driven by higher gas deliberate committed are under.
The nuclear and gas realm.
Links to the new pipeline.
This was upset by a drop in Brent prices and oil production was a mild winter and pipeline delays impacted gas output.
In Q3, our total production of a breach above 80000.
Ourself oil equivalent per day.
17% higher than last year at 19% up.
Quarter on quarter.
In August we reached a new all time high production record of $16 4 million kilometers per day.
This is a remarkable growth of 44% for an hour tool falchion in 'twenty two record.
Our lifting costs grew by 9% year on year.
5% quarter over quarter is explained by the activity ramp up however, if you put it on the productivity perspective that comes from the newer wells.
This possibly impacted the lifting cost per barrel of oil equivalent.
Which decreased 7% year on year, and 14% quarter on quarter recording five $6 per barrel equivalent.
Call sales stood at 4.6 thousand barrels per day, representing 80% of the production plus 19% of the segment's revenue.
Getting a realized price of $63 per barrel.
15% of the output was destined to exports.
Yeah.
Focusing on gosh, our self in Q3 grew by 20% yearly.
As of February aging the almost for Timken in QE just for the quarter may.
Mainly explained by the higher volumes sold the local market for one guy.
We are in the.
The campaign.
The new shale wells performance is in line with our expectations with you if I checked out the output grew more than five times year on year, thanks to the 11th shell.
Yes.
Timing this year.
Another free are scheduled to start completion of this month.
And they are a little short, but seats has been completed and tested and we sold that.
Exceeding our expectations.
Like we talk about it in the last quarter. We also drill oil patch number five which completion of these newly finished and began drilling pad seven scheduled to be completed by next year Q1.
Each pack has frameworks.
The average gas price for the quarter stood at $47 per million Btu.
Similar year on year and quarter on quarter. So you can see below the retail share downsides.
Because with the prevent deliveries from their planned gas to power plants.
Other clients remain very similar.
Two last year.
So as you can see here gas deliveries were above take or pay during the winter season.
By the pipeline delay though.
We're or warmer winter how.
However, going into Q4, the gas Ninety's relenting at the warmest stream as the warmer spring in years and highest hydro in the last 15 years 15 years is happening so.
Does weather phenomenon impact from the domestic sales in <unk>.
That's in the plan got impacted.
The impact in the exports to Chile, the soles, which it has happened in the same thing and thermal power generation.
Indirectly reduces the rate the grid electricity costs.
We expect the gas demand to normalize by the seven.
It is noteworthy to mention the important yourself take or pay is that kind of assurance for our investments.
Okay.
So we move onto petrochemical business that posted a $60 million of EBITDA. In Q3. This is 16% lower year on year because of the drop in international prices that last year. It was all time high.
Lower reforming sales in the local market. However, EBITDA was.
Was 60% up quarter on quarter due to the higher domestic sales of styrene and exports of polystyrene a rubber.
Plus higher reforming price.
In Q3, 42% of the total sales volume was export it up from.
From the last year's 48%.
Well, we move onto the financial side.
Your free we recorded a free cash flow 90 free cash outflow of $90 million.
This is mainly explained by the expansionary capex that we are are medically gas and higher debt service because of the peso debt.
Though we benefit from the pension evaluation, because it dilutes our principal amount.
Working capital deteriorated due to increased collection base and rates from commenced allison's last year last quarter sorry.
Additionally, we raised $68 million from the local markets, mostly domestic dollars in summary, we generated $92 million in the quarter.
This is achieved.
Achieving a $964 million cash position by the end of the period.
Moving on to the Slide 11, we show our consolidated financial position between our affiliates have the ownership.
But just let's focus on the restricted group, okay at the parent company that reflects the perimeter.
We posted across debt of $1 6 billion similar to the last quarter. However finished well with strong liquidity position mentioned before.
Cash flow generation from the businesses, the net debt and leverage ratio decreased significantly recorded $677 million.
One time leverage.
The average life whistles were reduced to $3. One years until 2027, you see the debt profile, we don't face any relative of debt maturities.
So this.
Concluding our presentation now I will turn to Raquel. So she will poll for questions. Thank you so much.
Thank you the floor is now open for questions.
Your question please enough through some chop, we will read and answer them in oversea.
Also please make sure your name.
And company are correctly displayed to introduce you to the items should any participant need assistance center, such as message or raise your hand fifth hold while we poll for questions.
So and the first question comes from a on a frontrunner in Italy from Jefferies.
The first one is how do you see the evolution of production of among Russia going forward on how do you see this impacting lifting cost.
Okay.
Are you there now.
Okay. Good.
Well it's a.
Worth, noting that <unk> started in 2017, with 2.2 media and television and display.
We were capable of boosting that up to 10.2 million two minutes per day as of this year and probably going forward.
The field will be delivering around seven to seven 5% median viewing minutes. A day. This has to do with the increase of production in Seattle.
And I said there were more than counterbalanced the decrease in mammoth loser, we're observing that the.
The wells that we drill and complete ECR et cetera.
Much better productivity and therefore, we are shifting a little bit of our production from Malaysia to Sierra.
Should I take that started back in around half a million cubic meters per day back in 2017, and we expect 2024 to reach a production of around 6 million cubic meters per day.
On our share of the field.
Yes.
Regarding lifting costs.
It's also worth noting that in mango Mojo, we are on $6 per million Btu.
The reduction of the reaction for next year and some of the reduction of this due to the mild winter and hot spring that need I mentioned before.
Led to the reduction of the.
Uh huh.
Contribution of B M <unk>.
Evacuation and treatment facility, we used from wipe yes. It is more expensive than our own facilities. So that is why we have a reduction in the lifting cost.
Okay. Thank you Joseph.
The next question from Alejandro <unk> concession for prices to <unk>.
Yes.
Yes.
Okay.
Wow.
So <unk> is not here and now.
As competition by let me say let.
Let me.
And so this.
So far we've been granted.
Some they saw increases to cope with the cost variations, we were working to to keep pushing them more so we can.
Hum tied up.
Yes.
With the cost variations, but not further than that.
Okay. Thank you Peter.
And next question comes from.
A voluntary anika from the BCG could.
Particularly went about their third Gulf tender our prices and if you were awarded the PPA for Danone on letterman plants.
Yeah.
Hi, <unk>, yes, indeed, the tender has been finished.
The offers they reveal.
Uh huh.
We did the each political radio so we think that.
We are qualified the technical Linda economics.
[noise] requirements of the.
Auction. However, there is no.
Resolution from the Secretary of energy Shane.
Which projects are being awarded so we're still waiting for that.
We presented <unk> with 300 million and 300 megawatts with a new gas turbine, we will replacing Gloria and Infinera Rod presented.
Hansen, the combined cycle 11 megawatts.
Both projects have been qualified to dysfunction.
Thank you.
Next question comes from Alex <unk> from <unk> Securities. She asks about a legacy energy, which we are already answer.
And he asks about what if scenarios are being considered in terms of regulatory the regulatory changes sorry on how it might be affecting your own strategy.
Thermal projects on overall margins.
This is Barry the question so.
See you then.
So a lot of us being class or before the question Doug.
That Alejandro was asking but so far the question what.
Great.
Kennedy Malay a P.
People managing said it's about.
They want to.
To make it to the spot market into a marginal system like we used to be in the nineties. The question like how and then the other.
The incumbent government, we don't have much.
Information about this.
It's just it's what it's.
Going on.
The good finish that because of the availability rates that we've been witnessing the drop and the ability to rates.
That response, mainly because.
Because of the pool remuneration.
That's why <unk> call.
<unk> managed to get pay better.
Then open cycle.
Okay cycle legacy units that so far more business or where we stand right now there's no more information going forward.
Remember the legacy.
70% of salary, so capacity, but just less than 30% of ourselves.
So today.
Our strategy for <unk> going forward.
Keep adding ppas you've seen here.
More wind farms that are <unk> PPA.
More will participate in these auctions Becker.
Yes.
Such great that your energy is doing.
And trying to enhance our thermal.
Our thermal portfolio to a better technology and more efficient so the dispatch wise, we are ranked senior.
For us going forward.
If a refinish normalized witnesses that.
For example, the legacy units of wellness and beta we're now will be behind.
But maybe they will play a role that they play the 90 shopping just backup could be getting pay a proper <unk>.
<unk> cost proper remuneration that that really raised the fixed costs, but that's it but it's going to not going to be a material.
<unk> contribution in the future for bunzl.
The hydrus, we still don't know what's going to happen with the consistency in industrial that are going to end.
This year, we're still working normally normal here.
But physicians will be ending next year or two.
June and October.
In particular for his wave wave, it's in 2020 nicely Sui longtime frontier Mt.
The question Maher, it's so.
So far.
Uh huh.
That is the contribution going forward for Pompe is now coming from there, which will never come from M. P. M Ppas that will build it.
Thank you.
We have another question from the lending Securities team. This is Marty no nonsense can you provide can you provide.
<unk> an update on the progress of pump owner he is crude oil projects.
While these initiatives ramping up in the current economic environment and what expectations do you have are they contribution for salt next year.
Okay.
Our.
Oil project for the coming years, he should be using going out on the field.
So far we have is the completion of a well that's already been built that's the wrinkle in there end of 2001, we will be completing that well in January 2024, and probably will have the best thing finished by.
March of next year.
The next step would be the drilling of two types of three Bud soft three wells each that will be completed by the first quarter of 2025.
To match with the new transportation capacity that we acquired from our Nevada.
We probably.
Allow us to start bumping pumping oil into our system by <unk>.
Mid 2025, and that's when we're going to be seen.
A significant result in or impact in campuses.
The.
Level of production of these wells.
Is gonna be capped by the transportation capacity that we acquired and that will be in the range of 900 to 1000.
Sure.
Cubic meters per day.
Thank you. Okay. Next question comes from Phil into my shoulder.
With me on the issuance of 328%.
You May ask your question.
These products.
Adjustments and.
The second question.
Okay.
I am expected further adjustment.
So thank you were flattish as I said before it's.
It's going to be we don't have more visibility that this we just are working very closely with MISO and secrecy of NRG.
We just are working to get more increases to two.
To pair it with the cost variations.
And the next question is from <unk> from <unk>.
From Bank of America.
He asked the same first question.
As Martina as oil and gas. The second question is more for <unk>.
About.
What's the outlook to sign a new gas contract with Chilean market exports.
With the Mr. Keystone pipeline operational star and some industrial surplus in nuc in region.
Could you provide some color regarding the prices in amount.
Okay.
How is the outlook to sign new gas contracts with chiller regarding the prices what color regarding the prices and amounts.
Yes.
The.
Important to note is that the so far the contracts with <unk> are renegotiated on a seasonal basis, we have a.
Contract starting in April and.
Finishing in six months from that from from.
From April and then we have to.
Renegotiated and again so.
We just finished negotiating the contracts for the spring and summer of 2023, and 2024, and we will have to sit down with the Julians <expletive>.
To start negotiating contracts for the periods starting in May.
My understanding or my view is that there is enough gas in the Nokia innovation in order to supply not only the general market.
The new pipeline pipelines in this case.
Since we would have for the next winter already sold the compression capacity both in that arena.
And to supply.
The Chilean market during the winter.
Probably around 5 million cubic meters, a day, which is the maximum capacity on best on this during the winter Ashish.
Thank you Sir.
And the second question from Air, France, and China.
Yeah.
Effectively restriction on resolution that allows you to set up.
Thanks.
Yes.
Josh will calculate.
Charlie.
Hello, everyone.
So.
The last few months have been able to apply to these new scheme on neighborhood to explore.
Almost $50 million.
And our gorilla glass.
From October and November.
At a higher exchange rate of our own.
515 basis.
<unk> versus 350 basis per dollar.
Thank you Dr fish that exchange so okay.
The question Youre asking is Debbie for.
Thank you for your thorough in 'twenty.
Dominion Nordics.
We are also expecting to export our own $10 million from from December through the skin.
Okay.
Thank you.
Our next question comes from a Keystone failure from Milan.
Yeah. The first one is with more of a question capacity out of pocket more of that into the province of <unk>. We may argue that exports could be lower during winter.
But at the same time industrial users might be tempted to increase production to keep the production to keep experts at the same level or even higher which made you think things will go for the overall group assess premium size.
As I mentioned before there is enough gas in the mid <unk> and others to supply not only the.
Internal market during the winter, but also to survive in the Chilean market. So my guess is that producers will be more than willing to supply GW in the wind.
As long as.
Fulfilling their commitments with the blonde yasir.
Premiums.
Okay.
Thank you have a lot of them.
And the second question from Kristen is with regard to the reversal of the PGN pipeline. When do you think the government could launch a new brand of auction for volumes to be sent up staying on <unk>.
How big does that auction could be.
It is worth noting that the reversal of CGM in the first stage and without the second the second tranche of the <unk> pipeline can only move gas.
During off season during the spring and summer.
In that sense.
They went to replace imports bigger base of approximately three to 4 million coming from what <unk> on the other hand. It is also important.
<unk> the biggest message, Missouri first to renegotiate that contract with Bolivia.
Is three D I'll use that during the this spring and the summer there when you guys will be having fair gas.
So it's difficult to say when that auction will be taking place and what is going to be the amount, but again. The total members from one EMEA during the summer.
We'll be around for is at around 4 million minutes per day.
Only way to increase the really the output from <unk> into the north.
Region is with the car.
Construction of the second tranche of the vessels.
Okay.
Thank you would assume on the third question is considering that most of our revenues are linked to the official effects can be 70, 70%. How you ask them are you considering any has.
And he has a CVT and gave us two unaffected regimes comps by 2024.
Okay Alright.
Okay. So first of all this important them through to clarify that we do not have.
And you had Golar my theory this until 2027.
Secondly, we consider a scenario where there is a global exchange rates scheme, where we have to pay.
Does the higher exchange rate and the one of our in gum.
Revenues.
Not sustainably for the gone variables in.
In that case, the cost of financing for new breakfast with regards to even more expensive.
Bye now.
And thirdly, as a fleet and.
Before.
We have very low leverage ratios.
Because of our very strong financial position. So we are thinking we are already through two hour.
<unk> position and also related to refiners how are there any data so far short of time, where we could see that that scenario is playing out for example.
A few weeks ago, we minus two usual locale born in cargo.
Okay.
Lo Fi person right.
Thank you and he got a next question comes from.
<unk>. He says why P. S reported a relatively large impairment charge and discuss portfolio mentioning lower long term prices driving driven by higher competition on potential oversupply.
<unk> seen a similar scenario.
We'll be there a risk of impairment on gas reserves downward revision.
Okay.
Until 2020, H, we already have our commitments for natural gas already sold.
So I don't see any problems in the coming five years.
Five years from now our expectation is that the regional markets will be open there is more gas going to Chile.
More gas going to breastfeed.
And eventually we will we will be having.
And LNG plant already in the process of being constructed.
So our expectation is that the natural gas market five years from now is still going to be a place where we can have some opportunities to keep on pumping hour our resources.
Thank you next.
Next question comes strong and then also curious yes.
Is it any mid long term plan related to offshore in proximity of net monitoring blood amazing.
Okay.
So far we don't have any any plans for investing offshore.
Thank you Laura.
And next question comes from for Lilac malaria, Maryland is still on the on the administration of a bump up from the Ips for administration in all of them of the exploration of contract off of Ministrations in June 2023.
Thank you the senior Investor Yes.
The contract has been renewed now it's continued operators like pump.
Thank you on that.
Jim I'll start and I'll ask.
And regarding renewable expansion any update on transmission bottlenecks.
Hi, John So so far us.
A couple of months ago the government.
This close in a resolution to what is called <unk>.
Mitch outlined all the needed expansion from the transmission grid in high voltage transmission grid there is free.
Three tiers of priority the first tier.
I don't have the slide right now I can say to you that basically.
We should see Argentina map.
They have like Hansen.
South of Argentina tool to gather the wind farms.
Enhancing the west.
Northwestern part of the nine canceled the solar park.
Some are better status of rub two.
A billion more than $2 billion of investment in the first year.
That's basically tackling interested the renewable.
Search and then it's a it's very comprehensive plan, but basically it's not me.
<unk> to be done overnight.
The question Mark No doubt now that we know where are the priorities is what's the next move is it going to be a beauty, if you're going to be.
Funded by the government like the network vision of pipelines for each tranche.
Something that we.
We don't have a clue, yet, but the Katrina coreys already.
The defined where.
The expansion is needed and.
And and Ah.
We'll see what's going to be the scheme to to do it.
I think there's one question it's more.
A more comprehensive way aggressive ever lower in fact, well could you talk about future project that we're planning to do.
I will say in a nutshell is what or as you said very well.
Right now we are very excited about ramping up <unk>.
Vitol crude oil shale oil.
Block that Greenfield as we are planning to.
To make first of all next year and plan to reach a plateau of 20000 barrels per day by 2027.
<unk>.
Then we are very active again as everybody knows who the gas side, we ramp up production. This year, we are very proud of that and then.
This is all under take or pay contracts for the next five years or so Russia central.
Upcoming is to see if theres more pipeline around so we can keep replacing imports and then obviously the second generation.
One thing too.
To keep according to.
To Chile to Raffi to other countries and then in power generation that I would say this.
Later, because today we are.
<unk> were curtailed by the high voltage grid, that's not something that we control.
Today, what we're doing it's Mike.
Kelly's putting them size.
This is Sal our current power generation expansion in the pipeline, but we're.
We're not doing more furtive from this because there's no.
Power grid available, we will love to do more.
With today, we are restricted restrained towards that but today's that and today also we are as you know, which we addressed in this call is the.
Is the thermal auction that the dominants do it again.
Again.
We apply when we two projects and full of them.
Qualify the economic tender.
And the technical partial.
Feel like very confident that we can.
Kim has awarded a debt so that sets us basically.
The main idea is to keep increasing our E&P footprint.
Uh huh.
I will say that the or as you said very well the upside potential there is way more exciting.
Infrastructure has been freed up and constructive.
The other side power generation you sold so it's a core business will come back or things that today, we are restricted by the power grid.
Okay.
Oh, Thank you very much for all your questions. This concludes our question.
Section now, let us turn to honor for the final remarks.
No.
You want to say anything.
But as you know.
No that well is being quick and.
In fact, much again anything you may need a you forgot lasher, we are more than available for you you can reach ourselves.
Thank you for joining our conference calls we appreciate it.
Until next quarter Bye bye.