Q3 2024 Pampa Energía SA Earnings Call
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Speaker Change: Good evening, I'm Raquel Cardasz from IR and we would like to welcome everyone to PAMF Energia's third quarter 2024.
We would like to inform you that this event is being recorded. All participants will be in listen-only mode during the presentation.
After the company's remarks, there will be a Q&A session. Questions can only be submitted in writing through Zoom. Should any participants need assistance, please send us a chat message.
Before proceeding, please read the disclaimer on the second page of our presentation. Let me mention that forward-looking statements are based on Pampanerjia's 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 or may not occur.
Investors should understand that general economic and industry conditions and other operating factors could also affect the future results of Pampanerjia and could cause results to differ materially from those expressed in such forward-looking statements.
Lida: Now I'll turn the video conference over to Lida. Please go ahead.
Lida: Hello, thank you Raquel. Hello everyone and thank you for joining our conference call. I will make a quick summary of Q3. You might find more details in our earnings release and financial statements. Today we are having our Q&A with our CEO Gustavo Mariani, our CFO Mr. Nicolás Bindi and Horacio Turri, our head of EMP.
Lida: Let's start with the quarter figures marked by the solid performance from gas upstream and power generation, which helped to overcome the winter peak.
with the year's most critical period. Gas production increased 8% year-on-year with a growing contribution from Shell. Our CCGTs achieved high-low factors supported by strong gas and capacity availability.
Lida: Our balance sheet remains solid, with extended maturities and improved liquidity, bringing NET-BED to its lowest level since 2016 when we acquired Petrobras Argentina.
with just the BDA amounted to $279 million, up 14% from last year, driven by increased gas deliveries through the new pipeline from the planned gas, higher spot prices, and excellent dispatch and availability.
performance in our power generation segment.
Tariff increases also boosted contributions from TGS and Transcener
Lower gas exports.
Lida: Power and Gatsby to resell and Petkin margins more partially upset this game
The quarter-on-quarter decrease is...
Lida: explain by warmer September temperatures, gas pipeline curtailment, and higher operating costs.
It is worth noting that 75% of the quarter's EVDA was dollar linked and EMP leading the share.
Lida: Excluding most regulated types of businesses, the dollar share goes up to 85%.
Lida: CAPEX in Q3 is 59% lower year-on-year mainly because of the shale gas ramp-up and PP4 construction in 2023, partially upset by final payments for PP6 ongoing development in Rincon de Aranba.
Moving on to power generation, on slide 4, we posted an EVDA of $112 million in Q3. This is a 23% increase year-on-year, mainly explained by the operating outperformance and higher legacy prices, partially offset by lower industrial demand, increased operating expenses and the divestment of migratory rates.
Q3 dispatch rose 19% year-on-year driven by our CCGTs Altenelva, Barragan and Loma supported by graded gas and power availability
Lida: Lower water levels at Pichipicunyufu Hydro and the divestment of Mario Ferreiro partially offset this increase.
Take or Pay Capacity Payment, especially from PPAs, contributes most of the EBDA. It is driven by capacity availability and in Q3 we reached 96% up from 94% last year helped by fewer thermal outages.
A quick review on PEPES VI expansion, the civil works were completed, all windmills are installed since October and the project now is 98% advanced.
Between September and October, 50 mailboxes were commissioned, additional were commissioned by Comesa, reaching 113 mailboxes operational, out of the total planned 140 mailboxes. We are now conducting the final test.
and full COD is suspected.
just next week or before the end of the month.
PEPES-6 energy will be sold under B2B PPAs in Matar.
Going on, slide 7, our EMP business posted an FDA of $122 million in Q3. This is 8% down year-on-year.
largely due to higher operating costs related to Rincon de Aranda, reduced exports to Chile, and lower industrial sales due to the economic downturn. These factors were offset by increased gas production from the latest round of plant gas.
Lida: The beginning of Rincon de Aranda pilot plan and increased gas treatment costs raised the total lift and cost by 16% year-on-year, however, lift and cost per VOE slightly rose to $6 per VOE.
Higher output lower the gas lift and cost by 2% to 80 cents per milliliter
Total production averaged nearly 88,000 BOE per day.
and 8% higher than last year.
Lida: When we zoomed in, crude oil represented only 6% of the output and 16% of the EMP revenue.
Well, gas accounted for 90% of our production.
Lida: As you can see here, the deliveries have been increasing throughout the year, thanks to the new gas pipeline and peak during the winter. However, bottlenecks due to the delays in the commissioning of compressor plants, warmer September, and more significantly, soft demand from industries in Chile impact the volumes.
Lida: Still, deliveries stay above ticker pay levels that we do in the winter.
In Q4, demand is expected to ease with warmer weather.
Lida: El Mangrucho contributed 57% of the quarter's production and Sierra Chata provided a growing share of 29%.
Lida: Sirachata's production grew 18% year-on-year and reached a new all-time high record of 5 million hinges per day in July without connecting or drilling any wells this quarter.
Lida: Mangrushu experienced the same thing, no new walls tidying and a 7% increase year-on-year.
Lida: The average gas price for the quarter was $4.4 per mL BTU, 6% down due to the lower exports to Chile.
Lida: and sells to industries partially upset by better retail prices due to tariff increases.
Lida: As you can see right below, increased local gas deliveries were directed to retail and thermal power generation.
[inaudible]
I'm afraid I can't.
Speaker Change: Before we move on from EMP, let me briefly summarize what we presented yesterday about Rincón de Aranda. Production is currently at 1,000 bottles per day. This is primarily crude, low-water, low-gas companies.
Speaker Change: The development plan targets a production plateau of 45,000 barrels per day by 2027. This is aligned with the ongoing pipeline expansion.
Speaker Change: We are building facilities, securing evacuation capacity in Bacamorga Sur and planning to drill seven paths annually for the next two years. This is why we procure four drilling rigs right now.
Speaker Change: We estimate to invest over $700 million in 2025, with a total of $1.5 billion in CapEx between 2025 and 2027.
Speaker Change: A quick note on petrochemicals, we posted two million dollars on EBDA in the Q3. This is a 88% drop year-on-year due to higher costs and peak demand due to the economic downturn.
partially upset by higher volumes and
The Export Dollar helped PatKin to stay afloat this quarter.
Speaker Change: Okay, so moving to the slide 12, we show restricted group figures that reflect the BOM parameters. In Q3, the cash flow reached $80 million.
Speaker Change: Supported by improved working capital with days of sales outstanding at 48 days.
just six days delay
Speaker Change: Besides the robust operating cash flow, this last year's CapEx was shale gas run-pop. This year's spending, capital spending, was mainly maintenance for maintenance at 74 million dollars.
Speaker Change: In September, we issued a $410 million international bond, maturing in 2031, and to improve the debt profile, partially redeeming a part of the 2027 notes.
Speaker Change: Overall, this resulted in a net cash increase of $272 million, raising our cash position to $1.2 billion.
Speaker Change: by the end of September. This is a 23% increase compared to last year September and 150 million dollars more compared to June of this year.
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This slide shows our consolidated financial position, including
Speaker Change: Our affiliates have the ownership, but let's keep it on, restrict the group figures.
However, the net bet recorded $539 million, down 20%.
Speaker Change: year-on-year and 0.8 times to the last 12 months of BDA. The lowest ratio and amount in the last eight years.
Speaker Change: So this concludes our presentation. Now I will turn the word to Raquel. She will poll for questions. Thank you so much.
Raquel Cardasz: Thank you so much, Lida. 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 order to receive them. Also, please make sure your name and company are correctly displayed to introduce you to the audience.
Speaker Change: So to begin, the first question comes from Bruno Montanari for Morgan Stanley.
Speaker Change: First question he asked is, can you talk about the initial performance of Rincón de Arana and how should we think about the path of drilling in the coming quarters through the end of 2025?
Good morning.
Speaker Change: Bruno and all the audience. Regarding Rincón de Aranda, as Lida mentioned before, we have two rigs.
actually working to help the Greek last one's father
and our forecast is to drill
Speaker Change: from today to the end of 2025, seven parts of four wells each, so we will be drilling around 28 wells in the period November 24, December 25.
Speaker Change: In terms of our forecasted production, we are expecting to hit 12,000 barrels by April-May 2025 and 18,000 barrels by September of 2025.
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Speaker Change: Thank you, Horacio. Next question is for you two, I think.
Regarding the evacuation capacity...
Speaker Change: Can you remind us, Pampa and Argentina's gas evacuation capacity today and how that should evolve into 2025 and after? And how about oil?
Speaker Change: How are the discussions related to harming the stake for oil exploration in Badalmatasul evolving?
Thank you. Thank you.
Oh, yeah.
Thank you. Bye-bye.
Hi Bruno, Wu-Fa-Wo
Speaker Change: Producers don't own evacuation capacity for natural gas. So the ones who own the transportation capacity are either the distribution companies or big industries.
This year
Speaker Change: Early in the winter, one of the compression plants of the gastrointestinal fissure became online, though increasing its capacity.
Speaker Change: from 11 to 16 million cubic meters of natural gas per day. And the second plant I think is supposed to be online anytime soon, despite the fact that during the summer it's not...
Speaker Change: next next winter and it will be for sure ready by then. By that moment the evacuation capacity of the Nestor Kitchener will be a total of 21 million cubic meters per day.
until a new infrastructure project is
It's online.
Speaker Change: pipeline. So now the pipeline that used to bring gas from
Speaker Change: But just to keep in mind, that is not additional production from the Neuquena Basin, it is
Speaker Change: gas that used to go to the Litoral, to the east of Argentina, now it's able to...
to go to the North.
Relating...
Oil
We would mention, I think...
Speaker Change: If I recall correctly, in the previous call, we are part of the consortium that has been formed for the project Vaca Muerta Sur for several weeks.
Speaker Change: more than weeks. There are currently daily meetings to discuss the documents. We are very optimistic that this project, that we will finish the documentation and we will sign the final agreement.
Speaker Change: I'm on the different place of the industry probably by month and that the project will be launched before a year end.
Thank you, Gustavo.
Third question from Bruno.
is regarding Argentina's LNG project.
Speaker Change: How have discussions about LNG projects evolved? Is Pampa still interested in being directly involved? And if so, in which portions of the projects would the company be more interested in? The floating units, the land facilities or perhaps only the infrastructure part?
Definitely, we are very interested in the LNG project.
that are being discussed currently.
Speaker Change: through an LNG facility is the only way to do so in a significant number in the
in the long term. We believe floating units may...
Speaker Change: More sense than the land facilities, basically because of the fact that given capital restrictions and high cost of capital for Argentina.
Speaker Change: own it, own it and build them and own them, but so far we are giving
Speaker Change: priority to the all evacuation so today we are focused on the
Speaker Change: on the Vaca Muerta, Vaca Muerta Sur, that's our priority and the energy project can come once we have a
We want a Vagamort Azulis.
It's on the way.
Speaker Change: Thank you. Next question comes from Alejandro Vimchilis from Jeffreys. It's regarding Exxon's process. How do you see the situation of the Sierrachata block and a potential change in the partners there?
Speaker Change: Hello, good morning. So, we don't have information about the process relating to this asset.
I think...
Speaker Change: Thank you, Nico. Next question comes from Maritina Martens from Latin Securities.
Speaker Change: First one is regarding Energia Base or Spot Energy prices, the latest increases granted to the Energia Base scheme outpacks devaluation, improving legacy asset remuneration. Do you expect this trend to continue?
Speaker Change: that we expect to be announced at some point next year.
Speaker Change: The second question from Marina says, there has been news about a potential Urea plant in Vallablanca. Given Pampa's focus on developing Rincón de Aranda in the coming years, can we expect a start date or a go or non-go decision on the Urea project?
Speaker Change: You are totally right that today's focus for Pampa is definitely Trincon de Aranda, which is a major challenge and a significant capital deployment.
Having said that...
Speaker Change: the other two segments of Pampa, gas production and power generation. We don't expect a significant impact.
on our ratios, on our net indebtedness.
Speaker Change: Pampa has a net indebtedness because of the development of Gondaranda.
M.
Speaker Change: The profile that we have and the cash position that we have, we feel totally comfortable to move ahead with the project, the size of the Eurea project.
once we are convinced that it makes sense.
Speaker Change: When we will know if it makes sense or not, it will not be before one year from now. In the next six months...
Speaker Change: the price for a turnkey project to build the Eurea project. We don't expect to receive that.
Speaker Change: The soonest will be around one year from now, because we need to prepare the documentation that will take us.
Speaker Change: So, we hope to be ready by the end of the year.
and the other beat. So this is a...
Speaker Change: So the go-no-go decision will happen probably at some point in the second half of next year.
Speaker Change: Thank you. The next question comes from Daniel Guardiola from VTG. First one was about a Sierrachata situation, but we already answered that. So second question is about Oldelval.
Speaker Change: He asks for an update on the entry date for the Dublin capacity and how many barrels of capacity are guaranteed in this pipeline, considering there will likely be spare capacity. How many barrels do you expect to transport by Dublin in 2025?
And on top of that...
Speaker Change: We already have agreement with other producers in order to make use of their idle capacity for an additional 6,000 barrels, so we will be
Speaker Change: then in a position to have by April of next year 2,000 barrels of evacuation capacity which will match our production forecast.
Speaker Change: On top of that, we have enough treatment facilities by September of 2025 in order to produce 18,000 barrels, which
Speaker Change: We expect to be in a position to make use of either capacity of other producers in the original Old El Val Duplicar project and move those additional 6,000 barrels
Speaker Change: At the same time, we are working with Alderval Steel in the first steps of what might be an additional increase in their total transportation capacity that adds up to approximately
Speaker Change: 120,000 additional barrels, out of which we will be in a position to eventually contract 12,000 barrels additional capacity.
Thank you, Horacio.
Speaker Change: Next question from Daniel was about Trincon de Arnaz plants, but we already answered that.
Speaker Change: So, the fourth question is about power generation. What would be the EBITDA impact in Pampa's units if Pampa decides to adhere to the Secretariat of Energy Plans?
Speaker Change: and we would like to know if this plan would involve additional CAPEX commitments. Have you considered increasing the company's footprint with new generation plans?
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Okay, regarding the impact on EVDA of this...
every year. And regarding CAPEX, obviously it requires...
Speaker Change: in all of the equipment, some additional capex that we are still working on. We haven't replied yet.
Speaker Change: the request from the Secretary of Energy, so this is a work in progress. But yes, it requires additional capex in terms of EVDH around $10 million.
We've been doing so on renewables and we are...
Speaker Change: our sixth wind farm with 140 megawatts of capacity. In terms of thermal generation, we presented last year a proposal for a 300 megawatt thermal plant.
in Genelba but that was for the
Speaker Change: for the auction that was finally, this administration decided to cancel or postpone.
Speaker Change: And today, given the regulatory environment, in terms of thermal generation, there is no possibility to increase because...
Thank you. Bye.
The deregulation has not happened yet.
urgghhh
energy matrix of the energy generation.
Speaker Change: during the year. So there are probably six weeks a year with very extreme weather conditions. Those could happen in summer in Argentina. They could happen either in December or in February or March.
January because of the
Speaker Change: the holidays usually there is no problem but in those months in the weeks with a with prolonged very extreme weather
V.
Speaker Change: the requirements of the system might put the system to a limit. As long as we are able to import as we have been importing electricity from Brazil mainly and
And from you, Wai?
So, there are a few weeks a year.
Speaker Change: with a stressful situation and that needs to be addressed. Other than that, the system is okay for...
It's a current requirement.
Speaker Change: Thank you both. Next question from Daniel says could you give us an update on the gas transportation and transmission tariff schemes?
Speaker Change: TGA has already requested to extend the date. Right now it's no longer RTI, the name is RQI, right? It's RQI and basically they're requesting to extend the due day of December 31st to more because that the processes of the delay behind against the electricity utilities. The electricity utilities, however, they did have a scheduled public hearing for Trans-Canada on November 4th and it was it was postponed with no date and we are expecting a new date.
Speaker Change: I am talking about Trenton and the NTGS what we've been doing lately are actually focusing on extending the license and actually I think last week we had a battle the other way we had
Speaker Change: two weeks ago, right? Yeah, the license extension is probably here and that was a very key part of the process to get the license extended.
Speaker Change: But the processes are pretty good, the idea is to have the RQIs or RTIs soon.
sooner than later.
Speaker Change: What is the current status of PAMPAS and its subsidiaries receivables with CAMELSA, and in what time frame are the invoices being paid?
They're basically paid on time.
That's been the case.
Speaker Change: Since early this year. We are paid last six months we have been paid with
The government has not yet...
so
so
Speaker Change: Once they decide how they move forward, we will be able to...
Speaker Change: to give you a more straight answer. Definitely, we do have interest in...
Thank you. Bye.
Thank you all.
Next question from Ignacio.
Speaker Change: It's about the Bata Muerta Azul project, so we already answered that, and the last one, it's about OCP Ecuador.
Speaker Change: What are the negotiations or extension plans for the concession of OCP Pueblo?
Speaker Change: Finally, we've been informed that the government has decided that the assets should be returned to the state at the end of the concession on November 30th.
Speaker Change: We plan to launch a new bidding process later on, so now we are collaborating with them and following all the contractual steps needed for the return of the asset to the government in this initial phase.
Speaker Change: Thank you all, Nico. Next question comes from Gustavo Farias from Mancos, America. First one is about Trincon de Aranda, so we already answered that.
Speaker Change: And the second one is regarding the reversal of the Northern Gas Pipeline. How do you see the upsides from gas from local market and exports to Brazil in terms of production and pricing? And what are the pending developments to increase the gas exports from Argentina?
We've been developing contacts with Brazilian traders.
Speaker Change: generation market in the mining sector of Chile, in the north of Chile.
Speaker Change: Thank you, Horacio. The next question comes from Raúl Sin. Can you please provide guidance related to gas production for 2025 and onwards?
Speaker Change: Yes, we are forecasting to end 2024 with a production of, on average, of around 13 million cubic meters per day, reaching peaks of around 16 million cubic meters per day. Next year, we see the average production of Pampa increasing a little bit to 13.1, 13.2 million cubic meters per day and reaching peaks of around 14.3, 14.5 million cubic meters per day, including exports to Chile.
So that's more or less the answer to the question.
Speaker Change: Thank you, next question comes from Florencia from MetLife. After refinancing 27 and leverage at 0.8 times, which are the next steps for the group?
Go.
Speaker Change: Hello, Florencia. So, after the refinancing of the 27, I think it was a very good deal for the company and the country, issuing them with the minimum coupon for an Argentine company in the last five years. We are very comfortable with our level of indebtedness and our debt profile, considering all of the projects that the company has in the pipeline nowadays.
Speaker Change: The first one says, with the proposed government reforms allowing free contracting in the term market, how does Pampa plan to position itself competitively?
Hi Matthias and thank you for the question.
Speaker Change: Our competitiveness, we are very optimistic. We are eager for this new regulation to happen because we...
Grrr.
to manage itself in this
Speaker Change: The fact that we produce the gas that our thermal plants will burn.
Give us
Speaker Change: The second is related to our portfolio of power generation plants and not only we have several combined cycles
Speaker Change: The cost of gas transportation because they are located at wellhead is insignificant or inexistent, and that gives us a competitive advantage vis-a-vis other power generation plants that need.
Speaker Change: Danya Dehderri David Ara綜pe David AraÛpe David AraÛpe Márfuráb R. David AraÛpe David AraÛpe David AraÛpe Mátánda Mátandá Mátánda Mátandá David Arañón David Arañón
Speaker Change: Piano Tutorial 1. Piano Tutorial 2. Little High Smurf 3. Little High Smurf 4. Low Smurf 5. Smurf 6. Low Smurf 7. Low Smurf 8. Low Smurf 9. Low Smurf 10. Low Smurf 11. High Smurf 12. High Smurf 13. Low Smurf
She's from a team with a lot of expertise.
our commercial team for
Speaker Change: in power generation is well trained with a lot of expertise. We are the one of the biggest players on the on the matter so we are very comfortable to face that expected new environment.
Speaker Change: Thank you Hugo. Next question from Matias is regarding hydro concessions. So we already answered this.
Speaker Change: Now, Sebastián Lacunza is asking regarding LNG projects, which we already answered, and the next question says, is Pampa seeking to sell legacy plants in Tucumán?
So.
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First of all, we don't have power plants in Tucumán.
Speaker Change: Thank you, Monica. I don't know if you have, if we have more questions.
I'm going to go to Deloitte.
There's one from...
Speaker Change: How much upside can you have from the deregulation in the segments of EBTA?
Speaker Change: in the following years. I guess he's talking about power, right?
Speaker Change: Yeah, but that's too soon to tell. Let us read the new regulation and do the math. And yeah, I'll come back to you.
We don't know what it's going to look like yet.
https://www.patreon.com
So,
Speaker Change: We don't have any more questions. Thank you everyone for your questions and now I will turn to Lida for final remarks.
Lida: Thank you so much for speeding up to get here, Urs or Nico, I don't know if you have any remarks that you wanted to add. I think we covered it all pretty well, right?