Pampa Energia S.A.

Good morning, everyone, and thank you for waiting. I'm Margarita Chun from Maiar, and we would like to welcome everyone to Pampa Energía's first quarter 2022 results video conference. We 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 participant need assistance, please send us a chat message. Before proceeding, please read the disclaimer that is located on the second page of our presentation. Let me mention that forward-looking statements are based on Pampa Energía's management's beliefs and assumptions and on 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 conditions and industry conditions and other operating factors could also affect the future results of Pampa Energía and could cause results to differ materially from those expressed in such overlooking statements. Now I'll turn the video conference over to Lita Wang, Investor Relations and Sustainability Officer of Pampa Energia. Please go ahead.

Good morning, everyone. Thank you for joining our conference call. We are pleased to share our first quarter 2022 results. Our CEO, Mr. Gustavo Mariani, and our CFO, Mr. Nicolas Minlin, are both here and joining us for Q&A. Let's start with the quarter's figures. Revenues increased by 32% year-on-year to $555 million, driven by gas exports, commodity prices, updated legacy prices, and Energia Plus. All of them were partially offset by expired PPAs at Loma and Piquirenda, and lower than inflation tariff increases in utility business. Roughly 81% of our sales were dollar-linked. The adjusted VDA amounted to $226 million, 11% up year-on-year, and 13% up quarter-on-quarter, explained by the same reasons detailed before, offset by higher expenses, intense EMP activity, and lower pet chem margins. Quarter-on-quarter seasonality boosted the VDA. As you can see on the right below, the share between electricity and oil and gas is balancing, driven by our gas business. CAPEX in Q1 almost doubled last year's figure, mainly due to the growing planned gas commitment and power expansions at Barragan and Pepe No. 3. However, it was 30% down quarter on quarter because of higher diversments at PP3 and Barragan expansions. Moving on to the power generation as seen on slide four, we posted an NVDA of $121 million in Q1, 5% up year on year and 15% up quarter on quarter, mainly contributed by higher spot prices and thermal B2B margin, besides the outage that happened in Barragán last year. However, this was partially upset by one of the Lomas PPA maturity and increased peso link expenses. Last month, spot energy prices were adjusted by 30% as of February, plus another 10% increase from June 2022. Also, the low factor coefficient was permanently eliminated. So, power plants with a lower dispatch rate just collect the full availability payment. Moving on to the Pampa power generation operating figures, Q1 was 10% up year on year, surpassing again industry average that only achieved 1% growth. We recorded higher thermal dispatch at almost all our units in line with the country's reliance on thermal generation to cover the reduced hydrogen generation and increase local demand. The power generation business relies on capacity payment, like a ticker pay. So availability is what matters most. In Q1, we reached an outstanding availability of 98% without a significant outage, better than the 95% achieved in 2021. Again, Pampa's availability was way above the system expectations. the system availability of 74%. Regarding our thermal expansion, The closing to CCGT in Senado Barragan is almost 80% advanced. Most of the power grid is ready, and we continue getting ready boilers, high-voltage facilities, and transformers. More than 1,000 people are working daily on this project. Nevertheless, the successful commissioning required additional time to review works carried out years ago, postponing the COD to the fourth quarter of 2022. PP3 wind farm expansion is roughly 25% advanced. We made substantial progress in the civil works and continue working on the control system and different permits with the regulator. We also started to install cable piping in the foundations. The estimated COV is split in two stages. The first one, 50 megawatts by February 2023, and the remaining 31 megawatts by May 2023. Now, moving on to the EMP business, even though it was an off-peak season, we posted an adjusted VDA of $56 million in Q1, 70% up in Europe. and 22% up quarter-on-quarter, mainly boosted by export volumes and prices, higher industrial gas demand, upset by increased costs related to the growing activity and export expenses. Our total lifting costs increased by 32% year-on-year, but it's 27% down quarter-on-quarter, explained by the increased activity to keep a high production level to export more and prepare for the 2022 gas winter commitment. Efficiency-wise, lifting costs reached less than $6 per VOE, similar year-on-year, and 25% down quarter-on-quarter. Our total production averaged almost 58,000 barrels of oil equivalent per day. Of that, 91% is gas. On the oil slide side, which represented 24% of the segment's revenue in the quarter, the volume sold was 62% up year-on-year and 12% up quarter-on-quarter, being 5.2 thousand barrels per day. The increase was mainly driven by both local and foreign demand recovery. Oil price was almost $70 per barrel, primarily due to the exports and rather local rise. Regarding gas, as shown on slide eight, our volume sold maintained at 9 million kilometers per day since the 2021 winter, placing the off-peak surplus on exports and local industries. Our production outperformed the industry average, which grew by 13%. And this production of performance was led again by El Mangrucho that represented 69% of the quarter's production. This block is wholly owned and operated by us with the outstanding productivity boosted by its active drilling and completion of wells and the growing evacuation capacity to be ready for this winter. It was also followed by Rio Neuquén's growth, which almost doubled year on year, in addition to Sierra Echata block. Our average gas price of the quarter was $3.5 per million BTU. This is 27% up year-on-year and 14% up quarter-on-quarter. This is thanks to the export prices. Also, spot prices converge to the plant gas levels. The year-to-date sales breakdown now is fairly distributed. Take-or-pay contracts, export contracts with Chile that ended last April, step in CAMESA and the retail due to the seasonality. It is worth highlighting that Pampa led the export market through the gas and gas pipeline that connects to Chile. Also, compared to last year Q1, we are growing our B2B industry share. Regarding our operations, this quarter we drilled 12 gas wells and completed 9 gas wells, all of them tight and mostly at El Mangrucho Rock. We expect drilling activities to accelerate even more during the winter to achieve more than 11 million cubic meters per day of production. As mentioned in previous calls, in preparation for the output surge, we are expanding the gas treatment plant at El Mangrucho. This month, we are adding 2.5 million kilometers per day of capacity, and by the third quarter of this year, the total capacity will reach above 13.5 million kilometers per day, more than the double of last year's capacity. Okay, moving on the pet can business, we posted an EVDA of $6 million, 67% lower year on year because of higher raw material costs, especially in virgin NAFTA. This is offset by the significant rise in commodity prices. Quarter on quarter, the EVDA is down 33%, driven by a lower volume of reforming products. Sales volume was 7% down year on year, mainly due to lower reforming products dispatched as façon instead of the end product. In Q1, 37% of the sales were exports. Regarding cash flow, the free cash flow was almost breakeven because of the increased capex and Lomas expired PPA. This quarter, our restricted group capex grew to $74 million compared to 31 last year. Although we are raising our expansion capex in the core business, they are self-financed by their outstanding operating performance. Note that working capital is negative this quarter, mainly driven by chemists' delays in payments. In addition, we incurred debt for $33 million, mostly from the green bond. In summary, we generated $34 million of net cash in the quarter, achieving $607 million of cash position by the end of March. Additionally, we continue divesting non-core businesses. We are transferring our stake in Venezuela oil blocks, ensuring a clean exit for Pampa. Pampa will collect 50% of any potential compensation from these blocks. Moving on to the slide 11, this slide shows the consolidated figures, including our affiliates and ownership, but let's focus on the restricted group that reflects the BOM perimeter. We posted a gross debt of $1.5 billion, 97% dollar denominated, bearing an average interest rate of 7.8%. The average life decreased slightly to 4.1 years during the quarter, we issued our first green bond in pesos, equivalent to $28 million, due in 18 months to finance our PP3 expansion. However, net debt, very important, decreased to $845 million. The net leverage ratio remains similar at 1.2 times. In the next 12 months, the company just faces less than $20 million of maturities. Therefore, we expect to keep strengthening our balance sheet and focusing the investment on our core businesses. So this is the end of our presentation. Now I will turn the word to Margarita. We'll open the floor for questions. Thank you.

Thank you, Lira. 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 so that we can introduce you to the audience. Please lower your hand once your question is answered. Should any participant need assistance, send us a chat message or raise your hand. Please hold while we pull for questions. The first question is regarding the new gas pipeline, Nestor Kirchner. The question comes from Anne Milne and Frank Magan of Bank of America and Bruno Montanari of Morgan Stanley. There are three questions. First one is the expected timeline of the new pipeline. Second one is Pampa's perspective given the new pipeline. And the third one is if there is no transportation limitation, what will be the expected production for 2023 and 2024?