Pampa Energia S.A.

Good morning, ladies and gentlemen. Thank you for... Can you hear me? Good morning, ladies and gentlemen. Thank you for waiting. I'm Margarita Chun from IAR, and we would like to welcome everyone to Company Argea's third 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 Pump Energy'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 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 forward-looking statements. Now I'll turn the video conference over to Lira Wang, the Investor Relations and Sustainability Officer of Pampa Energía. Please go ahead.

Hello. Hello. Hello. Hello. Do you hear me? Okay. Sorry. Technical problem. Anyway.

Thank you, Maggie. Hello, everyone. And thank you for joining our conference call. I will make it short and sweet, so we have plenty of time for Q&A with our CEO, Gustavo Mariani, who's here, and our CFO, Nicolás Minning, who is here as well. Let's start with the quarter's figures. It's been another solid quarter for our businesses, though gas made it to the headlines again, as expected. Revenues increased 11% year-on-year and 7% quarter-on-quarter to $621 million, mainly driven by seasonal gas sales, pet chem, commodity prices, electricity spot prices, and Energia Plus. However, the end of Loma and Piquirenda PPAs last year mainly offset these increases, as well as Loma's gas turbine number 5 outage and lacked regulated tariffs. 87% of our sales were dollar-linked. The remaining are electricity spots and regulated utilities. Those are in pesos. The adjusted VDA amounted to $246 million, 5% less year-on-year, but similar quarter-on-quarter, basically explained by the same reasons detailed before, plus higher payroll in U.S. dollar terms. As you can see on the right below, the business share flipped, and now Oil & Gas leads the consolidated adjusted VDA fence to our gas business, which took almost half of our EVDA. CAPEX in Q3 was 87%, higher year-on-year, and 27% up quarter-on-quarter, mainly due to the fast pace at our power expansion project, PP3, and to a lesser extent, the finishing touches in Barragán. EMB remained similar to last year, but it's 27% lower than Q2 as drilling and completion activity slows down during the winter peak. Moving on to power generation. As seen on slide four, we posted an EBITDA of $89 million in Q3, down 29% year-on-year and 10% quarter-on-quarter. mainly due to the maturity of these PPAs that we talk about and odages and LOMA that we mentioned before, plus higher pesos expenses offset by better spot energy. This is thanks to the price increases back in February and June and increased thermal B2B sales known as Energia Plus. Q3 dispatch was 17% down year on year, mainly due to limited gas procured by CAMESA for power generation, affecting mostly Genelba-Marragan, which trigger higher dispatch firing liquid fuels. This quarter, we also experienced certain outages and program overhauls, offset by higher water input. the power generation business model relies on take or pay capacity payment. So availability is what matters the most. In Q3, we reached an outstanding rate of 96%, just a little bit above the 95% recorded last year. It will be higher if it wasn't for LOMA number five outage. So again, Pampa's availability was way above the system average that it recorded 78%. Regarding our expansion at Ensenada Barragán, The closing to CCGD is advancing as we are entering the last stages towards the COD. We successfully performed the steam blow and carry out our facilities reinstatement works to deliver the first steam to the turbine. We also keep working on commissioning the water treatment plant and the cooling tower. Around 200 people are working daily on this project to achieve the COD forecast by the end of this year. So moving to PP number three, wind farm expansion. The project is now 72% advanced. We completed the civil works and the wind turbine bases. We also received all the wind turbine components at the port of Bahia Blanca. As of today, we have nine wind turbines ready to be assembled. Vestas, who is our supplier, is already assembling the first section of the towers and the nacelles. The estimated COD is split in two stages, the first 54 megawatts by February 2023 and the remaining 27 megawatts by March 2023. Moving on to EMP, between May and August, we delivered close to 11 million cubic meters per day, as stipulated in Plancast. Still, because of better weather and hence lower demand, we reduced to almost 10 million cubic meters per day in September. However, our gas production in Q3 outperformed by growing 20% year on year and 6% quarter on quarter. averaging 10.7 million kilometers per day and outpacing nationwide growth that only increased by 4%. 76% of the quarter's production came from only one block, that's El Mangrucho, and almost all it's Thai gas. This month, we are adding 3.3 million kilometers per day of evacuation and treatment capacity at El Mangrucho, reaching 14 million kilometers per day of capacity, more than doubling last year's. Rio Neuquén and Sierra Chata also contributed to the growing output, but at a smaller pace. Though Thai gas is our primary production source, we are drilling shale gas wells to increase our share. We drilled four shale gas wells at Sierra Chata and also drilled and completed two tight gas wells. Last Friday, we also received news regarding the tender tapping the new pipeline, the extension of planned gas until 2028, and exports can be done on a take-or-pay basis during winter season. but following certain restrictions. So all are good signs towards bringing more stability to the gas market, but we are still waiting for more details. Briefly commenting on the EMP business figures as seen on slide eight, we posted an adjusted VDA of $117 million in Q3, the highest quarter since 2018. This figure is 13% up year on year and 15% up quarter on quarter. Explained by the gas performance venture before and the higher realized oil prices upset by increased costs related to the growing activity, exports and payroll expenses. Our total production averaged more than 68,000 barrels of oil equivalent per day, of which 92% is gas. Our lifting costs grew by 45% year-on-year and 16% quarter-on-quarter, explained by the planned gas increase commitments. However, the lifting costs only increased 22% year-on-year and 8% quarter-on-quarter, recording $6.6 per BOE, evidencing the efficiency of our operations. Zooming in, crude oil represented 20% of the segment's revenue in the quarter. The volume sold was similar year on year, but 20% up quarter on quarter, almost 6,000 barrels per day of nearly own production. During the quarter, local sales increased offset by reduced exports. Realized price was more than $70 per barrel, primarily due to the brands and the gradual rise in the domestic price. Back to gas, our average gas price of the quarter was $4.8 per million BTU, 9% up year on year and quarter on quarter, driven by seasonality and export prices. This price is also the highest since 2018. Regarding the sales breakdown, Q3 is in peak season, which is a skew to retail because they hold priority on their plant gas. As a result, we slightly reduce B2B share and gain exposure to exports despite selling in spot markets. Export share will take off during Q4 as we began exporting 1.5 million kilometers per day under take-or-pay basis since October until May of next year to Chile. Okay, briefly about petrochemicals. It delivered another outstanding EVTA of $19 million in Q3, much higher than the last year's $7 million. This is primarily contributed by better prices of reforming, plus the higher dispatch of octane bases in the local market, partially upset by higher raw material costs. However, quarter on quarter, the ABTA remains similar because of the higher sales volume was upset by a reduced styrene margin. Sales volume was 7% down year-on-year, mainly due to lower exports and tire industry conflicts, upset by low local demand growth for Star Enix and Octane bases. In Q3, one-third of the total sales volume was exported. Moving on to the cash flow, we recorded a free cash flow of $11 million, driven by the outstanding operating performance from all free businesses, helped by leaner working capital, offset by debt service. The increased debt considers the pesos raised in the local market and net from the 2023 notes exchange we finalized last August. In addition, in Q3, we collected 20 out of the 40 million pesos from the Eleanor sale finance milestone. So we concluded that sale and acquire the full ownership of Mario Cerrito wind farm for over $20 million. So in summary, we generated $119 million of net cashflow in the quarter achieving 685 million of cash in September. Moving on to the slide 12, this slide shows the consolidated figures of our financial position, including our affiliates at ownership, but let's just focus on the restricted group that reflects the bond perimeter. The net debt reflects the successful exchange of 2023 notes by issuing $293 million of amortizing 2026 notes, and paying down $122 million in cash. Hence, we lowered our international debt. In addition, taking advantage of the domestic liquidity and from the higher seasonal working capital from CAMUSA, we also issued a local bond for 22 billion pesos, due in 18 months and took $7 billion net peso bearing loans and $7 million of pre-import credit facility. So we posted a gross debt of $1.6 billion, similar to last quarter. 85% of that is dollar denominated, bearing an average interest rate of 8.3%. Net debt and leverage ratio remains similar at $927 million and 1.3 times. The average life decreases slightly to 3.7 years. As you can see, Pampa does not face relevant debt maturities until 2027. Well, so this concludes our presentation. Now I will turn the word to Maggie who will poll for questions. Thank you.