Pampa Energia S.A.

Good morning, ladies and gentlemen. Thank you for waiting. I'm Margarita Chun from Mayar, and we would like to welcome everyone to Pampa Energías' 4th 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 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 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 Lydia Wang, investor relations and sustainability officer of Pampa Energía. Please go ahead. Thank you, Mayi.

Hello, everybody.

Thank you, Marie. 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. Nicolas Mimic, who are both here. 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 acquired Petrobras Argentina. The challenges posed in this period did not prevent us from growing and delivering milestones. Our core businesses, gas and power, grew significantly in the last five years. In 2022, we raised our peak gas production to more than 11 million kilometers per day and currently working to ramp it up to 16 million in 2023, thanks to the planned gas last tender. More than doubling our 2017 watermark and proudly becoming the company that grew the most its gas output since the pandemic. 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 gigawatts install capacity to reach 5.1 gigawatts by 2022. In 2023, 323 megawatts more, are coming online as we are inaugurating PP4, and we commissioned two weeks ago Marragan with YPF more than 12 years after the CCGT project started. Our way of managing helped us to gain efficiencies and be savvy over CapEx. So we invested in equity assets that increase our VDA and made it resilient. We made good use of our robust cash flow by enhancing our power portfolio, strengthening our liquidity, substantially reducing our leverage, and returning value to shareholders with share buybacks. 2022 was a great year in Pampa's history. We look forward to delivering outstanding results to become a leading efficient energy producer. So now let's focus on the chorus figures, which Gus made it to the headlines again, as expected. The adjusted VBA amounted to $183 million, 7% less year-on-year, mainly because of lower PPA income as some contracts mature in Loma in late 2021 and Barragán in April last year, as well as Loma's gas to my number five outage, higher payroll in dollar terms, and lack regulated tariffs affecting Transener and TGC. However, the off-peak gas exports to Chile, the higher as spot power and reforming outstanding results offset these decreases. 83% of our EVDA was dollar-linked. Quarter-on-quarter, the drop is explained by seasonality in gas and power demand and prices. As you see in the right below, the gas prices helped oil and gas to lead the consolidated adjusted VTA, which took 56% of our VTA. CapEx in Q4 was 13% higher year-on-year, just mainly because EMP is reeling and completing activity surges in off-peak season to achieve planned gas commitments. However, this variation was partially upset by the advanced progress in PP4 wind farm, which implies lesser capex diversments. Moving on to power generation, as seen on slide five, we posted an adjusted VDA of $86 million in Q4, down 19% year-on-year and 4% quarter-on-quarter, mainly due to the end of some PPAs, the outages at LOMA number five unit and higher peso expenses upset by better spot prices, higher dispatch, and lower maintenance costs. Q4, dispatch rose 11% year on year, while the national power grid dropped 1%. This is mainly due to the last year's overhauls at Loma and Genelva. More gas for Central Piedra Buena. Outstanding water input. in Pichipicunufu and capacity factor at wind farms, partially offset by LOMAS number five unit outage and less liquids and Bolivian gas. Availability is essential to collect acre pay capacity payment, especially to our PPAs contributing most of the ABDA. In Q4, we reached an outstanding rate close to 97%, just above the 95.5% recorded last year. Again, this is way above the grid's recorded 69% ability rate. It would have been higher if it wasn't for LOMAS number 5 outage. Regarding our expansion at Cincinnati Barragán, the closing to combined cycle was commissioned just two weeks ago, substantially improving the power plant's efficiency and, therefore, its low factor. In addition, CAMESA granted clearance to the steam turbine up to 260 megawatts, priced with a 10-year PPA, with an off-day on CAMESA. With the existing gas, two gas turbines, the total installed capacity climbs to 827 megawatts, becoming one of the country's most efficient and biggest thermal plants. Moving on to wind farm expansions, we acquired at Arauco a 100 megawatt wind farm located in the province of La Rioja in mid-December, building a 20-year renovar PPA. The total price was $170 million and doesn't have leveraged the asset. The transition was an excellent opportunity to keep boosting our green portfolio and invest in resilient assets. Regarding PPF4, the project is now 86% advanced. We completed the cable installation, transforming station, and testings. All the wind turbine components are right now in the facilities, and we have commissioned already 36 megawatts. However, due to the climate condition and among other factors, we estimate to complete the COD by the end of Q2 this year. Also, last month, we announced a new project, PP6, which kick off already. We aim to add 300 megawatts investing more than $500 million. The first phase will add 95 million megawatts by the third quarter of 2024 with investment of almost $190 million. Keep in mind that PEP expansions are sold all under B2B PPAs. So on slide eight, let me briefly comment on the MP figures. We posted an adjusted VDA of $72 million in the quarter, 57% higher year-on-year because of the planned gas deliveries, gas export prices, and higher oil demand and prices, offset by lesser gas export volume and increased costs related to the growing activity and payroll. However, quarter-on-quarter, EBITDA is down 39%. This is primarily due to the seasonality. Our lifting costs likely grew yearly, but was down quarter on quarter due to seasonality. Efficiency-wise, the lifting costs per BOE performed in the opposite way, recording $7 per BOE in the quarter, 3% down compared to last year. In Q4, our total production averaged almost 62,000 barrels per day. So many crude oil represented 9% of our output. Still, it reached 22% of the segment's revenue, mostly because of export prices linked to brand and export volumes, which tripled compared to last year. Last December, we successfully extended the planned gas contracts until December 2028. Furthermore, regarding the tender tapping the first stage of the new gas pipeline to be online on July 23, Pampa got awarded $4.8 million out of the $11 million cubic meters per day at a similar price to previous tenders until 2028. This is excellent news as it contributes significantly organic growth, and long-term visibility to our gas business. Therefore, by this winter, we will more than double the maximum record register in 2020, producing almost 16 million kilometers per day by investing 1.1 billion cumulative between 2020 and 2023. Besides the upcoming new capacity in the main pipeline, our shale gas campaign will support the significant ramp-up in production for the first time in our history. In Q4, we drilled two wells and completed five wells to Baca Muerta at Cerra Chata, confirming its great potential for shale development. Most of the $490 million capex in EMB is destined to drill and complete 24 wells to Vaca Muerta in Mangrucho and Sierra Chata blocks. Still, currently, Thai gas is our main primary production source. So as we engage in Shell gas campaign to increase our share, this year, we will connect to horizontal wells in Mangrucho and keep drilling in Rio Neuquén, that it's not operated by us. Our gas production in Q4 was 6% up year-on-year, but 11% down quarter-on-quarter due to seasonality, averaging 9.5 million kilometers per day and outpacing nationwide levels that only grew 2%. 72% of the quarter's production came from El Mangrucho, where we commissioned the second gas treatment plan last November, with a capacity of 4.8 million kilometers per day, replacing temporary facilities and covering subsequent winter ramp-up. Therefore, El Mangrucho can produce up to 14 million km per day. The average gas price of the quarter was $3.9 per mm2, 24% up year-on-year due to export prices, but 20% down quarter-on-quarter because of seasonality. Regarding the sales breakdown, Q4 is fairly distributed. We retail in off-peak and lesser exports year on year, but still represents 13% of our output with higher prices. Exports will remain under record pay until winter, even winter, since we obtained permits 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 block, we recorded a 14% increase in our proven reserves, amounting to 179 million barrels of oil equivalent. Although we held the production record in 2022, the replacement ratio was two times and the Irish life was kept at eight years. The additions reflect the excellent results of shale gas pilots to Bacamorta formation that we did in Sierra Chata and El Mangrucho, tripling shale reserves certified last year. The petrochemical business, EVDA, grew by 68% year-on-year, posting $15 million in Q4 revenues. primarily contributed by domestic reforming and polystyrene sales, plus a lower cost of emerging NAFTA offset by reduced margin and demand of styrene and rubber. In Q4, 30% of the total sales volume was exported. As you can see left below, after we reorganized the production strategy in 2019, we could smoothly navigate the volatile commodity prices producing at maximum capacity close to historical rewards. In spite of intensive EMP capex, In Q4, we recorded a free cash flow of $101 million. This is driven by the outstanding operating performance of all the free businesses. Working capital reduced the seasonality that Kamesa paid at a higher frequency, upset by debt service and an income tax early paid of $15 million. The increased debt considers the dollar link that we raised in the local market. In addition, in Q4, we acquired the Arauco wind farm that we previously talked about it, and we had to make a first installment of $128 million. This is shortly married. So in summary, net of everything we generated $15 million of net cash flow this quarter, achieving $700 million cash by the end of the year. Moving on to slide 14, we show the consolidated figures of our financial position, including our affiliates at Ownership. Let's focus on the restricted group that reflects the bond perimeter. We posted a gross debt of $1.6 billion, similar to last quarter. 84% is dollar-denominated, bearing an average interest rate of 5.4%. Taking advantage of the domestic liquidity diversifying our leveraged resources, we issued a five-year zero-coupon dollar link for an additional $15 million. plus $100 million peso bond at Ballard plus 2%. The net leverage and net debt kept going down, recording $913 million and 1.2 times multiple. The average life also decreased to 3.6 years. Ban Ban does not face relevant debt maturities until 2027, so This is thanks to the successful bond exchange made in August of last year. So this concludes the presentation. Now I will turn the word to Margarita, who will poll for questions in the chat. Thank you so much.