Pampa Energia S.A.

Recording in progress.

Ladies and gentlemen, thank you for waiting. I'm Margarita Chum from IAR, and we would like to welcome everyone to Pampa Energía's second quarter 2023 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 on the second page of our presentation. Let me mention that forward-looking statements are based on Pampa Anarchia'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 videoconference over to Lira Wang, Investor Relations and Sustainability Officer of Pampa Energía. Please go ahead.

Good morning, everybody. Thank you, Maggie. Hello, everyone, and thank you for joining our conference call. I will try to make it short and keep some parts where we explain the earnings release so we can have plenty of time for Q&A with our CEO, Gustavo Mariani, who's here, and Nicolás, who's joining us very soon, Horacio Turri, our head of EMP, that is here to answer many questions that you might have in EMP, and a lot of us, our corporate finance director. So let's start with the poorest figures and go straight to the adjusted VBA, which amounted to $222 million in Q2. 13% less year on year mark by soft domestic demand due to the mild winter. lower commodity prices and peso depreciation affecting spot and regulated businesses, partially upset by the renewable and Barragans PPA plus higher gas export sales. However, the 8% rise quarter-on-quarter is explained by the winter season and PPAs. It is worth noting that 87% of the quarter's EBDA was dollar-linked, And the share between power and EMP is almost even, though oil and gas is leaning in the pie, thanks to Petken and PGS. CapEx in Q2 was 59% higher year-on-year, mainly because of the PP6 wind farm construction, plus EMP shale drilling and completion activity, offset by the commissioning of PP4. PP4. Moving on to the power generation, as seen on slide four, we posted an adjusted VTA of $98 million in Q2, similar year on year, but down 9% quarter on quarter, mainly explained by the impact of peso depreciation over spot prices, certain thermal outages, and lower power demand, upset by the addition of wind farms and Barragán's new PPA. plus the special prices for legacy CCGTs. Q2 dispatch rose 17% year-on-year, led by Barragán, new CCGT, and the wind farms, upset by less dispatch at Piedra Buena due to the fact that lower national power demand and program maintenance at Genelba. Take-up capacity payment, especially from PPAs, explains most of the EVTA. It is driven by availability, and in Q2, we reached 95% below last year's almost 98% due to outages at Güemes and Genelva restored during the quarter, plus the commissioning tests in Barragán, CCGT, fire and diesel oil. However, it is way above to increase availability of 74%. Moving on to expansions, we commissioned the last wind turbines at PP4 in mid-June. Therefore, a total of green capacity of 81 megawatts contributes to the power grid, having invested more than $120 million. This is 5% cheaper than the budget. Regarding the PP6, the project is roughly 17% advanced. We are working on the facilities and have started the civil works for the high voltage substation. We have already received the cages while the remaining wind turbine components are being loaded in China and arriving here within two months. The estimated COD for the first phase of 95 megawatts is in Q3 of next year. And the second phase of 45 megawatts is next year's Q4. So keep in mind that PP expansions are also under B2B PPAs. Last month, actually, another thing is that the Secretary of Energy launched a new tender to add up up to 3 gigawatts of thermal capacity, prioritizing only locations that demand is considered critical. Well, the submission is due at the end of this month, and the schedule award is in October. We are analyzing to participate here. Well, on slide six, our EMP business posted an adjusted EBDA of $97 million a quarter, just 4% down year on year. The oil and gas exports most contributed a quarter, offset by the soft retail gas demand because of the mild winter. However, quarter on quarter, EBDA was up 58%, mainly driven by gas seasonality. Our total lifting costs grew by 50% year on year, and 7% quarter-on-quarter. This is explained by the increased treatment costs. Efficiency-wise, however, the productivity from new walls possibly impact the lifting costs per BOE, which grew at a slower pace of 11% year-on-year and 9% down quarter-on-quarter, recording $6.5 per BOE. In Q2, our total production averaged above 67,000 VOE per day. This is 4% higher than last year. Zooming in, crude oil represented 8%. Still, it reached 17% of the segment's revenue, mostly because of increased oil exports upset by the drop linked with rent, getting a realized price of $65 per barrel. This output breakdown should change at the end of next year, following the agreement with Total to acquire the 45% remaining stake at Rigón de Aranda, a shale black oil block in Vaca Muerta. This marks the beginning of our shale oil development, aiming to keep exploiting the full potential of Vaca Muerta. We want to replicate our success story as a sole owner and operator in Emangrucho. That block is ranked as one of the best producing blocks in the Pina Basin. In consideration of Rincón de Aranda, we agreed to swap our Maria Severo wind farm. This move does not prevent us from developing more renewable energy, which is the case with the recently commissioned PP4 and with the current construction undergoing in PP6. About gas, our sales in Q2 grew by 4% yearly, averaging 10.6 million cubic meters per day, mainly explained by higher volumes exported to Chile, even during peak season, and increased demand for thermal generation from Camesa, upsetting the soft retail demand. The average gas price of the quarter was $4.7 per mu BTU, 7% up year on year. This is mainly thanks to the exports to Chile. Let me follow up on the Q2 production. As peak season starts on Q2, Plant Gas agreed the deliveries prioritize retail. But as you can see in slide nine, the warmer winter negatively impacted retail demand, curtailing production to below the maximum volumes agreed under Pangas. The delay in the commissioning of the Nestor-Kirchner pipeline also affected the gas output in July until today, as we are delivering the 4.8 million kilometers ramp-up that we agreed to run for, picking up the production to more than 15 million kilometers per day today. So we are reaching a new all-time high. Despite the weather, the Q2 production increase was mainly supported by exports as we pick up deliveries to Chile, even during the winter, as you can see in the graph below. You can see in this chart as well that this were under takeover pay for the upcoming months, and this actually ends in The clearance ends on April 2024. On top of this, we could add spot sales. Weather is something we can manage, but operation execution, we can't. So as you can see in slide 10, the new Shell Wells performance is unlike what we expected. Note that Sierra Chata's maximum daily production range from 750,000 kilometers to over a million. These results confirm Sierra Chata upside potential, one of the most productive blocks in the Baca Muerta gas window. Pad P2 was drilled and completed during the quarter. We are now completing one pad and drilling another one. In El Mangrucho, we drill and completed PAC-2 and PAC-3 in Q2. PAC-3's daily flow outperform our expectations and PAC-2 is currently under testing right now because it's just started the production. But this is all in line with the average of shale gas well in Vaca Muerta. Nothing out of surprises here. We are also completing one pad and drilling another one here in Mangrush. So let's move on to the petrochemical business that posted $10 million of ABDN Q2, almost half year-on-year, driven by the significant drop in international prices and lower exports, upset by higher volume source of reforming products. However, EBITDA was up 43%, up quarter on quarter, primarily because of better prices and SBR demand, offset by lower styrene and polystyrene sales. Sales volume was 17% up year on year, mainly driven by reforming, as the plan had a maintenance last year, offset by lower exports. In Q2, 41% of the total sales volume was exported. Well, moving on to the financial position. In Q2, we recorded a free cash flow of $44 million. This is mainly due to the expansionary capex in gas and power. Higher debt service driven by peso debt through principal, though principal gets diluted by the valuation. Also working capital improved due to better collection days from Camisa. By Q1, it was almost 16 days delayed And Q2, it improved to 50 days delays, so 10 days better. Now it's substantially improved to 36 days, so almost 15 days more improvement. These variations were upset by seasonality. Additionally, we raised $147 million net from the local markets. In summary, we generated $103 million of net cash flow in the quarter, achieving a cash position of $872 million in the end of the period. So moving on to the slide 11, we show our consolidated financial position, including our affiliates at ownership, but just let's focus on the restricted group that reflects the bond perimeter. We posted a gross debt of $1.7 billion, similar to last quarter. However, the net debt and the leverage ratio substantially decreased due to the divestment of separator wind farm and peso debt dilution because of the peso depreciation, recording $786 million and 1.1 times net debt to APTA. The average life was also reduced to 3.2 years until 2027. As you can see here, there's no relevant death maturities that we face. Well, this concludes our presentation. Now I will turn the word to Margarita and Raquel, who will poll for questions. Thank you so much for hearing us.