Pampa Energia S.A.

Good morning, everyone, and thank you for waiting. I'm Raquel Cardaz from Mayar, and we would like to welcome everyone to Pampa Energía's fourth quarter 2023 research video conference. 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 Pampa Energias 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 Lida.

Please go ahead.

Hello, everybody. Thank you for joining us to this, another new quarter. I will make a quick summary of Q4. You may find more details in our earnings release or financial statements. Today we have for the Q&A, our CEO, Gustavo Mariani, our CFO, Nicolas Mindin, our head of EMP, Horacio Turri, our head of finance, Pito Suleguler. So full team here. Well, so let's quickly review 2023. This is another challenging year, but it did not prevent us from growing and delivering milestones. In 2023, we'll reach again a new peak in gas production, exceeding 16 million kilometers per day. This is a remarkable 44% increase compared to the 2022 record, thanks to the new pipeline facilitating additional eastbound evacuation and our active campaign, Vaca Muerta. However, average production did not take off as expected due to soft demand from mild weather and poor thermal dispatch. For the first time in years, we delivered below the take-or-pay. Pampa EMP is mostly gas production, but from now on, we aim to diversify with Shell Oil from RICONERA. Power generation did not stay quiet either. In 2023, we commissioned Senado Barragán's CCGT, PP4 wind farm, adding 360 megawatts of efficient energy. We also will be inaugurating this year PP6, which is total install capacity of 140 megawatts. So with all online we will be reaching 5.5 gigawatts by the end of this year. EVDA fell 12% year on year. This is mainly because of reduced gas sales mentioned before and the impact of this depreciation over our affiliates. This is . We will address this issue later. Our way of management help us to gain efficiencies and be savvy over business and balance sheet we used our robust cash flow to enhance our portfolio without neglecting our financial position, strengthening our liquidity and substantially reducing our leverage by paying down debt or taking advantage of the local market. Overall, 2023 was another remarkable year in Tampa's history. We look forward to delivering outstanding results going on. So regarding the quarter, we must highlight again this net leverage reduction, which reached the lowest level in years, $613 million of net debt, The situation was coupled with a soft demand for gas and thermal energy. This is our main products. This was expected because of seasonality. Q4 is an off-peak season, but this was worsened by mild weather. This was a warm spring and cold start of the summer. In any effect, generating high levels of hydro and therefore ranking senior to thermal dispatch. And as well, as high nuclear availability. So that also kind of lag behind thermal generation. Another highlight is that we are harvesting our drilling campaign in Q4, shale gas represented 47% of our total gas production. This is a significant increase compared to last year, just nearly 3% of total gas production. The adjusted VBA for the quarter amounted to $129 million. This is 30% less year-on-year because of soft man. Peso devaluation also impacted for our affiliates, Transcenera and TGS. And therefore, because their income, in real terms, got hit by the steep jump in the FX, the new PPAs at our wind farms and Barragans CCGT, plus the additional income from the export dollar, offset these variations. Therefore, power took most of the total EBDA share in Q4. CAPEX in Q4 was 50% higher year-on-year. This is mainly because of the ramp-up in EMP, which is concentrated in shale gas drilling and completion of wells, plus the construction of the PP6 wind farm. So let me give you a quick simplified explanation of how peso depreciation affects Pampa. There's very important things that they do. In the Q4, we accrued $250 million of income tax. This is an accrued, not cash accrued, which is 150% higher than the last year's period. This is because of this temporary lag between IFRS valuation of PPE And it's tax appraisal. So tax reporting in Argentina follows the functional currency in pesos, and pesos is adjusted by inflation. But, you know, the steep devaluation that happened in December 13 widened this gap between both valuations. So it generated a temporary non-cash deferring context. which if the peso recovers, right, both valuations will be similar and the tax, the set tax should be zero, should reduce to zero. Another effect is on the affiliates. So the affiliates, they also follow financial, the financial reporting follows peso currency and their figures are also adjusted by inflation. So inflation was unnumbered by the grand devaluation that happened in December last year. Should we all follow functional currency dollars? TGS and Transcendent actually posted a higher VBA, making Pampas 2023 a VBA of $831 million instead of $802 million. Taking aside affiliates, the only segment we invoice in pesos today is just legacy. And actually, not the whole legacy. It's just the conventional, thermal, and the hydros, which accounts less than 10% of our total Q4 sales. So let's move on to power generation. As seen on slide six, we posted an adjusted EBITDA of $94 million in Q4. This is 10% higher year-on-year, mainly explained by lower operating costs and new PPAs, offset by soft thermal dispatch, overhauls, maintainances in some GTs, and basically evaluation that impacted the spot energy, plus the divestment on Mario Cebreiro. Despite seasonality, EBITDA remains similar to last quarter. This is explained by the increase in the spot energy of 28% happening in November. There is another 74% clear from February this year. However, as you can see there, spot prices are still behind inflation and devaluation. Q4 dispatch decreased 3% year-on-year. This is mainly due to the lower demand and outages mentioned before, partially offset by Barragan's new CCGT, the hydros, and the new wind farms. Ticker pay capacity is very important, especially for PPAs. It is driven by availability. And in Q4, we reached 93%, below last year's 97%. This is mainly because of Loma La Lata's outage that affected the whole quarter. Moving on to PP6 expansion, the project's progress is 69%. We keep working on facilities and civil works and power transformers that have already arrived from China. That's most of the main components. They are stored in the Vallablanca port. The towers components are being constructed. On Tuesday of this week, we mounted the first wind turbine. There's 30 more to come, right? It's total 31 wind turbines. The estimated COD, it ranges between Q3 of July of this year until October of this year. We estimate to finalize the whole wind farm. It is worth highlighting that this wind farm, PP6, will be sold under B2B PPAs. Well, moving on to YMP, as you can see here, gas deliveries are recovering after Q4's weak demand. The late summer boom and the return to normal of hydro levels are helping domestic sales and exports to Chile. It is not worthy to mention the importance of take-or-pay, a kind of insurance for our investment, because for the first time in 2021, we delivered volumes under the take-or-pay contracts. On slide nine, our EMP business posted an adjusted VDA of $50 million in Q4. This is 30% below year-on-year. The decrease was driven by this sharp decline in local and foreign demand, which affected our gas prices, too. This was partially offset by additional income from export dollars. In Q4, our total production averaged about 56,000 barrels of oil equivalent per day. This is 8% below last year. Zooming in, crude oil representing 8% of our EMP output, but 22% of the segment's revenue, mainly because we're investing 40% to exports more than double last year. The activity rock pop explained that our total lifting costs slightly grew by 5% year on year, and combined with a lower production, this impacted the lifting cost per BOE, which increased 14% year-on-year, recording $7.4 per BOE. Focusing on gas, Our Q4 production decreased by 7% year-on-year. This is averaging almost 9 million cubic meters per day, mainly explained by the lower demand. 53% of the quarter's production came from El Mangrucho and 25% from Sierra Chata, the latter showing a significant growth compared to the 6%. of share recorded last year. The average price for the quarter stood at $3.2 per million BTU. This is 17% down due to lower than expected exports. Remember that the local production that is sold under plant gas, it's covered under GSA. Regarding the campaign, the productivity was outstanding. As you can see, nine walls from Sierra Chata rank among the top 20 producing walls in Vaca Muerta, outperforming Pierce and El Mangrucho, which they are also outstanding by their own right. In this sense, Sierra Chata almost tripled its production year on year, thanks to drilling 10 walls and completing nine during 2023. In Emangrucho, we drilled 15 wells and completed another 14, ranking two of them among the top 20 producing wells in the formation. So, thanks to these outstanding results, especially at Sierra Chata, we recorded an 11% increase in our proven reserves, amounting to 199 million BOE. We almost double-shelled reserves, certified in 2022 to 83 million, Although we held a production record in 2023, the resale replacement was 1.8 times and the average life increased to 8.6 years. The petrochemical business that I'm going to talk briefly posted a $20 million ABDA in Q4. This is 33% higher year-on-year because of lower costs due to the drop in production and higher income from this export dollar. And also that explains the quarter-on-quarter increase. Q4, 45% of the sales volume was exported. This is higher than last year by 30%. In Q4, we recorded a cash flow of $95 million, outflow of cash, $95 million. This is mainly explained by the expansionary capex in shale gas. We also recorded lower debt service quarter on quarter, benefited from the peso devaluation, also diluted the principal amount of the peso debt. Working capital improved as we collected winter sales from CAMESA during December. Additionally, net of redemptions, we paid down $37 million in principal debt. In summary, we reduced $129 million in net cash in the quarter, achieving $834 million cash position by the end of the period. However, we increased our cash position year on year. Moving on on the slide 12, we show our consolidated financial position, including our affiliates and ownership. But let's focus on the restricted group that reflects the bump perimeter. We posted a gross debt of $1.4 billion. This is 10% lower year on year. This is accompanied by a 19% growth in cash. Thanks to the strong liquidity position, our commitment to canceling debt and the debt peso, Argentine peso debt dilution, the net debt and leverage ratio decreased significantly, recorded $614 million and 0.9 times leverage. The Irish life was 3.2 years. Until 2027, as you can see, we don't face any relevant debt maturities. So this concludes our presentation. I will turn the word to Raquel. She will poll for the questions. Thank you very much.