Yahoo Finance Pampa Energía S.A. (NYSE:PAM) Q3 2023 Earnings Call Transcript
Pampa Energía S.A. (NYSE:PAM) Q3 2023 Earnings Call Transcript November 9, 2023
Operator: We would like to welcome everyone to Pampa Energía's Third quarter 2023 Results Video Conference. We inform you that this event is being recorded. [Operator Instructions]. Before proceeding, please read the disclaimer 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 for 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 they are related to future events that make 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 Wang, Investor Relations and Sustainability Officer of Pampa Energía. Please go ahead.
Lida Wang: Thank you, Raquel. Hello, everyone, and thank you for joining our conference call. I will make a quick summary of Q3. You may find more details in our earnings release. Today, we are having a Q&A with our CFO, Nicolás Mindlin; and Horacio Turri, our Head of BNP; and our Head of Corporate Finance. Let's start with the quarter's figures highlighted by the ramp-up in gas production and set a new all-time high milestone, growing shell contribution, the incremental share of efficient and green PPAs, and we'll keep enhancing our balance sheet by increasing our liquidity. The adjusted EBITDA amounted to $244 million in Q3, similar year-on-year. Thanks to the additional output coming for the Plan Gas and contribution from new PPAs, such as wind farms and Barragan CCGT, partially offset by a drop in commodity prices, affecting crude oil Brent and PEPE and peso depreciation impacting spot energy.
However, the EBITDA grew 10% quarter-on-quarter, mainly explained by the higher gas production. It is worth noting that more than 85% of the quarter's EBITDA was dollar linked. And the share now is led by E&P, mainly due to natural gas. CapEx in Q3 was 40% higher year-on-year, mainly because of the ramp-up activity in E&P, which is concentrated in shale gas drilling and completion of wells, plus the construction of PEPE VI wind farm, offset by the commissioning of PEPE IV last quarter. Moving on to power generation. As seen on Slide 4, we posted an adjusted EBITDA of $91 million in Q3, which is 2% higher year-on-year, mainly explained by the new PPAs at our wind farms and Barragan's -- and Barragan and lower maintenance and material costs, offset by a decline in spot and Energía Plus prices, the divestment of Mario Cebreiro Wind Farm and partial outage in July, Loma de la Lata, plus higher labor costs.
Compared to last quarter, power was 7% below. This is explained by the divestment of Mario Cebreiro and higher costs -- labor costs, offset by the increase in spot prices because we've been granted 23% increase in pesos. Another 28% update was clear from November onwards, accumulating a 150% increase year-to-date. The dispatch in Q3 rose 32% year-on-year, led by Barragan new CCGT and more hydro at Pichi Picún Leufú and new wind farms that we built and acquired, offset by less thermal dispatch due to the lower power demand, the outage at Loma de la Lata mentioned before and the exit of Mario Cebreiro. Take-or-pay capacity payment, especially from PPAs, display most of our EBITDA. It is driven by availability. And in Q3, we reached almost 94%, below last year's 96%.
This is because of Loma, TG #5 and the overhaul that we did in Genelba programmed overhaul. However, this is way above the grid's 73% availability rate. Moving on to PEPE VI expansion. The project's progress is 94%. We are working on the facilities and works with the high voltage station and testing the main transformer bank. Also the main components for the 31 wind mills arrived in and the construction of the towers is underway in Argentina. The estimated COD for the first phase of 95 megawatts is for the next year Q3 and the second phase of 45 megawatts will be by next year's Q4. It is worth highlighting that PEPE IV energy will be sold under B2B PPA. Now moving to the E&P business. We posted adjusted EBITDA of $132 million in Q3. This is way above last quarter's figures and 12% higher year-on-year.
The increase was driven by higher gas deliveries committed under the new Plan Gas.Ar linked to the new pipeline. This was offset by a drop in Brent prices and in oil production, plus some mild winter and pipeline delay impacted gas output. In Q3, our total production averaged above 80,000 barrels of oil equivalent per day. This is 17% higher than last year and 19% up quarter-on-quarter. In August, we reached a new all-time high production record of 16.4 million m3 per day. This is a remarkable growth of 44% from our 2022 record. Our lifting costs grew by 9% year-on-year, 5% quarter-on-quarter. This is explained by the activity ramp up. However, if you put it on a productivity perspective that comes from the new wells, this possibly impacted the lifting cost per barrel of oil equivalent, which decreased 7% year-on-year and 13% quarter-on-quarter, recorded $5.6 per barrel equivalent.
Crude oil sales stood at 4,600 barrels per day, representing 80% of the production, but 19% of the segment's revenue, getting a realized price of $63 per barrel. 15% of the output was destined to exports. Focusing on gas, our sales in Q3 grew by 20% yearly. This is averaging almost 13 million cubic m3 per day in the quarter, mainly explained, again, by the higher volumes sold in the local market through Plan Gas. Regarding the campaign, the new shell wells performance is in line with our expectations. In Sierra Chata, the output grew more than 5x year-on-year, thanks to the 11 shell wells this year, another 3 are scheduled to start completion this month. In Mangrullo, PEPE VI has been completed and tested and results exceeded our expectations like we talked about in the last quarter.
We also drilled Pad #5, which completion is nearly finished and began drilling Pad 7, scheduled to be completed by next year Q1. Each pad has 3 wells. The average gas price for the quarter stood at $4.7 per MMBtu, similar year-on-year and quarter-on-quarter. As you can see below, the retail share downside because of the incremental deliveries under Plan Gas testing to power plants. Other plants remain very similar to last year. So as you can see here, gas deliveries were above take-or-pay during the winter season, despite the pipeline delayed or warmer winter. However, going into Q4, the gas line is relenting as the warmer spring is the warmest spring in years and highest hydro in the last 15 years this is happening. So this weather phenomenon impacting the domestic sales, impacting the Plan Gas, impacting the exports to Chile because also Chile is happening the same thing and thermal power generation indirectly reducing the grid's electricity costs.
We expect the gas demand to normalize by December. It is noteworthy to mention the importance of take or pay. This is a kind of assurance for our investment. So we move on to Petrochemical business that posted $60 million of EBITDA in Q3. This is 16% lower year-on-year because of the drop in the international prices that last year was all time high and lower reforming sales in the local market. However, EBITDA was 60% up quarter-on-quarter due to the higher domestic sales of styrene and exports of polystyrene and rubber, plus higher reforming prices. In Q3, 42% of the total sales volume was exported, up from the last year's 38%. Well, we move on to the financial side. In Q3, we recorded a free cash flow of -- free cash outflow of $90 million.
This is mainly explained by the expansion of CapEx that we are undergoing in gas and higher debt service because of the peso dep, though we benefit from the past devaluation because it dilutes our principle amount. Working capital deteriorated due to increased collection base and rates from CAMMESA since last year -- last quarter, sorry. Additionally, we raised $68 million net from the local market, mostly in domestic dollars. In summary, we generated $92 million in the quarter. This is achieving $964 million cash position by the end of the period. 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, okay, the parent company that reflects the bond perimeter.
We posted a gross debt of $1.6 billion, similar to the last quarter. However, thanks to our strong liquidity position mentioned before, the cash flow generation from the businesses. The net debt and leverage ratio decreased significantly, recording $677 million and 1x leverage. The average life was also reduced to 3.1 years until 2027. As you see in the debt profile, we don't face any relevant debt maturity. So this concludes our presentation. Now I will turn to Raquel. So she will poll for questions. Thank you so much.
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