Pampa Energía S.A. (PAM) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed results: a 5% increase in Power Generation Adjusted EBITDA and a reduction in gross debt are positive indicators. However, the free cash flow outflow and negative cash generation outlook due to high CapEx are concerning. The Q&A highlights ongoing projects and potential growth, but management's unclear responses on certain financial specifics add uncertainty. Overall, the sentiment is neutral as positive and negative factors balance out, with no clear catalyst to drive significant stock price movement in either direction.
Key Financial Performance
Adjusted EBITDA $239 million, a 17% decline year-on-year, driven by soft gas sales, falling petchem prices, and higher operating expenses. Partially offset by contributions from the new PEPE 6 wind farm, increased gas exports to Chile, and higher production at Rincón de Aranda.
CapEx $354 million, a 134% increase year-on-year, with $249 million invested in the development of Rincón de Aranda.
Oil and Gas Adjusted EBITDA $87 million, down 28% year-on-year, due to reduced domestic gas sales, expiration of winter peak contracts, and higher lifting costs. Partially offset by increased gas exports to Chile and stronger crude oil production at Rincón de Aranda.
Lifting Costs $7.6 per boe, with gas lifting costs at $1.1 per milliBTU, influenced by lower output and transition from trucking to in-house facilities.
Total Production 84,000 barrels per day, down 7% year-on-year due to output decreases at El Mangrullo and nonoperating blocks, partially offset by Rincón de Aranda and Sierra Chata gas field.
Crude Oil Prices $62 per barrel, 14% lower year-on-year, mainly due to Brent underperformance affecting exports. Hedging strategy around Rincón de Aranda's rising production mitigated the price drop.
Total Gas Sales 13 million cubic meters per day, down 11% year-on-year, but rose 10% from Q1 due to seasonality. Sierra Chata increased its share to 29% of gas output with a 14% production gain year-on-year.
Gas Prices $4 per milliBTU, steady year-on-year, influenced by Brent prices and offset by improved retail and industrial segment prices.
Power Generation Adjusted EBITDA $112 million, a 5% increase year-on-year, driven by PEPE 6 performance and higher spot prices, partially offset by increased operating costs and scheduled outages.
Free Cash Flow Outflow of $307 million, driven by CapEx at Rincón de Aranda and seasonal working capital needs.
Cash and Cash Equivalents $879 million at quarter end.
Gross Debt Nearly $1.6 billion, down 23% since December 2024, due to redemption of '27 and '29 notes.
Net Debt $712 million, with a 1.1x net leverage ratio, reflecting cash outflow for CapEx and working capital needs.
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Operating Highlights
Rincón de Aranda production ramp-up: Successful production ramp-up with new pads and supporting infrastructure, including temporary processing facilities and pipelines. Current production is 16,000 barrels per day, with a target of 20,000 barrels per day by Q4 2025 and 45,000 barrels per day by 2027.
PEPE 6 wind farm: New 140 MW wind farm contributed to higher spot prices and improved EBITDA.
Gas exports to Chile: Increased gas exports to Chile through two pipelines, reaching 1.1 million cubic meters per day by June.
Domestic gas contribution: Pampa contributed 17% of the gas consumed for power generation in Argentina.
Adjusted EBITDA: Q2 2025 adjusted EBITDA was $239 million, a 17% decline year-on-year due to soft gas sales, falling petchem prices, and higher operating expenses.
CapEx: Year-on-year CapEx surged 134% to $354 million, with $249 million invested in Rincón de Aranda development.
Debt management: Extended 2029 notes to 2034 with a $140 million recap at the lowest spread over U.S. treasuries in Pampa's history.
Vaca Muerta Sur pipeline agreements: Secured transportation agreements to support Rincón de Aranda's production ramp-up, with a $426 million investment planned for related infrastructure.
Exploratory licenses: Extended Parva Negra Este exploratory license until 2027 and drilled a horizontal shale well awaiting completion.
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Risk or Challenges
Delayed Winter Demand Spike: Colder temperatures starting in June delayed the expected spike in winter demand for both power and gas, impacting revenue projections.
Decline in Adjusted EBITDA: Adjusted EBITDA declined by 17% year-on-year due to soft gas sales, falling petrochemical prices, and higher operating expenses.
Higher Operating Costs: Increased lifting costs, particularly at Rincón de Aranda, and gas treatment fees pushed costs higher, affecting profitability.
Reduced Domestic Gas Sales: Domestic gas sales to retail and thermal power declined due to colder weather arriving later than usual and the expiration of winter peak contracts.
Production Decline in Certain Blocks: Total production decreased by 7% year-on-year due to output declines at El Mangrullo and non-operating blocks.
Crude Oil Price Decline: Crude oil prices averaged $62 per barrel, a 14% decline year-on-year, primarily due to Brent underperformance, affecting export revenues.
High Capital Expenditure: CapEx surged 134% year-on-year, driven by investments in Rincón de Aranda, leading to a free cash flow outflow of $307 million.
Scheduled Outages in Power Generation: Scheduled maintenance and outages at key facilities like Loma De La Lata and Barragán CCGT reduced power generation volumes by 7% year-on-year.
Debt and Cash Flow Challenges: Net debt rose to $712 million, with a free cash flow outflow driven by high CapEx and seasonal working capital needs.
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Guidance & Outlook
Production at Rincón de Aranda: Expected to reach 20,000 barrels per day by Q4 2025 and target 45,000 barrels per day by 2027 when the Vaca Muerta Sur pipeline is operational.
Capital Expenditures (CapEx): Budgeted $100 million for 2025, with over $360 million already invested year-to-date. Total required investment for Rincón de Aranda infrastructure is approximately $426 million, with the central processing facility (CPF) expected to begin operations next year.
Gas Exports to Chile: Increased flows through two pipelines, GasAndes and del Pacífico, with exports reaching 1.1 million cubic meters per day by June 2025.
Shale Gas Production: 57% of Q2 2025 output is shale gas. New wells at Sierra Chata and exploratory drilling at Parva Negra Este are expected to support future production.
Power Generation: Adjusted EBITDA for power generation increased by 5% year-on-year in Q2 2025, supported by the PEPE 6 wind farm and higher spot prices. Capacity payments under take-or-pay PPAs continue to support 70% of the segment's EBITDA.
Debt Management: Extended average debt maturity to 6.2 years from 4.2 years, improving the maturity profile. Net leverage ratio stands at 1.1x, reflecting significant CapEx and working capital needs.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Could you give us more color on the CPF in Rincón de Aranda?
A:The CPF (Central Processing Facility) has three purposes: oil and water separation, oil dispatch to YPF facility for pipeline injection, and natural gas separation sent to Vista facility. It has a total output of 7,000 cubic meters per day (approximately 42,000 barrels per day) and is expected to be completed by the end of 2026.
Q:Have you already started self-producing with your own fuel? If not, when do you expect to begin? What is the spread between CAMMESA's reference price and your own procurement price?
A:Yes, self-procurement of gas has begun on a marginal basis due to lack of deregulation. The spread between CAMMESA's price ($8 per million BTU) and winter gas price ($4.50 per million BTU) is about $3.5.
Q:Could you give us any color on the expected evolution of the lifting cost throughout the second half of the year and 2026?
A:Lifting costs are expected to decrease from $16 per barrel in Q2 2025 to $7 per barrel in 2026, with further reduction to $5 per barrel after CPF construction. Production is expected to increase from 15,000 barrels per day in 2025 to 45,000 barrels per day at plateau.
Q:Are you planning to hedge production during 2026?
A:Yes, 70%-75% of expected production is hedged at $69 per barrel for one year forward.
Q:Do you expect less discount versus Brent when you reach the 20,000 barrels production target by year-end?
A:Management cannot predict future discounts versus Brent and relies on market curves for price indications.
Q:Do you expect any participation in the construction and maintenance of the required gas pipeline for TGS?
A:Discussions are ongoing, and TGS could be part of the consortium to build and operate the gas pipeline.
Q:How much gas may Pampa add in sales for the two LNG ships in 2027 and 2028, and how much CapEx is needed?
A:Pampa expects to add 6 million cubic meters per day of gas sales by 2028. The associated CapEx is $400 million, with $60-$80 million per year on a plateau basis.
Q:How much EBITDA contribution for TGS do you expect for this project?
A:Management did not provide a specific figure and deferred the question to TGS.
Q:What level of shale oil production do you expect from Rincón de Aranda?
A:Production is expected to increase to 18,000-20,000 barrels per day by year-end 2025, with a plateau of 45,000 barrels per day by 2026.
Q:What are the drilling cost trends?
A:Drilling costs are decreasing due to improved efficiency, with costs per well expected to drop from $15.5 million to $13 million within a year.
Q:What is the cash generation outlook for the second half of 2025?
A:Cash generation will be negative due to $1.5 billion investment in Rincón de Aranda between 2025 and 2026.
Q:What is the company's learning curve in operating shale oil?
A:The company has improved drilling and completion productivity and is exploring optimization in sand usage and stage spacing.
Q:What are the next key milestones for the CSA LNG project?
A:Key milestones include pipeline interconnection, compression plant installation by 2027, and LNG vessel arrival in Argentina by Q3 2028.
Q:Are you looking to change the CapEx or production forecast due to weaker oil prices?
A:No changes are planned, and the project remains profitable at current prices.
Q:Are you interested in the stake the government wants to sell in Transener?
A:No, due to legal restrictions preventing full control of transmission by power generators or distributors.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the EBITDA contribution for TGS, stating it should be asked to TGS. They also did not provide clarity on the potential for less discount versus Brent, citing reliance on market curves. Additionally, they deferred specifics on shareholder distributions in 2027 and the impact of the Transener stake sale due to legal restrictions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Aranda pad
CEO Executive
Chairman Turri
Conference event
Corporate Participant
Director Exploration
ET IR
Energia Results
Executive Director
Executive VP
Exploration Production
Head Investor
Instructions disclaimer
Lida Slide
Lida Wang
Participant ET
Production Lida
Results Video
Rincón de
Slide development
Sustainability Corporate
Turri Executive
VP Vice
Vice Chairman
Video Conference
Wang Head
commissioning infrastructure
coordination commissioning
development production
event Instructions
pad coordination
production ramp
ramp Rincón
statement Lida
PAM Transcript
Pampa Energía S.A. (PAM) Q3 2025 Earnings Call Transcript
Unknown11-5
The earnings call presents a mixed picture: strong production and strategic plans, but concerns about free cash flow and vague management responses. Positive factors include increased shale gas production, extended debt maturity, and potential market share growth. However, negative aspects like negative free cash flow, uncertainty in regulatory impacts, and unclear guidance balance these out. The lack of clear guidance on key metrics and the negative free cash flow outlook contribute to a neutral sentiment, while the strategic production plans prevent a negative outlook.
Pampa Energía S.A. (PAM) Q2 2025 Earnings Call Transcript
Unknown8-11
The earnings call reveals mixed results: a 5% increase in Power Generation Adjusted EBITDA and a reduction in gross debt are positive indicators. However, the free cash flow outflow and negative cash generation outlook due to high CapEx are concerning. The Q&A highlights ongoing projects and potential growth, but management's unclear responses on certain financial specifics add uncertainty. Overall, the sentiment is neutral as positive and negative factors balance out, with no clear catalyst to drive significant stock price movement in either direction.
Pampa Energia S.A. (PAM) Q4 2024 Earnings Call Transcript
Unknown3-6
The earnings call presents mixed signals: strong EBITDA growth and improved cash position are positive, but increased debt and lifting costs are concerns. The Q&A reveals uncertainty around regulatory impacts and future projects, with management providing unclear responses. These factors, combined with a lack of significant new guidance or partnerships, suggest a neutral outlook for the stock price over the next two weeks.
Pampa Energia S.A. (PAM) Q3 2024 Earnings Call Transcript
Positive11-10
The earnings call highlights strong financial performance with increased EBITDA and free cash flow, alongside a significant rise in cash position. The strategic shift towards shale gas and the completion of major projects like PEPE 6 are promising. Despite some uncertainties in the Q&A, management's optimism about LNG projects and competitive positioning boosts sentiment. The positive financials and strategic developments suggest a stock price increase in the short term.
PAM Report
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