Pampa Energia ((PAM)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Pampa Energia’s recent earnings call revealed a balanced sentiment, reflecting both positive developments and notable challenges. The company showcased significant operational achievements, such as a successful production ramp-up in Rincón de Aranda and contributions from a new wind farm, alongside proactive financial management. However, these were counterbalanced by declines in adjusted EBITDA, oil and gas performance, and free cash flow issues driven by high CapEx. Overall, the sentiment remained balanced due to the presence of both highlights and lowlights.
Rincón de Aranda Production Ramp-Up
The company successfully ramped up production in Rincón de Aranda, achieving 16,000 barrels per day from four pads, with expectations to reach 20,000 barrels per day by the fourth quarter of 2025. This development marks a significant operational achievement for Pampa Energia.
Wind Farm Contribution
The new 140 megawatts wind farm, PEPE 6, made a positive contribution to the quarter’s figures, bolstered by higher spot prices. This addition highlights Pampa Energia’s commitment to expanding its renewable energy portfolio.
Proactive Liability Management
Pampa Energia extended its 2029 notes to 2034, issuing a $140 million recapitalization at the lowest spread over U.S. treasuries in the company’s history. This move demonstrates the company’s proactive approach to managing its financial liabilities.
CapEx Surge
The company reported a 134% year-on-year surge in CapEx, totaling $354 million, with significant investment directed towards the development of Rincón de Aranda. This substantial investment underscores the company’s focus on expanding its production capabilities.
Power Generation EBITDA Increase
Pampa Energia’s power generation adjusted EBITDA increased by 5% year-on-year to $112 million, driven by the performance of PEPE 6 and higher spot prices. This growth reflects the company’s successful expansion in the power generation sector.
Successful Gas Export to Chile
The company increased its gas exports to Chile, reaching 1.1 million cubic meters per day by June. This achievement highlights Pampa Energia’s strategic expansion into international markets.
Decline in Adjusted EBITDA
Adjusted EBITDA fell 17% year-on-year to $239 million, primarily due to soft gas sales, falling petchem prices, and higher operating expenses. This decline presents a challenge for the company moving forward.
Oil and Gas EBITDA Drop
Oil and gas adjusted EBITDA decreased by 28% year-on-year to $87 million, largely due to reduced domestic gas sales and higher lifting costs. This drop underscores the challenges faced in the oil and gas sector.
Production Decline
Total production averaged 84,000 barrels per day, down 7% year-on-year due to output decreases at El Mangrullo and nonoperating blocks. This decline in production is a concern for the company’s overall output.
Free Cash Flow Outflow
Pampa Energia posted a free cash flow outflow of $307 million, mainly due to high CapEx at Rincón de Aranda. This outflow highlights the financial challenges associated with the company’s aggressive investment strategy.
Crude Oil Price Decline
Crude oil prices averaged nearly $62 per barrel in the second quarter, 14% lower than the previous year, affecting exports. This decline in prices poses a challenge for the company’s export revenues.
Forward-Looking Guidance
Looking ahead, Pampa Energia anticipates continued challenges with an adjusted EBITDA of $239 million, a 17% year-on-year decline. Despite these challenges, the company remains optimistic about contributions from the new PEPE 6 wind farm, increased gas exports to Chile, and higher production at Rincón de Aranda. The substantial CapEx investment of $354 million, particularly in Rincón de Aranda, reflects the company’s commitment to future growth. Additionally, the successful liability management transaction extending the maturity of 2029 notes to 2034 demonstrates a strategic approach to financial stability.
In summary, Pampa Energia’s earnings call presented a balanced outlook, with significant operational achievements and proactive financial management countered by declines in adjusted EBITDA and free cash flow challenges. The company’s focus on expanding its renewable energy portfolio and increasing international gas exports provides a positive outlook, despite the hurdles in the oil and gas sector. Investors will be keen to see how Pampa Energia navigates these challenges and capitalizes on its strategic investments.