Pampa Energia’s Earnings Call: Strategic Moves Amid Challenges

Pampa Energia ((PAM)) has held its Q1 earnings call. Read on for the main highlights of the call.

Pampa Energia’s recent earnings call conveyed a balanced sentiment, highlighting significant achievements such as the approval of the LNG project and robust power generation performance. However, the company also faced challenges in its Exploration and Production (E&P) business, increased costs, and cash flow outflows, which were notable concerns during the discussion.

FLNG Project Approval

Pampa Energia announced the approval of the Final Investment Decision (FID) on the Floating Liquefied Natural Gas (FLNG) project, where it holds a 20% stake. This strategic move aims to export 6 million tons of LNG per year, requiring 27 million cubic meters of gas per day, thereby monetizing the Vaca Muerta reserves.

Adjusted EBITDA Growth

The company reported an adjusted EBITDA of $220 million, marking a 17% increase from the previous year. This growth was primarily driven by stronger spot prices in power and higher deliveries of Plan Gas, showcasing the company’s financial resilience.

Power Generation Business Performance

Pampa Energia’s power generation segment reported an adjusted EBITDA of $130 million in the first quarter, a 51% increase year-on-year. This was mainly due to higher spot prices and contributions from the newly commissioned PEPE VI wind farm, highlighting the segment’s strong performance.

Regulatory Progress in Utilities

The company made significant strides in regulatory normalization as TGS and Transener completed their comprehensive tariff reviews. These reviews set conditions for the next five years until 2030, indicating progress in the utilities sector.

Export Campaign Expansion

Pampa Energia’s 2025 export campaign is on track to double last year’s volumes. The company has expanded its exports to Brazil and increased flows through the GasAndes and Pacifico pipelines to Chile, reflecting its strategic growth in the export market.

E&P Business EBITDA Decline

The E&P business faced challenges with an adjusted EBITDA of $41 million, down 39% year-on-year. This decline was due to increased operating expenses and lower sales caused by disruptions in the TGS transportation system.

Increased Lifting Costs

Higher costs due to well testing and preliminary low output at Rincon de Aranda led to a 20% year-on-year increase in lifting costs per barrel of oil equivalent (boe) to $6.9. Gas lifting costs also rose moderately by 17%, impacting the company’s cost structure.

Free Cash Outflow

Pampa reported a free cash outflow of $118 million in the first quarter, mainly driven by higher capital expenditures for Rincon de Aranda and a seasonal increase in working capital, posing a challenge to the company’s cash management.

Petrochemical Business Challenges

The petrochemical segment faced a tough year with expectations of breakeven or small EBITDA margins due to international price challenges and higher dollar costs, highlighting the difficulties in this business area.

Debt Increase

The company’s gross debt increased to $1.6 billion, up 19% from December 2024, due to the redemption of 2027 notes. Net debt rose to $577 million, reflecting the company’s ongoing financial commitments.

Forward-Looking Guidance

Looking ahead, Pampa Energia expects continued growth in its power generation and utility businesses, driven by stronger spot prices and increased Plan Gas deliveries. The company plans to significantly increase its gas supply for the FLNG project, representing a nearly 50% increase from current production levels. Despite challenges in the E&P segment, the company remains focused on strategic investments and managing its debt effectively.

In conclusion, Pampa Energia’s earnings call highlighted a mix of achievements and challenges. The company’s strategic initiatives in LNG and power generation are promising, while increased costs and cash flow concerns present hurdles. Overall, the sentiment was balanced, with a focus on growth and overcoming operational challenges.