Full Transcript: Pampa Energia Q2 2026 Earnings Call

Pampa Energia (NYSE: PAM ) reported second-quarter financial results on Wednesday. The transcript from the company's second-quarter earnings call has been provided below. This content is powered APIs. 7 billion investment to build Latin America's largest urea plant, aiming to monetize its shale gas reserves and diversify revenue.

The company reported a Q2 adjusted EBITDA of $415 million, a 28% increase quarter-on-quarter, driven by record oil production and improved power generation margins. CapEx decreased by 21% year-on-year to $279 million, with significant investments in the Rincón de Aranda project, which aims to reach a production plateau of 45,000 barrels per day by next year. The company's power generation segment saw a 39% year-on-year increase in adjusted EBITDA to $155 million, benefiting from strong spot margins under a new regulatory framework. 3 billion.

5 and 2 times in the next two to three years. Management emphasized a strong growth trajectory, driven by strategic investments in Vaca Muerta's resources and a robust industrial energy model in Argentina. Full Transcript OPERATOR Welcome everybody to Pampa Energia's second quarter 2026 results 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. Please send your questions in writing through the chat. If anyone needs assistance, please send us a Zoom message.

Before continuing, please read the disclaimer on the second page of our presentation. Let me mention that forward-looking statements are based on Pampa Energia's 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 Energia and could cause results to differ materially from those expressed in such forward-looking statements.

Now, I will turn the video conference to Lida. Hi everybody. Good morning. Thank you for joining us.

And first I would like to give you a quick summary of our announcement on fertilizers. This is a new business and then a quick summary of the quarter so we can move on to the Q and A. Today we have only our CFO. We have a small inconvenience without Gustavo, but I think we both can do it, right?

Yeah. So let me go to slide 3 which you can see. Last July our board approved the FID for the construction of Latin America's—so far Latin America's—largest urea plant, officially marking Pampa Energia's entry into the fertilizer business. Granular urea is critical to agricultural production and global food security, and it is primarily used in the production of corn, wheat, sugarcane, and barley.

Because natural gas is its main feedstock, urea production is highly concentrated in a few countries, while Argentina and its neighbor countries currently rely on imports from distant regions—today exposed to significant geopolitical uncertainty. The investment thesis is straightforward. We aim to monetize the best shale gas reserves that Pampa Energia holds in Vaca Muerta through the development of high value—added businesses.

Natural gas and electricity account for approximately 70% of the production cost of urea and will be supplied by Pampa Energia, reinforcing the competitive advantages of our vertically integrated business model while enhancing the project's operating efficiency and long-term profitability. So beyond diversifying Pampa Energia's revenue base, the fertilizer business will also help Argentina's foreign currency generation through import substitution—we are substituting imports and increasing exports—with an annual contribution of approximately $1 billion.

Brazil, which currently imports between 7 and 8 million tons of urea per year, together with the rest of the Southern Cone, which has an annual deficit of about 2 million tons, will be the project's primary market. Moving on to the project details, the plant will be located in Bahía Blanca on a proprietary site strategically positioned next to one of Argentina's main export ports, with direct connection to Vaca Muerta pipelines—existing pipelines—and close to Pampa Energia's thermal and renewable power generation assets. 3 million cubic meters per day average year and 75 megawatts of power, all again supplied by Pampa Energia.

The plant is scheduled to be completed by the end of 2029. Now that we have reached the FID, the next milestones are obtaining the RIGI and the Buenos Aires approvals, which are essential to the development of the project. Last Friday the evaluation committee of the RIGI cleared Fértil Pampa's presentation, so we are waiting for the formal approval to be published in the Official Gazette. Thus, Pampa Energia continues to strengthen its industrial profile further through the several projects presented under the RIGI framework.

We are currently participating in seven projects across oil and gas, LNG, fertilizers, NGLs. Last June, following the FID at TGS, our affiliate filed an application for the $3 billion investment on an integrated NGL project. Also TGS's private initiative, which consists in expanding the Perito Moreno pipeline, a dedicated pipeline for the LNG project, and on the Aranda. All those RIGI applications got approved.

Overall, these projects provide a clear roadmap for Pampa Energia's long-term growth, supporting Argentina's export expansion and enabling us to monetize Vaca Muerta's resources further. Well, now moving on to the second quarter results. 5 thousand barrels of oil equivalent per day due to the sustained ramp-up at Rincón de Aranda and gas self-supply. The new regulatory framework also had positive impact on our power generation segment, which benefited from the strong spot margins, as high fuel costs impacted and drove the marginal costs up the system.

So that helped, and also we have more B2B PPA sales. To a lesser extent, increased international prices also boosted the PET business, which recorded its highest quarterly EBITDA since 2023. Quarter on quarter, EBITDA grew 28%, supported by gas seasonality, stronger spot power margins, and increased PET prices. Capex dropped 21% year on year to $279 million during the quarter, of which $165 million were destined to Rincón de Aranda.

It is worth noting that we already invested last year $900 million in Rincón de Aranda, and we expect to invest an additional $700 million this year as we move toward the 45,000 barrels per day production plateau once the CPF and Vaca Muerta Sur oil pipeline are both online next year. Moving to slide 7, the oil and gas adjusted EBITDA was $182 million, more than double last year, driven again by Rincón de Aranda production ramp-up; the gas self-supply to our power plants resulting in higher output billing at stronger prices as fuel cost pass-through increased. These factors were partially offset by lower realized accrual prices due to the hedge.

Quarter on quarter EBITDA increased by 74%. This is mainly explained by gas seasonality. Total lifting costs grew 30% year on year. This is primarily driven by Rincón de Aranda ramp-up, partially offset by the divestment at El Tordillo and lower activity at El Mangrullo.

70 on average, as production growth offset the increase in lifting costs. If we do double click, oil lifting cost per barrel actually declined 28% to $15 in Q2; however, increased quarter on quarter following the commissioning of the second TPF at Rincón de Aranda that increased the crude oil treatment from 20,000 barrels to 28,000 barrels per day. Gas lifting costs also decreased 13% year on year to $1 per MMBtu, but slightly decreased 6% sequentially due to the maintenance cost at El Mangrullo. So focusing on crude oil only, production increased three times year on year, purely explained by Rincón de Aranda.

Realized price averaged nearly $59 per barrel. This is a little bit below last year due to the oil hedge. Without the hedge, the prices would have been $91 per barrel, resulting in approximately $64 million more of sales. Exports accounted 57% of total volume sold in Q2 '26.

This is very similar year on year and quarter on quarter. Rincón de Aranda contributed one third of oil and gas EBITDA, up from 6% last year—so last year was only 6% and this year's quarter this is one third—continuing to diversify the production mix. Now oil accounting 22% of the total output. At Rincón de Aranda the ramp-up continues.

As you can see, the performance is comparable to the best blocks in the core, reaching a new record of 27,000 barrels per day on May 21st. Actually, specifically since March we have not tied in new wells, just producing from 33 wells. Even so, Rincón de Aranda averaged 22,000 barrels per day, up 22% quarter on quarter. The quarter exit rate was 16,000 barrels, temporarily affected by chokes on certain wells while we completed other neighboring pads so we avoid the frac hit.

These 10 wells in Set 2 pads were completed in July and will be tied in in August—which will support rebound in production. In Q2 we also drilled another 10 wells from four pads. Currently we have two high-spec rigs and one frac fleet operating in the block. For the remainder of the year we expect to tie in those 10 wells that we drilled and to reach an exit rate of 28,000 barrels per day.

Our target remains a production plateau of 45,000 barrels per day once the CPF and the Vaca Muerta Sur oil pipeline are online next year. Regarding RIGI, well, as we said previously, the application was formally approved on July 21 as long-term strategic export project. The application includes the drilling and completion of 259 wells from July 21 on and the construction of the CPF. We are already building oil and gas pipelines and water treatment plant facilities to treat the flowback water.

5 billion, and it is expected to be deployed through 2041. So the RIGI approval represents a significant milestone for Rincón de Aranda, providing a stable framework for tax, customs, and FX incentives for 30 years. Long-term strategic export projects are also eligible for specific benefits, in particular the exemption to waiver on export duties starting in the second year of operation after the enrollment. In this sense, Pampa Energia expects to export all of Rincón de Aranda's production through the Vaca Muerta Sur pipeline, which is estimated to generate approximately $17 billion over the project's useful life.

Moving on to gas, production increased 10% year on year and 4% sequentially, reaching over 14 million cubic meters per day, driven by the gas self-supply to our CCGTs under the new power market framework, partially offset by lower volumes sold under Plan Gas and, to a lesser extent, reduced deliveries to large users. Seasonal demand from retail and CAMMESA explained the quarter on quarter growth, offset by lower self-supply procurement since we have faced transportation restrictions in the gas pipelines. During Q2 we tied in four new wells at Sierra Chata, bringing production to a new all-time high.

And in El Mangrullo there was no new development activity, with production supported by the existing well base. At Río Negro, four new tight-gas wells were drilled and two were connected. For the second half of the year, our plan includes drilling activity in Sierra Chata and El Mangrullo. This is aligned with our 2027 Activity Production Plan, which considers the recently awarded transportation capacity at the Perito Moreno pipeline, in which gas transported through new infrastructure is able to capture the full margin—the full spot margin.

In Q2, 56% of our gas was sold under Plan Gas GSAs through CAMMESA and retailers, down from the 80% last year following the transfer of these GSAs to our power plants for self-supply. As a result, intersegment consumption increased to 31% of our total sales. This is compared to just 3% last year. Under the new framework, we expect approximately 40% of this year's production to procure our own power plants' needs.

2 million cubic meters per day. Industrial volumes declined as we prioritized self-supply demand, which is priced at a higher price because of the higher pass-through allowed by CAMMESA. This is seasonal and deregulation guidelines. 6 per MMBtu.

This is 15% higher than last year, reflecting higher fuel pass-through in power generation by CAMMESA again because of the winter season, plus higher retail prices following tariff increases above peso devaluation. Turning to power generation, we posted an adjusted EBITDA of $155 million in Q2. This is 39% higher than last year and 8% higher than last quarter, mainly driven by stronger spot margins and B2B margins under this new regulatory framework, as well as LNG procurement margin.

However, this was offset by the maturity—mandatory maturity—of Energía Plus contracts, the outage of Loma de la Lata's gas turbine number four that is under a PPA—which is remunerated under a PPA—and the PEPE wind farms underperformance. As you know, the new guidelines reintroduced marginal costs as part of the spot pricing methodology, which caused marginal cost overshoot during the quarter, especially during the winter season, reflecting higher fuel prices, in particular using LNG and liquid fuel oil, diesel oil. So the spot margins widened, specifically for the CCGTs, though that margin is capped at 15%. We only can capture 15% of that margin—that's what I mean.

The current framework allows full margin—so you can capture the whole margin—if you are using new infrastructure such as a gas pipeline, which is the case for the Perito Moreno pipeline that will be online next May 2027. This full margin thing is not only benefiting power generation; it's also benefiting E&P, which will be producing more gas that now has security to be transported through this Perito Moreno expansion. So full capture—the FRA equals to 1 instead of 15%. 2 million cubic meters per day in the Buenos Aires—bound tranche.

So it goes to the—it will be used to procure the gas needs of the legacy Genelba CCGT, right? And we also participated in the second tender for the remainder of the Perito Moreno. We are waiting for the results. 3 million cubic meters per day in the Bahía Blanca tranche.

Total availability fell to 88% during the quarter, mainly due to the ongoing outage in Iwiles—which now is currently since July 31st is no longer part of Pampa—and we have some outages also in Güemes and in the mentioned Loma de la Lata TG4. Also had some scheduled maintenance. Even though it's 88% availability, we continued to outperform the peers in the National Grid. 35% of the capacity was contracted, slightly higher than Q2 last year.

This is reflecting the new guidelines that boosted the B2B PPAs. Now, going to the financial part, turning on to the cash flow, in slide 11 we present the parent company figures, which aligns to our bond perimeter. Free cash flow was negative $128 million in Q2, but improved year on year and quarter on quarter. This is mainly due to stronger EBITDA generation and lower capex at Rincón de Aranda, and receivables due to the better collection—though this is impacted by higher winter sales.

Quarter on quarter improvement is explained by the release of collateral on our Brent hedge as oil prices declined. 3 billion at the quarter end, $604 million more than Q1. 6 billion. This is mainly because of the re-tap of 2037 notes priced at the lowest spread to the T-bills USD in Pampa Energia's debt issuance history—and corporate history, I may say, Argentine corporate history.

4 times the last 12 months EBITDA. So, concludes now this presentation. The floor is open for questions. If you have a question, please send it through the Zoom chat.

We will read it first in, first served. Make sure your name and your company is there; otherwise we can just read it and we can also reintroduce you to the audience. Should any participant need assistance, just send us a chat through the platform. Thank you.

Wait for a while we poll for questions. Moana, should we start with the new expansion projects that Alejandro de Micheris from Jefferies is asking? How do you see capex in the next two to three years? At what level do you expect debt to leverage to peak?

UNKNOWN, Pampa Energia executive Good morning. Thank you for the question. Yeah, evidently we're facing challenging CAPEX deployment, especially with the urea project. But also bear in mind that EBITDA looking forward should increase as well.

Right.