Pampa Energía S.A. (PAM) Earnings

Management highlights

### New Business: Urea Fertilizer Project - Pampa's board approved FID for the 2.1 million ton per annum urea plant, marking the company's entry into the fertilizer business. The plant will be Latin America's largest urea facility, located at Bahia Blanca, Argentina adjacent to a major export port and connected to existing Vaca Muerta pipelines. - Total project investment is $2.7 billion, with commercial operation targeted for the end of 2029. The project monetizes Pampa's Vaca Muerta shale gas reserves (natural gas is 70% of urea production cost) via a vertically integrated model, with Pampa supplying all feedstock gas and power. - The project targets import substitution for Argentina and export growth to Brazil and surrounding Southern Cone markets, which have a combined annual urea deficit of 9-10 million tons, and is expected to contribute ~$1 billion annually in foreign currency revenue. The project has cleared RIGI evaluation committee review and is awaiting formal official approval.

Guidance

- **2024 Total Capex**: Expected to be ~$1 billion, with $700 million allocated to the Rincón de Aranda oil development project. Excluding the urea project, 2025 capex is expected to fall to ~$700 million, with long-term maintenance capex across all business units stabilizing at ~$600 million annually, plus incremental equity contributions for the urea project. - **Rincón de Aranda Production**: 10 recently completed wells will be tied in by August 2024, supporting a year-end 2024 exit production rate of 28,000 barrels of oil per day. The project is on track to reach a 45,000 barrels per day production plateau in 2025 once the CPF and Vaca Muerta Sur oil pipeline are commissioned, with oil lifting costs expected to fall to ~$5 per barrel by Q2 2025 after CPF comes online. - **Power Generation EBITDA**: Full year 2024 power generation adjusted BDA is expected to reach ~$600 million, with Q3 2024 results higher than Q2 2024 driven by winter demand, before moderating in Q4. EBITDA will begin declining by ~$40 million annually starting in 2028 as legacy PPAs roll off. - **Long-Term Gas Production**: When all active projects come online in the next 3-4 years, average annual gas production is expected to reach ~20 million cubic meters per day (peak 20-22 million cubic meters per day). 2P reserves support 25 years of plateau production at this level, requiring ~$250-$300 million in annual maintenance capex. - **Urea Project Contribution**: At full operation, the urea plant will generate BDA equal to ~65% of annual gross revenue, with an incremental ~$90 million annual BDA contribution to Pampa's gas segment if production is expanded to supply the project. Power generation contribution from the project will be marginal.

Segment performance

1. Oil and Gas: Adjusted BDA was $182 million, more than double year-over-year, and a 74% quarter-over-quarter increase, contributing 43.9% of total adjusted BDA. Total production hit an all-time quarterly high of 107.5 thousand barrels of oil equivalent per day. Crude oil production tripled year-over-year, and exit production at Rincón de Aranda reached 22,000 barrels per day temporarily constrained by well choke management. Average lifting cost per BOE stayed flat at $7.7; oil lifting costs fell 28% year-over-year to $15 per barrel, while gas lifting costs fell 13% year-over-year to $1 per million BTU. Gas production rose 10% year-over-year to over 14 million cubic meters per day, with average gas prices up 15% year-over-year to $4.6 per million BTU. Intersegment gas sales to internal power generation increased to 31% of total gas sales from 3% year-over-year. 2. Power Generation: Adjusted BDA was $155 million, up 39% year-over-year and 8% quarter-over-quarter, contributing 37.3% of total adjusted BDA. Results were driven by stronger spot and B2B PPA margins under the new regulatory framework, partially offset by expired Energia Plus contracts, an outage at Loma La Lata turbine 4, and underperformance at Pepe Wind Farms. Total plant availability fell to 88% for the quarter, still outperforming sector peers, with 35% of capacity contracted under B2B PPAs, slightly up year-over-year. 3. Petrochemical: Adjusted BDA reached its highest level since 2021, with quarter-over-quarter growth of 28%, contributing approximately 5% of total consolidated adjusted BDA. The strong quarter was driven by elevated export product margins from post-conflict market conditions.

Risks & headwinds

- Forward-looking statements for all new projects are subject to material risks from general economic conditions, industry dynamics, regulatory changes, and geopolitical uncertainty that could cause actual results to differ materially from guidance. - Urea project timeline and profitability depend on receiving formal RIGI and provincial REPIE regulatory approvals, as well as successful completion of project financing on expected terms. - Rincón de Aranda near-term production is temporarily constrained by well choke management to avoid fracking hits to new well pads, creating near-term volatility in output. Plateau production depends on timely completion of new pipeline and CPF infrastructure in 2025. - Oil hedging programs resulted in $64 million of foregone revenue in Q2 2024, as the hedged price of $59 per barrel was well below the unhedged market price of $91 per barrel. - Power generation spot margin upside is currently capped at 15% for existing gas transportation capacity, limiting near-term benefits of high spot prices under the new regulatory framework.

Analyst Q&A

• Q: What are the planned capital expenditure levels for the next few years, and when will leverage peak?

  A: 2024 capex is expected to be ~$1 billion, mostly allocated to Rincón de Aranda. Excluding the urea project, 2025 capex will fall to ~$700 million, with long-term maintenance capex stabilizing at ~$600 million per year. Pampa's current low leverage (1.4x net debt to LTM EBITDA) supports the investment pipeline, with leverage expected to peak during the urea project's concentrated 2028 construction phase.

• Q: How will the $2.7 billion urea project be financed, and what is the planned capital structure?

  A: Pampa targets a 60% debt / 40% equity capital structure, with limited-recourse project finance. Due diligence is nearly complete, negotiations are well advanced, and financial close is expected by Q4 2024. Total equity contribution over the 41-month construction period will be ~$1.4 billion, with the largest capex concentration in 2028. Pampa will retain 100% ownership of the project, using its current low-leverage balance sheet and existing cash holdings to fund the equity portion.

• Q: Will Pampa unwind its current oil hedging position after the $64 million Q2 revenue drag from hedging?

  A: No, the company will maintain its current hedging strategy. The plan is to hedge all ramp-up production until Rincón de Aranda reaches the 45,000 barrels per day plateau, with all incremental new production remaining unhedged. Once the plateau is reached, the overall percentage of hedged production will be reduced, matching the original strategy.

• Q: What is Pampa's long-term vision and positioning after announcing multiple large new projects?

  A: Pampa is an Argentine integrated energy company that invests heavily in Argentina to monetize Vaca Muerta's resources across multiple industrial segments: oil, gas, power, LNG, and now fertilizer. The diversified, vertically integrated model leverages existing infrastructure and competitive advantages to capture long-term value from the region's resource base.