This article first appeared on GuruFocus .
Release Date: August 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Pampa Energia SA ( NYSE:PAM ) achieved an all-time high quarterly oil and gas production of 107.5 thousand barrels of oil equivalent per day, driven by the successful ramp-up at Rincon de Aranda.
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The company's adjusted EBITDA grew 28% quarter-on-quarter to $415 million, supported by strong spot power margins, gas seasonality, and higher petrochemical prices.
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Pampa Energia SA ( NYSE:PAM ) received approval for the RIHI framework for its Rincon de Aranda project, providing a stable 30-year tax, customs, and FX incentive regime, including export duty waivers from the second year of operation.
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The company approved the FID for a $2.7 billion urea plant, which will leverage its own natural gas and power to create a high-value-added business, with an estimated annual contribution of approximately $1 billion through import substitution and exports.
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Pampa Energia SA ( NYSE:PAM ) maintains a strong balance sheet with $1.3 billion in cash and a low net leverage of 1.4x, positioning it well to finance its growth projects, including the urea plant, without seeking partners.
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The company's power generation segment posted a 39% year-on-year increase in adjusted EBITDA to $155 million, benefiting from the new regulatory framework and wider spot margins.
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Pampa Energia SA ( NYSE:PAM ) expects to significantly increase its gas production to a peak of 20-22 million cubic meters per day over the next 3-4 years, supported by intercompany demand from its power, urea, and LNG projects.
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The company's oil lifting costs are expected to decline to around $5 per barrel by Q2 2027 as production ramps up to the 45,000 barrels per day plateau, improving profitability.
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Pampa Energia SA ( NYSE:PAM ) has secured 3.2 million cubic meters per day of transportation capacity on the Perito Moreno pipeline, which will allow it to capture full spot margins for its gas and power generation, adding an estimated $100 million in EBITDA next year.
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The petrochemical business recorded its highest quarterly EBITDA since 2023, contributing positively to the consolidated results.
Negative Points
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Pampa Energia SA ( NYSE:PAM ) reported negative free cash flow of $128 million in Q2, impacted by higher working capital due to increased winter sales and receivables.
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The company's realized oil prices were negatively affected by its hedging strategy, resulting in approximately $64 million less in sales revenue during the quarter.
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Total lifting costs increased 30% year-on-year, primarily due to the Rincon de Aranda ramp-up, although cost per BOE remained flat.
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Power generation availability fell to 88% due to outages at several plants, including the ongoing outage at Neuiles and the Loma La Lata gas turbine, which impacted performance.
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The company faces significant capital expenditure requirements, with net leverage expected to peak at around 2.0x over the next 2-3 years as it funds the urea project and other developments.
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Pampa Energia SA ( NYSE:PAM ) expects the petrochemical business's strong performance to be circumstantial and not sustainable in the long term.
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The company's power generation segment is expected to face headwinds in 2028 as certain PPAs roll off, potentially reducing EBITDA by around $40 million.
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The urea project's financing is still under negotiation, with the company unable to disclose interest costs, and it will require substantial equity contributions of around $1.4 billion over the next 41 months.
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Production at Rincon de Aranda was temporarily affected by choked wells to avoid frack hits, leading to a lower-than-expected exit rate for the quarter.
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The company's gas production is subject to transportation restrictions in pipelines, which limited supply procurement during the quarter.
Q & A Highlights
Q: How do you see CapEx in the next two to three years, and at what level do you expect leverage to peak? A: (CFO) We are facing a challenging CapEx deployment, especially with the Urea project. However, EBITDA should increase as we achieve maturity of the Rincon de Aranda investment and the Southern Energy and San Matias pipeline investments by 2028. We foresee net leverage increasing from current levels to a maximum of around 2 times, varying between 1.5 and 2 times for the next two to three years until we finish the Urea project investment. CapEx this year is around $1 billion, mainly for Rincon de Aranda, and around $700 million next year, excluding Urea.
Q: Can you give any color on how you plan to finance the $3 billion Urea project and the deployment along the 41 months of work? A: (CFO) We've been working intensively on financing since the beginning of the year. The idea is to finance the project through a project finance loan with limited recourse on Pampa. We are close to finalizing the due diligence process, hoping to end it in August, and are negotiating the terms of the loan. We expect to finance a proportion around 60/40 equity-to-loan ratio. The big contributions, both of debt and capital, will be in 2028, and the financing will be closed by the last quarter of the year.
Q: How much revenue and EBITDA may we expect from the Urea project on a consolidated basis, and what is the impact on Pampa's E&P and power segments? A: (CFO & IR) Revenues are simple to compute: 2.1 million tons of urea per year times the price of urea (e.g., $400-$500), with EBITDA around 65% of that. The internal gas price for the project is $3 per million BTU, with a consumption of 3.3 million cubic meters per day. If we increase gas production only for this project, it's around $90 million of additional EBITDA to the gas segment. We are not planning to build new power facilities for this project; the power contribution is marginal, with the big contribution coming from gas.
Q: Considering the current production levels at Rincon de Aranda and the 10 wells scheduled to be connected in August, what kind of production ramp-up can we expect between now and the end of the year? A: (CFO) The goal this year is to reach 28,000 barrels per day by the end of the quarter. The increase is like a staircase; you will see peaks and troughs of production as we tie in wells, but the goal is to achieve the 28,000 barrels per day exit rate. The same will happen next year when we try to reach the 45,000 barrels per day plateau once the CPF and Vaca Muerta Sur oil pipeline are online.
Q: How can we think about Pampa's long-term peak gas production, considering the volumes to SESA, the Urea project, and self-procurement for power generation? A: (CFO & IR) We foresee procuring around 10.5 million cubic meters of gas per day for our own power business, another 3.5 for the Urea plant, another 6 for the floating LNG project, and 1.5 for exports. This adds up to around 20 million cubic meters of gas per day, quite constant because we are selling intercompany, avoiding seasonality. This is what we foresee for the next three to four years when all our projects are online.
Q: How long can Pampa sustain the peak gas production plateau, and what CapEx is required to sustain it? A: (CFO & IR) Assuming a very conservative 20 million cubic meters per day of final production, with current 2P reserves, it's around 25 years of average life. This is only 2P, not including 3P or resources. The required CapEx to sustain this level, considering the average well type of our shale gas blocks and maintenance of treatment plants, is around $250 to $300 million of CapEx per year.
Q: Can you talk about the funding strategy of the Urea project and the rationale behind it? A: (CFO & IR) The strategy is fourfold: first, to monetize our gas reserves, which is a perfect fit; second, the Urea business per se makes sense as the region needs a lot of urea and currently depends on imports from unstable regions; third, the RIHI framework makes this project possible; and fourth, our balance sheet. We have a lot of cash and low leverage, and we are ready to deploy the cash. We are not afraid to use our unleveraged balance sheet to grab these opportunities. The project is 100% owned by Pampa.
Q: Can you share something about the tenure and interest costs of the Urea project debt? A: (CFO) I cannot disclose the interest cost yet as we are still negotiating. However, given it is a project finance, we expect a spread over our bonds. The profile will most likely be a four-year grace period while we build the plant, with a maturity closer to seven years or so.
Q: Can you expect a normalization of oil lifting costs following the recent increase driven by the new TPF? A: (IR) The TPFs are rentals costing around $5 million per month. We commissioned the second TPF, but production didn't grow because we choked some wells to avoid frack hits. Now that everything is fracked, we can connect all the pads. We expect an exit rate of lifting costs of around $10 per barrel with the two TPFs. Once the CPF is online and production ramps up, we expect lifting costs of around $5 per barrel by the second quarter of next year.
Q: Given the still favorable oil market outlook and the $64 million revenue loss in Q2, would you consider unwinding the hedging position? A: (CFO) No, we won't. The idea is to keep this level of hedge and naturally, as production increases, we have a big portion unhedged. The original strategy was to hedge the ramp-up until the 45,000 barrels, and this is what we're doing. Once we reach that plateau, we still have to define, but in general, we foresee that the percentage of hedging will
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
