德银-阿根廷-能源行业（个股-PAM）-3季度：伴随着持续去杠杆化的坚实的季度-20171113-Deutsche_Bank-Pampa_Energia：3Q17，Solid_Quarter_as_Deleveraging_Continues_13页_935kb

Pampa Energia Summary

Core Content

Pampa Energia, a major energy company in Argentina, reported strong financial performance in 3Q17, driven by its Generation and Distribution segments. The company's financial results and credit profile are highlighted in this analysis, along with its financial models and key risks.

Main Points

• Solid Performance in 3Q17:

  • Pampa Energia reported an earnings beat in local currency terms, with EBITDA significantly exceeding expectations.
  • The Generation segment saw a 25% improvement in EBITDA compared to the forecast, aided by higher average prices and the commissioning of the CTPP plant.
  • The Distribution segment had a 60% increase in EBITDA, due to tariff increases and improved client growth, although it was still down -3% YoY.
  • The company's LTM net leverage dropped below 2.5x, indicating improved financial position.

• Oil & Gas Segment:

  • Production stabilized at around 70k boed, with a solid netback of USD22/boe.
  • EBITDA for the Oil & Gas segment is expected to range between USD550mn and USD600mn annually.
  • The segment's performance was slightly below forecast, but the netback remained robust even with subsidies.

• Unconsolidated Subsidiaries:

  • TGS showed improved EBITDA and positive FCF, with net leverage below 0.5x.
  • Transener is experiencing solid EBITDA generation and positive FCF, as it works on resolving tariff appeals.
  • The company has a low level of cash and equivalents, but its liquidity is supported by financial investments totaling approximately USD111mn.

• Financial Models:

  • The company's financial model indicates that its LTM gross leverage has steadily declined from 1.4x in 2Q17 to 0.9x in 3Q17.
  • Pampa Energia is projected to generate positive FCF going forward, although this could be offset by dividend payments and project-related capital expenditures.

• Bond Recommendations:

  • Deutsche Bank recommends a Buy rating for Pampa's 7.375% '23 bonds and 7.5% '27 bonds.
  • These bonds are considered attractive compared to YPF's bonds, offering better z-spreads and lower durations.

Key Information

• 3Q17 Results:

  • EBITDA: USD269mn (USD271mn estimate), 58.7% margins.
  • Total Revenues: USD242mn, slightly below forecast.
  • Netback: USD22/boe, consistent with 2Q17.

• Outstanding Issues:

  • Long-term risks include potential policy changes and dependency on future exploratory success.
  • Short-term risks involve government payment delays for subsidized natural gas prices, structural subordination, and tariff increase delays.

• Financial Highlights:

  • LTM Net Debt:DB Adj. EBITDA: Improved to 2.1x in 3Q17.
  • DB Adj. EBITDA:Interest Expense: Improved to 3.7x in 3Q17.
  • EV:DB Adj. EBITDA: Improved to 3.0x in 3Q17.

• Segment Analysis:

  • Generation: Increased EBITDA due to higher prices and new projects.
  • Distribution: Major growth driver due to tariff increases and stable cash costs.
  • Oil & Gas: Stable production and netback, but slightly below forecast.
  • Petrochemicals: Minimal activity with low EBITDA and revenue.

Conclusion

Pampa Energia's performance in 3Q17 was strong, with significant improvements in EBITDA and leverage ratios. The company is well-positioned for continued growth, supported by its diversified energy assets and improved regulatory environment. Despite some short-term risks, the Buy rating for its bonds is justified by their favorable spread to duration and improved credit profile.