Gustavo Mariani: We have been seeing peso appreciation this year. So we do see dollar inflation in our cost. And there’s not much that we can do against these movements of the macro . So we are seeing it but there’s not much that we can do as — on operations to prevent that from happening.
Lida Wang: And mostly productivity-wise, productivity efficiencies. But unfortunately, — but in order to retain talent, this is — the payroll has to go. Let’s consider that since 2018 to 2021, 2020, there has been big decrease in dollars in terms of the salary. So it’s logical to have a ramp-up.
Margarita Chun: Thank you, Gus and Lida. The fifth question of Frank is about TGS LNG project. If the TGS LNG project goes forward, what would be the upside for volumes, both over the medium and long term. What would this mean in terms of CapEx both for upstream developments and possible participation with an equity stake in a project.
Gustavo Mariani: Frank, TGS is still working on the engineering of this project. And — and basically, it’s too early to tell it’s too soon to speculate about CapEx plan in terms — both for TGS and for Pampa regarding this project. Hopefully, by mid of this year, we will have more clarity as I hope that at some point of this year, we will be in a position to decide whether to move forward or not. Once we do so, I’d be happy to share these figures with you. But currently, it’s too early to tell, would be too speculative.
Margarita Chun: Thank you, Gus. The last question of Frank is about with significant opportunities in coming years, will you be able to finance this with your existing cash flow? Is equity financing and option?
Gustavo Mariani: Okay. Thank you for the question, Frank. I’ll go back. I think this would lead us to first slide in the presentation. And I want to go back here because I think this shows the tremendous free cash flow generation of our portfolio capacity — of our portfolio of assets. As you can see here, in the first 2 charts. In the past 5 years, we have increased our capacity to produce natural gas by 120%. That obviously meant a huge amount of CapEx. Also in power generation, we grew our capacity by 44% from 3.7 GS gas to 5.4. Again, a huge amount of CapEx in order to do so. But — and then I go to the bottom of the slide. While we did so, we grew our production capacity by so much, we were also being able to do so while reducing our net indebtedness, as you can see in the middle of the bond, we have reduced our net indebtedness by 25%.
We also — we have repurchased our own bonds. We have repurchased like $330 million of nominal bonds. At the bottom right, in the past 5 years, we have reduced the number of ADRs outstanding from $83 million to $55 million. So we have reduced our stock outstanding by 34%. We have spent earning in share repurchases more than $600 million. So between share repurchases and debt repurchases, we have spent around $1 billion. So, I think this slide shows the cash flow generation capabilities of our portfolio. We have been increasing our production capacity tremendously and we have also been able to repurchase our own stock and debt. So going forward, going back to your question, I think, yes, there are a lot of opportunities that we can take advantage of and our portfolio generates the needed cash flow to do so.
And — but if we may decide to finance ourself increasing indebtedness, we will probably be doing this year, taking advantage of the cheap financing available in the local market, in the peso market, we might do so. Regarding equity financing, it is an option, yes, it’s always an option but to place share price of our stock, we are more tended to repurchase our own stock to reach to new stock. So it’s always a possibility, certainly, not at these prices.
Margarita Chun: Thank you, Gus. Our next question comes from Bruno Montanari from Morgan Stanley. He has 3 questions. The first one is the balance of risk and opportunities in Argentina seems to be migrating more towards the oil side of the industry recently. Would Pampa be interested in being more active on the oil investments to increase production, now that the gas upside seems to be well mapped out. If yes which is — in which blocks could you — could the company intensify developments.
Gustavo Mariani: Bruno, thank you for your question. We are studying several alternatives. We do want to increase to balance a little bit more our production towards oil. As you know, today, we are probably 90% natural gas and 10% oil. So we want to have a more balanced portfolio. And in order to do so, we are starting several alternatives and discussing with our partners, one possibility is increasing exploration and production in which is 1 block that we own but we need to reach an agreement with our partner. And there is a couple of other alternatives that we are selling but nothing concrete as I can tell you at this moment.
Margarita Chun: Thank you, Gus. The second question of Bruno is although an increase in lifting cost was expected, the company seems to have been able to offset some of the inflation incurred on E&P cost. What are the trends for lifting costs going forward?
Gustavo Mariani: Well, as you well mentioned, yes, the inflation in dollar terms put pressure here as well. But basically, what I think what explains is the fact that we have been building new infrastructure and we do still have spare capacity in that infrastructure that we have been building over the past few months. So we are not still having a high utilization rate of this new infrastructure. I hope that as our production continues to grow, lifting costs will continue going down.
Margarita Chun: Thank you, Gus. Last question of is can you comment on Pampa’s strategy to deal with a potential material devaluation of the Argentine peso happening in a very short time frame. What will be the impact in terms of margin of E&P on power generation? And how would the company protect its cash balance and cash flows?
Nicolas Mindlin: So firstly, most of our incomes are dollar linked. I think the biggest impact on our cash flow will be — and will depend on the ones that we are owed by CAMMESA and also regarding plant gas but it should not be a big impact. And regarding our cash and our cash balance, we are mostly invested in dollar-linked assets or in U.S. dollars. So I think we are already protected from that scenario.
Margarita Chun: Thank you. Nico. The next question is from Matias Castagnino from BCP Securities. His question is regarding the remaining amount of the 2023 bond.
Nicolas Mindlin: So this maturity is like a different new maturity than last year’s. So the current regulation applies. That means that we have access to the official effects for 40% and we have to refinance the other 60%. We can do this as early as 45 days before the maturity and this is not a big maturity. So it’s very manageable for us and we are analyzing different alternatives that will depend among other things on market conditions at that time.
