May 13, 2021
Margarita Chun
Good morning ladies and gentlemen. Thank you for waiting.
I'm Margarita Chun from IR. We would like to welcome everyone to Pampa Energia's First Quarter 2021 Results Video Conference.
We 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. Questions can only be submitted through the Zoom platform available at the browser or through the app.
Should any participant need assistance, please contact us through the chat or email or you can raise your hand. Before proceeding, please read the disclaimer that is located on the second page of our presentation.
Let me mention that forward-looking statements are based on Pampa Energía management beliefs and assumptions and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and depend on circumstances that may or may not occur in the future.
Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Pampa Energía and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the video conference over to Lida Wang, our Investor Relations and Sustainability Officer of Pampa Energía.
Lida, you may begin the video conference.
Lida Wang
Thank you, Margarita. Hello everyone, thank you for joining our conference call.
I hope you all are safe and well. In the interest of time, I will summarize the latest events and financial figures.
For more details you can check the earnings release or contact us. Our CEO, Gustavo Mariani and our CFO, Mr.
Cohen are both here and joining us for Q&A. Despite the challenging context, the first quarter showed solid figures from sales to net cash flow, a great proof of the company's resiliency.
As of 2021, figures are shown in dollars as we announced the divestment last year, and clearance should be any time. Therefore, Pampa is getting simpler and leaner.
The revenues from continued businesses increased 4% year-on-year to $420 million, mainly due to Genelba's new PPA growing gas oil supply by our EMP. We also recorded higher petrochemical and EMP prices due to the rise in international prices and Plan Gas GSA.
All of them were partially offset by the drop in legacy prices and hydrocarbon volumes as well as the tariff rates and devaluation effect over our utility businesses. In Q1, 2021, 83% of our sales were dollar link and almost 88% in EBITDA terms, mainly coming from our core businesses PPA power, capacity followed by EMP.
The adjusted EBITDA from continued businesses amounted to $204 for the quarter 16% higher year-on-year mainly explained by the same reasons detailed before plus production efficiencies and decrease in Peso link expenses due to the devaluation effect. Quarter-on-quarter EBITDA increased by 11% mainly due to the Plan Gas, petrochemicals price improvement and the high seasonality on power and liquid businesses offset by Barragán outages and evaluation effect on regulated income.
Therefore, oil and gas is regaining exposure by taking 41% as we show in the right below while excluding electricity takes 59% of the consolidated adjusted EBITDA. Moreover, during Q1 the CapEx from the continuing businesses fell 11% year-on-year and 10% quarter-on-quarter explained by the commissioning of Genelba's last year first half offset by the recovery EMP activity due to the Plan Gas and Barragán expansion project.
Moving to the power generation segment as seen on slide 4, during the first quarter of 2021, we posted an adjusted EBITDA of $115 million similar to the Q1, 2020 mainly because of Genelba Plus CCGT, higher B2B sales and the valuation impact on our personally nominated expenses. These effects were offset primarily by the dilution of dollar legacy prices in dollar terms, which are frozen since February last year.
Remember that they're in Pesos. Quarter-on-quarter EBITDA decreased by 5% mainly due to Barragán's outages and devaluation impact upset by the summer season that rose the spot energy prices in Q1, 21.
Spot energy comprises 59% of our capacity, but only represented 22% of our power generation EBITDA in the quarter, and it will keep shrinking until the regulator grants inflation adjustment, which is imperative to continue with the proper maintenance of this plants under pay consider the contribution to the quick availability. Generation in Q1, 21 was 4% down year-on-year impacted by increasing renewables in the grid combined by weaker demand.
Less of oil and gas in the north of the country, in addition to Barragán's outage. All of them were partially offset by Genelba Plus CCGT and CAMMESA exports using our efficient dual fuel units at Parque Pilar and Ingeniero White.
Quarter-on-quarter generation was quite similar with thermal outpacing hydro and wind generation. Keep in mind that the power generation business model relies on capacity payment.
So lower dispatch does not impact the revenue making as long as the availability is outstanding, especially for PPA base energy. The availability rates in Q1, 21 reached almost 95% with install capacity of 5G awards operated all by Pamba slightly lower year-on-year mainly due to Barragán's availability.
We expect exports by CAMMESA to remain but slow down as it forecasted drops in the country, meaning that there's more reliance on thermal generation regardless of the fuel. All in all, our 2021 generation is expected to increase year-on-year.
Regarding our expansions our crucial project is closing to CCGT at Ensenada Barragán Thermal Power Plant as seen on slide 5. The project is considered critical infrastructure for Argentina's grid, which will add 280 megawatts in the south of Greater Buenos Aires.
The project is 40% advanced, Siemens carry out the steam turbine inspection without any anomalies. We are beginning to stall the water system and review the facility's connection to the grid.
Around 900 people are right now at the site working with the strictest protocols to minimize the circulation of COVID. We also implemented a nice shift to recover the delays caused by the second wave of the pandemic to achieve the CLD by second quarter of 2020.
Keep in mind that CAMMESA is like a Pampa operates Ensenada Barragán and it is the fourth CCGT project for us. Once closed, the install capacity will amount to 847 megawatts contributing to the grid one of the most efficient thermal units.
So moving on to the EMP results seen on slide 6, we posted an adjusted EBITDA of $33 million in Q1, 21 13% higher on year-on-year, mainly driven by Plan Gas rebounding gas prices, as of the beginning of this year. Crude oil prices also grew to pre-pandemic levels due to the international prices.
However, the lower oil demand and gas exports and more royalties because of higher prices compensated the EBITDA increase. Quarter-on-quarter the EBITDA increase is remarkable considering that they are both quarters off peak quarters driven basically by Plan Gas and also a little bit higher production gas production.
Efficiency wise we recorded $23 million of lifting costs, 24% improvement than Q1, 20 driven by higher productivity at competitive gas plants such as Mangrullo, lesser volume and devaluation. By BOE produce we reached less than $6 of lifting costs 19% lower year-on-year and 2% lower quarter-on-quarter.
Despite the harsh environment the industry depletion and it is worth highlighting that our oil and gas production only decreased 5% year-on-year mainly because of lower oil output, and remains similar quarter-on-quarter. We reached almost 44,000 barrels of oil equivalent per day, of which 90% is gas.
On the oil side, we represented 21% of the segment's revenue in the quarter volumes sold decrease by 39% year-on-year to 3.2000 barrels per day explained by lower domestic demand, as refined products haven't recovered to pre-pandemic levels although we resume exports in April. As per crude oil prices, they increased by 11% year-on-year and 44% quarter-on-quarter reaching more than $55 per barrel, driven by the brand and bouncing back from the sharp fall at the beginning of the lockdown.
Regarding gas, we can see on slide 7. Q1, 21 reach an average of 241 million cubic feet per day of volume sold 7% lower year-on-year but similar quarter-on-quarter explained by still weak been recording domestic demand and lower experts to Chile.
The fact that drilling and completion activity reactivated in Q1 after a dreadful year also impacted the production. Although the growth efforts are placed for the winter season when price surge and the shortage of gas happens.
Production was lower at our less efficient gas bearing blocks but was partially offset by the steady growth at El Mangrullo our block with outstanding productivity wholly owned and operated by us. In Q1, 21 El Mangrullo reached 165 million cubic feet per day of gas production 9% higher than Q1, 20 and contributing close to 70% of our overall gas rank the four largest gas producing block in Neuquina basin.
During the first quarter of 21 our average gas price was $2.8 dollars per MMBtu, 21% higher than last year, and 42% higher than Q4 mainly explained by the Plan Gas were over 70% of our output is sold at $3 per MMBtu. Though this GSA does not cover the spot market or the CAMMESA additional gas tenders, fleet prices improved, but haven't reached the Plan Gas levels.
As we approach to the winter season fleet prices are expected to converge to Plan Gas levels. As you can see right below the quarter sales are more diversified than a year ago, but still mainly destined to CAMMESA whether through Plan Gas or spot cells.
This of course are also part of Plan Gas and will soar during the winter increase in each share to 1/3 of this year's production. Also, we put in place a campaign to appeal to gas B2B sales with positive results increasing our market share.
The only segment shrinking was gas exports which decrease by half year-on-year. Let me briefly comment again on the importance of Plan Gas, which sets a turnaround for our EMP business.
Plan Gas grants have four year GSA intended to reverse the declining trend on local gas production. Pampa was the first major awardee and the only producer tendering the largest winter production growth in the Neuquina Basin.
Winter is seasonally critical because on top of the industrial production consumption, retail and thermal power increases demand dramatically resulting in a gas shortage and massive imports, which are pay with hard currency and does not help to the Argentine macro. Under the GSA, we are committed to increase our annual production by 15%, and by 28% in the winter season, charging $3 per MMBtu off peak and $4.5 per MMBtu, on peak season.
That makes a year weighted average of $3.6 under this GSA. Therefore in Q1, 21 we reactivated our investment activity by drilling six tight gas wells at Río Neuquén and Sierra Chata and completing two tight gas wells at El Mangrullo, our main production field in that block, we are preparing for the output search by building the second gas treatment plant, which will more than double acquisition capacity to reach almost 300 million cubic feet per day.
Drilling activities in the mentioned blocks will increase during the following months to fulfill our commitments especially for the winter. It is worth mentioning petrochemicals outstanding performance despite the economic downturn context.
The EBITDA increase was mainly explained by the significant rise of international reference prices and local spreads thanks to the growing demand link to the industry recovery. Exports which are 40% of our sales are growing for SBR and reforming products country continuing with the pricing trend, we expect to achieve similar performance during Q2 but beyond we are not sure how commodity markets behave, will behave and as they are highly volatile.
Finally, moving on to slide 10 our solid performance allows us to keep deliberation our balance sheet therefore improve our leverage ratios, granting us some degrees of freedom compared to other industry peers amid this challenging environment. This slide shows conciliated failures including our affiliated ownership, but let's only focus on the restricted group for covenant purposes.
Restricted Group is the parent company plus the hydros. Since Edenor was deconsolidated, Pampa under IFRS is the same as the Restricted Group.
As of the year end, the Restricted Group cross debt recorded $1.6 billion similar to last December 91% denominated in US dollars up from 88% in Q4, because we've been paying down short term Peso debt. The dollar debt there's an average interest rate of 7.4% while the Pesio debt averages a 39% interest.
Average life decreased from 4.8 years to 4.6 years. The cash amounted to $409 million 12% lower than last quarter to stock mainly due to higher working capital by Plan Gas coupon and Peso debt payments and share buyback partially offset by positive operating cash flow.
The Restricted Group's net debt is similar to the last quarter amounted to $1.2 billion. The net leverage ratio improved from 2.4 to 2.3 times driven by the higher LTM EBITDA.
In the next 12 months, the company only faces $165 million of maturities of which 84% local currency after Q1. We paid at maturity $16 million of Peso debt and made some share buyback.
We will keep reducing shortened Peso debt unless we find another opportunities to capitalize on either through M&A or further security buybacks. Regarding our affiliates, Barragan amended its BRDs amortization schedule, easing the maturity profile for the next two years.
Finally, the last April's annual shareholders meeting approved to cancel another 2.3 million Treasury ADRs as of today outstanding capital amounts to 55.7 million ADRs. Also keep in mind, that our board also approved a new program for up to $30 million last March with a price cap of $16 per ADR.
So this concludes our presentation. Now I will turn the word Margarita.
She will poll for questions. Thank you very much.
Q - Margarita Chun
Thank you, Lida. The floor is now open for questions.
[Operator Instructions] Our first question comes from Frank McGann from Bank of America. He has three questions.
The first one is what are your expectations for the hydrocarbon law in terms of timing and major provisions you will have? How could it affect Pampa's opportunity?
Gustavo Mariani
Hi, Frank. Regarding the hydrocarbon law, there have been many versions of or many proposals circulating informally through the market.
We've seen one that is very encouraging. But so far none has been formally presented in Congress.
So we still don't have any clarity about that. My personal opinion is that any improvement in the law that will encourage investment and growth in exports is more than welcome.
Not only for the impact they will have on the industry but especially because a growth in exports will help to stabilize the Argentine economy and I think that is most important help for the sector and stable economy. So no law will be a solution for the industry.
If we have an unstable, macroeconomic environment. The first thing that we need is a stable macroeconomic environment.
And then any encourage to investments and exports as I said, will be more than welcome. So far that is much I can say.
Margarita Chun
Thank you Gustavo. The second question is about what are the potential projects that you could do with Gas plan?
Will Pampa be the operator in these projects?
Gustavo Mariani
Okay. It's too early to answer the details that you're asking because we are at an early stage.
The excellent news regarding that I can tell you so far is that a leading international company, like [Indiscernible] is willing to devote time to analyze understand investments opportunities in Argentina. And so far, that's what we are working with them, we are sharing information, we are helping them understand the new opportunities that we see in the natural gas market in Argentina.
But we are at a very early stage of the conversation. So far, only an NDA has been signed.
So that is what I can tell you so far.
Margarita Chun
Thank you, Gustavo. The last question from Frank was about do you see the potential, any potential new projects to add new capacity?
I think he means the power generation business. When do you think the system will need new capacity?
Gustavo Mariani
The timing will very much depend on the growth prospect of the industry or the economy of Argentina. So I don't have a timeframe in my mind because it's not easy to predict the outlook for the economy.
But as you know, power generation projects take a long time from the moment that you start thinking about it to the time that it's in commercial operation. So like a combined cycles is at least three years.
So if the economy starts to perform okay, I don't think it's crazy that next year, at some point of next year, we will start to think about new project in power generation. Today the system is running with a good safety discussion.
But that is because we are counting with old and inefficient equipment that you will be very good for the system to be replaced by more efficient renewables or combined cycle to replace all the steam turbines that are still running in the system. That would be very good news.
Obviously, the investment environment has to be there. So with the current yields of sovereign and corporate debt it's not a very good moment to be planning this kind of project.
Margarita Chun
Thank you Gustavo and our next question comes from Bruno Montanari. He has two questions.
The first one is can you talk about how the new plan gas payment are taking place? Is the government paying on time and how much does the company has in receivables related to the subsidies?
Gustavo Mariani
What has happened is that that sorry, can I speak? Basically for ourselves the main, the revenues are coming basically from CAMMESA that's our most important buyer.
So for the plan gas CAMMESA has equal the payment delay with those for the power generation segment. So we are collecting our gas sales in the same way that we are collecting our power generation sales.
So although that is a little bit of delay compared to what was commodity under the plan gas that is something that we were expecting to happen. We never thought that CAMMESA would have an special treatment for plan gas vis-à-vis power generation.
The amount of receivables of subsidies, I think it's something like 100 million Pesos.
Lida Wang
No, we already accrue in the balance sheet 220 million Pesos is like $3 million but remember that this is the off peak. During the peak will go up.
It's worth to know that we already got the first, the January's order of payments. So we either can use it for paying taxes or collected money.
Gustavo Mariani
Yes. So in short there are a little bit delay, but I think that in terms of property subsidies but I think that can be mostly attributed that is the first implementation of the process.
But now that they have issued the first orders of payments, we think they will normalize the situation pretty soon.
Margarita Chun
Thank you Gustavo. Regarding the second question.
The second question of Bruno Montanari from Morgan Stanley it was partially answered because he was about gas plan but he added have you seen an increase in the appetite of foreign investors to invest in the oil and gas sector in Argentina?
Gustavo Mariani
Not really, but gas prom is the first company, international company that has approached us. So cannot say that there is growth of foreign investors’ appetite.
Definitely there is interest from gas prom, but I cannot say that it's a general situation among international investors.
Margarita Chun
Okay, thank you Gustavo. Our next question comes from Carolina Carneiro from Credit Suisse.
She has two questions. The first one is on the Gas Plan.
Are there any expectation of additional procurement acquisition from government? Maybe she refers to the third round of gas.
Gustavo Mariani
There are still no official news about a third round for winter supply of natural gas. But we think that and we have been discussing about this with the government that it's a must that they should do.
Argentina for this winter is importing LNG at an average of, I think something like $9 per MMBtu, full price including classification. And also, we will be importing liquid fuels like diesel that is even more expensive.
So as we always said, it makes a lot of sense to pay the local industry something close to the import parity of these fuels, in order to save fiscal money and also to save international reserves because the local industry we collect, although this enterprise we find in dollars we are paid in Pesos. So it makes all the sense to do a third round.
Third auction for winter gas and to do it as soon as possible. Obviously it will be for starting the winter of 2022.
But the sooner they do it, the more time the industry has to plan to see their capacity to increase production and to have a successful auction. So we are encouraging the government to do a third round but we have no, there's no official response so far.
Margarita Chun
Thank you Gustavo. Our next question comes from Alejandra Andrade from JPMorgan.
Could you comment on the pace of CapEx going forward?
Gustavo Mariani
Basically, as we explained on the first quarter, CapEx will be mostly, will be this year mostly concentrated on the EMP business in order to be able to deliver our huge increase in production that we committed under the first two rounds of the plan gas auctions. So in total for the year we have something like $180 million of CapEx in the EMP business and that will be mostly deployed during the second and third quarter.
As Lida commented, we are investing in expanding our production capacity at El Mangrullo we are about to more than double our production capacity processing capacity in El Mangrullo with a new plant. And the bulk of those CapEx will be spent during the second and third quarter of the year.
In power generation we have the expansion of Barragán as you know that's a subsidiary that it's an investment that is already financed. So we are not expecting to need any deployment of cash from Pampa into Barragán.
So on the power generation segment for Pampa it's only maintenance CapEx of around $40m - $50 million this year.
Margarita Chun
Thank you Gustavo. I forgot the question from Carolina.
The second question of Carolina Carneiro and it is also related to the question of TPCG about legacy power plan, any update on discussion for potential change in adjustment clauses for legacy generation? There are others talking about an incoming 29% update.
Gustavo Mariani
There's been, we are expecting an increase any time. So coming next, I don't like to say a few days but in the next few weeks it has been mentioned by government official that they are working on this and we've seen an exchange of information between the Secretary of Energy and CAMMESA this week that is a sign that the resolution is moving forward.
So we expect to have a recognition of that less than the past inflation of last year for legacy capacities around this 29%. And contrary to what the resolution issue last year that said that this remuneration we're going to have a monthly update.
We are not expecting that to happen. So we expect to be recognized partially for last year inflation and not until the end of the year to have a new recognition for current inflation.
Margarita Chun
Thank you Gustavo. Our next question comes from Constantino combining it with a question of [Indiscernible].
The first question is about the EMP business. How secure do you expect gas export under the new export regime in force?
What are your estimates on export volumes for 2021?
Gustavo Mariani
Is it public what we, we are awaiting approval for an export contract. That's an important export contract in terms of quantity starting in October that goes from October until April of next year.
So during the summer season. We are very much advanced on the paperwork and within before the end of the month we should get approval for that contract.
We are very optimistic that given the fact that we are increasing so aggressively our production during the winter that we will be granted this export contract and I think there will be no problem for the country in its capacity to export after the winter because there will be excess of production vis-à-vis the local consumption. So we are optimistic that it will be respected.
I think the question was related to that was that was the question?
Margarita Chun
Okay, thank you Gustavo. The second question of Constantino is combined with [Indiscernible] from balance question is about the drilling and completion activity in the EMP business regarding drilling and completion activity expected in the following months in view of the plan gas commitment, could you give an estimate of the number of wells, the unconventional wells as well?
Gustavo Mariani
They're all unconventional wells and will be drilling something like 8 wells in these two months. In the next two months.
Completing was that some of them have already been drilled, some are drilled currently, but they will all be completed in this month and next month in order to grow our production to comply with our commitments in the plan gas. In the auctions of the plan gas, we were as aggressive as we could have been.
So three weeks of lockdown that happened during April that affected our plans and we are currently a little bit behind our committee production. We are around 10% below what we committed for this month in the plan gas auction.
Totally explained by the three week incapacity to work that we had during April. We hope that in the next two weeks, we will be able to, if we have, if the wells perform as we expect we think that we will be able to comply with our commitment under the plan gas.
A – Lida Wang
Just to add right now we have 13 wells gas wells okay. And for the year we expect to drill like 30, but complete out of this 30, 25 so 25 wells will be completed this year only gas talking about.
Margarita Chun
Thank you Gustavo and Lida. The third question is about any updates on the devaluation regarding NNR deal?
Gustavo Mariani
We don't have much to add on that process. We have submitted and the potential purchasers and all have submitted to [Indiscernible] all the information that they have requested.
The last information submitted was several weeks ago. So we are awaiting whether they have more questions or they're working on the resolution but we don't have any clarity on that.
Margarita Chun
Okay, thank you Gustavo. Final question is about do you foresee any difficulties in reaching committee volume in plan gas for during the winter?
Gustavo Mariani
No, as I said, obviously we are counting on the wells to perform as expected and in this business you never know until you put the well production. But, if everything goes if there was performance as expected within the next two- three weeks we will catch up with our delay.
We will be producing what we committed for this winter.
Margarita Chun
Thank you Gustavo. We will continue with Constantion’s second question is about what do you expect for the facilities with maturing UST PPA in 2021?
Are they passing to legacy regime?
A – Gustavo Mariani
Yes. Well we have two facilities maturing this year.
The first one is -- which is 30 megawatt, very small plant 30 megawatt which is internal combustion engines that under the resolution 31 are not able to operate because they have a variable costs that is well above what the resolution 31 pays to that technology. But those equipment are needed because of its location.
So it's needed the distribution company around this. It's needed for the system for several reasons.
That is I don't want to get too technical. So we are in conversations with the interested parties in order to accommodate the remuneration so that we keep we can keep this 30 megawatt running once the PPA ends in July of this year.
The other facility that is maturing is the steam turbine of Loma de la Lata in November of this year. That will fall under resolution 31, but that is a combined cycle that because of its efficiency, because of the way that is remunerated and the resolution 31 obviously it will not have the kind of margins that we had under the PPA but it will continue working on the resolution 31.
Margarita Chun
Well Constantino, he has another question that I think I understood is that we have seen some turbine falls in the past months on the Argentine. What is your position to secure thermal asset availability mostly in the US link PPAs?
Thank you. Because in this quarter the market availability was very low.
It was 81%. Power availability was 95%.
I guess that's the question about.
Gustavo Mariani
We tried to go, nothing different from what we always do. We are proud of our outstanding availability that we have in our facilities and we have that because of the excellent quality of our people.
The fact that we do everything that is required to the equipment and we spend as much of this as is necessary and require and we're all the time doing our best to keep that availability as high as possible. So nothing different and our concern as we explained in the previous conference call is that without an adjustment in resolution 31, there are some technologies that are not being remunerated well enough.
And so if there is no adjustment in resolution 31, we will not be able to continue with this kind of state of the art maintenance of our equipment and in a medium term, it will be felt. But I think that if as expected, this increase in resolution 31 that we already talked about happens in the next few weeks.
That is a fear that will not materialize.
Margarita Chun
Thank you Gustavo. Our next question comes from Rahul Bhat.
It's very related to the question we answer our energy of plant EBITDA positive, do you plan to shut down the plants if no inflation adjustment is provided?
Gustavo Mariani
I think we already covered that. No, we are not planning to shut down any plant except for Energa which because of its technology and the way it is remunerated under resolution 31 we will not be able to continue operations in July or August, in July.
If this facility doesn’t, if we are not able to get a special treatment to this facility but again, it's only 30 megawatts out of the 5G gas, the 5,000 megawatts that we operate. So it's a very small and marginal unit for our portfolio of power generation.
Margarita Chun
Thank you Gustavo. Our next question comes from Liliana Young from HSBC.
The first one was about hydrocarbon law which was answered. The second one is about what kinds of incentives would you like to see so that you can export more gas?
Are they are more related to fostering gas infrastructure investments or making sure you're allowed to export even when the domestic consumer has not enough gas or if it's about increasing domestic gas prices?
Gustavo Mariani
It's not a question that it's easy to answer in a sentence, but I think that in order to export gas to Chile, a little bit to Brazil, the conditions are there. It's only a matter of I think what is more important is that we gain or we regain the confidence of those markets meaning that we will be signing contracts and we should be able to perform on those contracts.
In the past Argentina was not able to do so and that was painful and costly situation for our neighbors. So the most important thing is to regain the confidence of this market so that they will be with time be able to eliminate or reduce the impact of LNG and replace that with supply from Argentina and in the process of decarbonization that Chile is planning to include Argentine gas as part of the solution which is something that they are not foreseen at this moment.
So in the short term I think that the most important thing is that is to credibility from our potential market. In the long term it will be huge infrastructure project in order to be able to export LNG.
We need a new pipe from the Neuquen Basin to [Indiscernible] being able to transport more gas from Neuquen Basin to north of Argentina, and also to export an LNG export facility which there are huge investments and as I said before, they require financing cost significantly lower than what Argentina is seeing these days. So that is a question that we can spend more time answering in the future.
Margarita Chun
Thank you Gustavo. The next question comes from Bruno Montanari from Morgan Stanley.
He added one more question. You mentioned M&A as a potential use of cash.
Which M&A opportunities does the company see in Argentina?
Gustavo Mariani
Again there's nothing that, we are starting a few potential M&A but at the very early stages. All related obviously to the energy sector mostly on power generation and petrochemical related investment.
But there's nothing concrete or, nothing concrete so far. So that much to tell you on that front.
Margarita Chun
We are close to one hour. The following questions are all repeated.
So we will try to reach you out to answer again or you can see, you can watch the video conference again. I don't know, would you like to give some remarks that we didn't address today that you think we should tell everybody.
No?
Gustavo Mariani
No. No.
I was expecting question about the petrochemical segment of Pampa that is so good this quarter. So we are very happy of that.
We expect this second quarter to be as strong as the first one. Obviously, we don't know whether that will be, whether the segment will be able to continue with that excellent performance in the second half of the year.
But we are very happy to what is happening so far. Just to give you some structural change that is happening in the segment is related to the development of -- in a way to the development of Vaca Muerta, but Vaca Muerta is quite light and as the share of light oil coming from Vaca Muerta continues to grow that results in more [Indiscernible] coming out of the refineries, and that is an important input to our segment that we used to import and now we are able to source it locally.
So that has helped the margins of this business. So there is a structural positive change in the segment held by high international prices and we price according to our, price our products according to import parity.
So it's a segment that has been doing very well in the past. In this first half of the year we hope we expect this to decline slightly in the second half.
And any other comments? I think that covers.
Lida Wang
Yes. So we are one hour, we are top of the hour.
So thank you so much for joining us. It's a pleasure.
We are going to have a survey after this. If you have any questions, please reach us out.
We are always available for you. We are also reaching out all our investor community with ESG materiality survey, we would like you to complete it if you want, we can send you the link.
And I think that's all. Thank you so much again.
Margarita Chun
Yes, this concludes today's presentation. Thank you for joining.
You may disconnect at this time. Bye.