PAMPA ENERGÍA S.A. 
Fitch Ratings has affirmed
The Rating Outlook is Stable.
CGC's ratings reflect its production profile, reserve base, leverage and the recent improvement in its liquidity profile. CGC's increased production and its strong liquidity profile and exports help mitigate the impact of capital controls.
CGC's 'B-' LT FC IDR is constrained by
Key Rating Drivers
Weak Operating Environment: CGC's ratings are capped by the country ceiling of
In recent years, despite having the world's largest shale gas deposit,
Production Profile: CGC's production increased by 58% in 2021 compared to 2020, reaching 55,500boed, following last year's acquisition of Sinopec Argentina. The acquisition diversified the company's operations and production profiles by adding sites in San Jorge, Neuquina, and Cuyo basins. These are prolific basins, and Cuyo falls within the prolific Vaca Muerta basin, complementing CGC's existing operation in the Austral basin.
As of end of
Stable Cash Flow Profile: Fitch's rating case estimates FCF will be negative in 2022 as the company deploys
CGC is exposed to potential payment delays by the government, but this is mitigated through its oil production, which will partially be exported, and non-contracted gas sales. Moreover, the company maintains a strong liquidity position, a large portion of which is held in USD abroad, to offset the impact of capital controls and payment delays. The company stands to benefit from the easing of the capital controls (Decree 277/2022) that encourages energy companies to increase exports, by allowing them to maintain dollars abroad.
Adequate Leverage Profile: CGC's gross leverage, defined as total debt to EBITDA, is expected to be 2.1x in 2022 and decrease to an average 1.7x over the rating horizon, which assumes debt will be rolled over each year through 2025. Total debt to 1P is expected to be
Derivation Summary
CGC's (B-/Stable) credit profile compares favorably to Argentine corporates
Compared to Argentine peers
CGC is an energy company, and its business profile compares mostly to Capex and Pampa's upstream business, but both Capex and Pampa are diversified energy companies that generate majority of cash flows from power generation, thus they are more exposed to CAMMESA. Both Pampa and CGC are leaders in
CGC produces both oil (33%) and gas (67%) exclusively in
Over the rating horizon, Fitch expects that CGC's production will average 57,000boed, which is higher than all its peers, as SierraCol is expected to produce on average 36,000boed,
CGC's 2021 half-cycle production is expected to be
CGC has an adequate capital structure with gross leverage, defined as total debt to be EBITDA, expected to be 2.1x in 2022 and total debt to 1P estimated to be
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer
Operations
Oil and gas production to average 57,000 boe/d over the next four years;
Average realized natural gas price of
Average realized Brent price of USD86bbl in 2022, USD85bbl in 2023, and USD53bbl long term;
Capex of
Lifting cost (COGS - D&A) of
Selling expenses are
SG&A expenses are
Exploration expense are
Other income expenses are
Reserve replacement ratio of 105% per annum.
Financial:
Fitch Average and EOP ARS/USD exchange rates;
Dividends received of
Dividends paid of
Debt outstanding remains close to
Interest costs are 9% of total debt outstanding.
RATING SENSITIVITIES
Any further regulatory developments leading to a more independent market that is less reliant on support from the Argentine government could positively affect its collections and cash flow given the company's dependence on PG4 subsidies paid by the government;
Contracted exports with high quality off-takers with a long-term tenure with adequate legal protections to avoid interference from the federal government;
Loosening of central bank capital controls rules allowing the company to strengthen its hard-currency cash balance;
Maintaining a gross leverage, total debt to EBITDA profile of 2.0x or less.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade of
Amendments to capital control rules which weakens the company's ability to access its capital and refinance debt;
Significant delays in payments that negatively affect working capital, liquidity and leverage;
Revision of existing contracts (PG4);
Significant deterioration of credit metrics of total/EBITDA of 4.5x or more.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Adequate Liquidity: CGC reported
Issuer Profile
CGC is an energy company with operations in
Sources of Information
The principal sources of information used in the analysis are described in the applicable criteria.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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