LATAM INVESTMENT RESEARCH

CORPORATE CREDIT AND EQUITY │ July 25, 2023

CAPEX │ Argentina │ Integrated Energy ENERGY, POWER & UTILITIES

2024s Exchange Mechanics Oriana Covault +54-11-5528-7341

Research Analyst
ocovault@balanz.com
Credit Rating (CAPXAR)
Martín Arancet +54-11-3444-9594
Neutral
Research Analyst

Capex launched its 2024s exchange offer using a contingent options modality but with marancet@balanz.com

a twist. Option A includes a cash component that is a function of tendering mix and Ezequiel Fernandez +54-11-5528-9152
could come around 50% of the total offer and a debt component for around 50% in Research Head
new amortizing 2028s, at a 9.25% coupon. The cash portion will be covered using up efernandez@balanz.com
to US$50M in a pre-export financing locked by the company with international banks.
Using a 10% exit yield and a reasonable participation we value the Option B early terms
at ~US$102, above the holdout the strategy and offering upside if the Argentina CAPEX

elections come out favorably, as in our base case. CAPXAR 6.9% May 2024

Neutral
Capex launched an exchange offer for the May 2024 ~US$239M maturity, aiming to remove
Y TM: 10.1% Duration: 0.8
refinancing risks with presidential elections around the corner. The company is offering cash
and new notes in the typical structure of the latest Argentina corporate debt exchange under Clean Price: US$98.3 Size: US$239M

FX controls, featuring two main options for bondholders. As it seems, Capex did not secure
dollar access via the Argentina Central Bank, so it plans to finance the cash portion via a CAPXAR 2024s Yield-to-Maturity
~US$50M in pre-export financings agreed with Citibank and ICBC.
16%

At the early terms, Option A includes a pro-rata cash consideration that would be contingent 13%
on the tender success and might reach ~35% in the more likely scenarios, with the remaining
65% coming in new 2028s with a 9.25% coupon rate and US$12.5M in eight semi-annual 10%

installments starting in February 2025. On the other hand, Option B only offers new 2028s
7%
note multiplied by a factor of 1.04. The deal is conditioned to a 70% of minimum participation
(waivable) and a non-waivable condition of US$85M of tenders under Option B. The early
4%
terms expire on August 4th and the final deadline for tendering was set for August 18th, while
Oct-21

Oct-22
Jan-22

Apr-22

Jan-23

Apr-23
Jul-21

Jul-22

the settlement date should be around August 25. Mind that both options include the
payment of accrued interest. Source: Factset

Using a 10% exit yield (CAPXAR 2024s pre-offer yield and ~110bps above the Pampa 2027s)
KPIs* F2023* F2024E F2025E
a 70% tender rate and a 50% preference for Option A, we value option A at US$99 at the
Revenue, US$M 405 320 303
early terms. Under the same assumptions, we value option B at US$102, which comes
roughly US$3 above the latest clean price and appears the more appealing option. EBITDA, US$M 184 163 141

Oil & Gas 142 133 110

Finally, a word on the company’s recently published F4Q2023 results. The company posted Power 39 27 28
EBITDA of US$28M, 10% below our estimates (-36% QOQ) on the back of less-intensive firing
NGL & Others 3 3 3
of thermal power plants with 70% capacity factor and pricing headwinds hurting top line for
Capex, US$M 187 168 115
the upstream sector. Quarterly investments accelerated to US$56M evidencing inflationary
pressures and the completion of a horizontal well in Parva Negra. Net leverage came Net Debt to EBITDA 1.5x 2.2x 2.8x

unchanged at 1.5x, however we expect a spike to ~2.0x in the ST as the company continues Source: Capex, Balanz.* Fiscal year ends in April.

with their investment efforts in Agua del Cajón and a weaker price environment for crude oil
that could lead EBITDA 11% down during F2024E. We expect Capex to end F2024 with
US$50M in cash assuming a 70% participation rate in the offer, hence in a possible scenario
of 30% of holdouts, still in a manageable position to honor compromises.

See important disclaimers in the last page,

 CORPORATE CREDIT & EQUITY RESEARCH

Capex Summary (at official FX, assuming a 70% participation rate on the exchange)

30-Apr-2021 30-Apr-2022 30-Apr-2023 30-Apr-2024 30-Apr-2025 30-Apr-2026

F2021 F2022 F2023 F2024E F2025E F2026E

Cr ude Oi l Output, kbl /d 5.9 6.8 7.6 7.7 8.1 8.0

N atur al G as Output, Mm 3/d 1.3 1.3 1.4 1.5 1.6 1.5

O&G Unconventional Mix 36% 34% 31% 35% 40% 37%

Power Output, TWh 3.5 4.9 4.8 3.9 3.6 3.6

Re v e nue s , U S $M 196 278 405 320 303 297

Oil - US$/bl 43.8 66.8 103.5 71.4 60.5 57.2

Gas - US$/Mmbtu 2.8 2.3 2.2 2.8 2.8 3.2

Power - US$/MWh 25.2 8.9 10.9 18.0 15.3 15.0

E B ITDA, U S $M 96 148 184 163 141 134

Upstream 58 97 142 133 110 103

Power Generation 33 42 39 27 28 28

NGL & Others 5 9 3 3 3 3

Net Income, US$M -7 33 103 -11 -46 -46

Cape x, U S $M 41 120 162 164 114 97

N e t De bt, U S $M 142 138 281 348 371 377

Cash 137 87 13 56 30 13

Debt 279 225 294 405 402 390

N e t De bt to E B ITDA 1.5x 0.9x 1.5x 2.1x 2.6x 2.8x

Amortizations & Debt Repurchases, US$M 49 15 0 189 113 42

Source: Capex, Balanz

Capex Quarterlies (at official FX, except when noted)

44592 30-Apr-2022 31-Jul-2022 31-Oct-2022 31-Jan-2023 30-Apr-2023

F4Q22 F1Q23 F2Q23 F3Q23 F4Q23 YOY

Cr ude Oi l Output, kbl /d 7.1 7.3 7.8 7.7 7.6 8%

N atur al G as Output, Mm 3/d 1.3 1.3 1.3 1.3 1.8 44%

Power Output, GWh 1,137 1,265 1,275 1,213 1,042 -8%

Re v e nue s , U S $M 69 123 79 98 104 51%

Upstream - US$/bl 93 95 82 79 78 -16%

Upstream - US$/MMbtu 1.7 2.8 2.8 1.9 1.4 -15%

Power - US$/MWh 13.3 13.2 11.2 14.2 15.4 16%

E B ITDA, U S $M 34 72 38 44 28 -16%

Upstream 20 60 29 28 24 18%

Power Generation 11 10 5 14 9 -12%

NGL & Others 3 1 4 3 -5 2095%

Ac c r ue d Cape x, U S $M 43 31 34 40 56 31%

N e t De bt, U S $M 154 182 256 274 281 82%

Cash 98 62 15 14 13 -87%
Debt 252 244 272 288 294 17%

N e t De bt to E B ITDA, LTM 1.0x 1.0x 1.4x 1.5x 1.5x 0.6x

Stressed Net Debt to EBITDA, LTM* 2.3x 2.2x 2.9x 2.7x 3.1x 0.8x

Source: Capex, Balanz estimates. *EBITDA, peso-cash and peso-debt adjusted for BCS FX.

2
 CORPORATE CREDIT & EQUITY RESEARCH

DISCLAIMER SECTION

This report is for information purposes only and is not intended to recommend the purchase or sale of any security or investment.
It contains information available in the market and such sources presumed to be reliable. However, no guarantees can be made
about the integrity or accuracy of it. All opinions and estimates herein reflect the current judgment of the author as of the date of
the report and it may be subject to change without notice.

The value of any investment may fluctuate as a result of market changes. The information in this report is not a prediction of results
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of Balanz Capital Valores S.A.U.