Pampa's Capex Peak: Record EBITDA, a Third Year of Cash Burn, and a Hedge It Won't Defend

Adjusted EBITDA of $398 million, up 23% year-on-year, is not a number a company hides. Pampa buried it anyway — behind a restricted-group free cash flow line of -$388 million, $394 million worse than a year earlier and $260 million worse than the second quarter. Cash stood above $1 billion, gross debt rose to $2.8 billion on a $138 million local bond plus a further $220 million at 6.5% after quarter-end, and net leverage moved to 1.7x from 1.4x. That is the quarter. Everything else on the call is an argument about whether that is a trough or a habit.

Three years of outspending the business

CFO Adolfo Zuberbühler laid out the bridge with unusual candour. Maintenance CapEx at plateau runs $600-650 million; Rincón de Aranda needs roughly $400 million more next year to climb from 28,000 to the 40,000 b/d exit and then 45,000 in the first quarter of 2028; and around $250 million a year goes into affiliate equity and the prepayment of pipeline capacity. The punchline was unhedged:

By 2028, free cash flow should turn positive. We won't have any new CapEx in Rincón de Aranda except maintenance and any new CapEx in the affiliates or prepayment of gas. One more year of negative free cash flow at Pampa level.

What has quietly changed is which build-out owns the narrative. The keyword ladder this quarter is led by Fértil Pampa, Plan Gas, gas transportation and dry gas — the molecule-placement complex — rather than the drilling engines. Rincón de Aranda topped this company's extraction in 2025Q3 and again in 2026Q2; it is no longer the thing management is selling. The growth engine has become a cash line item.

And asked directly, in a quarter of "market volatility and sharp declines," whether a buyback was on the table given the prior program was struck at a maximum $60 per ADR, the CEO was flat: “No buybacks and no dividends.” — Gustavo Mariani, CEO · 2026-11-03 That is a departure in tone from the company that sold its GeoPark stake at a gain and rotated the proceeds into its own depressed shares, promising that “if there is another opportunity to be very aggressive, we will be very aggressive again.” — Gustavo Mariani, Chief Executive Officer (CEO) · 2026-05-09 The opportunity is here; the aggression is now capital expenditure.

The hedge that became the explanation

Realized crude net of hedge, export duties and discounts was $55.7 a barrel. Without the hedge it would have been $84 — roughly $60 million of forgone sales in a single quarter, plus almost $300 million of collateral posted, of which management estimates only about $100 million would come back if positions were closed today. Gustavo Mariani's framing has shifted from prudence to lesson: “What we learned is not to be as aggressive as we have been last year. Going forward, I don't think that the hedging will surpass 50% of our expected production.” — Gustavo Mariani, CEO · 2026-11-03

Here is the tension. That 50% ceiling is not new. It was promised in March 2026 (“we are fully hedged 1 year going forward. So until first quarter of next year, we are fully hedged” — Gustavo Mariani, CEO · 2026-03-03) and again in May (“During the ramp-up, we wanted to ensure the stability of the results. That's why we decided to hedge 100% of our production. Going forward... probably around 50%.” — Gustavo Mariani, Chief Executive Officer (CEO) · 2026-05-09). Yet the position is being rolled forward into a fourth year of this strategy at current market prices, hedged into July 2027. The stated lesson has not yet changed the tape. Mariani is at least clear that it is “not related to financing requirements. It's fully discretionary risk management or our own decision.” — Gustavo Mariani, CEO · 2026-11-03 Discretionary, and so far expensive.

Urea: from a slide to a lump sum

The one promise Pampa kept was the final investment decision on urea, which six months ago was framed as “we hope to take the final investment decision by the end of the third quarter or at some point in the fourth quarter of this year.” — Gustavo Mariani, Chief Executive Officer (CEO) · 2026-05-09 It is done: $2.7 billion, entirely covered by a lump-sum turnkey EPC contract with delay and performance guarantees, “fully equity of Pampa” — Lida Wang, Investor Relations or IR Moderator · 2026-11-03 with no partner, project finance targeted to close before year-end after eight months of diligence. Spending runs $300 million this year, $600-700 million next, about $1 billion in 2028. Seven RIGI-approved projects sit behind this at close to $30 billion of headline investment, but Pampa is a direct owner of only two — the urea plant and Rincón de Aranda.

The quieter capital-allocation news is gas. Pampa bought 6 million cubic metres a day of third-party gas in October — roughly half its expected flat requirement — rather than drilling for it, and the contracts carry deliver-or-pay penalties at three times the gas price in winter. Horacio Turri's market thesis is that “the dry gas, dry shale gas, like the one coming from Sierra Chata or El Mangrullo or Aguada Pichana, will be the gas setting the marginal price,” — Horacio Turri, Head of Oil and Gas · 2026-11-03 with average prices above $3 once Plan Gas expires. Note the estimate compression: the incremental E&P EBITDA from new transport capacity is now “in the range of $30 million” — Horacio Turri, Head of Oil and Gas · 2026-11-03, versus the “EUR 50 million to EUR 60 million” — Adolfo Zuberbuhler, Chief Financial Officer (CFO) · 2026-05-09 guided for the earlier tranche in May.

Power: a deregulation tailwind with an unquantified offset

The power numbers are genuinely improving. The fraction of the spot margin a generator keeps rises from 15% to 25% in January; the share of energy sellable under B2B PPAs goes from 20% to 60% in April at roughly 40% higher prices; and with the Perito Moreno expansion — corroborated three days earlier on affiliate TGS's own call — Genelba becomes eligible for the full dispatch margin. Lida Wang put the power uplift at around $100 million.

But the same resolution shrinks the declared-cost markup from 25% to 17.5%. Asked how much of the $160 million segment EBITDA disappears with it, Mariani did not have the number: “I do not expect anybody in this table to have that figure on top of their mind.” — Gustavo Mariani, CEO · 2026-11-03 Pressed again: “Overall, the positive factor will, I am completely sure, be higher than the downside factors. But I do not have the breakdown of each of them.” — Gustavo Mariani, CEO · 2026-11-03 For a company whose entire equity story is now a multi-year capital budget, the inability to net two regulatory changes of known size is the least satisfying moment on the call.

Worth setting against the global tape, too. Every utility and generator reporting this fortnight is talking about large load growth from data centres. Mariani's answer inverts it: “the demand in Argentina hasn't been growing for quite a long time... less than 10% of the total hours of the year, the market is tight.” — Gustavo Mariani, CEO · 2026-11-03 No blackout risk from generation, no new-build wave — the upside here is price and contract structure, not volume. And the El Niño weather pattern that dominated the global keyword board last quarter shows up here only as a marginal negative: softer thermal dispatch, offset by self-supply economics, with management expecting minor impact on the CCGTs.

So the quarter reduces to a simple question investors will argue about for the next eight quarters: is $1.7 billion of net debt and a third consecutive year of cash burn the price of a 2028-2030 earnings machine — urea, a 45,000 b/d plateau, a deregulated power market — or the point at which a company with a $3.7 billion market cap should have bought its own shares instead? Management has answered clearly. It chose growth. Q4 is its softest quarter, Plan Gas summer gas sits near $2.9 per million BTU, and the tally arrives in 2028.