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01/10 16:41
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call showed strong financial performance with significant EBITDA growth across segments and a positive cash position. Despite concerns about future liquid prices and management's vague responses on some projects, the overall sentiment remains positive. The company's strategic projects and partnerships, along with robust financial results, suggest an optimistic outlook. Considering the mid-cap market cap, the stock is likely to experience a positive price movement, though not exceptionally strong due to some uncertainties and lack of clear guidance in certain areas.
Net Income ARS 112 billion during Q3 2025 compared to ARS 68.8 billion in Q3 2024, a 62.8% increase. This was driven by better performance in the liquids business (higher EBITDA of ARS 37 billion) and midstream business (EBITDA growth of ARS 14.5 billion), along with lower negative financial results (ARS 31 billion). However, it was partially offset by a decline in natural gas transportation EBITDA (ARS 10.5 billion).
Natural Gas Transportation EBITDA ARS 102.4 billion in Q3 2025, down from ARS 113 billion in Q3 2024, a decrease of ARS 10.5 billion. The decline was due to insufficient tariff adjustments (ARS 29.2 billion increase in revenues was offset by ARS 42.2 billion inflation adjustment effect), rising operating expenses (ARS 2.4 billion), and incremental revenues (ARS 4 billion) from interruptible transportation services.
Liquids Segment EBITDA ARS 55.2 billion in Q3 2025, up from ARS 18.2 billion in Q3 2024, a 203.3% increase. This was driven by higher export volumes (61,000 metric tons, contributing ARS 18 billion), increased ethane sales (38,000 metric tons, adding ARS 11.7 billion), higher butane prices (adding ARS 13.2 billion), and reduced operating expenses (ARS 5.4 billion). However, it was partially offset by extraordinary flood expenses (ARS 8.9 billion) and higher natural gas prices (ARS 4.3 billion).
Midstream and Other Services EBITDA ARS 61.2 billion in Q3 2025, up from ARS 46.7 billion in Q3 2024, a 31% increase. This was due to higher sales from increased natural gas transported and conditioned volumes (adding ARS 21 billion) and positive monetary effects (ARS 3.2 billion). However, it was partially offset by higher operating expenses (ARS 10.4 billion).
Financial Results Positive variation of ARS 31.1 billion in Q3 2025. This was due to a ARS 43.4 billion increase in income from financial assets (higher yields in domestic financial investments) and a decrease in inflation exposure loss (ARS 10.7 billion). These were partially offset by a higher foreign exchange loss (ARS 21.8 billion) due to exchange rate changes.
Cash Position Increased by 22% or ARS 160 billion in Q3 2025, reaching ARS 875 billion (approximately $638 million). This was supported by EBITDA generation (ARS 219 billion), reduced working capital (ARS 36.4 billion), and higher financial investment yields (ARS 53 billion). CapEx amounted to ARS 87 billion, with interest payments of ARS 29 billion and income tax payments of ARS 61 billion.
Perito Moreno pipeline expansion: Awarded to TGS on October 17, with an expected CapEx of $560 million. Includes construction of 3 compressor plants and expansion of Tratayén compressor plant, adding 90,000 horsepower. Incremental capacity to be commissioned by April 2027, with a 15-year operational and maintenance period.
Regulated pipeline expansion: $220 million investment to expand capacity by 12 million cubic meters per day. Includes 20 kilometers of pipeline and 15,000 horsepower compression capacity increase.
Liquids business performance: EBITDA tripled to ARS 55.2 billion in Q3 2025, driven by higher export volumes, increased ethane sales, and deregulation of butane prices.
Midstream and other services: EBITDA rose to ARS 61.2 billion, driven by increased natural gas transported and conditioned volumes in Vaca Muerta.
Financial results improvement: Net income increased to ARS 112 billion in Q3 2025, up from ARS 68.8 billion in Q3 2024, due to better liquids business performance and midstream growth.
Cash flow growth: Cash position increased by 22% to ARS 875 billion ($638 million).
Butane price deregulation: Implemented in January 2025, allowing sales at export parity price, boosting EBITDA by ARS 13.2 billion.
Regulatory Approval Delays: The project to expand the Perito Moreno pipeline requires approval from RIGI authorities to obtain tax benefits. Any delays in this approval process could impact the project's timeline and financial benefits.
Inflation Impact on Tariffs: The tariff adjustment for the natural gas transportation business was insufficient to offset inflation effects, leading to a decline in EBITDA by ARS 10.5 billion. This indicates a risk of continued financial strain if inflation outpaces tariff adjustments.
Flood-Related Extraordinary Expenses: The company incurred ARS 8.9 billion in extraordinary expenses due to a flood in March, which negatively impacted EBITDA. Although recovery from insurance is expected, delays or disputes in claims could pose financial risks.
Foreign Exchange Losses: The Central Bank's decision to float the U.S. dollar exchange rate led to a foreign exchange loss of ARS 21.8 billion in Q3 2025. Continued currency volatility could adversely affect financial results.
Natural Gas Price Increase: The rise in natural gas prices from $3.1 to $3.4 per million BTU negatively impacted EBITDA by ARS 4.3 billion, highlighting sensitivity to input cost fluctuations.
Operating Expense Increases: Higher operating expenses across various segments, including ARS 10.4 billion in midstream services, could erode profitability if not managed effectively.
Expansion of Perito Moreno pipeline: TGS plans to expand the transportation capacity of the Perito Moreno pipeline by 14 million cubic meters per day. The project involves a CapEx of $560 million, construction of 3 compressor plants, and expansion of the Tratayén compressor plant. The incremental capacity is expected to be commissioned by April 2027, with TGS operating and maintaining the pipeline for a 15-year period. TGS will commercialize the incremental capacity and collect a dollar-denominated unregulated tariff during this period.
Expansion of regulated pipelines: TGS will invest $220 million to expand the capacity of its regulated pipelines between Salliqueló and Great Buenos Aires by 12 million cubic meters per day. This includes adding 20 kilometers of pipeline and increasing compression capacity by 15,000 horsepower in one compressor plant.
The selected topic was not discussed during the call.
The earnings call showed strong financial performance with significant EBITDA growth across segments and a positive cash position. Despite concerns about future liquid prices and management's vague responses on some projects, the overall sentiment remains positive. The company's strategic projects and partnerships, along with robust financial results, suggest an optimistic outlook. Considering the mid-cap market cap, the stock is likely to experience a positive price movement, though not exceptionally strong due to some uncertainties and lack of clear guidance in certain areas.
The earnings call presents a mixed picture. While there are positive elements like improved net income and increased EBITDA in the liquids business, these are offset by concerns over high inflation, rising natural gas costs, and lack of tariff adjustments. The Q&A highlights some positive steps, such as capacity expansion and a strong cash position, but also reveals management's reluctance to provide clear guidance. Given the company's market cap, these mixed signals suggest a neutral stock price movement over the next two weeks.
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