YPF SA Q3 FY2024 earnings call

Key Points

• Achieved strong EBITDA, 13% up sequentially and 47% up interannually despite Patagonia's extreme weather.
• Revenues up 7% sequentially driven by gas sales, oil exports, and fuel prices, partially offset by diesel demand contraction, oil price decline, and Patagonia production impact.
• Adjusted EBITDA up 13% sequentially due to higher gas sales, shale hydrocarbon production, and better fuel prices, offset by some costs.
• Net result significantly grew mainly due to positive income tax.
• Hydrocarbon production boosted by shale operations, with 4% sequential and 8% interannual growth.
• Investments concentrated in upstream for shale oil production.
• Downstream processing levels high, refinery utilization good, fuel sales volume mixed, and efforts to improve downstream margins ongoing.

Revenues reached $5.3 billion, 7% up sequentially, mainly driven by higher seasonal sales of gas, as well as growing oil exports to Chile and better fuel prices. Adjusted EBITDA totaled almost $1.4 billion, 13% up sequentially. Total hydrocarbon production averaged 559,000 barrels of oil equivalent per day, rising 4% sequentially and 8% interannually. Investments deployed nearly $1.4 billion, 13% up sequentially. Net debt was $7.5 billion, with net leverage ratio improved to 1.5 times. Shale oil production was 36% more than Q3 last year, accounting for almost half of total production. Downstream processing levels averaged 298,000 barrels per day, refinery utilization rate about 90%, and local fuel market share maintained at 57% cumulatively in the first nine months.

Forward-looking Statements

• Guidance for 2027 shale oil production maintained, with intention to update.
• 2025 cash flow expected to be neutral operationally, with 2026 and beyond expected to be positive cash flow.
• Capital expenditure plan for 2025 to maximize shareholder value, with efficient control of capital expenditure, focusing on non-conventional areas like Vaca Muerta.

Risks Discussed

• Operational risks due to extreme weather affecting production in Patagonia.
• Uncertainties related to legal disputes such as the one with Burford.
• Project推进 risks, e.g., potential delays in VEMOS project approval and construction.
• Production forecasts subject to various uncertainties including investment and partner approvals.

Q: Horacio, how was the roadshow to sell Argentina’s LNG in Asia and Europe? How was the process to potentially get equity investors to the LNG plant? Also, on lifting costs, roadmap to get to $8 a barrel next year?

A: Horacio mentioned roadshow for LNG had positive receptivity with potential buyers, and working on getting equity investors, but details confidential. On lifting costs, working towards reducing it, with plan involving focusing on more profitable businesses like Vaca Muerta oil and dealing with mature fields process.

Q: Bruno Montanari asked about free cash flow trends into 2025 and 2025 CapEx plan excluding conventional assets?

A: Horacio said 2025 cash flow neutral operationally, 2026 and beyond expected positive, CapEx plan to maximize shareholder value, focusing on non-conventional areas and being efficient.

Q: Daniel Guardiola asked about infrastructure, Oldelval Duplicar projects and VEMOS second tranche?

A: Horacio said VEMOS has all permits, internal approval of YPF's part delayed by a couple of weeks, Oldelval Duplicar has about 25% additional capacity secured, trucking is marginal; on legal disputes, Burford-related is confidential.

Q: Andres Cardona asked about 2025 production expectation and Metro Gas divestiture?

A: Horacio said 2025 unconventional production expected to increase 30%-40%, Metro Gas divestiture to be done via proper bidding process to maximize shareholder value, and Federico mentioned reduced 2025 bond maturities coming due in July.

Q: Marina Mertens asked about downstream pricing decision-making and adjusted EBITDA including associate companies?

A: Horacio said downstream pricing follows market conditions, adjusted EBITDA from associate companies not consolidated but YPF's EBITDA performance considered; Federico mentioned YPF's EBITDA and property's year-to-date EBITDA.

Q: Tasso Vasconcellos asked about challenges as CEO of state-owned YPF and differences from private company?

A: Horacio said working as private company, focusing on efficiency, productivity, profitability, with big changes like Real-Time Intelligence Center and Toyota Well-like efficiency initiatives.

Q: Bruno Amorim asked about shale oil production guidance and conventional production?

A: Horacio said 2027 shale oil production guidance maintained, will update, conventional production managed with tertiary production and other potential, not expecting steep decline.

Q: Leonardo Marcondes asked about new well drilling and Excel asset disposal?

A: Horacio said new well drilling aims for longer wells to improve profitability, Excel asset disposal is confidential as it's Excel's decision-making process.

Q: Ezequiel Fernandez asked about Argentina nationwide crude production expectation, gasoline/diesel demand, cash flow from asset sales, and floating bonds for YPF Holdings?

A: Horacio said Argentina crude production expected to increase with VEMOS, market share maintained, cash flow from asset sales related to financial instruments, Vaca Muerta South financing arranged on project finance basis with received LOIs