Q4 2020 YPF SA Earnings Call
Okay.
Ladies and gentlemen, this is the operator your lines will remain on music hold until the conference begins the conference will begin momentarily. We thank you for your patience.
[music].
Thank you for standing by and welcome to the White P. F full year and fourth quarter 2020 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised.
Today's conference is being recorded if you require any further assistance. Please press star zero. Thank you I'd now like to hand, the conference over to Santiago Wozniak Investor Relations manager Mr. West. Please go ahead.
Good morning, ladies and gentlemen, decent deal with C&I White P. S by Euromonitor.
For joining us today, you know where fiscal year and fourth quarter 2020 earnings call I Hope you're all safe the presentation will be conducted by our CEO Sergio for Andy our CFO will handle Dale and myself.
During the presentation, we will go through the main aspects and events that explain our fiscal year and fourth quarter results and finally, we will open up for questions.
Before we begin I would like to draw your attention to our cautionary statement on slide two P.
Please take into consideration that our remarks today in answer to your questions May include forward looking statements, which are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by these remarks.
Also note the exchange rate used in our calculations to reach our financial figures in dollar terms. Our financial figures are stated in accordance with the idea for us during the call. We may discuss some non <unk> measures suggests adjusted EBITDA normalized EBITDA normalized.
Normalized Opex I will now turn the call to set for Hugh.
Thank you Santiago and good morning, ladies and gentlemen.
Thank you for joining us on the call.
In our remarks today.
I will first interviews.
Highlights of White P F 'twenty 'twenty performance.
And Alexandra will later give you for the details on our main results.
Afterwards, I will share with you our view on the 2021 outlook finally, we will open the floor for questions.
Let me start by saying that despite twenty-twenty Harbin being one of the toughest years for the oil and gas industry worldwide.
We are quite satisfied about white P F.
And overall performance in this exceptional year.
As you know we have witnessed how the COVID-19 pandemic.
Like all economies much harder than anyone could have ever imagined.
With a related lockdown measures, making consumption collapse, particularly having a negative impact in oil prices as never before.
Today with.
With a global progress achieved in understanding the situation there.
We're keeping close track on the vaccine that rollout as it may hold the key to finally lever these challenging halsey toy soon behind.
I rejoined the company last May.
E C O with a freedom for the elimination of history and White P F.
Through these historical and preparing to get back to profitable growth.
I believe we took the right measures.
At the right time acting swiftly to shield, our finances, while protecting the health and safety of our employees and contractors and other of the communities where we operate.
Despite the difficulties of the pandemic.
Critical activities continued with no interruptions following a strict health protocols, which allowed us to keep providing energy to our clients in a safe way.
We even achieved the lowest ifr liability in our history.
And by advancing new technological solutions and accelerating the digital transformation of our company.
We weren't able to work remotely.
An efficient and agile way.
Our digital agenda is aimed at generating and preserving value by deploying a wide range of world class technologies and solutions.
From priorities are to continue increasing efficiencies.
On achieving sustainable cost reductions overtime.
Given our airports.
We were able to be net cash flow positive along the year D.
Despite the contraction in profitability that we experience as the pandemic hit.
Heavily affected demand and prices of our products.
Who did so by reacting quickly and adjusting investment activity to accommodate to the changing market conditions.
To prioritize financial discipline.
We are for managed to reduce our net debt.
By about $500 million along the year.
Partially reversing the increase in the net leverage ratio as a consequence of the reduction in our EBITDA.
In the same line, we proactively engaged.
In a market friendly liability management exercise last July.
Addressing the upcoming $1 billion maturity of our March 2021 notes.
We successfully.
We financed close to 60 per cent of debt maturity.
Nevertheless, new regulations introduced by the Central Bank in September have liked us to launch a broader exchange all for last January.
This exercise allowed us to comply with the foreign exchange regulations and resulted in a financial relief of around $600 million for 'twenty 'twenty, one and 'twenty 'twenty two.
It shall provide.
Partially indirect funding towards our Capex program aimed at reverting the oil and gas production decline trend of the last five years, we not only work on the financial front, but also took the pandemic as an opportunity to rethink the way in which we conduct our operations and refocus our own.
Our core business, the oil and gas value chain.
We embark it.
On a company wide cost cutting plan aiming at achieving a structural cost reductions.
And operational efficiencies.
Defaults were made not only in white P F. But also embolden, our supplies and the unions to adapt to this new normal and enable beef towards growth for oil.
So far we see early results as encouraging carbon reduced 17% average cost per well and over 20% in opex after netting one wolf effects.
And we achieved key milestones in our sustainability truck, improving our ranking position within the oil and gas industry.
As we will further explain and working towards the energy transition by consistently reducing greenhouse gas emissions and increasing the share of renewables in our total energy consumption.
During the second half.
US demand gradually recover.
We started with periodic price increases.
The Pam to stabilize.
Price is in U S dollars and more recently recover margins.
That process continues today as we monitor market conditions to adjust prices.
Although remaining conscious on the overall macroeconomic situation and the price effect on demand.
In our retail segment in particular our.
Our digitalization process.
This allowed us to be closer to consumers and consolidate our market presence.
Nowadays 12.
12% of fuel sales take place through our App, which has already reached 2 million users.
1.8 million monthly transactions.
All these actions helped us create the basis for gradually resume activity in a more efficient way once economic conditions. He started to show signs of stabilization and partial recovery.
We were able not only to go back to PREPA and digging production levels at back on water, but have also reached record production. This February for our oil operated areas.
And in Mongolia, total, we have drilled the longest horizontal well in all become huerta with productivity being at the top of the shale play.
A similar case can be found on the conventional side.
We have continued beating record production levels at Mon until Israel.
Despite being a 90 year old block thanks.
Thanks to success successful territory recovery techniques.
In addition.
We have recently recover to pre pandemic, a utilization rate of our refineries as demand for diesel and gasoline continued improving during January and February of this year.
Let me end this introduction by saying that we are fully satisfied with the company's performance in such a challenging year.
And that I am, especially proud of our employees of their commitment and effort.
I also want to thank our clients for the fidelity.
And our investors partners and suppliers for their renewed support.
And now I leave you with Alejandro.
Thank you Sergio and good morning to you all before going into our financial results. Let me go deeper on how we are working to protect our people and to address D energy transition.
Sustainability is at the core of everything we do and therefore safety of our people is a top priority.
As we have gradually started to resume activity day index that measures the frequency of vaccines per million hours worked reached its lowest historical value at Cedar point too in 2020, improving more than 50% when compared to 2019.
However, while we continued to strengthen safety precautions, we have to regret the casualty of a fail a worker who lost his life in January of this year, while performing maintenance tasks at one of our oilfields.
As regards to our response to the pandemic, our Covid committee continuous overseeing the Greek debt critical services and operations are maintained with the utmost care for our employees suppliers and customers.
Over 90% of the people, whose positions do not require face to face interactions are still working remotely.
We are also monitoring the health of our employees and contractors on a daily basis to prevent contagion.
And we have performed necessary testing and distributing more than 500000 masks in our operational units.
We are also helping the communities, where we operate with equipment to face the COVID-19 outbreak.
We have helped hospitals and local municipalities and provide essential workers with protection and equipment to face the pandemic.
In addition, he take our R&D subsidiary has developed nail kit and molecular test that can diagnose day COVID-19 virus in a simple and fast way.
So far more than 1 million tests were produce distributed commercialized and some of them even exported beast.
Besides 200000 leaders of hydro alcoholic will produce for use of our employees and the nations.
Further focusing on sustainability, we have significantly improved our ranking position within the oil and gas industry to the 10th place based on a voluntary participation in the corporate sustainability assessment design for the Dow Jones sustainability index.
In addition, white P. F was included in S&P's, the sustainability Yearbook, 2021, which includes companies with top tier sustainability and ESG practices ranking in the top 15% among oil and gas companies.
In line with our policy to promote cleaner and more efficient energy solutions, we have been working hard on reducing our direct greenhouse gas emissions.
We have set a target of Cedar 0.3, or four tons of C. O. Two equivalent per unit produced by 2023, and we are making good progress in 2020, we would use the intensity of direct emissions by more than 2% as compared to 2019 already reaching Cedar 0.367.
Moreover, natural gas, which accounts for almost half of our hydrocarbon production mix plays a key role not only as a transition fuel, but also as a smart flexible partner for renewables Intermittency.
We are committed to a cleaner oil and gas production by minimizing flaring venting and methane leaks, along our supply chain.
In addition, nearly 20% of the energy used in our operations in 2020 came from renewable sources significantly advancing our target that was originally set for 2025.
In this front ypa of loose a power company controlled jointly with D represent our strategic arm for the energy transition.
Despite the pandemic White P. F loose managed to reach C. O D. On several power generation projects between September and October for an aggregate capacity of over 400 megawatts, including efficient thermal assets and renewables.
When including these projects now in commercial operation. The company has reached a total installed capacity of over 2.2, gigawatts, including more than 200 megawatts from wind farms.
In addition, another 231 megawatts are expected to be commissioned in the first half of this year, including 174 megawatts of renewable energy.
I will now go through our financial results for the year.
'twenty 'twenty figures were fully impacted by the effects of the pandemic.
It was an extremely challenging year for the worldwide oil and gas industry and we were not the exception.
Top of the list our revenues for the year contracted by 32% mainly explained by a similar decline in field sales both on lower volumes east touch as well as lower prices, while natural gas revenues and jet fuel sales also contributed to the decline as natural gas prices dropped by about 30% while jet volumes collapsed.
By more than 70 per cent.
Compensating at least partially the severe decline in revenues, we managed to achieve a significant reduction in total costs that were down by 25% during the year or an even larger 30% when normalizing opex by eliminating some one off items as I will comment in a few moments.
While this was partially generated by the contraction in purchases and royalties on the back of lower volumes from prices. A key aspect was the reduction in Opex, which produced savings of about $1 billion when eliminating one off items.
This was the result of a company wide structural cost cutting program initiated last year that has already started delivering initial encouraging results.
But even more critically as already commented by Sergio we have reacted quickly and decisively upon the adverse of the unexpected pandemic to prioritize financial discipline by helping our investment plan, which was cut by about $2 billion when compared with the previous year.
And on the same line, we managed to reduce our net debt by about $500 million along the year.
However, as conditions started to normalize in the second half we have been gradually increasing activity leveraging on the cost efficiencies already secured with capex, reaching $538 million in Q for more than doubling the amount invested in the previous quarter.
Based on the key variables already laid out adjusted EBITDA for the year total one and a half million dollars contracted 60% year over year.
This figure was significantly impacted by nonrecurring charges in 2020 total in close to $600 million, mainly related to abnormally high operating costs from bricks in standby mode. The voluntary retirement program for non unionized employees. The reversal of the Greek 10, 53, and the charge related to.
For the termination fee of the floating LNG contract with X smart.
When adjusting for these charges normalized EBITDA would have reached over $2 billion or 40% higher than reported adjusted EBITDA, but still contracting by 44% year over year.
In terms of operating income it is worth highlighting that during the fourth quarter. We recorded a reversal of for an impairment charge of over $820 million, resulting in positive operating income for the quarter and leaving the cumulative figure for the year at a loss of $911 million.
The impairment reversal it was driven by the revaluation of certain gas projects on the back of the confirmation of the new plan gas, which resulted in improved economics and midterm visibility for these projects, which was taking into consideration for the reassessment of the economics of our resources.
On a quarterly basis, adjusted EBITDA reached $183 million in Q4 or $385 million after normalizing for the nonrecurring items affecting this quarter.
These normalized adjusted EBITDA figure representing represented a 30% sequential decline, mainly driven by lower oil and gas production and higher opex, resulting from the resumption in pooling and workover activities. Despite the steady improvement in demand for refined products and the gradual recovery in fuel prices.
All of which is fully in line with the guidance providing during the previous quarters webcast.
Going into the upstream business total hydrocarbon production for the year declined by 9% in line with the guidance provided in previous quarters as we adjusted investment and will connectivity to phase the effects of the pandemic on our financial situation.
Crude oil production went down by 9% year over year, averaging 207000 barrels of oil per day during 2020 with lower conventional production being partially offset by higher shale oil.
On the natural gas front production came at 36 million cubic meters per day, a decline of 10% versus the previous year aligned with the company's objectives taken in late 2019 to reduce natural gas production on the back of prevailing low prices at this.
Supply overhang remain in place.
Finally, NGL production decreased by 5% year over year, mainly associated to lower gas production.
As economic conditions recover on the back of the Flexibilisation of the Lockdown measures, we have gradually resumed investment and wellhead activity, which had a net negative impact in production in Q4 as total output decreased by 10% sequentially due to the temporary closing of wealth to avoid interference while for.
Racking in connecting new ones as well as program maintenance activities in natural gas pipelines.
During the year, our crude oil realization price average $40 per barrel, 24% down from the previous year D.
This decline was lower than the close to 35% drop in Brent as local prices were not fully impacted by the collapsing international prices given the introduction of the virus reassure on may 20th which established a minimum reference price for me that need the quality crude at $45 per barrel.
However, after they buy real Grier shall expire in mid August on the back of the recovery in Brent prices.
Local oil has since been freely negotiated following export parity.
On the natural gas side and steel as a consequence of the extra sulfur market prices were also below the previous year's realization price.
Our selling price average at 2.6 dollars per million Btu compared to 3.6 dollars per million Btu in the previous year.
Going forward, we expect higher average realization prices given that about 60% of our natural gas production will be sold through the four year contracts granted on the back of the new plan gas for at average prices of $3 six $6 per million Btu.
In terms of costs. During 2020, we were able to reduce our average lifting cost by 19% averaging $97 per barrel of oil equivalent driven by operational efficiencies achieved on the back of our cost cutting program as well as lower pulling and workover activities, primarily in the second and third quarters.
Therefore, although we expect cost reductions to maintain and even increase in the future as they focus on efficiency became the new norm lifting costs could increase in 'twenty 'twenty, one, but still be well below 2019 levels as activities fully restored and natural decline in conventional fields impacts the overall average.
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Looking deeper into our shale production. Despite the challenging environment, we were able to increase average production for the year by 9% when compared to 2019.
However, in Q4 share production contracted 14% sequentially due to the maintenance works in gas pipelines and the temporary closing of wells. In addition to a technical adjustment in the way we account for the NGL production coming from some non operated blocks that generate the right categorization between net.
Two on gas and liquids for the previous quarters with a net negative impact in total production in Q4.
More recently in January our oil and gas shale production has already started to recover reaching 95000 barrel of oil equivalent per day up 7% versus average levels in the fourth quarter, while preliminary figures for February show a historical high from our operated areas show.
<unk> our investment focus on these assets.
Going into the right side of the slide oil and gas conventional production for the year contracted by 12% compared to the previous year with similar performance in both crude and natural gas production.
However, I would highlight that full natural decline was partially offset through the advancement of secondary and tertiary recovery techniques with encouraging results.
As an example, montel Asbury close 2020 with the highest production in its history, reaching 21 6000 barrels per day, increasing by 8% year over year, Thanks to innovation and topnotch technology that allow us to improve the oil recovery factor.
Tertiary production average 2.2 thousand barrels per day during the year compared to just about 100 barrels per day in 2019, and further increasing to $4 5000 barrels per day last January.
White P S ambitious EUR strategy in Argentina cash included the risking of areas with high polymer potential to further expand those areas with proven pilot response.
The successful experience with tertiary recovery commenced in 2015 through an initial pilot using polymer flooding techniques are the green big field in Milan Telesphere.
Becoming the basis for the current operation of five polymer injection units at that field, while three additional P of use are expected to be connected in 2021.
In addition, full planning for 'twenty 'twenty. One also includes the installation of seven more P. I use.
For for the Massification production at church are winning Mendoza as well as three pilots Atlas Atlas and Canyon non Leon in Santa Cruz and they'll travel in June.
Total investment for you our development in 2020, one is estimated between 60 and $90 million.
Moving into the next slide.
As mentioned before we have gradually started to resume activity in Q4 after having gone into a full stop during the second quarter.
As of the end of the year, we had over 80 weeks back in operation, including drilling Workover and pulling towers, which compares to an average of less than 20 pulling equipment in operation during the second quarter.
We have resumed activity in a more efficient way as each dollar invested having more power than in the past.
We have seen a significant improvement in frac speed, reaching seven stages per day in Q4.
And while we expect this figure to be slightly worse in 2020 one as the resumption in activity has mainly focused on our core have which has better logistics due to lower distances. It should still result significantly better than the average figure for 2019.
In addition in January we reached our historical record in terms of monthly stages totaling 412, Fracs outpacing the previous record of 385 reached in September of 2019.
We have also drilled the longest horizontal well in Monrovia soon which reached a lateral length of 3800 meters and an IP of 2.2 thousand barrels per day.
On the conventional side, we have accomplished a significant reduction in pulling intervention time as total hours per intervention in Q4 were 26% below the average for 2019.
And in terms of future opportunities for 'twenty 'twenty, one weekend with efficient sources of growth thanks to the drilled but uncompleted wells that we have in our backlog.
By the end of 2020, we have already connected 18 of the 81 DUC wells that resulted from the complete activity halt in Q2.
And plan to connect 48 additional wells during the first half of this year.
They are assessed associated production expected to reach 33000 barrels of oil equivalent per day by the end of the second quarter.
Going into the evolution of hydrocarbon reserves in 2021 P reserves contracted to 922 million Boe's.
This decline was mainly driven by the reduction in investment activity, while also being negatively affected by the impact from lower prices would generate D. The downward revision of over 100 million barrels of oil equivalent.
More than offset the upward revision related to Opex savings for about 50 million Boe's.
Despite this the reserves replacement ratio for shale to close to 150% with our high quality net shale reserves expanding by 5% year over year now representing 39% of total proved reserves up from 31% in 2019 led primarily by the incorporate.
<unk> of natural gas reserves, given the viability of new projects associated with a new plan gas that was already commented in this presentation.
Finally, the price P stability provided by the new blood gas together with the overall lower cost base also led to a significant addition of Tupi and three P reserves.
Total reserves, including proved probable and possible grew by six 7% during the year as three P reserves increased by more than 100%.
Switching to our downstream business demand for refined products dropped significantly during the year affected by the lockdown measures in place since late March.
During 2020 gasoline contracted by 30% and diesel by 11%.
The worst monthly record was in April when gasoline and diesel volumes contracted by about 70% and 35 per cent year over year, respectively.
And then the vans has gradually but steadily improved closing the year with gasoline and diesel demand at minus seven and minus 5%, respectively compared to December 2019 levels.
Additionally, preliminary data for this year shows further improvement in diesel and the Stabilisation for gasoline.
Separately, given the collapsing local demand we explored the regional export market as an opportunity to take advantage of our refining capacity.
On this front, we managed to once again export fuels to Bolivia. After 12 years and to you to why after more than five years, thus regaining our ability to act as a regional exporter of refined products.
In terms of refinery utilization, we reacted quickly to the falling demand and immediately adjusted our processing levels. Thus.
Thus capacity utilization averaged 73% in 2020 down from <unk>, 87% in 2019, however utilization has been increasing in line with recovery in demand after reaching its lowest level in April at 47%.
Utilization for the fourth quarter average, 75% and that for January shows average refinery utilization already at 86%.
On this topic it is worth highlighting that despite the logistics complications generated by the pandemic, we decided to move forward with the program margin or major maintenance at our La Plata refinery, taking advantage of the low demand environment to minimize economic impact.
Excluding these works which ended in October utilization would have been at 79% during the fourth quarter.
With regards to prices.
Pandemic affected international reference oil and refined product prices in a very significant way reaching levels not seen not seen since 2003.
In this context and on the back of a weak macroeconomic local environment, our net fuels realization prices in dollar terms with in a sliding scale until we have managed to start with periodic adjustments back in August.
This permitted to stabilize our net price in dollars and more recently regained some margin.
However, even after the cumulative increases C. Now got since August our average net prices for 2020 measured in dollars still stood about 15% below the average levels of 2019 and about 30% below the average for the past 10 years.
As mentioned before we launched a cost cutting plan across the company and this effort should not only render very significant savings in our structural operating expenses, but also and equally or even more importantly on our capex costs.
We have already reviewed about 90% of all vendor contracts and revisited a good portion of our internal operating processes, achieving important savings in key activities and have renegotiated conditions with the unions, introducing kpa related compensation and flexible lysine working conditions.
Furthermore, in July we launched and voluntary retirement program for non unionized employees, which closed by the end of August and will allow us to organic and will reduce our overall size and G&A costs.
This program resulted in a reduction of 13% of our non unionized work force, having a total estimated cost of $125 million and generating future savings of over $50 million per year.
And the results are very encouraging for both Opex and Capex.
Normalized Opex was done for.
For 24% year over year, both for full year 2020 and in Q4.
Normalized opex was calculated by excluding one off items affecting the figure in 2020, such as the termination charge for the contractual agreement with X month, the cost of the voluntary retirement program standby costs and the provisioning of gas distribution companies receivables related to FX variations.
Granted by the Greek 10 53.
However, while it is fair to highlight that this decline was also the result of reduced activity. During 2020, we expect cost efficiencies secured primarily during the second half of 2022 rendered overall opex savings for 'twenty 'twenty, one when compared to pre pandemic levels in the order of 20%.
On the Capex side further to the significant reductions in development cost already achieved along recent years at our core oil covered back in work that we are very confident about the investment efficiencies that we are currently achieving through renegotiated contracts and new well designs.
We therefore expect average development cost for our core shale oil have to decline by an additional 15% in 2021, when compared with pre pandemic levels.
Turning to cash flow, let me start by reiterating something that was already mentioned in previous quarters about the impact of Central Bank Communications 70, 30 on our liquidity position.
The regulation established by the by that communication, which restricts corporates in Argentina from holding liquid assets abroad. If they want to continue being granted access to the official FX market has led us to hold most of our liquidity locally and in pesos.
Given the situation and taking into consideration the deliberate nature of our long term business, we have been monitoring our liquidity exposure related to FX variations net of the stock of peso denominated debt, which acts as a natural hedge.
And based on the residual exposure, we have decided to reduce the overall liquidity position while at the same time actively entering into effects derivatives to further hedge at least partially our net exposure.
As a result of this as of December 31st our net FX exposure related to our liquidity position stood at less than 30%.
Along this line financial discipline continues to be a key priority for us, particularly during these uncertain times.
During 2020, our conservative approach on the back of the effects of the pandemic led to positive net cash flow from our operation at the resulting operating cash flow was more than compensated by a further decline in investment activities.
This together with the decision to reduce our cash position resulted in net negative borrowing of $471 million during the year.
Moving into our debt profile in July 2020, we managed to successfully secure a significant short term debt relief after refinancing almost 60% of our 1 billion 2021 bond.
However, the enactment of Central Bank communication 71 O six in September changed the landscape.
Within this new regulation in place and despite the refinancing executed earlier in July we were required to either refinance at least 60 per cent of the residual amount of $413 million on our 2021 bonds or other ways secure an equivalent an equivalent amount of cross border free.
Dancing to be able to fully honor our commitments.
Given the limited options at hand, and after format confirmation from the Central Bank of our obligation to comply with the regulation in spite of the earlier refinancing perform on the March 'twenty 'twenty, one bond we lunched a brother exchange offer last January not only inviting receipt of our callers of the 2021s, but also called this out.
For the rest of our international dollar denominated notes with an aggregate face value of $6 2 billion.
It is important to highlight the rationale behind the decision to invite all outstanding bonds into the exchange offer.
As was commenting during the transaction, we can see that he was inequitable to offer such alternative only to holders of the 'twenty 'twenty. One bonds are not to the rest of our investor base engaged those investors consider a convenient towards to exchange their short term cash flows for a piece of the enhanced senior security that was being offered.
And if investors were to see value in the offer the company would in exchange get it much needed cash relief to help in the process of obtaining indirect financing to fund the Capex program for 2021 and that reverting D oil and gas production decline over the last five years.
The exchange resulted in a global participation of 32% and 60 per cent in the case of holders of the 2020 one's allowing us to comply with the central Bank regulations, thus avoiding a potential in voluntary nonpayment situation and generating a financial relief of around $600 million on aggregate for <unk>.
2021, and 'twenty two.
We understand the successful result was possible primarily due to the reasonable proposal that was presented to the market and the open and constructive dialogue that we shared with investors how long the process, which permitted us to adjust the offer to accommodate investors' concerns while staying within parameters that we could commit to in the long term.
As a final demonstration of the success of this transaction earlier this week S&P announced a two notch upgrade toward international credit rating, taking it to Triple C plus and mentioning it now being limited by the sovereign rating, while they stand alone credit profile was for the race to me buying us.
Supporting this decision the rating agency quoted the pulse debit exchanged cash flow relief that will free up capital to invest in production and recovered volumes.
Looking forward, we have included a pro forma amortization schedule of our consolidated debt to reflect the post exchange adjustment of our debt stock as of December 31st.
In summary, with east exercise, we have managed to significantly reduce refinancing risk for 2020 one as most of the debt debt comes due east in the local markets.
Look at bonds and bank loans, while cross border maturities, excluding subsidiaries debt that was already repaid or refinanced during January and February and after netting the $165 million of the residual amount of Twenty-twenty wants to cancel a much 'twenty three 'twenty third standard $275 million and net.
Primarily concentrated in trade finance bank loans, which are typically easier to rollover.
Furthermore, very recently in February after the consummation of the International exchange, we access the local capital markets being able to successfully raise over $120 million equivalent through the combination of a reopening of a three D. Three year dollar linked security at the heel of 3%.
And the new 42 months inflation linked note at a real rate of 3.5%, both providing very competitive financing conditions.
Finally, let me add that although we have managed to further reduce our net indebtedness in the fourth quarter, our net leverage ratio calculated as net debt over last 12 month EBITDA has jumped to four nine times on the back of the contraction in EBITDA during the most recent quarters.
And also worth noting this ratio stood at the lower three seven times when calculated based on the definitions for covenant purposes.
However, where leverage is likely to continue to increase this quarter as the full effect of the pandemic will be included in the rolling 12 months used for EBITDA calculation purposes.
Although we anticipate adding net new funding during the year, we expect net leverage to decrease in coming years as net indebtedness stabilizes. While every day recovers provided that market conditions continue to normalize and no particular contingencies materialize.
I will now switch back to Sergio to go through the outlook for 2021.
Thank you Alejandro.
Now let me briefly go through what we expect for the year 2021 before moving into our Q&A section.
First of all although we shall continue prioritizing our financial commitments on top of the investment activities.
Respect to be able to accommodate our capex plan for the year set at $2 $7 billion.
Funding should come from and enhance.
Cash flow from operations, an increase in net debt within manageable levels.
On the potential sale of some non strategic assets.
Given efficiency gains and secure in 2020 and those that are still expected to be achieved.
Each dollar invested from 'twenty to 'twenty, one onwards will be more powerful.
Now in us to progressively revert oil and gas production.
In this regard we expect to invest close to 80% in the upstream segment are.
And 90 per cent increase compared to 2020 is still focusing investments in crude at $1.5 billion.
And your own $600 million towards developing gas assets.
Mainly in line with our commitments.
Under the plan gas for.
When comparing full year production in 'twenty 'twenty, one versus 'twenty 'twenty, we expect it to be relatively flat at around two candidate how some barrels per day in crude.
<unk> three 5 million cubic meters per day in natural gas.
However.
We expect production to increase in the second half by about 5% in crude.
A 9% natural gas compared to the same period in 2020.
So far when looking at debt of two for January and February growth.
Performing slightly better than our plan.
In addition, it was recently announced by Argentina's precedent.
That the executive power will send to Congress, a new oil and gas bill with a special conditions to attract new investments.
Such us export promotion foreign currency access with stable pricing mechanism.
And a special fiscal benefits.
Although we are not aware of the timing or the specific details of this new law.
We are hopeful that it will incorporate attractive incentives.
And so once enacted it should be a very useful tool.
To increase production levels no debt.
First for White P F, but for the whole Argentine oil and gas industry.
I am optimistic about reaching a new growth cycle for White P F.
For the efforts made in 2020 towards becoming leaner and more efficient shall continue in the future as part of the new normal.
And it should provide for a better shaped company more resilient in its operations and with a disciplined approach towards capital allocation.
I truly believe that we will have a much stronger 2021 vote.
Both for the company.
And its stakeholders.
As I stated before we will continue focusing on shale oil as our main driver for future growth.
Within unconventional gas more.
More than $500 million will be deployed.
Our sale oil operated core hub.
Integrated by Loma Campana Banderilla School in America Chica blocks.
This project with proven track record in terms of for DVT hub.
Key facilities already in place, which are drastically improve the cash flow profile.
We will only need to detect.
About 15% of the total capex twin to incremental facilities.
During 2021 prospect to drill 90 wells in these three blocks.
Taking our net crude oil production from the current.
33000 barrels per day to almost 53000 barrels per day at the end of 2021 60.
A 60% increase.
Even after achievement of results.
The average development rate for these blocks will continue being really lovely day really low.
So we still see huge potential going for is to maintain a net production plateau of more than 130000 barrels per day by 2027 with for potential from the future development of there why the other 10 year block also protect them very competitive breakeven prices.
In all four blocks.
Following the new plan gas incentives during 'twenty 'twenty, one we will invest $500 million in gas developments.
Over 80 per cent of the total capex for the gas segment.
Also when looking at the entire program, we plan to invest more than $1.5 billion in aggregate during the 'twenty 'twenty, one 'twenty 'twenty for period.
More than 250 wells, including both operated and non operated blocks.
The key projects that will provide a new production in the immediate future our mainly those fully owned and operated by us.
Such as for Inconel mangroves oil and what other Latina.
For the other projects such as like a leader in Rio Neuquen, where we have joint ventures in place.
Also contributing in 2021 are projected to have a more significant contribution in coming years.
That would be all for an hour side.
Before taking your questions.
Let me once more thank you and the whole investor community for your support.
At this time, if you'd like to ask a question. Please press star one on your telephone keypad Bruno Matt.
Larry with Morgan Stanley Your line is open.
Good morning, and thanks for taking my questions I have plenty of questions, but let me stick to two three.
The first one is about.
These potential new view that is going to pass.
So.
Why would this time be different I mean, we've.
Over the past decade, I think we saw a lot of incentives and you lost trying to be fast. So I wanted to get your view on why an international company could be comfortable to invest again aggressively in share in Argentina.
Second question is about working capital.
It seems that an important part of the cash flows in the quarter.
King from working capital release, mostly receivables and inventory.
So I was wondering how we should think about working capital in the coming quarters.
And the third question is about the asset sales potential.
So.
What would the company be willing to divest at this point I know you mentioned non core.
But could we eventually see white P S Sterling exploratory acreage in Bakken word.
And some of the more perhaps non core assets to two.
To raise a more significant amount of cash and then really.
Be able to have a more comfortable short and medium term debt amortization schedule. Thank you very much.
Thank you Bruno and good morning for you.
Let me start by addressing a more simple question and then we'll go into a more strategic one.
Let me start really working capital one.
Let me say that broadly you commenting on daily trends between the cash flow from operations and EBITDA level for the year.
It's roughly half the difference of about $1.5 million.
Part of that.
If not P. On the working capital part of that differential comes from accounting Reclassifications per might've been related to leasing expenses.
The other day fell a little bit net.
And half of that amount allowed for $100 million are represented by oil reclassifications.
Then you also have some non cash items, mostly related to nonrecurring items included in EBITDA.
For about $400 million, how you would pay.
Which includes a portion of the voluntary redundancy program that was non cash D C.
Here also a portion of the.
Cost associated with the early termination of the X smart contract.
Also it is <unk>.
Noncash in nature, and one in or it's being paid in governments.
So you have something to go where you have non cash item senior leader.
That are adding working capital because we are financing debt and then we do have the historically about $400 million in positive working capital.
In the year, mostly related with collection of thought and they got to blend gas program.
And going forward I would say that we would expect for.
Has it been working capital in.
Impact in the in this year and Couldnt do in one broadly in the other similar to what we had in last year in young adult for about $500 million I would say.
Roughly speaking.
Going to other your other question more generally speaking and then we've done. So if you had to comment a little bit more on on the potential hydrocarbon law that is being discussed.
And from potential asset sales.
But generally speaking what I would say that well.
Clearly the landscape for the industry as a whole east.
Changing significantly in the lack of P.
Improved rec.
Brent.
The national price it for our industry for oil in particular.
Then also what I would say that you know once.
Once again I think we are the achievements that we made in the net that part of that of last year of 2020, and the cost reductions that we secured.
During the last few margin that we expect to maintain or even improve in the coming years.
Basically put our back from work that we source in particular.
It'd be very special point, right, basically providing us with attractive breakeven.
To consider aggressive investment for as long as we can accommodate those within our capital structure and maintain financial fluency with each other as mentioned by Turkey and then during the presentation you have the goal of our strategic decisions.
Generally speaking I would say that that is a tremendous opportunity for us to invest in developing beef.
A tremendous not sure we chose which is still at the very low stage of development or at an early stage of development, but then also debt are.
We expect net.
Adobe evolution for regulatory considerations that could further.
In Peru, the ability and the visibility such as the planned gas that was recently put in place where we expect more of that down the road because incentivize investment not only by one P. M. But also by international players, but we add our net social comment a little bit more.
For the leaner for lithium.
With respect to the new hydrocarbon law.
As you May know last Monday.
Peanuts quickly then for now.
Excuse me power.
We will send to Congress, a new oil and gas law.
Special conditions for attracting immune button.
And we understand that.
The third potential root for them.
No you're targeting three main goal.
The first one is to income device.
For investment of crude oil and that's why we've got.
Generally the structural incremental volumes for export.
By putting up all the currencies for Probuphine.
Lately it looks plausible volunteered.
Providing for some tax benefit.
The thick on goal.
Ooh courage.
The execution of hydrocarbon.
Patients.
Tucked up LNG and petrochemical.
Through tax extensions that in turn will contribute to substitute value value imports and.
And generate exportable.
Simplicity.
And significantly improved the quality of crude indicator of their refinery.
And finally regarding natural gas we understand the focus from you can devise in the production of natural gas under a scheme that allows for users who explored three candidates.
65 days a year.
Enabling for a long term contract while enjoying their supply of the local market.
At the same time activity, such as underground storage and in development of LNG could be promoted in D C and D flow.
While we have an active and constructive dialogue with the government authorities.
We have not.
Well of the timing of the actual net short if any at all.
For the executive by where my and presenting to the Congress.
And with respect to your question.
About potential investments for profit.
And let me first from Horizon weekend activities.
For.
We reviewed our big bundle reabsorbed by 11% with.
<unk> was acquired by Ecuador and sales.
Second we sold 15% stake in <unk>.
The offshore block.
And 102 shell.
On third and for their non operated office building two I felt a local water utility company.
Sure.
They're going for as we commented in the path, we are focused on the oil and gas.
Business on oil.
Core activity.
And you might see in our portfolio.
And in that you got on and taking into consideration current financial growth.
Makes sense.
Free cash generation through divestitures or non Ricardo carpet.
Provided us a day.
Capital keep her meet their moral rapid deployment of resulting from the oil and gas.
We are having conversations with several key international player for the possibility of entering into new farm in agreement in back on water.
And any additional non another free time at all for.
When a life in agri.
Book mature conventional areas.
All both oil and gas.
That might be subject to potential.
Investment.
And should we conclude that there could be operated more efficiently.
By more flexible unpopular niche operator for.
For meeting us to allocate our resources to.
From those profit, where we can create the guidance.
Value for all our free Calder.
Yeah.
Finally, we will continue on a life in our portfolio.
Non operating and nonrecurring outfit.
Likely move forward with the monetization potential deal valuations, we felt the returnable.
Okay.
Although we are working on some alternative.
At this point in time, and given the market environment never leaving.
Moving in.
There is nothing material to comment on any particular relevant transaction.
Alright, thanks for the thoughts.
Sure thing.
Marcelo Gummy <unk> with credit Suisse. Your line is open.
Good morning, 72, the handler in Santiago, Thank you for taking the questions.
I have two questions here.
First one on lifting costs. So we can call decreased substantially year on year and I wanted to know as you mentioned.
2000 day, one could be higher.
Let us know how much of the 20th jointly lifting cost was.
Contingency measures or months.
If you could provide the breakdown of those magnets measures and how much we should expect lithium costs should rebound each day.
One.
And the second question on Capex, and maturities and congratulations on being able to roll out through 'twenty, 'twenty, one maturities and getting access to U S dollars.
And for service to debt, but going forward, our waikiki already comfortable with the maturity schedule and.
I look for SKU unforeseen.
Who called to rule out maturities.
And.
That was the key I mean, it could really expect the great level of Capex, if you will.
In 2021.
Thank you.
Thank you Marcelo for your questions.
In terms of lifting costs.
And as.
As we basically anticipated.
Our previous call in the third quarter.
You would expecting lifting cost due to increased for more than the fourth quarter as we revamp.
The shipment activity.
Mostly oil connectivity related to pulling in Workover and O&M.
Type costs, so definitely we should expect more of that debt next year, but in terms of the overall.
2022 free.
So there's been plenty figure.
I'd say that roughly we equally assumed debt.
About the.
60% of two thirds of the actual cost reductions in lifting we're really.
<unk> blocks show a cost efficiencies achieved along the year, while I would say that about a third of the reduction in lifting cost was related to.
The lower production and lower activity.
So all in all a that would basically.
I mean that are about 50.
<unk> 15 per cent.
Cost reductions were achieved.
During the year on average when compared to the previous year.
And that would translate into what we have presented in the during the presentation or mentioned during the presentation that we expect offshore opex efficiency.
Primarily lifting cost efficiencies to be deals that are 20% going.
Going forward. So basically what we expect is that when we compare operating costs from our lifting costs in 'twenty, one versus pre pandemic levels.
Normalizing for activity, we would be we should be about 20% more efficient.
Thanks to all the Air Force that will put together as part of our company wide cost cutting plan, but that mostly for goes down the upstream business.
In terms of.
Financial maturity Capex. Your second question, what I would say that after the liability management. The two liability management exercise actually outperformed one in July and the chicken lung very recently.
We now have a relatively smooth.
The upcoming maturity profile.
Not only for the rest of the share but also for the next few years, probably the next important bond maturity only gone in 2025.
But looking more shortly and I'll talk to that.
Next a few months I would say that for the most part we have less than $100 million from maturities per month.
I would say more in line with 50 with the exception of a couple of months related to particular maturities, one which is a syndicated local syndicated loan.
For $250 million debt comes due next June and then.
One net.
Local bond that matures in November for an amount of about $19 million. So I would say that those are the only.
I would tell you relative to the large majority that we have ahead of us.
But again bulk of them related to local market by 19, both bank and local activities and we do not expect any significant or material risk.
And being able to refinance those maturities and then top of that I would tell you that we do expect to even be able to access the local market.
For for getting net new funding as was commented also.
In the previous quarter and onshore in during the day presentation. So.
We still believe and we are cautiously optimistic that our capex plan for the year, even though it has some risk that it should be achievable.
That would imply a obtaining a new funding and the exact amount will depend on how our cash flow from operations end up resulting in of course, there is still some.
Certainly.
On that front given the uncertainty in vitamin D. We are living in mostly related to the pandemic.
And then also depending on actually as was explained by circa before depending on how we move on with a potential divestiture itself for non strategic assets. So you're bringing on all of that we will have a resulting financial move.
For the rest of the year barring any day.
Our feeling cautiously optimistic as I said before that we would be able to manage to secure the financing needed to comply with the capex for them that we had presented for the year of about $2 $7 million.
Okay.
Our next question comes from the line of Frank Mcgann with.
Bank of America. Your line is open.
Okay. Thank you very much I was wondering if you could provide a little bit more information on the adjustments that were made for the abandonment.
Costs are.
Because it does seem to be relatively significantly I was just wondering what were the exact amounts if you have them in the fourth quarter.
And then what what really.
Cause for the change in terms of what your assumptions for.
The abandonment reserves that you have.
And how much if any adjustment if any was cash.
And then second I was just wondering 2021 looks like it's going to be a year, where you see.
Good improvement as you go through the year in terms of the little bit of acceleration in production I didn't know if you had any thoughts about the potential beyond 2021 in terms of what types of what type of growth you're targeting thank you very much.
Sure. Thank you Frank.
In terms of the adjustment in our abandonment costs in well abandonment cost or.
Basically there is mostly related to depreciation charges. So it's a first of all it's fair to say that its a non cash item.
Acting the evolution of the.
The Asian D.
I said that is being book I've had gone.
But to the.
Contingent liabilities for future liability for the cost of abandonment or the cost for abandonment upward.
In the in the future.
So roughly speaking the adjustment was related to.
Primarily.
The estimated reduction in costs.
In part aligned is the overall cost reduction that the company for.
Here in the last few months.
And also part of that D. A.
Accounting issues related to the east can value of those future costs.
So all in all what I would say that it's.
Of course had cash and impact on our on our results in other income statement, but as I said, it's a non cash item and its something that that relates to.
The liability that the company has done the road and I would say for the next 30 to 40 years.
Uh huh.
Sales become non operative in the company actually has to go ahead and add.
And then book you know.
Proceed with your abandonment of flow through us so all in all.
In recent years, we've been spending.
On average between 30 and $50 million actually cash.
One on well abandonment.
And then for security purposes, and we expect that level to remain the same in the future.
And again, so the adjustment is mostly related to depreciation issues.
But no more of an accounting than anything else.
And of course, if you have a further question from the technicalities or not.
I wouldn't read later on after these calls for our technical team to provide you with further details on that.
Because it's very very technical.
Then in terms of production.
As was commented during the presentation that we expect.
Total oil and gas production during the year for 'twenty 'twenty, one to be relatively stable D. Sorry, 2020, however on a sequential basis, we see production increasing both in oil and gas.
Actually when that when you look at and he was commensurately you look at the second half.
Production and no one should be around 5% higher than that of the second half of last year of total Glenn and then in terms of natural gas it should be closer to 10% higher so that demonstrate clearly the capex program that we are anticipating and we are predicting and aiming for.
And going forward.
We expect that to continue in 2020 due of course OLED, depending on our ability to walk around.
The financial constraints that we expect to start subsiding in the income in the future.
So all in all and providing that no major modifications take place in terms of the possibility for industrial light natural gas.
Can they get vacated as part of per potential hydro, new hydrocarbon lull or anything like that.
We are right now anticipating natural gas production to remain relatively flat in coming years.
And then yes of course, devoting all of our resources.
Our focus on improving and growing our crude oil production primarily related to shale.
Related to our.
Of course hub in terms of backup power.
Oilfield.
Total debt.
For the most part I would say that that's our our look into future production.
Okay. Thank you very much.
Sure.
Barbara Halberstadt with J P. Morgan your line is open.
Hi, Thank you most of my questions have been answered, but I would like to follow offline.
Q2 other than one is on liquidity and I just wanted to hear from you for your thinking in terms of amendment minimum cash levels that youre comfortable running the company with after.
Of course in Japan, and now in March after 'twenty. One then all of this increased need for funding Capex. So just trying to understand what that level would be and also on the funding side. You said you were cautiously optimistic that you'll be able to.
Find the necessary resources to fund Capex, that's just wanted to get a little bit of more call. There one did that site.
Just thinking in terms of incremental debt.
And if that would be us worst most state locally or is there or the company is thinking about tapping international markets I can thank you.
Okay.
Thank you Barbara.
In terms of liquidity and as was commented in the previous call a non core.
The foundation.
We have voluntarily targeted.
Lower overall liquidity position, mostly related to a central bank regulations with each other.
But he did that entertainment for other cooperate to call the large position of our liquidity in dollars and other.
Basically that that requires us to bring all of our liquidity onshore.
And being mostly held in local currency, so because of that and because of the FX exposure that that creates a we decided to work with another oil no one liquidity position. So generally speaking we feel comfortable with the.
Total liquidity provision that we had at the end of last year. So we would try to maintain.
Roughly those levels.
Of course.
Finale D will will clearly depending on the cash flow seasonality that we have that could be a.
Somewhat modifying along the year, but I would tell you that mostly.
We limited the range is I would say no more than 10% to 15%.
Plus minus the liquidity provision that we had at the end of last year.
And that would include the upcoming payment on the residual amount of their 'twenty 'twenty, one bonds that east coming due on next.
March 23rd.
So based on that is that that we will maintain debt.
Debt liquidity target in mind, and he was saying we continue to play a price our financial commitments the family that was done in 2020.
So I would say that the adjustment by Yamal will continue to be our overall capex level.
But hopefully we.
We will be able to secure all the funding needed to comply with our Capex target as was mentioned before so in that front.
Again, it will depend on the total amount, meaning from a in terms of financing will depend on the final cash flow from operations from the potential divestitures.
But in any case, we do have we are working on different alternatives in terms of funding.
Non shallow financial security for financial instruments.
A good part of that we.
We expect to come from the local market and also we are exploring firm potential cross border alternatives, but mostly related to trade finance and potential multi.
Multilateral agencies or multilateral debt financing that we are exploring as well we at this point and based on how our bonds are trading and the perception of investors.
We do not expect the top D. A.
Born the international bond market in coming months or the in the rest of the year.
To cover our funding mix.
Thank you.
Andres Giordano with Citigroup Your line is open.
Thanks, and good morning, everyone I have two questions. The first one has to with the shale projects.
You are investing one point from $1 billion over the next for years.
Can you break down the.
The lifting cost and cost per barrel and getting it all what I'm looking for is the breakeven for this time of projects and the second one is when looking at the business program for bundled reassured got Chica Loma combined now I would like to understand how many wells are gonna be drill it in each.
Each of these fields and if you can share some details have all day 2021 2020 for program in terms of Capex on wheels.
So you really are there.
Our field thanks.
Thank you Andre.
Well.
Yes.
Unfortunately, we are at this point not.
We need to flow through some of the information that you are requesting but let me give you some general idea.
But I would expect too.
For the purpose of getting your comfort level with what expectations.
First of all.
In terms of the.
2021 to 2020 for Capex and that we have related when you mentioned share broadly.
I assume that you are referring to the Capex plan related to our commitments towards the new plan that.
Which is mostly sourced from shale fields for although we'd also have from a conventional field.
That would contribute such as free and again.
But generally speaking on those projects and again, we are only now are we assuming a significant activity in terms fell off.
Exploiting more aggressively our natural gas resources.
So of course, our breakeven.
Or still to be materialized.
Though we do see the new price is provided.
And he played guide until the new oil price opportunities provided by the new blood gas.
There are force commented is a $3 six $6 per million Btu flat.
On average for the next for years.
We do expect those prices to be more than enough to.
Uh huh.
To leave a reasonable profitability for us to work on the development of our natural gas projects. So down the road, we expect as we do see the materialization of those efforts.
Come to reality, when you expect to be able to provide more color on the actual development cost and hopefully also potentially the actual breakeven on both projects.
Now in terms of the colt hub for oil as you were asking for Loma Campana Bungie has sued and keep them.
It was commenting we are expecting a novel.
Nobody oil investment this year of <unk>.
From with over $500 million.
<unk> could yield about 90 wells during the year.
The breakdown between the different three P M for three different projects.
Lee.
The same.
For all you have a little bit less.
The wells that are going to be drilling when do we assure them in the other two but roughly you are talking about a similar amount investing.
And the free in the three different projects.
Down the road.
We expect feeling.
The level of activity in coming years, I would say, mostly you know 'twenty two 'twenty for we would expect assuming that amount of capex and amount of wells to be connected our completed.
In coming years, and then probably expect.
A ramp up in activity from 'twenty five onwards.
To get closer to the door that was mentioned during the presentation by third deal that.
We are expecting by Tony you can share and approaching a plateau of over 130000 borrowers.
Per day are among these three projects so that's.
And for that I would tell you that.
On a D F. Bob how are you planning on that and by that time of course the cell.
Oil production coming from a low P shale fields.
We're currently represent more than 50% of our total net production by then.
Thank you. Thank you for the answers.
Sure.
Is he killed Fernandez with Bell Ma'am your line is open.
Thank you very much.
Good morning, So basically I have three question for I would like to go one by one if you don't mind.
The first one is related to fuel demand in Argentina.
Could share with US you had thought.
What has been or what do you think has been the structural impact from the pandemic.
Thinking about changes in mobility patterns for remote work and so on on fuel demand in Argentina.
More on the long term, what youre seeing or thinking about.
Electric vehicle production.
The impact on the accident in oil demand as well.
Yeah.
Yeah.
Sure. Thank you for Gil.
Let's start with that one.
In terms of structural impact all day.
The COVID-19 pandemic into fuel demand.
Hard to predict yet.
As you know.
Steel.
The early stage itself.
Potentially understanding a structural impact.
However, what I would say that by the end of last year and I've always mentioned in the presentation fuel demand recovered very significantly and I would tell you that even faster than we had anticipated closing the year with a range of in the 5% to 7% between diesel and gasoline in comparison.
<unk> and as of today, we have seen demand further improving our basically almost be a flat in terms of lethal.
And in about 5% down on gasoline so.
It's still early to say.
Those numbers those figures.
To imply that that could knock that might not be a significant structural impact.
But again as I said, it's I would say that it's still early to predict.
And we do expect to close the year.
Based on our our budget.
We'd like to for the year, we do expect to end the year still admittedly below.
Pre pandemic levels, but in the other day, a 5% below pre pandemic levels. Although current a current level you know my my imply that we were conservative on that but of course.
It's hard to predict we don't know whether there any people in other years second wave of contagion and any potential impact from lockdown measures down the road.
But predicting that and so it's a again unfortunately, it's still early to call it.
A final decision on structural impact.
And in terms of a potential impact from electric vehicles also I think in Argentina at this point, it's very hard to predict when and how.
That will actually penetrate our market.
We still see an important evolution in.
You know in developed countries.
Still when you look at propulsion embedded in it and so it's a I would say at this point, it's very hard to predict the impact that we would face in coming years from the interaction of electric.
Electric vehicles.
Country.
Yeah.
Alright, thank you.
My second question is related to the refinery output if we look into 2019.
We are doing the right deal.
The diesel and gasoline output mix was roughly 80%.
And now we seem to be closer to seven.
70% makes for diesel and gasoline basically.
More diversified output mix.
Do you expect it to revert back to that 80% mix for you.
Oil demand recuperates.
Okay.
You are in fact on because it's a little technical on I'm getting from some color on that.
That would mean for.
For a second.
If it.
We can take it off the call. It's just you know if its better no worries about that.
Yeah, maybe not for better because it's a little bit at least for me.
And maybe it's better to yeah. If we can follow up after the call that will be better, but yes, clearly 2020 was it any particular year and we adjusted on a general concept, we adjusted the refinery output.
Two to actual demand.
The company said, mostly.
D.
We made good use for all of the lower demand for gas fields to compensate for.
Further the output of diesel and ER, and then but the agenda at other rebalancing between gasoline and diesel and other products clearly we may have some.
Other refined output that AR that was designed to do different.
Two different markets, so, but yeah, maybe it's better to follow up after the call.
Okay perfect. So my last question is I think that's clear anyway, it's helpful.
And my last question is related to the latest blanket for auction that we so for just for winter volumes the small one.
I was wondering why you opted not to participate.
Yeah.
So I think that's a that's a very that's a more tactical and commercial decision the way our.
For our gas.
Natural gas.
Business unit decided to make.
It may well make the best use of the opportunity created by the new plan yet.
And different companies have different approaches there and we understood that the way to maximize the benefit for us on a on a year long basis for a long day year was still you know the way we did it with a one bulk.
Participation for without seasonal adjustment and oil and that's you know, but no particular reason basically your decision on how to maximize and optimize the opportunities created by the by the by the plan.
And remember our secured.
Debt.
Harold.
We participated in the plan gas, we would almost one 1 million.
Oh, SKU commit export value from.
From the 17 million 21 million cubic meters per day.
Income from White P F.
And I will give you the per.
Price is gonna be explained before 366.
Good afternoon, I'm with you.
But the rewards for commercial reasons.
At this day.
Yeah.
These are new new plan.
Understood commercial reasons, that's great. That's all from my side. Thank you.
Okay.
Yeah.
Luis Carvalho with UBS Your line is open.
Thanks for taking the question.
Maybe if you come back to D.
Free cash flow dislocation.
We chartered weaken sleek this year have a capex of two point share gain in debt interest of around $900 million cash only.
Amortization this year just spun up the desire for no debt maturity that you were successful and when you look to the cash you're going to be the champion business.
Potentially.
Net you would be able to deliver.
We used to see.
So you can use you can cash burn for this year.
You can choose one for Jeff close to five times and debt.
Recent debt negotiation, we will choose triggered to see how how the company will will you should see it and change it become again.
I'll take cash or free cash flow positive and reduced the debt. So just first question is can you help me to try to reconsider the AP.
How you plan to address the situation apart from.
I dunno cost allocation into one and the second question is is basically a follow up on a previous question.
Maybe why not be more aggressive on divestments.
Non core assets or even core assets in order to try to reduce the debt.
In D C and a bit more short term. Thank you.
Okay.
Yes, Thank you Luis for your questions.
In terms of our cash flow.
Basically.
The way the way we look at a day, yes, we have this plan of $2 $7 billion in terms of Capex, which is D.
The amount of Capex, primarily related to the $1 billion.
Targeting the upstream business.
And the basis for that east, primarily reverting D production decline trained that the company experienced in the last five years.
Which was particularly effective in the last year and 20, Duane on the back of the <unk>.
<unk> called that we that we had to pursue on on our investment activity last year on the back of the pandemic.
So to be able to get to that level. It will depend on the number that the P.
The P number there if you know what's going to be the cash flow from operations.
During 2021, Unfortunately, given the.
He has some uncertainties that we have ahead of US we are not providing that particular guidance on whether it be the figures with you.
Say, what we expect in terms of working capital improvements of working capital contributions already in this call but.
But we are not yet fully mentioning or disclosing our EBITDA projections for the year.
Of course, we do expect a significant recovery in EBITDA last year and as it was mentioned during the presentation, even though the reported adjusted EBITDA you can be over a $1 billion when netting for one off effects.
Do you need the level for the year was for $2 billion in value with a collapse in demand and with very low.
Realization prices. So we do all that we do expect all of those people to continue to work and continue to improve along this year.
So clearly the pavilion.
Excluding one off items of last year. We've you know each other the purpose of providing you with a with a clear floor in terms of our expectations for the for next year.
And of course, we are expecting something significantly better than that probably not yet reaching the levels that we see pre pandemic.
So when you combine.
Those two figures and including the working capital contributions that we expect yes, we seem to have and then Mt.
Sure.
For the gap that we need to be financed and Doug will come or that should come from the combination of divestitures and a net new debt and we've been saying that since the previous call that most likely return when one.
We're going to have to book for the market to increase the amount of net debt and the reason for that is of course, we need to put together the more aggressive capex program. This year, while our cash cash flow from operations or our ability to generate cash if P O.
Somewhat limited.
So however.
As we manage to.
Net or to fund that Capex.
Non needed to comply with our Capex target.
And as we start moving our production back in line for for stabilizing it this year and sequentially growing and unexpected that to continue next.
Next year.
We do see the combination of the incremental it is done or the normalization of the net isn't that.
You know in itself stabilize our net leverage.
In terms of proportion and so we do not see a tremendous need at this point to more aggressively reduce net debt. That's why the IV for the objectives of divestitures are more related to funding.
Partially our our capex burden, but not that much aggressively targeting a net reduction in debt because we believe that the overall net debt should stabilize itself by the improvement in EBITDA in coming years and not that much the need for.
And nominal reduction in the amount of debt. So that relates to your second question in terms of the more that can be more aggressive in divestitures.
And we do actively pursue.
Divesting non strategic assets and I was a growth commended in Nebraska.
We are considering selling our iconic.
Headquartered Ah.
The office building.
And to generate cash because all of that is non producing.
Moving to contemplate until they put up for sale.
But in terms of the most strategic backup more for assets.
At this point, we are not considering a full divestitures by rather, especially I'd mentioned before a potential JV for further findings.
Definitely that's an efficient way of you know.
Accelerating the development of those assets, which is not only good for one P. M. But also for the country in terms of accelerating the development of the hydrocarbon reserves and producing more oil and gas I assume that's P.
Possible.
I hope that I answered your questions, but that that would be the agenda at all.
Uh huh.
Okay. Thank you.
There are no further questions at this time. It is now my pleasure to turn the call back over to the Y P. F management team for final remarks.
Okay. Thank.
Thank you everyone for joining us today on this call and thank you for your continued support and of course, we will remain open for any further questions that you may have our IR team as always if the.
It's opened already two one for all your questions and concerns and with that I will just close it and thank you all and have a good day.
This concludes the Y P F full year and fourth quarter 2020 earnings call. We thank you for your participation and you may now disconnect.
Yeah.