Q2 2021 YPF SA Earnings Call
Our stated in accordance with the idea for us, but during the call. We may discuss some non <unk> measures such as adjusted EBITDA.
I will now turn the call to set of Hugh.
Thank you Santiago good morning, ladies and gentlemen, thank you for joining us on the call today.
During the second quarter, we did even everybody of strong financial and operational results come from.
With the ability continuous improving even surpassing pre COVID-19 levels.
Adjusted EBITDA for Q2.
One $1 billion the.
The 41% jump.
When compared to the previous quarter.
From 14% higher on the same quarter in 2019.
This improvement was partially supported by higher realization prices across the board.
Including not only the pump prices.
The other at similar dollar levels to those registered on average in 2019.
But also higher pricing for natural gas petrochemicals on non oil products.
Besides domestic demand for gasoline and diesel continued the recovery trend. Despite the setback presented by the mobility restrictions temporarily re established since the last week of April until June.
During the quarter diesel demand was almost back to the pre COVID-19 levels.
Whereas the gasoline demand was the most affected the threat funding of about 18% below pre pandemic levels on.
The keeping the recovery trend in standing in July about 7% below.
But our profitability improvement.
He is not only come from improved the prices we have delivered the production recovery that was announced at the end of last year.
While prioritizing operational efficiency.
Despite the disruptions were originated in the 20 day located in the province of Neuquen due on April <unk>.
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The significant impact in our operations, we managed to grow our total production by six 6% sequentially into the two.
On further growing by another 6% during July.
On average of 490000 barrel of oil equivalent per day.
Sales production on led this recovery.
As it jumped by 22% sequentially in Q2.
Primarily as a result of the 35% of expansion in shale gas.
And even higher 48% zone, when considering all of the our operated the avs on.
The <unk> meeting our planning gas for commitments.
On the crude oil inside the sales Blackstone expanded by 7%, while our efforts to mitigate natural decline in our conventional sales have also ran the very positive results.
Now moving for total conventional production to remain almost flat in Q2.
The territory of recovery continues to prove its effectiveness.
For Montana, Nevada.
Total oil output grew 1% on.
Over the quarter with tertiary of growing 14%.
As a whole production results in the first half of the year have met our guidance for natural gas.
<unk> 3000 barrels per day ahead for crude oil so Casey and the impact of our Capex program on the benefits harvested from our operating efficiency plan.
During the quarter, we had the highest number of rigs in operation since the pandemic started on managed to <unk> 41 wells.
21 of which were on the conventional on segment.
Not only of these.
We continue to incorporate the top notch technology on World class techniques.
In the last month.
We performed two similar Frac pilots by fracking two wells at the same time in the incumbent Mangles on Loma Campana.
The encouraging early results. So we plan to expand its use to other locations as the weather.
On our Frac of speed and back on what the has continued the setting new records with 148 average price per seat per month during the quarter.
Further improved in July of two 194.
Plus in the case of flow specific sets of <unk>.
Achieving more than two hundreds of <unk> per month.
Overall, we are maintaining our focus on cost reductions and consolidate in the structural efficiencies.
<unk> on a global Opex reduction on across the company of 17% in Q2 or on even better 20% when normalizing for non recurring the standby costs associated to the brocade in April.
Finally on the financial side.
For the fifth consecutive quarter, our free cash flow before debt financing landed in positive territory.
Totaling $311 million the.
Spike moving forward with our investment plan for the year.
This in turn allowed us to continue reducing our net debt by an aggregate $600 million in the first couple of the year.
The reaching six $5 billion of.
The net debt.
By the end of June on leading to a steep reduction in our net leverage ratio now back within covenant limits.
Looking forward given the robust results achieved during the first half of the year, we remain confident in our ability to execute our $2.7 billion Capex plan on in turn we're filling our production targets for the year.
With the potential of bias to the upside in the second half providing for a better starting point for next year.
In addition, we now have enough visibility for the remainder of the year to be able to provide the guidance for the full year adjusted EBITDA.
He is expected to total of $3.5 billion, plus or -5%.
While net leverage should continue to decline to around two times or even less by the end of the year.
Before leaving you with Alejandro I would like to once again tell you that I'm, especially proud of white the theme of the commitment on their efforts.
I also want to thank our clients for the fidelity on our investors partners and suppliers for the continuous support.
Thank you.
Okay.
Thank you Sergio and good morning to you all.
I am glad to say that our results from the second quarter have continued to show a very significant improvement.
Our revenues increased by 26% sequentially, reaching over $3.3 billion in the quarter, mainly supported by higher realization prices across all segments and the continuous growing trend in oil and gas production.
However, our revenue still remain below pre pandemic levels standing 9% of below the levels of the same quarter of 2019, mainly.
Mainly on lower volume sold of gasoline and net fuel prices at the pump measured in dollars, which stood on average about 5% below.
Going into the evolution of Opex, although at the expanded by 18% sequentially. It came in 17% below pre pandemic levels of Q2.2019 for an even larger reduction of -20%. If we exclude nonrecurring standby costs related to the blockade of inorganic during.
Yeah.
These results reconfirm, our continuous commitment towards maintaining structure on cost efficiencies gain as part of our companywide cost reduction program introduced last year.
More specifically during the quarter, we managed to keep overall lifting cost per barrel of oil we bundle of around 10% below pre pandemic levels by the increasing by 5% sequentially as expected higher unit costs in the conventional fields surpassed the effects of lower unit cost in the unconventional side where the.
<unk> lifting costs stood at $4.6 per barrel of oil equivalent during the quarter.
On the back of the recovery in revenues on the focus on cost efficiencies on adjusted EBITDA for the quarter jumped up 41% of sequentially, reaching $1.1 billion.
Or 14% higher from the pre pandemic fear of the second quarter of 2019.
Furthermore, our EBITDA margin increased by over three percentage points in the quarter to 32% standing at the high end of our metrics for the past few years.
It is also worth mentioning that our net operating result for the quarter came up $310 million on.
Almost doubling the result achieved in Q2.19.
However, our bottom line continued in the revenue due to the registration of the significant deferred income tax liability, resulting from the modification of the corporate income tax rate approved by Congress in June.
On the Capex side, they have accelerated the implementation of our Capex plan, particularly on the upstream side as total capex expanded by 19% when compared to the previous quarter with the upstream accounting for over 80% of the total of $580 million during the quarter. Despite the 20.
Locate during April that affected our operations in the okay.
Although we continue to be somewhat behind schedule, we remain focused on the execution of our investment program for the year and I sell you mentioned by Tokyo still expect full implementation by year end.
Finally, these results translated into another quarter delivering positive free cash flow before debt financing of $311 million.
Allowing for the further reduction in net debt to $6.5 billion by June 30.
Assuming on the evolution of our upstream activities total hydrocarbon production expanded by 6% on a sequential basis, even despite the aforementioned road blockades in the province of Neuquen.
This expansion was primarily concentrated in the natural gas, which grew by 7% versus the previous quarter as we focused our upstream activity in ramping up gas production to meet our commitments as part of the new plan gas.
And to be able to do this we managed to grow our shale gas production by 35% when compared to the previous quarter with an even more pronounced jump of 48% when looking specifically at our operating shale gas production, mostly led by the new wealth diving in the range from them on Grusha and what are the La arena.
While also increasing production at the loaded channel after performing work on the Workover activities on several wells.
On the crude oil side production also showed a positive evolution in the quarter, but with a more modest 1% growth.
The 7%, increasing shale oil, which delivered a 48% jump year over year in our core half more than compensating a small decline in conventional production.
It is worth highlighting that the results of our continuous efforts in developing our share of resources, both crude and natural gas, resulting in the first quarter and with shale production representing more than a quarter of our consolidated output spending of 26% of total production during the quarter.
Regarding prices within the upstream segment during the quarter, we benefited from a significant recovery in natural gas prices average.
<unk> three eight per million Btu back in line with 2019 levels of seasonal adjustments within the D. G for contracts or some sort of joined by better terms negotiated with the other clients.
Separately on the crude oil front, our average realization price increase but honestly to $51.6 per barrel as local group has continued being negotiated between local producers and refiners in the way to smooth out the impact of the volatility in international reference pricing into local pump price.
Yes.
Moving into the next slide let me provide you with some operational highlights within our upstream business.
During the first half of the year, we have completed the total of 55, new horizontal wells.
<unk> 17 of shale gas wells and 38 shale oil wells the highest mark since the company introduced or some kind of trailing drilling back in 2015.
This new record was not only the result of the ramp up in drilling rigs and Frac sites in operation since late last year, but even more importantly, the continuous improvement in operating metrics gained through the focused approach of our people in conjunction with the collaboration of our key contractors on the unions.
Examples of these operational improvements can be clearly found in the evolution of our Frac speed as we have managed to improve to an average of 148 stages per the equipment per month in the second quarter, representing a 42% improvement when compared to the average of 2019.
Even despite the blockade during April that affected our operations.
And this metric has continued improving after the end of the quarter. During July we have accomplished a new record by achieving an average of 194 frac stages per set with <unk> in full operation on the fourth one on call.
Along the same line on draining speaks volume of horizontal wells, while the metric that measures. The average meters drilled per day per lead declined to $1.56 during the quarter down from 166 in Q1, when adjusting for the non productive time of generated by the of locate the.
The adjusted figure with jumped to 181, representing a 13% improvement versus the average for 2019.
Further in late July we set the new record as we finished reading of new wins in <unk> in less than 20 days, including total depth of over 3000 meters on about 2500 meters of lateral length.
Switching to our downstream business domestic demand for our main refined products contracted 3% sequentially on the back of the new mobility restrictions introduced in late April which included 10 days of strict lockdown during may.
As a result gasoline demand, which is more retail driven contracted 17% on the sequential basis, returning to volumes well below pre pandemic levels of -18% versus 2019.
In contrast, domestic sales of diesel were supported by demand from the agricultural industrial and power generation sectors, increasing by around 7% of on a sequential basis, reaching levels almost flat versus pre COVID-19 levels standing at the only 3% below Q2.19.
And more recently in July the demand for both gasoline and diesel continuing with the positive trend that started in June as mobility restrictions were relaxed the land.
At -7% for gasoline on the positive 5% for diesel when compared to the same month in 2019.
As a result, our processing levels. During Q2 have slightly decreased on a sequential basis, averaging 266000 barrels per day by decreasing by almost 40% versus the same period of last year.
This was also of the result of lower availability at our La Plata refinery as we start to the major maintenance at one of our catalytic converters in late May and task that had been postponed from its on eating the scheduled earlier in March to minimize the impact from stronger than expected demand in late Q1.
Finally, with regards to prices for the romaine domestic refined products during the quarter. We continued with an active pricing strategy at the time in line with one of the was publicly announced by the pressing the of our board earlier in March.
This latest increases have allowed us to regain first of all dollar margin, taking our prices almost fully in line with 2019 levels.
Our average net prices for the quarter measured in dollars expanded by about 15% sequentially standing roughly 25% above the average net on the prices for the same period last year.
It is worth noting that the recovery in profitability on the dosing segment during this quarter, well social supported by better volumes and prices for other refined products as well as petrochemicals and non line of products, which have benefited from the recovery in global economic growth on the correlation with bent on other commodity prices.
Going forward, we shall continue monitoring the evolution of international and look on crude and bio fuel prices as well as key macroeconomic variables such as currency devaluation on the inflation to defining the future pricing strategies, focusing on maintaining reasonable margins along the value chain.
Moving on to our cash flow the continued recovery in profitability permitted another quarter with strong cash flow from operations. The total just north of $1 billion.
This result allows us to comfortably cover our investments on interest payments on it.
Also provided for the possibility to further reduce our financial debt, which declined on a net basis by another $253 million during the quarter.
While maintaining our consolidated liquidity relatively stable within the prudent target established earlier this year.
In terms of cash management, we have continued on many stirring our liquidity with an active asset management approach to minimize the FX exposure.
Those of considering the corresponding cost of carry of such a strategy.
Given our efforts in this regard during the quarter, we were able to further reduce our net FX exposure standing at the very low 6% by the end of June. Despite the regulations currently enforced that prevent us from holding a larger portion of our liquidity and foreign currency.
Turning to our debt profile the continuous deleveraging process mentioned before has permitted to not only reduce total indebtedness, but also provide a significant relief in short term maturities.
Total short term maturities as of June 30th many of those coming due within 12 months stood at $1.1 billion compared to $1.6 billion by the year end 2019, and about half of the $2.1 billion that was due by December 2017.
And within the total amount of short term debt later.
I am 40% of the deal under the 2024 on 2025 international bonds coming due in September of this year on during the first half of 2022 with a reminder, being composed mostly of pre export financing and local bonds.
Further to this in mid July we successfully tapped the look of capital market with the 384 million 11 year dollar linked bond with a coupon of finance the quarter per cent.
Price at par.
To fund practically all of our financing needs for the second half of the year.
As the consequence of the lower net indebtedness, coupled with our improved operating cash flows the net leverage ratio calculated as net debt over the last 12 months adjusted EBITDA declined from the four nine times in Q1 to two seven times by the end of Q2, putting us back inside comment on thresholds.
All of these further contributing for us to feel fully confident on our ability to comply with our financial commitments and deploy the investments needed to continue the delivering growth in oil and gas production.
Finally, we are proud to say that the hard work, we have been doing achieving significant improvements in our operations and financial condition has been recognized by more of this Argentina and fix.
As reflected in the rating upgrades announced during July in the can.
Case of movies, our long term of local credit rating was upgraded to the minors when fixed upgraded its corresponding rating by two notches to tabulate.
And with this I finish our presentation for today and now we are open for your questions.
As a reminder to ask the question you will need to press star one on your telephone to withdraw.
All of your question press the pound key please standby, while we compile the Q&A roster.
Your first question comes from the line of Bruno Montanari with Morgan Stanley.
Hi, good morning, Thanks for taking my questions I have two questions first one.
A little bit more color.
On the Capex deployment in the second half of the year.
And just kind of you are reaffirming the guidance, but looking at execution in the first half versus the blind for the second.
The company would be.
The increase the spend by around 60%.
Was wondering operation of D D D.
The easy thing to do because of that that level of which the company has not invest for a few quarters.
What needs to happen or what is the change in terms of all of the execution in order.
Four topics to reach that level.
And in case, you fall short of expectations on topics there are the game.
Cash and four.
For the production targets either of these year coordinates features on our next year.
And the second question is more about the timeline or further liability management for the 2022 maturities you do have.
One of the international volumes.
Do I E in the second quarter of 2020 true.
So I'm wondering if the plan is.
Two.
The hole that you were able blocks of the dollars and just repay debt with the cash balance or.
The company sees the space, we show more dollar D.
The debt in Argentina, or eventually try to do on order.
Boom the.
The repurchase and the rollover. Thank you very much.
Good morning, Bruno Thank you for your questions.
Let me go with the first one capex.
Yeah. So as you have just said.
We need to ramp up our activity in the second half clearly the first half was a little bit below or behind schedule, primarily in the first quarter as we have mentioned in our previous earnings call.
Clearly as we you know it.
It took a little bit longer to the ramp up activity.
Us versus what was expected.
However, in the second quarter, we feel much more comfortable with the with the evolution you need to bear in mind that we had the blockade in the can for 20 days, which are clearly affected our operations there.
Focusing back on one of the founding generally in the interim accumulation.
So when adjusting for that we feel comfortable debt the capex that we need to deploy in the third and fourth quarter.
Our main channel of course.
It's a it's a challenge of we're not going to say that it's not a challenge, but we feel comfortable that we can achieve on.
The up to the task and that's why we are reaffirming our plan for the year of the $2.7 billion.
Uh huh.
Being comfortable that we should be able to.
Mobilize all of the investment needed.
In the in the second half.
The only we have already started without July already increased activity on the Capex numbers for July are already surpassing.
The average for the previous quarter, and so I would tend to say that of.
Although it's a challenge we feel we still feel comfortable that we should be able to fully executed by year end.
And because of that is that we are also reaffirming our target for production for the year.
I would say that with the bias on the second half to the upside.
As again as we are.
Complying with the guidance for the first half, even though we were a little bit behind schedule, particularly in the in the unconventional because of the of the blockade in April so the the.
On the expectations for all of the well completion and tie ins for the second half.
We might be a little bit.
Higher than the guidance provided but so far we would just say that we're reaffirming our target on that without the small bias to the upside.
<unk> will end up being a much better starting point from next year. So hopefully we will be able to deliver that.
And hopefully we'll be able to in the next earnings call to confirm.
That upside.
In a few months.
In terms of liability management or debt maturities for 2022.
As mentioned in the call in the during the presentation.
We feel very comfortable now with the maturities that we have out in front of us for the next 12 months.
It's one of the smaller all of the small.
On a list of amount of short term debt.
And quite a few years.
So now with the $1.1 billion most of it or a good chunk of it concentrated in the in bank facilities and on.
The bank and sorry on the local bonds.
For the total of 60% roughly and 40% being in the hands of of being composed of international bond maturities.
Those are primarily related to the Amortizations on the 25 on the July 25, sorry of the March 25 of security.
Which are due in September of March of next year, and then the first amortization on the 'twenty 'twenty four international ones from next April on.
<unk> top of that the we have the.
From.
The maturity.
On the Pestling bond debt.
So you should back in 2017, which expires in May of next year, all the no we feel that with the local bond that was issued a couple of weeks ago, we have already pre funded our needs for the rest of this year.
So if we concentrate only on the maturities for next year, which are roughly a little bit over $600 million in the first half.
I would say that we feel very comfortable with the ability of.
Refinancing the maturities coming on the international front.
With further facilities on further financing in our with our relationship banks and with local bonds clearly by the end of this year the amount of total of local bonds outstanding on in bank facilities are going on.
The relatively low when comparing with the with the recent years averages.
So we feel very comfortable of that.
Even not having access to international markets that we should be able to to refinance those.
Those maturities.
Coming on the international ones with the with other sources of funding such as the look of bonds from bank facilities.
With the relatively.
Relative to the east.
Clearly on the on the foreign exchange potential restrictions.
We feel that based on the liability management of executed earlier this year.
We should have already provided the cash relief or the the foreign exchange reserves relief from the central bank enough to be able to access all of the dollars that we would require to honor our commitments next year.
But of course.
Current regulations expire by the end of the sheer so we don't know whether those.
Restrictions would be extended or not and if extended we feel that based on the exercises that would already performed well.
We hope that we should be able to to access the reminder of the required.
One of our payments remember that the cash relief that we that.
We obtained through the liability management exercise earlier this year from.
<unk> for postponement of about a little over $300 million in foreign exchange reserves requirement for 2022 and on top of that we are also working.
On the potential across more of the facility.
Together with the multilateral agency.
That if needed could provide all of those.
Further sources of funding.
Also of floating reserves of foreign currency gross of one of the financing.
Also contribute.
To the repayment of the of the maturities from next year. So all in all of I would say that we are not expecting right now to the specific liability management on the maturities next year, but rather replacing.
You know some sources of funding with the without us right.
The.
There is none of them. Thank you very much per day.
Sure.
Your next question comes from the line of Frank Mcgann with Bank of America.
Thank you very much.
Just to follow up a little bit on the on the Capex and production issue clearly if you're as you indicated is as you spend more in the second half and into the beginning of next year. You should have one would expect at least the potential for a nice acceleration in output and I was just wondering.
You're thinking of the <unk> of next year really as much of anything else, Ken could we see a pretty substantial pick up both on the oil and on the gas side as a result of the increased spending that you were seeing.
And how how do you think about the long term it's been so long since we can.
Think about the long term, but one of the pandemic and other issues.
But you have on the sorts of course debt.
You have almost unlimited potential if you have the capital to deploy.
D.
Do you see the change.
The very material upside here as you look out over the next two three years.
And if not when might we see that if you think we still could.
And then secondly, just in terms of cost obviously inflation remains pretty high.
<unk> been pretty aggressive on the cost side as well.
You see cost pressures building at the at this stage.
Okay.
Thank you for your questions.
Uh huh.
Implementing on Capex.
A few of you have mentioned, we do we would expect.
Of significant.
The increase.
The increase significantly as a relative world right, but we do expect the continuous growth.
In oil and gas production into next year, particularly into oil northern much into gas as you probably know the.
The new plan as.
The year round demand for gas east pretty much satisfied.
Then you have the the peak seasonal demands during the.
The demand during winter months.
Which based on the current realities of.
Midstream infrastructure.
As well as economics east.
On to supply those debt.
The demand with that we look at production on and we still see.
At least in the near future that the.
The man being supplied through the import of LNG and natural gas from from Bolivia.
On that regard.
Even though we are seeing some incremental demand.
From other sources such as.
GNC.
In English as well.
Natural gas.
Compressed gas.
We are seeing some extra the amount of some further the amount on that front and we have sign actually the some medium term contracts on the upfront for an average of about 2 million cubic meters per day.
So we are seeing some marginal incremental demand, but the.
At least for the next few years, we would not expect the significant <unk>.
The increase in gas production.
Ken's.
Most of our activity will be focused on clearly maintaining current levels of gas, but then increasing total crude production.
Where we see potential for further progress, particularly in back in one of the type of particularly in our core.
To compensate on and more than offset the natural decline in convention on sales, even though we are continuing to we continue to make good progress in mitigating the natural decline declining in margin feels not only through secondary production, but also through enhanced oil recovery.
We feel very comfortable with the further progress on further opportunities on the upfront as well.
So all in on.
When looking into 2022, we do see some potentially some increasing capex, particularly as we also start pushing forward with the revamping of our in our refineries.
The two to not only adjust for further crude coming from a commodity and also to comply with the.
The new legislation and new demand trends in terms of quality of fuels.
But then also we do see some potential <unk>.
Up in activity on the upstream from us well.
On the medium term on on them you know expectations for the long run I would say that so far we still don't feel very comfortable in providing much guidance. We are working on that front.
The social media a lot of conversation and debate about the new hydrocarbon law, which we would also expect to be materialized.
Youll see the being materialized before being able to fully the size of what our lung or medium and long term strategy would be but we have high expectations from that as well and.
We will see you know to fine tune, our medium term program in terms of Capex ones.
Net that law and so far.
Seeing the light.
And on on costs pressures I would say the effectively you know inflation, it's coming it's installed on on on our costs.
Particularly as inflation runs higher than the devaluation. So that is creating some pressure on our dollar based on.
The costs.
Even though you know we have managed the steel maintain.
On the structural cost reduction as we have said in the previous earnings call in.
In the first quarter, we have the 21% reduction in cost when compared to the first quarter of 2019 in this quarter.
Quarter when adjusting by the.
For the nonrecurring costs related to the blockade in April we were sitting on OE stood at about 20%.
Hello.
The 2019 operating costs.
On the road, we might see some pressure there we are seeing some pressure there. So we are doing our best to maintain the 20% reduction of though.
For the rest of the EBITDA, we might see.
Some of some degradation in that the in those cost efficiencies and probably being closer to a range of 15% to 20% reduction of instead of the full 20% of these action that we have as of today.
I don't really know we are doing on our best to the compensate those.
The economic pressures with further efficiencies all of course the board.
Okay. Thank you very much.
Your next question comes from the line of Anne meal with Bank of America.
Okay.
Hi, Good morning, Thank you very much for the call congratulations on that good with all of them.
I was just hoping you could give us a little bit more of your perspective on price is probably the second half of the year given that there will be from.
Elections, coming up and if the increases you'll be able to keep closer to the international parity that you've already.
<unk> achieved.
My second question I think you've answered it has to do with access to FX on the upcoming maturities.
A very complete answer.
And then I was hoping you could give us.
A little bit more information on what your expectations are for your lifting cost from the all in costs for the full year and maybe end up with what is your investment plan of your Capex committed on the ESG front, which is becoming increasingly important to investors. Thank you very much.
Thank you on.
I'm going to take the question on prices.
The two implemented along our previous calls have been adjusting prices of the Tam.
Since August of last year.
To accommodate our need to restore dollar margins.
We returned to healthy cash flow generation.
Thoughts on realignment process.
And the class accounts.
Cid on aggregate the nominal price increase in pesos.
On the order at all of 60%.
The permitted to pass through tax hikes by.
The fuel increases on on leading to about the 40% improvement in net margins pesos.
Our net contributions in the rollout by 2019 average levels.
This process of resulted.
The net price mix that is currently one of the balance when considering the kind of the crude prices.
Have been freely negotiated between producers and refiners.
On the variable discount the international reference prices.
To avoid the.
Passing through the volatility in Brent.
The local sands.
Therefore, the future of evolution of pump prices.
It'll depend on the evolution.
Crude oil as well as macroeconomic variables, such as inflation and devaluation.
We will continue monitoring closely.
And for us knowing us of this key variables remain within expected parameters, we don't foresee any relevant on adjustment and from prices in the <unk>.
Near future.
When you compare with respectful of the import parity in terms of the comparison pools to import parity.
The total prices are currently about 10% below on average.
The gasoline and some of the partner of discounted on diesel.
We mentioned before the pump.
Prices have currently of reasonableness.
Based on the pricing of local growth.
It is allowing for healthy margins along the value chain.
Without generating of necessarily pressures on.
The local consumer.
Thank you sort of you on.
As you mentioned.
I think the the question on on effects East.
I think it was fully answer right on.
Let me know if you're on anything else there and.
And in terms of least mixing costs.
We do expect for the remainder of the year to remain relatively stable on average to the levels that we have seen in this last quarter.
In the out of that of $11 per.
Per barrel of oil equivalent clearly, we see a trend where the average lifting cost on the conventional side.
Probably goes up a little bit.
At the end of the year.
And they are being compensated by a buyer.
By a further reduction in the lifting cost on the on the unconventional but only non we see the debt level of $11 probably.
In the coming years being able to review that a little bit.
As we increase the share of of shale oil.
On the overall mix.
Below the known we would tend to say that.
We would probably see it's relatively stable.
As an increasing in the convention on the side is compensated by by a further decreasing our non conventionals on there for the proportion of unconventional in the mix.
And then on on your last question on ESG.
In terms of specific capex.
We don't have a specific.
Hum amount allocated although clearly we continue to work on the reaction of C O two emissions.
Mostly through the reduction of flaring on me.
On the emissions at our refineries.
And I'm very specifically we continue.
Joining the efforts of our ore, allowing for the effort of our being devoted by our subsidiary 75% on subsidiary the White the flows as mentioned in the past.
Clearly, we see white, the EF loose sour strategic on.
In the.
I would say in the in the marathon towards energy transition.
As you know they they have reached CMV on the wind farm earlier this year and they would expect on the status for the Navy. The over 50 megawatts and they are targeting CMV on kind of alluded to on another wind farm for the over 100 megawatts for later on this year.
And I would say that they are also working on on the projects.
For probably for the we announced later this year on next year on the renewable side.
So more specifically or maybe specifically we will continue to look on those investments as part of our agenda.
The strategy on on energy on energy transition while also analyzing.
Of course, two reductions of emission reductions on our activities and other potential sources of energy transition.
As a strategic view for the medium and long term.
Excellent. Thank you very much.
Your next question comes from the line of Mike Hello, Janeiro, with credit Suisse.
Good morning, everyone welcome to reported.
From the question of them, perhaps at least from the remarks.
Most of my questions were already answered, but I never of course.
Sure.
On the topics as well.
So hum.
For the two principle.
True health.
How can we.
The expense.
That is true.
Yeah.
And Capex.
Each of them also deleveraging.
The level.
And of course.
But of course.
Yes.
Another second question on the new hydrocarbons ball.
On a moon.
So core growth.
Could you provide the needs.
The more.
Welcome to the earnings growth.
The hydrocarbons law on.
<unk> works on the new charge as we move towards the exports.
Interest on.
<unk>.
Okay.
We have the funding.
And the teams.
The range.
Thank you Marcelo for your questions on printing.
The fact with the the hydrocarbon at all.
And as you know there has been significant talk recently about the new hydrocarbon law that's.
That should be brought on by the executive power to Congress in the.
On your future.
With the onset of people fostering investments.
Our sector to accelerate the profitable development of oil and gas a reset of some resources.
Our country has.
While also incentivising the investment.
In the 30 station projects.
This of this.
Has included the ex please see the wind from precedent for non did well.
Publicly has stated its intention to percent and you'll be able to Congress this year.
On the.
As far as we understand the executive power is consulting with several of our actuals within the sector.
Together of different views with the intention of presenting avail of projects that provide the right sign knows who the relative possible volume.
Given our leading role in the industry. We are the key outdoor that is also maintaining an active dialogue.
With the governmental authorities, providing our own views on the matter, but we will not be able to say at this point what the final bill to be presented to Congress.
What would include on what the actual the timing of such presentation could be.
But we would expect such new legislation.
Two primarily provide the right incentives to accelerate profitable growth.
By of dissipating some macro risks.
Currently the thought through opportunities that lie in our underground.
Okay.
With respect to our main vocals or observations in terms of what the LOE might include.
We're very much interested in the.
The incentives to promote the investment by offering of specific export quotas.
While also guaranteed access to the FX market for the portion of such exports.
Although we are currently of net buyer of crude the supply of our refinery.
We do expect to become an net net exporter.
Yeah.
We continue tapping the full potential of our back on lot of locks.
In addition, we are also focused on the opportunities to expand our natural gas production.
Without the expanded.
The new law provides some scheme to allow D around exports to the regional market.
The very interesting.
It will also be very interesting to see incentives.
To facilitate investments mature conventional fields, where we see that there is a feel of the value to be attractive, although economics and make it the more difficult to allocate the capital.
Yes.
Finally in some specific.
The benefits that the speed.
EBITDA Industrialisation projects.
First one being considering my preferred deal.
The free up capital by monetizing the tax credits would be very well of them.
I'm kind of trying to point to take the yep.
Thank you Sir.
Marcelo on your other question.
On the Capex versus deleveraging.
As mentioned during the presentation.
We are now expecting to be around or even below two times.
Average.
By the end of this year.
That is.
Faster than expected day.
Leveraging process than we had previously anticipated.
In the nine with the the faster recovery in profitability.
Which allowed US also to continuously reduce debt net debt.
For the medium term, we do see that the level of two times leverage.
Reasonable based on the opportunities that we have to.
Further develop.
Our resources on a very profitable way.
So we do not.
We do not see of need to further delever.
Do not see the convenience of further delevering.
Because we do see that we can add more value for our shareholders.
By maintaining these these levels of.
Of indebtedness.
Our leverage.
To maximize the the potential growth.
As soon as possible primarily from from bank of more of the resources.
So we clearly are.
We'll be adjusting opportunities on the capex side, which are plenty.
To the realities of our cash flow generation.
In the way to the us cash neutral as possible.
In coming years.
<unk> that level of or trying to the best possible to maintain that level of two times leverage.
Relatively stable.
Yeah.
Alright, Thank you very much for the reported.
Sure. Thank you.
Your next question comes from the line of Konstantinos Populates the point day.
Good morning, and congratulations on your results.
And thank you.
Regarding the.
The net international balance.
Right now in Nashville.
In June the trade balance has been the negative mainly due to the influence of premium.
Refinery project sanctions piece of Gaslog, Illinois, and premium gasoline now you mentioned.
And to be net exposures of crude oil.
And.
The demand rising.
And the Argentina after the pandemic restrictions at east.
Your guidance on what's your view on.
On your trade balance are you going to keep the <unk> premium.
The diesel and gasoline <unk>.
It's something that should be.
Growing the bad debt in the next year. Thank you very much and again congratulations on your results.
Thank you konstantinos for the equipment operations.
On your question when you look at the broader trade balance.
We are.
And we've been for the for the past few years structurally.
Net export or not of a few of our net of hydrocarbon related.
Specifically, but when looking at the full spectrum of all of our experts, including other type of refined products as well as non oil products.
On average we being a net exporter in dealer of at all of I would say on average $5 million to $500 million per $1 billion city of.
All in all.
We do expect that to continue on.
Again, we do see incremental activity on the non oil side and and so we do expect to continue to be a net exporter down the road, but looking specifically into your question of out a few of those.
We do see a structure of need in the country.
Once demand completely stabilizes.
To continue importing some.
Particularly on the premium.
The diesel.
In line with what we have been doing in the past and so we would expect to continue doing that we would not see.
On a sufficient to invest in further refinery capacity.
The two supply the excess demand.
When that actually takes place bear in mind also that there is a lot of debate also on the on the long run us toward demand for we find the fields could be so at this point, we would not see a need for the country to invest in expanding.
The refinery capacity.
But as mentioned before.
Sorry to hear when I was hanging on so about the the question on of all of the hydrocarbon law, we loosely ourselves as becoming a net exporter of of crude primarily in a few years not in the very short term, but in a few years as we continue expanding our production in back of more time.
Which further compensates the natural decline in the mature fields, we do see <unk> being a net exporter on.
The whole country being a net exporter.
In the in a very significant way.
Surely that would take a few years.
But we do see that possibility and that would be.
More than compensate the.
Imports of of <unk>.
Refined products, which might include premium diesel and to some extent some premium gasoline as well.
Thank you very much.
Your next question comes from the line of Matthew <unk> with UBS.
Hi, Good morning, Thank you for taking my questions.
Although the gain of tariff.
The timeline can you provide on how the Newpage gosh eight is moving forward and negotiations and pay main job done from the program.
Production has been top of that just on on the financial side of things.
And also.
The GAAP of seeing the interest in activity of Eugene Argentina by biotech companies that could either that you like divestment from IPF digital spend of the past or potential partnerships and if you can also provide.
On how the white cap strategy to optimize the company's portfolio has has been invention and debt.
Last few months thank you.
Hi, Mike Thanks for your questions.
Regarding the new plan gas I should have just said.
Really we haven't experienced a tremendous ramp up in activity, which led to.
A significant increase in production of mentioned during the presentation, which allowed us to not only comply by the but exceed our commitments.
One of the challenge.
As we have mentioned in the previous call.
We have put ourselves in an interesting challenge.
Which require a significant risk.
Assumption in activity in natural gas production and the good thing or the good news is that we went up to the challenge.
Managing to increase our production in the middle keynote <unk>, two a little bit over 31 cubic meters.
Millions of cubic meters per day on average for the period of May to July which was the one of ours.
Two two.
Basically two to comply with based on the contractual agreements on the new plan gas.
We had a little bit below that of about 1 million cubic meters per day below.
On the market that we have achieved so on the production side. We we managed the lead up to the task on the financial side.
Although as we have said before there were some delays of the beginning of the program.
Then the government.
Paid on time the deal for the April.
Subsidy.
And now in terms of the specific monthly Bill for May they are running a few days.
<unk>.
And behind schedule.
That should have been fully paid.
The 75%.
Preliminary payment was.
New in late July So we had about 10 days behind schedule.
Potash, we understand the well the the payment of instruction on was already issued.
By an authorized by the secretary of energy. So it should be a moderate off of hours, if not base for us to collect on the amount.
She is close to 14 million one four.
About the.
<unk>.
<unk> four 2 billion.
Pesos.
So about $14 million and we should be able to we should be collecting debt amount very soon so with that.
On the other thing that you know the government is running behind schedule on on the payments on the remainder of 25% the balance sheet.
For all of the of the previous months.
We understand that is just a net.
Certainly the issue they need to.
And up compiling all of the final details on information to be able to finalize the.
Our assessment of the different deals presented by each company.
And with that we are also hearing that.
In coming days and weeks.
Should have the news of the government finally pay.
Paying those those amounts of to lay out of overdue.
All in all.
It's about 300 million persons that are overdue from those receivable of 25%. So it's not a big amount roughly a little bit over $3 million.
So we are not.
<unk>.
Worried about that amount from now.
As I said, we lose.
Track pretty closely the V.
The payment or the subsidy payments are made which is a more relevant amount and and the start of should we understand even though theyre running a few days behind schedule.
We understand that that should be fully paid in the very near future.
And I leave the associate to answer the question about the portfolio of location.
Okay. Thank you and thank you Matthew for the question.
On the portfolio monitoring on the patient.
As we commented the we continue focusing our strategy on our core oil and gas activities.
The prioritizing the rapid development of our.
The body of them incentives.
With the particularly are focusing back on more out of them.
And that the regard.
Given the significant improvement in our ability to generate cash.
Hence the cash for non where operations were not actively looking for divestitures to fund our Capex plan.
Rather to contribute to on optimized capital allocation.
We therefore continue having active conversations.
We the key international players for the possibility of entering into new farm in agreements in back on more of the time.
But do not foresee any relevant deal to be concluded in the near future as valuation assessments continue to be well apart.
In addition, along the same lines that we commented during our last calls.
And also on our lysine and having some preliminary dialogue.
The potential interested parties on.
<unk> group of mature conventional on areas that might be subject to some form of <unk>.
The best Man.
In this particular case.
We are prioritizing capital allocation.
Under the Samsung.
The assets with further potential to be developed.
I focused the player the salary and the benefits to all parties.
The in the provinces that true capitalized from a renewal of the investment in the assets leading to incremental oil and gas production on <unk>.
Hence the more of royalties.
In summary, our strategy going forward will be focused on optimizing capital allocation on analyzing on a potential opportunities.
Clearly not only of these investments, but also potentially strategic new investments.
With a clear view on prioritizing the profitable on rationale development of.
Our world Class resources.
Thank you very comprehensive and congratulation on barrels talking results.
Thank you.
Your next question comes from the line of <unk>.
Fernandez with balance.
Hi, Good morning D C.
Again, the mandate from the violence.
Great to see the results and thank you for the very complete materials.
Any questions.
First if you could comment on the new by your fuel law.
And what the reduction in Monday to refuel cuts on the prohibition for oil companies to get involved in bi fuel production per well.
Yep.
The second and going back to what on meal and asked about fuel pricing and you commented as well.
Should see fuel prices at the pump.
But at the same level of measured in pesos.
The year end.
And maybe going into more detail on that.
What do you think it could imply for the internal crude prices measured in dollars.
The downstream spread in the second half the who might absorb more.
Of the expected FX devaluation till year end.
And.
My final third question is related to <unk>.
Conventional crude production.
And what are you planning there in terms of maybe secondary or tertiary recovery efforts.
Hi, This is gil.
Thank you for per your comments on your questions.
Briefly on the first question about by Appeals.
We will see.
On a constructively.
The the new lower day, she said, reducing the can catch requirements with the with via fields taking.
Taking it down to two 5%, which didn't need that many of reasonable and.
And of course.
That also alleviate some supply pressure the burst of we have teams on.
The.
Particularly on the biodiesel.
Wherever the new shares so we're not being able to deliver all of the.
The volumes required.
By the downstream segment. So all in on we do see that's a very constructive and and of course.
That will permit the healthy stabilization of.
Of both markets right of the Biofuels market on on.
On clearly on the refinery side as well.
And we don't we don't see at this point any particular.
Challenge.
Given these new requirements on not being able to integrate.
The buyer feels into into the agenda or downstream chain.
In terms of pricing.
Well you are asking is is already delegate the question right.
We see ahead of the very delicate balance as we have mentioned in the presentation.
The local crude oil has not been fully trucking international reference prices, particularly under the.
Basically on the understanding both the on the producer side.
And as well as on the streamers clearly we have a different reality by being fully integrated.
But clearly the value chain needs to have an equilibrium in general of the market understands that the.
The local economy today cannot fully absorb.
The complete the evolution of international price he seemed to into our pump.
Down the road.
For as long as the this value all of which remain relatively stable. The associates have mentioned, we do not expect.
And the relevant increases in peso terms at the pump as you clearly state that would imply some degradation.
Uh huh.
Our dollar margins between now on on the next few months of course.
We do expect these on the.
In particular, the expectations in terms of what the evolution of the effects will be and that's why I mentioned.
Of the macro body of wells.
<unk> in different ways on what we are anticipating we will probably release it when we have to revisit our strategy in terms of from prices.
But then you know clearly.
And it's a it's a delicate balance and delegate equilibrium on how the industry will continue negotiating the local crude.
Broadly maintaining.
The.
The the differential that you currently see maybe reducing it marginally.
If international prices remained as strong as they are today.
So clearly in the industry you will find it.
Very different views in terms of what the evolution of international on crude prices.
We will be in coming months.
So.
We would expect the delicate balance to be maintained in coming months with all actors with all relevant factors being.
Being up to the challenge and contributing to maintaining a reasonable.
And all along the sector all along the value chain.
And if things.
On a Boe in a very different in the way of course.
Require a revisiting of of.
Of the agenda of our strategy.
Yeah.
And then finally on the convention of production time.
We've been mentioning we.
We are very focused on on <unk>.
Sure the production we.
Expanding the investments both on pilots on also full development on different blocks are clearly our stellar here. There is a man of Intel is there were a set of Ken mentioned, we have reached already.
Uh huh.
<unk> 5000.
<unk> thousand <unk>.
Barrels of oil per day.
In production.
In the in the last quarter. So we continue making very good progress there and we are further expanding that.
The other blocks.
Not only in towards but also in the province of the industrial for example on them.
Santa Claus so on so we expect to invest.
The significant amount of money.
Probably in the $100 million.
Just on enhanced oil recovery in.
In coming months.
To continue fostering.
Tertiary production and through that continuum mitigating the items, partially mitigating the steep natural decline in conventional sales.
Yeah.
And just due to the wound up with that.
So you can imagine also right. We are we have expectations of all the sudden in terms of.
On the incentives in the new law.
Also contribute.
Not only for us, but also other players.
Two to continue investing in conventional assets.
So like I said, we will see further potential on those assets.
And.
Maybe maybe.
On the optimization of our portfolio.
Those are not the key opportunities for ypa of us as we do see.
Even more interesting opportunities in the in shale.
But no more than that and we continue having a big portion of our production on roughly.
Close to 75% of our production coming from conventional so of course, we cannot.
Luca side and on forget.
On the efficiency of maintaining a sky is partially with production in our mature in conventional fields.
That's great. Thank you very much part of the complete answers.
Nicole Thanks.
Thank you.
Yes.
There are no further questions. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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No.
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