Q1 2024 YPF Sociedad Anónima Earnings Call
Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time your lines will remain on music hold thank you for your patience.
Operator: Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will remain on music hold.
[music].
Kathleen: Thank you for standing by my name is Kathleen and I will be your conference operator today at this time I would like to welcome everyone to the wide <unk> first quarter 2024 earnings webcast presentation.
Kathleen: Thank you for your patience. Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the YPF First Quarter 2020 Earnings webcast presentation. All lines have been placed on mute to prevent any background noise.
Kathleen: All lines have been placed on mute to prevent any background noise.
Kathleen: After the Speakers' remarks, there will be a question and answer session.
Kathleen: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Kathleen: If you would like to withdraw your question Press Star one again. Thank you I will now turn the call over to Margaret The Chin Investor Relations manager. Please go ahead.
Kathleen: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I will now turn the call over to Margarita Chun, Investor Relations Manager. Please go ahead.
Margaret: Good morning, ladies and gentlemen, this is somebody I read that you wipe P F I R.
Margarita Chun: Good morning, ladies and gentlemen, for joining us today in our fourth quarter, 2024. This presentation will be conducted by our CFO, Mr. Federico Barroetave, and our strategy, business development, and content. During the presentation, we will go through the main aspects and events that explain the. Then, we will open the floor.
Speaker Change: Thank you for joining us today in our first quarter 2024 earnings calls these presentation that will be conducted by our CFO, Mr. Food equal about with Albania, our strategy business, you've elevated income through Vice President Mr. Massimiliano wasted during the presentation. We will go through the main aspects any day.
Speaker Change: Does that explain the quarter results and then we will open the floor for Q&A session together with our senior management.
Speaker Change: Before we begin I would like to draw your attention to our cautionary statement on slide two please.
Margarita Chun: Before we begin, I would like to draw your attention to the fact that we have a lot of, Cautionary Statement: Please take into consideration that our remarks today and answers to your questions will be in English. During the presentation, we might discuss some non-IFRS. I will turn the call over to Federico. Please go ahead.
Speaker Change: Taking into consideration that our remarks today and answers 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.
Speaker Change: Our financial figures are stated in accordance we'd I asked for it but during the presentation. We may discuss some non ice for measures such as adjusted EBITDA, though I will turn the call over to food equal. Please go ahead.
Speaker Change: Thank you, Mike and good morning to all of you.
Federico Barroetave: Thank you, Margarita, and good morning to all. Before moving to the purpose of this call, I have reported annual financial statements in both currencies, U.S. dollars and U.S. The company believes that reporting in U.S. dollars provides general investors with a better understanding of the company. Sponsored ADR Class D, to start reporting quarterly financial statements also in both currencies. Let me start the presentation by highlighting that this was a quarter in which we were able to deliver a solid beginning of the year across all our key operating and financial metrics. Revenue amounted to $4.3 billion in Q1, growing by 3% sequentially, mainly on the back of better fuel prices. Local Fuels and Fertilizers.
Before moving to the purpose of this call as you May know the company's functional currency is U S dollar.
Food Equal: 2022 we have reported annual financial statements in both currencies.
Paul: Imagine that peso.
Food Equal: The company believes does reporting in U S dollars device generally investors with a better understanding of the company's business activities and analysis of our financial performance.
Food Equal: Accordingly as of this quarter the company took the initiative to start.
Food Equal: Our reporting quarterly financial statements also in both got it.
Food Equal: No.
Federico Barroetave: Also, in Q4, most of the BDAs recorded a strong evolution during Q1, totaling $1,245,000,000. 15% after the devaluation and lower imports of fuel combined with higher processing levels at our refineries, partially offset by a reduced effects regime for exporters and lower replacement costs of our suggested the BDA growth was even higher. Strong operating results enable our bottom line to become possible. $357 million in Q1, which also almost doubled. $341 million in Q1. Total hydrocarbon production reached 526,000 barrels of oil equivalent.
Speaker Change: Let me start the presentation by highlighting that this was a quarter in which we were able to deliver a solid beginning of the cross all our key operating and financial metrics.
Speaker Change: Revenues amounted to $4 $3 billion in Q1 growing by 3% sequentially and 2% in that arguably mainly on the back of better fuel prices in the domestic market and higher exports of fall.
Speaker Change: Partially upset by demand contraction in logos fuels in fact devices.
Speaker Change: In Q4, I wasn't true with functional currency in peso were affected by the Veeva over me December.
Speaker Change: But just as a BVA and recorded a strong evolution during Q1.
Speaker Change: Total in 1000 to $45 million 50.
Speaker Change: 1% up sequentially, mostly driven by the aforementioned factors.
Speaker Change: <unk> two a decrease opex after the devaluation and lower imports of fuel combined with kayak processing levels.
Speaker Change: <unk>.
Speaker Change: Perfect.
Speaker Change: Actually offset by reduce FX regime for exporters and lower replacement goes forward embedded studies in <unk>.
Speaker Change: On yearly adjusted EBITDA growth was even higher particularly boosted by <unk>, 7% expansion in oil production, while exporting 23000 barrels per day to Chile in Q1.
Speaker Change: The strong operating results in a lower bottom line to become positive.
Speaker Change: $657 million in Q1.
Speaker Change: Which also almost double the $341 million.
Speaker Change: <unk> Q1 'twenty three.
Speaker Change: Total hydrocarbon production reached by hand, and 26000 barrels of oil equivalent per day pricing, 3% sequentially and internationally.
Speaker Change: Even by a sound performance in our shale operations.
Speaker Change: Equally when you say loan, which recorded a 21% inter annual increase.
Speaker Change: In terms of our investment activities, we started the year deploying 1250 $2 million.
Federico Barroetave: Pricing 3% Sponsored ADR Class D recorded at 21% In terms of our investment activity, we started the year deploying 1,252,000,000. Produced by 15% Sequential, 4% interaction, mainly due to the devaluation impact mentioned before. More than 50% of the court, cash flow totaled a negative $394 million, were not fully compensated.
Speaker Change: Leasing by 15% sequentially and 4% in debt annually, mainly due to the devaluation impact mentioned before.
Speaker Change: More than 50% of the quarter investment was concentrated in shale operations in language that would a strategy for the short term.
Speaker Change: On the financial side free.
Speaker Change: Free cash flow totaled a negative $394 million as the deployment of our capex.
Speaker Change: I'm in a fee imports deferred from 2023 and that salaries were not fully compensated by the positive cash flow from operations.
Federico Barroetave: Taking our net debt to $7.2 billion, while maintaining the net level of the ratio of 1.7 times. Fully aligned with the target of forward. We will continue monitoring the evolution, particularly the cost, concentrate on the opportunities that we have ahead of us, reaffirming our shale oil-oriented growth strategy. I now turn the call over to Max. Thank you, Ferdy.
Speaker Change: Taking our net debt to $7 $2 billion, while maintaining the net leverage ratio at 1.7 times.
Speaker Change: Really aligned with the target of the year.
Speaker Change: Going forward, we will continue monitoring the evolutions of Argentina's macro context, particularly the cost inflation evolution.
Speaker Change: We will concentrate our efforts to exploit the opportunities that we have ahead of us reaffirming our shale oil oriented growth strategy and focusing on generating value for our shareholders, while maintaining financial prudency in our decisions.
I now turn the call over to Max to go through the operating results for the quarter.
Max: Thank you for a vehicle.
Max: Let me begin by expanding on Federico's comments about our abstract. During the first quarter, total hydrocarbon production grew by 3% quarter-on-quarter and year-on-year, driven by shale gas contribution. Continued on an upward trend now representing almost half of the total, Zooming into crude oil, total output continued high in the range of 255,000 barrels of oil per day on the back of shale growth of 31% year-on-year, offsetting the marginal decline in conventional fuels. Also, let me mention that on the conventional site, 9% of the total production came from tertiary production, increasing by 34% interannually and minimizing the impact of natural decline in mature fields.
Max: Let me begin by expanding on fed equals comments about our upstream segment. During the first quarter total hydrocarbon production grew by 3% quarter on quarter and year on year, driven by shale contribution, which continued on an up what Brent now representing almost half of it.
Max: It'll output.
Max: Booming in through crude oil total output continued a high in the range of 255000 barrels of oil per day on the back of shale growth of 31% year on year offsetting the marginal decline in conventional fields.
Max: Also let me mention that on the conventional side, 9% came from third party production, increasing by 34% and Theyre annually and minimizing the impact of natural decline in mature fields.
Max: Beyond crude oil, natural gas, and NGL production grew by 6% on a sequential basis on the back of demand recovery, delivering above 36 million cubic meters per day and 42,000 barrels of oil equivalent per day, respectively, both figures similar to the first quarter last year. Moving to lifting costs, they reached almost $13 per barrel of oil equivalent in the first quarter, 16% below the previous quarter, primarily driven by the sharp devaluation in mid-December 2023, increased production, and cost efficiency, such as tariff reduction on supply chains.
Max: Beyond crude oil natural gas and NGL production grew by 6% on a sequential basis on the back of demand recovery delivering a ball 36 million cubic meters per day, and 42000 barrels of oil equivalent per day, respectively. Both figures.
Max: Similar to the first quarter last year.
Max: Moving to lifting cost it reached almost $13 per barrel of oil equivalent in the first quarter, 16% below the previous quarter, primarily driven by the sharp devaluation in mid December 2023 increased production and cost efficiency.
Max: Tariff reduction in supply chain.
Max: It also impacted the lifting cost at our shale core hub blocks, which stood at $3.4 per barrel of IAEA equivalent on a gross basis, 15% down quarter-on-quarter, way below the already competitive range of $4 that we recorded during the last year. Regarding prices in the upstream segment, crude oil realization prices averaged $68.3 per barrel in their first quarter, representing a strong recovery of 15% quarter-on-quarter, mainly as a result of a better pricing landscape in the local market. On the natural gas side, prices remained essentially flat at $3 per million BTU, mostly derived from the off-peak season price of plant gas.
Max: It also impacted the lifting cost at our shale core hard blocks that stood US 3.4 dollars per barrel equivalent on a gross basis.
Max: 15% down quarter on quarter way below the already competitive range of $4 that we recorded during the last year.
Max: Regarding prices in the upstream segment crude oil realization prices I've read $68 $3 per barrel in the first quarter, representing a strong recovery of 15% quarter on quarter, mainly as a result of better pricing landscape in the local market.
Max: They're not throw the gas side prices remained essentially flat at $3 per million Btu, mostly derived from the off peak season price of plan gas.
Max: Zooming into our selectivity during the first quarter, we drilled 43, new horizontal wells in our operated blocks, mostly oil producing blocks and only one targeting shale gas. We also completed 29 wells all of them oil. Moreover.
Max: Zooming in on our shale activity, during the first quarter, we drilled 43 new horizontal wells in our operated blocks, mostly oil-producing blocks, and only one targeting shale gas. We also completed 29 wells, all of them oil. Moreover, we tied in 39 wells, being 92% oil. All these metrics are aligned with the company's strategy to monetize shale oil opportunities in the short term, together with the ongoing oil midstream expansion. It is also worth noting that shale oil production achieved once again a new record high, delivering 112,000 barrels per day with a 3% sequential growth, accumulating an increase of 60% over the last two years.
Max: We tied in 39 wells being 92% of oil.
Max: All these metrics are aligned with the company's strategy to monetize shale oil opportunities in the short term together with the ongoing oil midstream expansions.
Max: It is also worth noting that shallow production achieved once again, a new record high delivering 112000 barrels per day with a 3% sequential growth accumulating an increase of 60% over the last two years, 87% of our shale oil production.
Max: 87% of our shale oil production came from our core hub oil blocks, Loma Campana, La Marga Chica, Bandurria Sur, and Agua del Chaar. In terms of efficiencies within our shale operations, the first quarter we continued setting new quarterly records on drilling and fracking performance, averaging 290 meters per day in drilling and 219 stages per set per month in fracking These are improvements of 23% and 12%, respectively, versus the first quarter of 2023 and fully in line with the guidance we announced during the last annual call.
Max: From our core hop oil blocks Loma Campana, La <unk> Chica, one great food and a wide tenure in terms of efficiencies within our shale operations. The first quarter. We continued to set the new rig quarterly records on drilling and fracking performance.
Max: <unk> 290 meters per day, and drilling and 219 stages per set per month on fracking. These are improvements of 23% and 12% respected fleet versus the first quarter 2023 and fully in line with the guidance, we announced during the last annual call.
Max: It is important to mention that during last February we achieved the highest drilling speed for one well in our tenure block, reaching 475 meters per day for a well almost 4000 meters of horizontal length, which was fully drilled in 15 days.
Max: It is important to mention that last February, we achieved the highest drilling speed for one well in the Agua del Chaar block, reaching 475 meters per day for a well almost 4,000 meters in horizontal length, which was fully drilled in 15 days.
Max: As a result... We posted another quarter of competitive development costs for our core hub oil operations at $10.3 per barrel of oil equivalent, which is slightly above sequentially due to higher activity to accelerate the development of our core hub blocks rather than Loma Campana, which is our flagship block in Bacamorte. Interannually, the improvement was mainly due to a restated figure for the first quarter of 2023, especially on the back of lower performance driven by parent-child effects.
Max: As a result.
We posted another quarter of competitive development cost for our core or hot oil operation.
Max: 10.3 dollars per barrel of oil equivalent, which is slightly above sequentially due to higher activity to accelerate the development of our core hard blocks, rather than Loma Campana, which is our flagship blogging biomarker.
Max: In India annually.
The improvement was mainly due to a restated figure for the first quarter 2023, especially on the back of lower performance driven by parent child effect.
Max: In addition, we move forward with the strategy of exploring new shale opportunities beyond Baca Muerto. In that sense, a few days ago, we finished drilling the first horizontal well at El Cerrito Block in the Palermo Ike Formation, which is the second largest unconventional resource in Argentina after Guacamole. We will advance with the completion in the following months to continue exploring its potential in the coming years. On the conventional side, a few days ago, we started drilling the first offshore ultra-deep water well, Argerich, located 315 kilometers from the port of Mar del Plata in the province of Buenos Aires.
In addition, we moved forward with the strategy of exploring new shale opportunities beyond Bakken water in that sense. A few days ago. We finished drilling the first horizontal well at retail block Empire unlikely formation, which is the second largest unconventional resource in Argentina after walk on water.
Max: We will advance with the completion in the following months to continue exploring its potential in the coming years.
Max: On the conventional side a few days ago, we started drilling the first offshore ultra deepwater well.
Max: Our hit each located 315 kilometers from the port of <unk> in the province of Buenos Itis, We expect drilling works will take around two months.
Max: We expect drilling works to take around two months. Before moving to the next section, let me update you on the progress made in Anne's project, which aims at optimizing the portfolio of conventional assets in our upstream business. We have already appointed the bank to manage this process and move forward with a virtual data room last month. We expect to receive offers by June on track with the project timeline. Now, let me briefly comment on the progress achieved in the oil midstream expansions to unlock evacuation capacity in the Naquina Basin.
Max: Before moving to the next section let me update on the progress made in on this project that aimed at optimizing the portfolio of conventional assets in our upstream business. We have already appointed the bank to manage this process and move forward with our virtual data room last month.
Max: Expect to receive offers by June on tract with the project timeline.
Now, let me briefly comment on the progress achieved in the oil midstream expansions to unlock evacuation capacity in the <unk> basin.
Max: Regarding the evacuation to the Pacific, during the first quarter, YPF continued growing oil exports to Chile through the Trans-Andean Pipeline, which is also connected to our core hub blocks through the Bacamorta Norte Pipeline. We exported almost 23,000 barrels of oil per day, which is 22% more than in the fourth quarter, representing 9% of our oil production and totaling net export revenues of around $155 million.
Max: Regarding to your accretion to the Pacific during the first quarter, while <unk> continued growing oil exports to Chile, Peru, Trans Amgen pipeline, which is also connected to our core hub blocks through the walk on water not the pipeline.
Max: We exported almost 23000 barrels of oil per day, which is 22% more than the fourth quarter, representing 9% of our oil production and totaling net export revenues of around $155 million.
Max: We expect to increase export volumes gradually in the coming months, also increasing the mix of shale, which is even lighter than the conventional oil of the Neuquena Basin since our client successfully completed the testing of its refineries to process the lighter crude oil mix. Switching to the evacuation capacity to the Atlantic, on the one hand, Oldelual estimates to add around 45,000 barrels per day to its system by year end, and 200 more by mid-2025.
Max: We expect to increase export volumes gradually in the coming months also raising the mix of shale, which is even lighter than the conventional oil of the new innovation since our clients successfully completed the testing of its refineries to process the lighter crude oil mix.
Max: Switching to the evacuation capacity to the Atlantic.
Max: On the one hand, all the loss estimates to add around 45000 barrels per day to its system by year end and 200 more by mid 2025 on the other hand wipe yes is leading the pack on water South project a completely new pipe.
Max: On the other hand, YPF is leading the Bacamorta South project, a completely new pipeline with an export terminal, reaching an initial capacity of over 180,000 barrels per day by 2026 and amounting to more than 360 by 2027-28. During the quarter, we obtained the environmental permits for the whole project and launched the EPC tender, expected to be awarded by year-end.
Max: Glenn with export terminal, reaching an initial capacity of over 180000 barrels per day by 2026 and amounting to more than 360 by 2027 2008.
Max: During the quarter, we obtained the environmental permit for the whole project and launched the EPC tender expected to be awarded by year and keep in mind that this project has the possibility to expand to more than 700000.
Max: Keep in mind that this project has the possibility of expanding to more than 700,000 barrels per day by adding pumping stations. Switching to our downstream operations, processing levels average 301,000 barrels per day, increasing by 4% sequentially since the fourth quarter was negatively impacted by program maintenance stoppages at the La Plata refinery. Interannually, processing levels declined by 2%, mainly because during this quarter, the La Plata refinery was affected by the OTES terminal unavailability to deliver crude oil, which was partially restored by the end of the first quarter, in addition to heavy rains and flooding in nearby areas.
Iris per day by adding pumping stations.
Max: Switching to our downstream operations in terms of refinery utilization processing levels average 301000 barrels per day, increasing by 4% sequentially since the fourth quarter was negatively impacted by <unk>.
Max: Program maintenance stoppages at La Plata refinery inter annually processing levels declined by 2% mainly because during this quarter looked at our refinery was affected by all this terminal and availability to deliver crude oil which was partially restored by the end of the first quarter.
Max: Addition to heavy rains and flooding in nearby areas.
Max: This effect was offset in part by better performance at the Lujan de Cuyo refinery, where we recorded the highest monthly processing mark in March. Consequently, we reached more than 90% of the refinery utilization factor. Regarding domestic sales of fuels, total dispatch volumes decreased by 11% quarter-on-quarter, mainly because of retail demand contraction and lower diesel seasonality, dropping 14% in diesel and 7% in gasoline. Interannually, it was only 2% down as a result of a 4% contraction in diesel, affected by lower industrial and agribusiness activity, while gasoline remained almost flat.
Max: Effect was offset in part by a better performance outlook underscores a refinery where we recorded the highest monthly persisting mark in month March.
Max: Consequently, we reached more than 90% of refinery utilization factor.
Regarding the domestic sales of fuels.
Max: It'll dispatch volumes decreased by 11% quarter on quarter, mainly because of retail demand contraction and lowered this diesel seasonality dropping 14% in diesel and 7% in gasoline and terrain yearly it was only 2% down as a result of four.
Max: Percent contraction in diesel.
Max: <unk> by lower industrial and agribusiness activity, while gasoline remained almost flat.
Max: It is worth mentioning that despite fuel demand falling in Argentina, YPF was able to gain market share growing 8% in gasoline and 3% in diesel interannually, capturing almost 60% of the local fuel market share. Moreover, and quite important for the downstream margins, lower demand for fuel was translated into lower imports, representing only 4% of total fuel sale volumes, compared to 12% in the first quarter of 2023. In terms of prices, during the first quarter, YPF continued adjusting local fuel prices, aiming at mitigating the impact of the devaluation, while managing to reduce the spread versus international parity. As a result, average fuel prices measured in dollars increased by 11% sequentially and 5% interannually, narrowing the gap to import parity to 7% in the first quarter, compared to 20% in the previous quarter.
Max: It is worth mentioning that despite fuel demand drop in Argentina, <unk> was able to gain market share growing 8% in gasoline and 3% in diesel interact newly capturing almost 60% of local fuel market share. Moreover.
Max: And quite important for the Dutch downstream margins lower demand of fuel was translated into lower imports, representing only 4% of total fuel sales volumes compared to 12% in the first quarter 2023 and.
Max: In terms of prices during the first quarter, while <unk> continued adjusting local fuel prices aiming at mitigating the impact of the devaluation, while managing to reduce the spread versus international authorities.
Max: A result average fuel prices measured in dollars increased by 11% sequentially and 5% into annually narrowing the gap to import parity to 7% in the first quarter compared to 20% in the previous quarter.
Federico Barroetave: On the other hand, the local crude oil price recovered in the first quarter, where Melanito's price averaged $68 per barrel, representing a discount of 10% versus export parity, compared to 24% in the fourth quarter of 2020-2023. Thanks to all of you; this is all on my end. I will now turn back to Federico to go through our financial results for the board. Thank you, Mike. Switching to the financial front, cash flow from operations in Q1 amounted to almost $1.1 billion.
Max: On the other hand local crude oil prices recovered in the first quarter were Magneto price average $68 per barrel, representing a discount of 10% versus export parity compared to 24% in the fourth quarter of 2000 2023.
Max: Thanks to all of you. This is all on my end I will now turn back to Fred equal to go through our financial results for the quarter.
Federico Barroetave: Despite the increase in adjusted VDA, negative working capital variations affected Q1. There were temporary deferred payments of imported goods and services from last year to Q1 and some delays in the collection from certain gas clients. Given the deployment of our capital expenditure, coupled with irregular interest payments, free cash flow came at a negative $394 million.
Fred: Thank you Max switch.
Fred: Switching to the financial front cash flow from operations in Q1 amounted to almost $1 1 billion.
Fred: Despite the increase in adjusted EBITDA negative working capital variations affected Q1.
Fred: There was temporary deferred payment of imported goods and services from last year to Q1, and some delays in the collection from starting gas clients.
Fred: Given the deployment of our capital expenditure capital with a regular interest payments free cash flow came at a negative $394 million.
Operator: Consequently, our net debt increased to $7.2 billion while maintaining a stable net leverage ratio of 1.7 times. In terms of financing, during Q1, we issued an amortizing seven-year export-secured bond for $800 million with a yield of 9.75%. Part of the proceeds was disbursed to pre-paying cash 40% of the 2024 notes for $138 million, while the balance of $208 million was fully paid at maturity on April 4th. Additionally, we continue securing trade facilities, both with local and international banks, and paid at maturity almost $100 million of principal amortizations of international notes.
Fred: Consequently, our net debt increased to $7 2 billion.
Fred: While maintaining a stable net leverage ratio of one seven times.
Fred: In terms of financing during Q1, we issued an amortizing seven expert secured bond or $800 million.
Fred: With a yield of nine and three quarters.
Part of the proceeds was his first to prepaying cash 40% of the 2024 notes for $138 million.
Fred: While the balance of $208 million was fully paid at maturity on April 4th.
Additionally, we continue securing trade facilities, both with local and international banks and paid at maturity almost $100 million of principal Amortizations of international notes.
Fred: On the liquidity front, our cash and short term investments increased 15% sequentially to one 6 billion by the end of March.
Fred: Brian.
Fred: As a result of the new bond issuance.
Fred: Finally, when looking into our debt profile I would like to highlight that our healthy quality position comfortably covers our debt amortization for the next 12 months.
Speaker Change: So with this we conclude our presentation and open the floor for questions.
Operator: On the liquidity front, our cash and short-term investments increased 15% sequentially to $1.6 billion by the end of March, primarily as a result of the new bond issue. Finally, when looking into our debt profile, I would like to highlight that our health security position comfortably covers our debt amortization for the next 12 months. So with that, we conclude our presentation and open the floor for questions. We will now begin the question and answer session.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad Easter had angina Q if you will.
Operator: If you have dialed in and would like to ask a question, please press Star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: We'd like to withdraw your question simply press Star one again.
Speaker Change: We are called upon to ask your questions and listening via loud speaker on your device. Please pickup your handset and ensure that carefully.
Speaker Change: On mute when asking a question.
Operator: Again, please press star 1 to join the queue. Your first question comes from the line of Luiz Carvalho of UBS. Your line is now open. Hi everyone, can you hear me well?
Speaker Change: Again, Please press star one to join the queue.
Your first question comes from the line of disease.
UBS: <unk> of UBS. Your line is now open.
Disease: Hello, everyone can you hear me.
Disease: No.
Disease: Yes.
Max: Yeah, if we could hear you. Oh, thank you. Thank you for taking the question and congratulations on the results. I have basically two questions here.
Disease: Well. Thank you. Thank you for taking the question and congratulations on the on the results.
Luiz Carvalho: The first one, if you can, I don't know, give a bit more color and provide an update on the divestment process. How do you think that the development has been going so far? What are the potential, I would say, milestones that we should look for in the next, I would say, couple quarters? The second question is more related to cost reduction. I think that part of the, let's say, strategy is to, I don't know, optimize the, let's say, asset portfolio, but you may have, you know, good opportunities to, I don't know, streamline the costs overall.
UBS: Basically two questions here. The first one if you can give a bit more color and provide an update on the divestment proceeds.
UBS: How do you think that the development has been going so far.
UBS: Potential could say milestones that we ship.
Speaker Change: Look in the next I would say in the next couple of quarters.
Speaker Change: The second question is more related to.
Speaker Change: <unk>.
Speaker Change:
Speaker Change: Cost reduction.
Speaker Change: I think that.
Speaker Change: Part of the strategy.
Speaker Change: I don't know optimize the let's say the asset portfolio.
Speaker Change: You may have.
Speaker Change: It is too.
Speaker Change: Streamline due to the costs.
Speaker Change: Also I would like to get a bit more details how the company seen.
Speaker Change: I would say the cost reduction journey. Thank you.
Speaker Change: Thank you Louise we will start with the first question regarding the divestment profit profit.
Luiz Carvalho: So I would like to get a bit more details on how the company is seeing, I would say, the cost reduction journey. Thank you. Thank you, Luiz. We will start with the first question regarding the divestment process. Yeah, thank you very much. This is Max speaking.
Speaker Change: Yes. Thank you very much this is Max speaking I'm going to update you on the divestment process.
Max: I'm going to update you on the divestment process, but first, let me mention that we are on schedule with what we explained during the last call. The progress that we made between the last call and this one is that, yeah, between April 16 and 19, we went to a road show that started here in Buenos Aires at the Canadian Embassy. Then we had meetings in the U.S., in Houston, and in Calgary, and with the meeting in Calgary, we finished our pre-marketing stage.
Max: First let me mention that we are we are.
Max: We are on schedule on what we on what we explained during the last call.
Max: The progress that we made between that the last call and this one is that we have.
Max: <unk>.
And yes, we.
Max: Between April 16, 2019, we went.
Max: To our roadshow that started here in one sided.
Max: The Canadian embassy.
Max: And then.
Max: <unk>.
Max: I had a meeting.
Max: In the U S in Houston, and Calgary and with a meeting in Calgary, We finished our pre marketing stage.
Max: The following week, we opened a VDR, and at this stage... What I can say is that there are many CAs and a lot of companies working already with the information that we've disclosed in the VDR. So we are quite bullish about this process, and the other thing I can mention is that we are expecting offers or proposals during mid-June, targeting to close on these transactions during the second half of the year. Thank you, Max. And regarding the second question, regarding cost efficiency and cost reduction in the quarter, we have here Fede, our CFO. Thank you, Bruno.
Max: The following week, we've all we've opened our edr and that at this stage.
Max: While I can say is that there are.
Max: With many <unk> and a lot of <unk>.
Companies working already with the information that we've disclosed ended the VCR.
Max: So we are quite bullish about this process.
Max: The other thing I can mention is that we are expecting offers proposals.
Max: Proposals.
Max: During mid June.
Max: Targeting too.
Max: Close on this transaction during the second half of the year.
Speaker Change: Thank you Matt regarding the second question regarding <unk>.
Speaker Change: Efficiency cost reduction in the quarter.
Speaker Change: <unk> here.
Matt: Our CFO.
CFO: Thank you Bruno.
Federico Barroetave: I believe that the question is trying to focus more on the impact of the devaluation in the first quarter and how this is going to be affecting us further along the rest of the year. So let me tell you that so far, since the new government took office in December, we see that the main focus has been stabilizing the macro following the implementation of these some shock measures. Now, during this quarter, the key developments that we have seen are, number one, that monthly inflation more than halved from 26% in December to about 11% in March. Second, the FX gap between the official and parallel has tightened from over 200 to approximately 10%. This is the lowest level in four years. Then, the countries dropped from 2,000 basis points to 1,200.
CFO: I believe that your question is trying to focus more on the main impact on the devaluation along the first quarter and how this is going to be.
Affecting us further.
CFO: Along the.
CFO: The rest of the year.
CFO: So.
Speaker Change: Let me tell you that.
Speaker Change: So far six.
Speaker Change: The new government took office in December.
Speaker Change: We see that the main focus has been in stabilizing the macro following the implementation.
Speaker Change: All of this.
Speaker Change: Sharp measures.
Speaker Change: Now during this quarter the key developments that we have seen.
Speaker Change: Mainly number one is a natural inflation.
Speaker Change: More than half from 26% in December to about 11% in March.
Speaker Change: Second.
Speaker Change: FX gap between the official in parallel as tightening drove our two handed to.
Speaker Change: Approximately 10% this is the lowest level in four years.
Speaker Change: Then the country's drop from 2000 basis points to 1200.
Federico Barroetave: And again, this is the lowest since 2020. And then the net central bank reserves have increased by about $10 billion since December 2023. And we expect them to become... The expectation is that they will become a positive short.
Speaker Change: And again this is the lowest since 2020.
Speaker Change: And then the.
Speaker Change: Net central Bank reserves have increased.
Speaker Change: By about 10 billion since December 2023.
Speaker Change: And.
Speaker Change: We expect to begin.
Speaker Change: Let's say the expectation is that David can positive shortly.
Federico Barroetave: So, all in all, and probably as a key driver behind all these results, what we observe is that during the first quarter, the government implemented a strict fiscal policy that achieved fiscal surpluses in each consecutive month for the first time since 2008. I'm probably going to the root of your question, looking for the rest of the year, according to the market expectations survey of the central bank, they call REM in Spanish, which is now forecasting, on the one hand, a reduction in the monthly inflation rate from 9% in April to 5% by the end of the year.
Speaker Change: So all in all I am.
Speaker Change: Finally.
Speaker Change: And probably as a key driver behind all these results what we observe is that during the first quarter.
Speaker Change: Government implemented a strict fiscal policy that achieve.
Speaker Change: Fiscal surpluses in each consecutive month for the first time since 2008 now.
Speaker Change: And probably the going to the root of your question.
Speaker Change: Looking for the rest of the year.
Speaker Change: According to the medical market expectations survey of the Central Bank.
Speaker Change: All right.
Speaker Change: In our Spanish.
Speaker Change: Is now forecasting on the one hand, a reduction in medical inflation rate from.
Speaker Change: From 9% in April.
Speaker Change: Two 5% by the end of the year.
Speaker Change: This will result in a total inflation of approximately 160.
Federico Barroetave: This will result in a total inflation of approximately 160 towards CRM, which compares positively with the 211 we had in 2023. Now, on the other hand, in terms of FX evolution, the same survey expects the continuity of the current crawling peg during the second half of the year, but now with the indication that this will be done without considering discrete height. Now, all in all, Bruno, assuming that this is an area where inflation remains above currency depreciation, the company and management will continue to monitor strictly all key cost variables, looking for industrial efficiencies in order to mitigate their impacts on markets.
Speaker Change: <unk> <unk> and <unk>.
Speaker Change: Which compares positively with the two.
Speaker Change: 211.
Speaker Change: We had in 2023 now on the other hand in terms of FX evolution. The same survey expects the continuity of the.
Speaker Change: Current crawling peg.
Speaker Change: With.
Speaker Change: Converging adjustments during the second half of the year, but now with the indication that this will be then without considering discrete.
Speaker Change: Now all in all Bruno assuming that this a scenario where inflation remains above currency depreciation.
Speaker Change: The company and the.
Speaker Change: Management will continue to monitor strictly all key cost variables looking for industrial efficiencies in order to mitigate its impacts on margin.
Federico Barroetave: Okay, thank you. If I may just follow up on this one, if you can maybe provide a bit more general update in terms of what you already mentioned about the affidavit to prosperity, but also with regard to new regulations being discussed in the country at the moment and how I would say you see YPF positioned for potential, I don't know, adjustment of the regulatory framework looking forward. Basically, I understand, Bruno, you would like to have our views on the new legislative measures that are being discussed now in Congress. Yes, exactly, yeah. It'll be new next year.
Speaker Change: Okay. Thank you if I may just a follow up on this one.
Speaker Change: If you can maybe provide a bit more general update in terms of the.
You already mentioned about the efficacy of their EBITDA.
Speaker Change: Also with regards to new regulations being discussed in the country the movement.
Speaker Change: I would say AUC wide the acquisitions of potential I don't know adjustment on the regulatory framework moving forward.
Speaker Change: Basically.
Speaker Change: I understand the broader you are you would like to have our views on the new legislative measures.
Speaker Change: That are being discussed now in the Congress.
Speaker Change: Yes, exactly yes.
Speaker Change: We will next year.
Speaker Change: Okay excellent excellent.
Federico Barroetave: Okay, excellent. Well, Bruno, as you know, the new administration brought a radical transformation and deregulation agenda. This was implemented through Decree 70 and the Bases Bill, both currently subject to review and approval by the Congress. Now, regarding the Bases Law.
Speaker Change: Sure.
Speaker Change: Well.
Speaker Change: As you know the new administration brought a radical transformation in deregulation agenda.
Speaker Change: This was.
Speaker Change: Implemented through the.
Speaker Change: The decrease 70.
Speaker Change: Bashes Bill.
Speaker Change: Both currently subject to the review and approval by the Congress.
Speaker Change: Now regarding the.
Speaker Change: Baxter is low.
Federico Barroetave: The draft bill declares a public emergency on several matters for a period of one year. And it delegates a series of legislative powers to the executive branch during this emergency. Now, specifically for the oil and gas industry in general and for YPF, the new bill aims to restore the economic balance in the energy sector by introducing three main objectives. In our view, number one is that it removes almost all restrictions on the hydrocarbon sector, aiming to correlate in price an incentive regime for large investment called RIGI, which is especially critical to YPF and to the entire gas industry for the Argentine LNG project. And lastly, the bill reaffirms that the international trade of oil and gas should be free of any restrictions.
Speaker Change: Bill declares a public emergency in several matters. This is for a one year.
Speaker Change: And it delegates a serious of legislative powers to the executive branch during this emergency.
Speaker Change: Now.
Specifically for <unk>.
Speaker Change: The oil and gas industry in general and to IPF. The new Bill aims to restore the economic balance in the energy sector by introducing three main objectives.
In our view number one is.
Speaker Change: It removes.
Speaker Change: Almost all restrictions of the hydrocarbon sector.
Speaker Change: Aiming to correlating prices to import and export Paradise.
Speaker Change: Then it creates.
Speaker Change: And incentive regime for large investment call.
Speaker Change: Sure.
Speaker Change: Especially it's.
Speaker Change: Critical to Ips to IPF to the entire.
Speaker Change: The gas industry.
Speaker Change: For the Argentine LNG project.
Speaker Change: And lastly.
The Bill reaffirms.
And that international trade of oil and gas should be free of any restrictions.
Speaker Change:
Federico Barroetave: In this sense, it is important to highlight that... As the oil market is not formally regulated in Argentina, this new regulatory framework is not a necessary enabler to continue developing our shale oil resources in Bacamor. Anyway, the main impact on our business is related to the development of the LNG project, as I said, which depends on the new incentive regime for large investment projects. Perfect. That was very clear.
Speaker Change: In this sense.
Speaker Change: It is important to.
Speaker Change: To highlight that.
Speaker Change: As the OLED market is not formally regulated in Argentina.
Speaker Change: This new regulatory framework is not a necessary enablers enabler.
Speaker Change: To continue developing our shale oil resources in bank of America.
Anyhow the main impact on our business is related to the development of the LNG project as I said.
Speaker Change: Which depends on the new incentive regime for large investment.
Speaker Change: I apologize.
Speaker Change: Okay.
Speaker Change: Perfect that was very clear.
Speaker Change: Thank you very much.
Speaker Change: Thank you and welcome.
Speaker Change: Your next question comes from the line of <unk> <unk> of Morgan Stanley. Please go ahead.
Luiz Carvalho: Thank you very much. Thank you. Your next question comes from the line of Bruno Montanari of Morgan Stanley. Please go ahead. Good morning, everyone. Thanks for taking my questions. I have three on my side here.
Speaker Change: Yeah.
Morgan Stanley: Good morning, everyone. Thanks for taking my questions I have.
Morgan Stanley: Three on my side here the first one on <unk>.
Bruno Montanari: The first one on Vaca Murtasur. So is the final investment decision taken for the pipeline? And do you have a firm interest from other oil producers already to be equity partners in the project? And I was wondering how Vaca Murtasur would compare or compete with the potential further duplication of Odelval, which could also be on the table here.
Morgan Stanley: So is the final investment decision taken for the pipeline and do you have a firm interest from all the oil producers already too.
Morgan Stanley: Equity partners in the project and I was wondering.
Morgan Stanley: How does <unk> compare or compete with the potential further duplication of all the Wow.
Morgan Stanley: Which could be also on the on the table here.
Bruno Montanari: The second question is about the gas receivables collection. So I was wondering if you could share with us the amount that is currently due and if you were also having those offers to be paid with bonds at a haircut.
Morgan Stanley: Second question is about.
The gas receivables collection. So I was wondering if you could share with us the amount which is currently due.
Morgan Stanley: And if you were also having those offers to be paid with bonds at.
Morgan Stanley: At a haircut and the third one if you could comment on the free cash flow outlook for the coming quarters, you began the year maybe with.
Bruno Montanari: And the third one, if you could comment on the free cash flow outlook for the coming quarters. You began the year maybe with a little bit heavier negative free cash flow, so the question aims to check whether those pressures could subside now in the coming quarters. Thank you very much.
Morgan Stanley: A little bit heavier.
Morgan Stanley: Negative free cash flow. So the question aims to check whether those pressures could subside now in the coming question in the coming quarters. Thank you very much.
Speaker Change: Thank you Bruno we will start with the first question regarding back on more of the staff and all the while expansion here, we have masks, we'd ask our VP of strategy.
Max: Thank you, Bruno. We will start with the first question regarding Baca Muerta South and the Oldelvale expansion. Here we have Max with us, our VP of Strategy. Thank you for the questions. So far, the Vaca Muerta Sur project is progressing as expected. All of the midstream projects are actually advancing as expected and are on track to bottleneck our production capacity in Vaca Muerta. With this, we expect Oldelval's first stage to be completed by the end of this year. This will be a key milestone, actually, adding about 45,000 barrels per day of evacuation capacity in Vaca Muerta, reaching a total capacity of 345 from the original 225,000 barrels.
Speaker Change: Thanks for the question.
Max: Now, for further stages, we will reach a total evacuation of 540,000 barrels. Regarding, I think you asked, Vaca Muerta Sur, what was already FID was what we call Tramo 1, which is already in construction, and Tramo 2, which is the main trunk line all the way from Neuquén to the port with a new port facility. What we can tell you at this stage is that we already have the environmental permits for this project.
Speaker Change: So so far the Bakken water food is progressing as expected all of the midstream projects actually are advancing as expected and are on track to debottlenecking, our production capacity and lack of water.
Speaker Change: With this we expect all the involved first stage to be completed by the end of this year.
Speaker Change: This will be a key milestone actually adding.
Speaker Change: About 45000 barrels per day of evacuation capacity back on water, a reaching a total capacity of 345 from the original two 225.
Embarrass now.
Speaker Change: For further stages, we will reach a total evacuation of 540000 barrels.
Speaker Change: I think you asked back on what our food.
Speaker Change: What was already.
Speaker Change: The what we call trauma or not.
Speaker Change: This is already in construction.
Speaker Change: And the tramadol.
Speaker Change: Is the main trunk line for all the way from now to report with a new port facility.
Speaker Change: What we can tell you at this stage as we already got the environmental permits for this project. This was a key milestone for this.
Max: This was a key milestone for this, and we are working on it and in discussions with the rest of the industry. I cannot tell you much about this, but there's a lot of interest in participating in different levels of this project. So it's on track, and we don't see any delays in this project. And I'm sorry, and I think you also asked this question. Your second question was about further expansions in Olvera, right? So we believe that Vaca Muerta Sur is the most competitive evacuation route to monetize the crew in Vaca Muerta.
Speaker Change: And we are working and in discussions with the rest of the industry.
I cannot tell you much about this but there's a lot of interest in participating in different levels of this project. So so it's on track and we don't see any delays on this project.
Speaker Change: Hi, I'm, sorry, and I think you've also asked.
Speaker Change: Second question was about.
Speaker Change: Further expansions in <unk> right. So we will leave that Vaca <unk> is the most competitive evacuation route for them to monetize their crude embark on water.
Max: This is because at the port, where we are foreseeing to have the facilities, we can get to that port with BLCCs, which have much more competitive transportation costs per barrel. So we believe that this is the most efficient infrastructure system, and that's why YPF wants to pursue this project on top of, or as a priority over, any other project. Thank you, Max. I don't know if it was clear, Bruno, for you, but we can go with the second question. Yes, it is super.
Speaker Change: Because.
Speaker Change: The port where we are foreseeing to throughout the day.
Speaker Change: The facilities, we can get to that port with VLCC, which are have much more competitive.
Speaker Change: Transportation cost per barrel. So we believe that this will be this is the most efficient.
Speaker Change: Infrastructure system, so and Thats why <unk> wants to pursue this project.
On top of our.
Speaker Change: As a priority on any other project.
Max: The second question was about the gas receivables. Max, if you can answer it, is answering the question, our CFO. Okay. Hi Bruno.
Thank you, Matt I don't know if it.
Speaker Change: It was clear Bruno for you and we can go with the second question.
Speaker Change: Super Thank you.
Speaker Change: Thank you. The second question was about the gas receivables.
Speaker Change: Mass Ethan.
Speaker Change: During the question and our CFO.
CFO: Hi, Bruno.
Max: Well, as you know, this issue is somewhat marginal, I would say, for YPF, considering the magnitude of our accounts receivable and BDA. As it is publicly known, in recent weeks, CAMESA has not been able to meet its obligations with upstream companies and power generators for the months of December, January, and February. The total figures for YPF are that, out of a total receivable of 160 million, we had a past due of around...
Well as you know this decision is somehow.
CFO: Generally I would say for <unk> considering the magnitude.
CFO: Our current ratio and EBITDA.
CFO: As it is publicly known in recent weeks.
CFO: <unk> has not been able to.
CFO: Meet its obligations with upstream companies and power generators.
CFO: Yes.
CFO: At months of December January and February.
CFO: Total figures for IPF is that out of a total receivable.
CFO: $160 million.
CFO: We had a past few.
CFO: Of around.
CFO: It's probably 50% of that was past June.
Max: It's probably 50% of that was past due. Now, um... Last Wednesday, the Secretary of Energy issued Resolution 58, which establishes an exceptional payment regime for Ganesha past due amounts. This resolution provides that December and January will be cancelled with a government bond due 2038. All in all, considering this, and based on the best estimate of the company, the group has recognized a total charge of $55 million, of which $29 were considered a charge to our operating income, and the balance corresponds to our subsidiaries YPF Luz and Barragan Power, So, based on this, yesterday YPF signed an agreement with Kamesa by which the federal due amounts were immediately cancelled and the bonds shall be delivered in the coming days.
CFO: Now.
CFO: Last Wednesday.
CFO: <unk> energy issued resolution 58, we just averages and exceptional payment regime for Gannett surpass the amount this resolution.
CFO: Sorry.
CFO: December and January will be canceled with the government bond due 2038.
All in all considering this and based on the best estimate of the company. The group has recognized a total charge.
CFO: Yes.
CFO: $55 million.
CFO: Of which 29.
CFO: We're considered a charge to our operating income and the balance correspond to our subsidiaries <unk> and.
CFO: But again.
CFO: Power power plant.
CFO: So based on this.
CFO: Yesterday, <unk> signed an agreement with <unk>.
CFO: Rich.
CFO: From the fair value amount were immediate immediately canceled and the bonds shall be delivered in the coming days.
In addition.
Max: In addition, this agreement provides that moving forward, payments will be done in accordance with the contractual schedule. Got it. Quick follow-up. On this $29 million, was this charged in the first quarter already? Yes. Okay, and you did not normalize for that when you presented your EBIDA, is that correct? It impacted the evidence.
CFO: This agreement provides that.
CFO: Going forward payments will be then in accordance with the.
CFO: Contractual.
CFO: Scale.
CFO: Yes.
Speaker Change: Got it quick follow up on this $29 million was charged in the first quarter already.
Speaker Change: Yes.
Speaker Change: Okay, and then you did not normalize for that when you presented your EBITDA is that correct.
Speaker Change: It impacted EBITDA.
Max: It was in the line of the commercialization cost, so it is included in the EBITDA. If we wouldn't have this impact, it would have been $30 million higher. Okay, yeah, perfect. Well, we can go with the last question from Bruno. His question was about the free cash flow, the negative cash flow that we started the year with and the pressure or maybe the outlook for the coming months. Okay, well, what happened in the first quarter, Bruno, it's a combination of, I would say, three factors. Number one, let's say the composition of the negative free cash flow, number one, the payment of interest by the company that amounted to probably half of that.
Speaker Change: Youre welcome.
Speaker Change: The commercialization cost. So it is included in the NDA EBITDA. If we wouldn't have this impact you would have been $30 million higher.
Speaker Change: Okay perfect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay, well, we can go with the last question Bruno.
Bruno: His question was about the free cash flow.
Bruno: Now that the cash flow that we started with a year and the pressure or maybe the outlook for the coming months.
Bruno: Okay.
Bruno: Well.
Bruno: The.
Bruno: Katherine in the first quarter of Bruno it's a combination of I would say.
Bruno: Three factors.
Bruno: Number one.
Bruno: Let's say.
Bruno: The comp.
Position.
Bruno: Negative free cash flow.
Bruno: Number one the payment of interest of the company that amounted to probably half of that.
Max: And then the rest is composed of two main issues. One is this delay in payments that we just mentioned in gas receivables. And the other one is that, if you remember, by the end of last year, we deferred payments for imports of goods and services that we canceled in the first quarter with or through buying securities from the government that allowed us to cancel these past due payables. So that was a combination during this course.
Bruno: And then the rest is composed of two main issues one is this.
Bruno: Delay in.
Bruno: Payments as we just mentioned.
Bruno: Gaseous fuels.
Bruno: And the other one is that.
Bruno: If you remember by the end of last year.
Bruno: We have.
Bruno: Deferred payments of <unk>.
Bruno: Imports of goods and services.
Bruno: We cancel along the first quarter.
Bruno: We are through.
Bruno: Buying securities from the government allowed us to cancel these past due.
Bruno: Payables.
Bruno: So that was a combination.
Bruno: During this call.
Max: Now, moving forward, even though we expect a strong recovery in our EVDA levels during 2024, and this on the back of the new fuel pricing strategy already implemented and our growing shale oil production, we expect the CapEx target of $5 billion for 2024 to push the free cash flow into the negative territory, and this will be more or less in line with the same range that happened in 2023. Nevertheless, as the expansion of EVDA levels should be higher than the increase in our net debt, we should be ending the year with a net leverage ratio below 2023, that means something in the range of 1.7 to 1.7. I don't know, Bruno, if we answered your question. Yes, very clear. Thank you very much for that.
Bruno: Now.
Bruno: Moving forward.
Bruno: Even though we expect a strong recovery in our EBITDA levels during 2024.
Bruno: This on the back of new fuel pricing strategy.
Bruno: <unk> already implemented and our growing shale oil production.
Bruno: We expect the Capex target of $5 billion for 2024 and that will push the free cash flow into the.
Bruno: Negative territory.
Bruno: And this will be more or less in line with.
Bruno: With the same range that cabin in 2023.
Bruno: Nevertheless.
Bruno: As E expansion EBITDA levels, it should be higher than the increase of our net debt ash, we should be ending the year with a net leverage ratio.
Bruno: No 2023 that means something in the range of one <unk> to one seven times.
Bruno: Okay.
Bruno: Okay.
Speaker Change: I don't know if we answered your question.
Speaker Change: Yes, very clear thank you very much for that.
Speaker Change: Thank you we can advance the next question.
Bruno Montanari: Thank you. We can advance with the next question. Your next question comes from the line of Daniel Guardiola of BTG. Your line is now open.
Speaker Change: Your next question comes from the line of Daniel Guardiola of BTG. Your line is now open.
Daniel Guardiola: Thank you and good morning, guys I have a couple of questions here.
Daniel Guardiola: Thank you and good morning, guys. I have a couple of questions. My first question is on the asset disposal plan, and I hear you mentioning that you have already done a road show in Canada, Houston, and Argentina, and I wanted to ask you if you could provide us with the feedback you have received so far from potential buyers of these conventional fields and also potential pushback that maybe you have received from government entities or provinces in Argentina where these fields are located. So that's my first question.
Daniel Guardiola: My first question is on the asset disposal plan and.
Daniel Guardiola: Sure you mentioned that you already did a road show in Canada in Houston, and Argentina, and I wanted to ask you. If you could provide us the feedback you have.
Daniel Guardiola: I've received so far from potential buyers of these conventional fields and also potential pushback than maybe you have received from government entities are provinces in Argentina. Our these fields are located.
Speaker Change: That's my first question.
Speaker Change: And the second one is on the Exxon exit or disposal plan and they wanted to know if <unk> is actively looking into these assets that Exxon is planning to sale in Argentina.
Speaker Change: Thank you Danielle we can start with your first question.
Hi, Danielle how are you.
Daniel Guardiola: And the second one is on the Exxon exit or disposal plan. And I wanted to know if YPF is actively looking into these assets that Exxon is planning to sell in Argentina. Thank you, Daniel.
Max: Regarding the Asset Disposal Plan, we call it the Andes Project. The feedback that I can tell you we got is that we are already working. There are over 70 companies working that have signed CAs and are working in the BDR. This is above our expectations. In processes where I've worked in the past, I've never seen that many companies.
Well regarding the asset disposal plan, we are we call it the on this project.
Speaker Change: The feedback that I can tell you. We got is we are already working there.
Speaker Change: Above 70 companies working that science and are working in the PDR.
Speaker Change: This is above our expectations on processes, whereas worked in the past I've never seen that so that many companies. So I think that the that the.
Max: So I think that the market was expecting and looking forward to this process. On the potential pushback, what I can tell you is that, for this project, we started, and Horacio, our CEO, started from the very beginning working with all of the different stakeholders, with the governors or governments, different governments, with the unions, and with everyone else before going out to the market. So we did the homework before going out, and so far, we haven't had any pushback on the clusters that are published or released within the Andes project. And regarding the exome process, there's not much I can tell you.
Speaker Change: The market.
Speaker Change: Was expecting and looking forward to this to this process.
Speaker Change: Okay.
Speaker Change: On the potential pushback, what I can tell you is that we for this project we started.
Speaker Change: <unk> started from the very beginning working with all of the different stakeholders.
Speaker Change: With a cover with the governors of Golar governments different governments with the unions and with everyone else before going out to the market. So we did.
Speaker Change: Homework before going out and we don't see.
Speaker Change: So far we haven't had any pushback on the on the on the clusters that are published and there are released within the hour. This project.
Speaker Change: And regarding the excellent process.
Speaker Change: There is not much I can tell you the only thing I will tell you is one of our pillars.
Max: The only thing I will tell you is one of our pillars is Baca Muerta. We're going to focus on our assets that have the highest margins, and we are continuously looking for any opportunity that has synergies within our operations where we want to grow. So that's everything I can comment on at this time. Okay, great, thanks. And if I may squeeze just another one very quickly,
Speaker Change: Greg back on what we're going to focus on our most on our assets that have the highest margins.
Speaker Change: And we are becoming and we are continuously.
Looking to any opportunity that has synergies within our operations, where we want to grow.
Speaker Change: So thats everything.
Speaker Change: Everything I can comment at this stage.
Speaker Change: Okay, great. Thanks, and if I may as Kris just another one very quickly you did mentioned during the call.
Daniel Guardiola: You did mention during the call that you drilled, or you're planning to drill, an ultra-deep water well offshore in the northern part of Argentina. And if I'm not mistaken, this is an extension of a major discovery that was found in Namibia two years ago by Sheldon Total. I don't know if you could give us a notion of how big...
Speaker Change: <unk> drilled are reopened to drill.
Kris: Our ultra deepwater well offshore in the northern part of Argentina.
Kris: And let me take this as an extension of a major discovery that was found in Amelia two years ago by shell and hotel.
Kris: Maybe you could give us a notion of how big this new frontier could be for Argentina.
Daniel Guardiola: This new frontier could be for Argentina. Sure. Daniel, maybe you are referring to the Arqueriz. Yes, that one.
Speaker Change: Got it alright.
Speaker Change: Okay.
Speaker Change: Sure Danielle, maybe you're referring to the <unk>.
Speaker Change: Yes.
Max: Exactly. I'll go for it. It's not in the northern part of Argentina. The Arqueriz is the first ultra-deep water exploration well in Argentina, and it's located about 300 kilometers offshore from the city of Mar del Plata, this is Buenos Aires, at a water depth of 1,500 meters.
Speaker Change: Correct.
Speaker Change: I'll go for it.
It's not in northern part of Argentina.
Speaker Change: The <unk>, the first ultra deepwater exploration, well, Argentina, and its located about 300 kilometers.
Speaker Change: Sure from the city of <unk> at the water depth of 1500 meters.
Max: The block is called Cancien in the North Argentinian Basin. We started drilling this well at the end of April, and we are. We do have a 35% equity stake. The operator of the well is Equinox, with one of our partners. This is a joint venture. The other partner is Shell with 30%.
Speaker Change: The block is called <unk>.
Speaker Change: In the North Argentinean basin.
Speaker Change: Ed.
We started drilling this well.
Speaker Change: At by at the end of April and we are.
Speaker Change: We do have a 35% equity stake the operator of the well is Ecuador.
Speaker Change: Our one of our partners in this in this joint venture the other one is shell with 30%.
Speaker Change: And.
Max: This is an exploratory well, but what I can tell you is targeting a very big structure. The potential of this, I cannot tell at this stage, but of course, we are looking for something very quite material. You mentioned something about Namibia. What we are looking for here is the same Roca Madre, what's the translation of Roca Madre? Mother Rock from Namibia, and that's true.
Speaker Change: This is an exploratory well, but what I can tell you is we are.
Speaker Change: Targeting a very big structure.
Speaker Change: The potential of this we I cannot tell at this stage, but of course, we're looking for something.
Speaker Change: <unk>.
Speaker Change: Quite material we are looking at.
You mentioned something about mountain <unk>, while we're looking here is the same.
Speaker Change: Yeah.
Speaker Change: Commodity versus the translation of Brooklyn mother up from now.
Speaker Change: And that is true and.
Max: We're going to be drilling this well for the next two months, and our estimation is that we could, of course... After, if we have a discovery, then we need to..., to assess this, but we're targeting, at the end of the road, to produce maybe about 200,000 barrels per day. But this is, again, exploratory, so this is only in the case of having a discovery and good results and the appraisal works well. Thank you. Thanks a lot, guys.
Speaker Change: We are going to be drilling this well.
Yeah.
Speaker Change: During the next <unk>.
Speaker Change: During the next two months.
Speaker Change: In our estimation is that we could.
Speaker Change: Course.
Speaker Change: After if we have.
Speaker Change: Hi.
Speaker Change: Discovery, then we need to.
Speaker Change: Why not to assess this.
Speaker Change: We're targeting at the end of the road to <unk>.
Speaker Change: Produce maybe about 200000 barrels per day, but this is again its exploratory. So this is only in case of having a discovery and good result, and the appraisal wells.
Speaker Change: Okay. Thanks, a lot guys.
Speaker Change: Thank you Danielle.
Speaker Change: Your next question comes from the line of Alejandro Demichelis from Jefferies. Please go ahead.
Daniel Guardiola: Thank you, Daniel. Your next question comes from the line of Alejandro Demichelis from Jefferies. Please go ahead. Yes, good morning.
Alejandro DeMichelis: Yes. Good morning. Thank you very much for taking my questions couple of questions. Please.
Alejandro DeMichelis: Thank you very much for taking my question. A couple of questions, please. First one is, Max, I think you talked about the pipeline, the Bacassour pipeline. Could you give us some indication of the cost of the project from, say, Tramo 1, Tramo 2, plus the port?
Alejandro DeMichelis: That's the first question. The second question is, when you updated us on the strategy, you indicated bringing three extra rigs by the end of this year. Could you please indicate how you're progressing on that, and can we see some acceleration in your back-and-forth development? Thank you, Alejandro.
Alejandro DeMichelis: First one is.
Alejandro DeMichelis: Mark I think you talked about the pipeline the pipeline can you give us some indication of the cost of the project from from say somewhere one two plus report.
Alejandro DeMichelis: First question second question is when you update us on the strategy.
Alejandro DeMichelis: You indicated bringing three extra rig.
Alejandro DeMichelis: At the end of DCF could you. Please indicate how youre progressing on that and can we see some acceleration in Uruguay commodity developments.
Alejandro DeMichelis: Okay.
Mark: Thank you Alejandro we can start with the first question, maybe we Buck the.
Max: We can start with the first question, maybe. We have a comment about the first and second tranche costs. Tramo 1, which is already FID, is going to cost about $250 million. Tramo 2, between the pipeline and the terminal, is going to cost about 2.2 billion dollars. And the second one, I'm not sure if I heard you right, but I think you asked about our acceleration in our development plans in Bagamorta. Is that right?
Mark: The tranche, the first and second tranche a cough.
Mark: <unk>, which is already.
Mark: It's going to cost about $250 million.
Mark: <unk> models.
Mark: Between the pipeline and the terminal is going to cost about $2 $2 billion.
Mark: Yes.
Mark: And the second one.
Mark: Im not sure if.
Mark: I heard it right, but I think you asked about our acceleration in the back of <unk> and our development plans in like a martyr.
Mark: Is that right.
Mark: Yes.
Mark: And potentially bringing some new rigs to two two debates Nitro Argentina.
Max: Yeah, yeah. I'm potentially bringing some new rigs to the base in Argentina.
Max: Perfect, yes. So we are currently drilling with 14 rigs, and we are planning on adding the 15th rig by June, I think. Yes, and by June, we are also going to be working with four FRAC fleets in order to accelerate. So, so far, with the guidance that we provided last, last, in the last call, we are on track. And we are going to plan on a, and we are good. Sorry.
Speaker Change: Perfect. Yeah. So so we are currently drilling with 14 14 rigs and we are planning on adding a 15th <unk> rig.
Speaker Change: By June I think.
Speaker Change: Yes and by June.
Speaker Change: And also we are going to be working with four frac fleets in order to accelerate so so far we are we are with.
Speaker Change: With the guidance, we provided last last.
Speaker Change: Last call we are on track.
Speaker Change: And we are going to plan on.
Speaker Change: And we are sorry and in.
Max: And, and, and we, Oh, this is, uh, yeah, I don't know if I addressed the question. Okay, so just to be clear, of the three weeks that you mentioned that you were adding this year, you already have two working, and you have one extra coming in June. That's correct. Thank you. I'm sorry.
Speaker Change: And with.
Speaker Change: Okay.
Speaker Change: No. This is.
Speaker Change: Yes, I don't know if I address the question.
Speaker Change: Okay.
Speaker Change: To be clear of the three rigs that you mentioned that you were adding.
Speaker Change: Dcs you already have two working or you have one extra coming in June.
Speaker Change: That's correct yes.
Speaker Change: Okay.
Speaker Change: Great. Thank you I'm sorry are you Sir.
Max: Is there potential to bring more rigs than that? Yes, but at this stage, we cannot because we may get to a bottleneck by the end of this year. So we are carefully accelerating. Once all the LVAL system is... Yeah, once the...
Speaker Change: Did you bring more rigs than that.
Speaker Change: Okay.
Speaker Change: Yes, but yes, but at this stage, we cannot because we may get to we made four years to get to a bottleneck by the end of this year. So we are carefully.
We are carefully.
Speaker Change: Accelerating at once all the revised system is.
<unk>.
Speaker Change: Yes.
Speaker Change: Yes once you.
The.
Not fully debottleneck, but once the first stage of this.
Max: Adding capacity by the end of the year is COD, then we will be able to accelerate and further grow next year. Thank you, Ale. You're next.
Speaker Change: Adding the capacity by the end of the year is <unk>, then we will be able to accelerate and further grow next year.
Speaker Change: That's great. Thank you.
Speaker Change: Thank you Oliver.
Speaker Change: Your next question comes from the line of Bruno Amorim of Goldman Sachs. Please go ahead.
Bruno Montanari: Your next question comes from the line of Bruno Amorim of Goldman Sachs; please go ahead. Thank you very much for taking my question and congratulations on the results. I just wanted to follow up.
Bruno Montanari: Thank you very much for taking my question and congratulations on the results.
Just wanted to choose to follow up.
Max: I think you have made it very clear what the plan for this year and next is. I just wanted to ask your thoughts on when shareholders should expect to receive dividends. I understand that you're going through a turnaround process. You're investing for the future. Shareholders as a result of all the measures that you are implementing. Thank you very much. I'll take it, Max. Hi, Bruno.
Bruno Montanari: You have made it very clear what's the plan.
Bruno Montanari: For for this year and Max just wanted you to ask your thoughts on when.
Bruno Montanari: Holder should they expect to receive.
Bruno Montanari: Dividends I understand youre going through a turnaround proceeds you are investing for the future, but just wanted to hear from you when you think.
Bruno Montanari: The company will start paying meaningful dividends to shareholders as a result of all the measures that you're implementing thank you very much.
Bruno Montanari: Okay.
I'll take it next.
Speaker Change: Hi, Bruno.
Bruno: Thank you for your words, well in terms of dividend strategy for this year and for next year.
Max: Thank you for your words. Well, in terms of dividend strategy for this year and for next year, considering and given the strong growth in prospects of our shale oil development, particularly for the upcoming years, dividend payments shouldn't be or are not a top priority for this immediate to next years. However, we do believe that we have to normalize, and we are conscious that we need to normalize dividend payments down the road, considering that the company has not distributed dividends to shareholders for more than five years. So we are quite conscious of this. Even though it is too early to comment, we may consider, and we are considering, and we will. It's one of our drivers to reassume dividends as soon as possible.
Sure.
Speaker Change: Considering and given the strong growth in prospects.
Speaker Change: Prospects.
Speaker Change: Our shale.
Speaker Change: Oil development, particularly.
Speaker Change: For the upcoming years.
Speaker Change: Dividend payments.
Speaker Change: Shouldnt be or are not a top priority for this immediate to next years. However.
Speaker Change: We do believe that we have to normalize and we are conscious that we need to normalize dividend payments down the road.
Speaker Change: Considering that the company has not distribute the dividends.
Speaker Change: To shareholders for more than five years. So we are quite conscious of this.
Speaker Change: And so.
Speaker Change: Even though it is too early to comment.
Speaker Change: We may consider and we are considering.
Speaker Change: We will.
It's one of our drivers to reassume dividends soon.
Speaker Change: As possible. So this year I would say that we know that it's going to be.
Max: So, this year, I would say that we know that it's going to be negative free cash flow. We are expecting next year to be, and we are targeting a much more neutral year in terms of cash flow. And definitely, 2026 should be a year in which our top priorities will be to reassume this dividend leaving situation. So we have on our agenda normalizing this situation, as I explained. Right now, we understand that the way to maximize value for our shareholders is to improve as much as possible and to increase as much as possible the monetization of the BACA-MUERTA reserves, and in order to do that, we need to heavily invest this year. But we have this on our agenda, and it will be one of our priorities. Thank you, Bruno. Your next question comes from the line of Marina Mertens of Latin Securities. Please go ahead. Hi, good morning.
Speaker Change: Negative free cash flow.
Speaker Change: We are expecting next year too.
Speaker Change: The target for a much more neutral.
Speaker Change: Yeah in terms of cash flow and definitely turning 26 should we are nearing which.
Speaker Change: It will be our stockpile.
Top priorities to reassume the.
Speaker Change: This dividend, leaving.
Speaker Change: This dividend.
Speaker Change: Sure.
Speaker Change: Situation.
Speaker Change: So we are we have in our agenda normalizing in this situation.
Speaker Change: As I am.
Speaker Change: As I explained right now we understand that the way to maximize the value to our shareholders is to improve them.
Speaker Change: <unk>.
Speaker Change: As much as possible entities as much as possible the monetization of.
Speaker Change: Back more aercap.
Speaker Change: Yes.
Speaker Change: In order to do that we need to.
Speaker Change: We invest along this year.
Speaker Change: But we have this in our agenda and it will be one of our priorities.
Speaker Change: Thank you very much.
Speaker Change: Thank you Bruno.
Speaker Change: Your next question comes from the line of <unk> Nomura.
Speaker Change: Martin of lithium Securities. Please go ahead.
Martin: Hi, good morning, Thanks for taking my questions I have two questions. The first one regarding the pricing dynamics at the pump.
Marina Mertens: Thanks for taking my questions. I have two questions. The first one regarding the pricing dynamics of the pump. So considering that the government has delayed the adjustment to the tax on liquid fuels, do you consider there could be any potential constraints to implement further price increases at the pump? And the second one, given the progress in the project on this, to divest these mature fields. Could we expect YPF to proceed with any other sale of non-core assets?
Martin: Considering that the government has delayed the adjustment to the tax.
Martin: Our liquid fuels.
And you can see there could be any potential constraints to implement.
Martin: Price increases at the pump.
Martin: And the second one and the progress on the in the press on this.
Martin: These mature fields could we expect <unk> to proceed with any other sale of noncore assets.
Martin: Okay.
Marina Mertens: Thank you, Marina. We can start with the first question. Thank you, Marina. Hello Marina, how are you?
Speaker Change: Thank you Martina weekend with the fed.
Speaker Change: Question.
Speaker Change: Hello, Marine how are you.
Max: So regarding prices, since the end of last year, we have been developing an active fuel price recovery strategy that resulted in prices increasing at the pump by almost 200% in Argentine pesos. That allowed us to translate the discrete devaluation that took place in mid-December of last year and to increase prices in dollar terms, reducing the discount to international parities down to... Although... Local macro variables and the normalization of international spreads could reduce future results.
Martina: So regarding the prices.
Speaker Change: Since the end of last year, we have been developing an active fuel price recovery strategy.
Speaker Change: <unk> prices increasing at the bump our most are about almost about 200% in Argentine pesos that allowed us to translate the discrete devaluation.
Speaker Change: Place in mid December of last year.
Speaker Change: And to increase prices in dollar terms, reducing the discount to international parity to that.
Speaker Change: Down to two seven.
Speaker Change: The percent.
Speaker Change: Yeah.
Speaker Change: Although.
Speaker Change: Local macro variables and the normalization of international spreads could reduce.
Speaker Change: Future results.
Max: Due to that, we are addressing a demanding cost reduction and margin improvement plan in our downstream business in order to sustain business margins. That's where we are focused. Besides, it's hard to predict, mostly due to volatility and international prices; the company still needs to preserve prices both to compensate for the evolution of the Argentine peso and to adjust to local prices to import parity levels. Regarding the process and the... I think that this is, we are, the answer, the short answer is yes, but not now. I mean, we are focusing on Project Andes at this stage.
Speaker Change: To that we are addressing.
Speaker Change: Yeah.
Speaker Change: A demanding cost reduction and margin improvement plan.
Speaker Change: <unk> downstream business in order to sustain business margins, that's where we are where we are focusing.
Speaker Change: Besides besides its hard to predict mostly due to the volatility.
Speaker Change: And international prices the company still needs to preserve the prices both to compensate for the evolution of Argentine pesos.
Speaker Change: And to adjust to local prices to import parity levels.
Speaker Change: Regarding the process on this.
Speaker Change: I think that this is where we are.
Speaker Change: The answer the short answer is yes.
Speaker Change: We're going to have but not now I mean, we are focusing on on the project and this is at this stage.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you Martina.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Leonardo <unk> with Bank of America.
Max: Perfect. Thank you. Thank you, Marina. Your next question comes from the line of Leonardo Marcondes of Bank of America. Please go ahead.
Leonardo: Please go ahead.
Leonardo: Oh, hi, everyone. Thank you for taking my questions here.
Leonardo Marcondes: Hi everyone, thank you for choosing my questions here. My first question is regarding the natural gas segment. Is the rise in natural gas prices for residential use already embedded into your estimates for the year, and what could we expect from this increase in terms of results for the next quarter? My second question is regarding the stock variation we saw during this quarter. I was wondering if you could provide a bit more color on the dynamics that led to this impact of around $125 million in this first quarter. And maybe I can do a third one here.
Leonardo: My first question's regarding the natural gas segment.
Leonardo: Is there a rise in natural gas prices for free.
Leonardo: Metro growth for residential use already embedded into your estimates for the year and what could we expect from these inquiries in terms of results for the next quarter.
Leonardo: My second question.
Leonardo: Regarding the stock variation was so.
Leonardo: This quarter.
Leonardo: I was wondering if you could provide a bit more color on the dynamics that led to this impact.
Leonardo: The $105 million.
Leonardo: This does this first quarter and maybe if I can.
Leonardo Marcondes: It seems that drilling and fracking efficiency have significantly improved this year already, right? So I was wondering if you could provide a bit more color on your target for this 3D and FragSpeed metric and what has been done to improve it so fast. Thank you. Thank you, Leo. We can start with the first question regarding the tariff adjustment at MetroGas and the view on the outlook for the year. Give us one second.
Leonardo: Two a third one here.
It seems that the drilling and the Frac efficiency.
Leonardo: Significantly improved this year already right so.
Leonardo: No.
Speaker Change: I was wondering if you could provide a bit more color on your target for <unk> and <unk> metrics.
Speaker Change: And what has been done.
Speaker Change: Improving.
Speaker Change: Thank you.
Speaker Change: Thank you Leah we can start with your first question regarding the tariff adjustment of net loss.
Max: So the tariff adjustment, what I can comment on is that it was transitory and allowed us, MetroGas, to pay for all of its operating costs and any financial interest that they had to pay. For more information, visit www. FEMA.gov. That's all on the second question; sorry.
Max: Yes, and the second question was about the stock variation in the quarter. Maybe, Leo, you can detail a little bit more about that, because you know the stock variation; we cannot have a fundamental analysis of it. You know it depends on the macro conditions in Argentina also, so maybe we cannot share a deep opinion from our management regarding that.
Speaker Change: And the view on the outlook of the year.
Speaker Change: Please give us one second.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change #100: So the tariff adjustment is what I can comment is that it was transitory and allowed us to metro asked to pay for all of its operating cost and any.
Speaker Change #100: Financial interest that they had to two two.
Speaker Change #100: To pay for.
Speaker Change #100: Yeah.
Speaker Change #100: That's all on the on the.
Speaker Change #101: And the second question for Ed.
Speaker Change #101: And the second question was about the variation in the quarter, maybe Leo you can.
Detail a little bit more about that.
Speaker Change #102: Because you know there's no variation we cannot have.
Speaker Change #102: Our fundamental analysis of holiday.
Speaker Change #102: Now it depends on the macro condition in Argentina also so maybe we cannot share.
Speaker Change #102: Deep opinion.
Speaker Change #102: From our management regarding that.
Speaker Change #103: Sure maybe we can discuss.
Max: Sure, maybe we can discuss this impact critically, but I maybe just want to highlight here, I wanted to understand maybe the dynamics that led to this impact of around $125 billion in this quarter from this effect, what it led to because it was a somewhat strong rate, so... Well, you know, that is a general reaction in the market. You know, the new management started just by the end of December last year, and there were many good news in the company regarding the It's just to understand, Leo, let's say, are you referring to the reduction in operating costs during this quarter? because we probably didn't understand your question well. Well, under the...
Speaker Change #103: This impact is critical.
Speaker Change #103: Maybe just to highlight here I wanted to understand maybe the dynamics that led to this.
Speaker Change #103: This impact of around 150 and $125 billion in this quarter.
Speaker Change #103: From this from disease affect what has led true true.
So.
Sure.
Speaker Change #103: What has impacted.
Speaker Change #103: His line.
Does it work.
Speaker Change #103: Somewhat stronger rates.
Speaker Change #103: Well.
Speaker Change #104: No that is Danielle <unk>.
Speaker Change #104: Reaction in the market now at a new management started just baidu.
Speaker Change #104: By the last.
Speaker Change #104: By the end of December last year, and there have been many good news in the company regarding the pricing in the downstream business.
Speaker Change #104: Project, there have been many new stability.
Speaker Change #104: It.
Just to understand.
Speaker Change #105: Are you referring to the reduction in the operating cost along this quarter is that.
Speaker Change #105: And because we.
Speaker Change #106: We don't understand well probably your question.
Speaker Change #106: Well.
Speaker Change #106: Understood.
Max: Under the total other costs here, we saw a very strong stock variation, but maybe we can discuss this because it's more of an accounting discussion than a strategic one, right? So maybe we can live to discuss this afterwards. Yes, Leo, maybe I got your question. This is a stock variation inventory, right? Yeah, that's it. Because I understood, like, yeah, yeah, okay.
Speaker Change #106: Under the all other costs here.
Speaker Change #106: So a very strong suck variation, but maybe we can disclose is because it's more.
Speaker Change #106: Accounting discussion then strategical one right. So maybe we can leave <unk> afterwards.
Speaker Change #107: Yes, Leo maybe I got your question. This is a stock variation inventory right.
Speaker Change #107: Okay.
Speaker Change #108: Because I guess.
Leo: Yes, okay.
Max: You know, they are having a huge evaluation, so that is why this is an exceptional evolution in the stock variation. Also, you have to consider that in terms of OPEX, since the new management started, they're having some cost efficiency already achieved. You know, in the option business, they're having some tariff reductions in the transportation business, also in the downstream business. So, in that sense, I think if we have to analyze specifically the inventory, I have to tell you that the main variation reason was an exceptional devaluation.
Leo: Yes.
Leo: So that is why this is an exceptional.
Leo: Evolution in the variation also you have to consider that in terms of opex since the new management studies, there have been some cost efficiency already achieved.
Leo: The option business there have been some tariff reduction and the transportation also in the downstream business. So in that sense I think if we have to analyze specifically the inventory.
To tell you that the main variation reason was the exceptional devaluation.
Max: Thank you. Very clear. Very clear. Thank you. Apologies for the confusion here. No, no.
Speaker Change #110: Very clear very clear. Thank you apologies for the further confusion here.
Speaker Change #111: The last one.
Max: Sorry. Sorry. Sorry.
Speaker Change #111: Israeli and Frac efficiency.
Speaker Change #111: So your last question with all of our drilling and fracking efficiency improve.
Max: So your last question was about drilling and fracking efficiency and how it compares to the targets that we announced in March, right? Yeah. Yeah. Well, regarding that, during the first quarter, we've improved our drilling speed materially from 290 to 290 meters per day. That's 9% above the last quarter, so that's sequentially.
Speaker Change #111: Compared to the targets that we announced in March right.
Speaker Change #112: Yes, yes.
Speaker Change #112: Okay.
Speaker Change #112: Well regarding that during the first quarter.
Speaker Change #112: <unk> improved our drilling speed materially from Q.
Speaker Change #112: Two we got to 290 meters per day.
Speaker Change #112: Thats, 9% above.
Speaker Change #112: Last quarter, so that sequentially.
Speaker Change #112: And regarding the Frac.
Speaker Change #112: <unk> speed, we also improve about 11% to 219.
Speaker Change #112: Stages first set per month, so due to that that's where we're putting most of our efforts.
Speaker Change #112: The unconventional business in order to.
Speaker Change #112: To accelerate but we're very focused on efficiency.
Speaker Change #112: Okay.
Speaker Change #113: Very clear thank you.
Speaker Change #114: Thank you Leo.
Can go with the last question, Steve we are running out of time maybe.
Steve: Your last question comes from the line of <unk> Fernandes with Merrill Lynch. Please go ahead.
Max: And regarding the frac speed, we also improved about 11% to 219 stages per set per month. So due to that, that's where we are putting most of our efforts in the unconventional business in order to accelerate but very focused on efficiency. We are clear. Thank you. Thank you, Leo. We can go with the last question since we are running out of time, maybe. Your last question comes from the line of Ezequiel Fernandez of Balance. Please go ahead. Hi, good morning, everybody. This is Ezequiel Fernandez from Balance.
Steve: Hi, Good morning, everybody. This is Gil Hernandez balance thank you very much for the.
Ezequiel Fernndez Lpez: Thank you very much for the Materials that the IR team provided were very complete to get the quarterly picture. I have four questions, but they should be quick. Sorry if it's a little bit lengthy on the final one. So, we have already discussed a little bit. Non-core potential sales. I was wondering if you have any specific plans for YPF Loose, Profertile, and YPF Lease. And I would like to go one by one of the questions, if you don't mind.
Gil Hernandez: Materials, the DIR team provided.
Gil Hernandez: Very quickly to get the quarterly picture for.
Gil Hernandez: Four questions, but they should be quick.
Gil Hernandez: Sorry, if it deliberate lengthy and the final one.
Gil Hernandez: So we already discussed a little bit.
Gil Hernandez: The noncore sales potential sales.
Gil Hernandez: Wondering if you have any specific plans for IPF loose preferred deal.
Gil Hernandez: <unk> lithium.
Gil Hernandez: And.
Speaker Change #117: I would like to go one by one of the questions. If you don't mind.
Speaker Change #118: Sure we can start with.
Max: Sure, we can start with... On these assets, at this stage, no, we don't have any plans. Okay, great. Um, my second question is related to some of the midstream upgrades in place. I understand that there are no ports in Argentina at the moment that can receive BLCCs. I was wondering if there is any work being done on any of the existing ports or if it's something that you will leave for the Vaca Muerta Azul pipeline. Yeah, Eze, we can start with that question. Keep in mind that Punta Colorada is a port that used to be used by the mining industry.
Speaker Change #119: On these assets at this stage no we don't have any any plans.
Speaker Change #120: Okay great.
Speaker Change #120: My second question is related to some of the midstream upgrades in place.
Speaker Change #120: I understand that there are no ports in Argentina at the moment that can receive <unk>.
Speaker Change #120: Ccs.
Speaker Change #120: I was wondering if there is any work being done on any of the existing ports or if it's something that you will leave.
Speaker Change #120: For the back of more of a full pipeline.
Speaker Change #120: Okay.
Speaker Change #120: Okay.
Speaker Change #120: Okay.
Speaker Change #120: Yes.
Speaker Change #121: We can start with that question keep in mind that the Colorado is a poor that used to be used by the mining mining industry and in our case, we are building an offshore facility not.
Max: And in our case, we are building an offshore facility, not exactly using the... Yeah, that's the case. So this will work only for the new infrastructure system, which I commented on, which is Vaca Muerta Sur. And in Punta Colorado, offshore of it, BLCCs will be able to get to that port.
Definitely you can deploy.
Speaker Change #121: Yes, Thats the case, so that this will work only for the new infrastructure system, which I commented, which is back on water food.
Speaker Change #121: An important accolade our offshore of it.
Speaker Change #121: This is.
Speaker Change #121: Vlccs will be able to to get to that point.
Speaker Change #121: Yes.
Max: Okay, that's great news. And I have two more questions on the downstream side. The first one is:
Speaker Change #122: Okay, that's great news.
Speaker Change #123: I have two more questions on the downstream side.
Speaker Change #123: Bob.
Bob: The first one here.
Bob: There seems to be intention by the government to fully liberalized prices and for <unk>.
Max: There seems to be intentions by the government to fully liberalize prices and for... Eventually, internal prices, crude prices in Argentina, too much rent with the applicable discounts, of course. And then for anybody to be able to import fuel. If that situation materializes, I think that puts the general downstream sector in Argentina a little bit, I wouldn't say in a bind, but it's going to be hard to, You know, we put it on fuel.
Bob: Eventually internal prices crude prices in Argentina too much Brent.
Bob: Applicable discounts of course.
Bob: And then for anybody to be able to import fuels.
Bob: If that situation materializes I think that puts the general downstream sector in Argentina, a little bit I wouldn't say in a bind but it's going to be hard to compete with.
Bob: Reported fuels.
Max: How do you see that? Do you agree with that view or not? Refinery Synergina should be fine even in that. Hi Ezequiel, in order to answer these specific and detailed questions, I will use the opportunity that we have together with us here. Mauricio Martn is the Vice President of Downstream and Commercialization, so he will be giving a much more detailed answer to you, so I'll pass the microphone to him. Hello Montanari, 1.
Speaker Change #125: How do you see that.
Speaker Change #125: <unk>.
Speaker Change #125: Bob.
Speaker Change #125: Refinements in Argentina should be fine even in that scenario.
Bob: Hi, Gail.
Bob: In order to answer this specific.
Bob: Other questions I will use the opportunity that we have together with us.
Bob: Here.
Mauricio Martin: Mauricio Martin.
Mauricio Martin: He is the vice president of downstream and commercialization so he will.
Mauricio Martin: Given a much more detailed answer to you so I'll pass.
Mauricio Martin: The microphone to him.
Mauricio Martin: Hello, Good morning, everyone.
Mauricio Martin: According to your question, we are increasing our local prices. According to our philosophy of converging to the import parity levels together with that we are also increasing the local price crude oil prices it doesn't matter.
Max: According to your question, we are increasing our local prices according to our philosophy of converging to the import parity levels. Together with that, we are also increasing the local crude oil prices, just matching both streams in order to keep our market supply with local features. In that sense, of course, for the future, in the future, we are going to reduce our gap in international prices. And that's because we are deploying in the downstream sector a strong optimization plan in order to increase our productivity.
Mauricio Martin: Both.
Most of the streams we noted.
Mauricio Martin: Keep our market.
Mauricio Martin: Supply with local local fields in that sense.
Mauricio Martin: Of course in the for the future in the future we are going to.
Mauricio Martin: Reduce our.
Mauricio Martin: International prices and Thats, because we are deploying in downstream sector.
Mauricio Martin: And it's strong.
Mauricio Martin: Limitation plan in order to increase our focus.
Max: And because of that, we are going, we intend, and we are making huge efforts in order to keep our margins green, and in that way, I assume that during this current year, we are going to save two, three dollars per barrel in order to keep that margin at value. Okay, so do you think those $2-$3 per barrel savings would keep local refiners or at least the YPF refiners competitive vis-a-vis import fuel importation
Mauricio Martin: And because of that we are going.
Mauricio Martin: We intend and we are making huge efforts in order to keep our margins.
Mauricio Martin: Green and in that way.
Assume that during this current year, we are going to save.
Mauricio Martin: Two to $3 per barrel in order to keep that margin.
Mauricio Martin: Ending balance.
Mauricio Martin: Okay.
Mauricio Martin: Okay. So do you think those two or $3 per barrel soybeans would keep.
Mauricio Martin: Local refiners or at least they're competitive.
Mauricio Martin: <unk> refined that relative vis vis imported fuel regulations right.
Speaker Change #127: Okay Perfect. My final question on industrial side.
Max: Okay, perfect. My final question is, this discussion is a little bit muted in Argentina, but outside it happens everywhere, which is the impact of electric vehicles on local fuel demand. I don't know if you have any preliminary estimates about when this will start to be a relevant factor for YPF.
Speaker Change #127: This discussion is a little bit muted in Argentina, but outside it happens everywhere, which is the impact of electric vehicles in local fueled demand I don't know if you have any preliminary estimates about when will this start to be a relevant factor for IPF.
Max: Thank you for your question; it's quite interesting. We are constantly reviewing what the electric cars are making or the program... We have the time machine, I said, because we are looking at what is happening in Europe, what is happening in the U.S., and, of course, in Latin America. So for our current business plan, the electric vehicle is not an issue for us, nevertheless, we are deploying some electric chargers through our station, just as a pilot, and just for us to foresee what the impact of this new mobility model will be.
Speaker Change #128: Thank you for rest of your question is quite interesting.
Speaker Change #128: We are simply doing what electric.
Speaker Change #128: Cars are made.
Speaker Change #128: Making our turnaround work we have the we have the time machine. They said because we are looking what is happening Europe, what is happening in U S and of course in Latin America. So.
Speaker Change #128: Our current business plan.
Speaker Change #128: <unk> electricity the electric vehicle is not really an issue for us and Nevertheless, we are deploying some.
Speaker Change #128: Electric charges through our station, Jeff as in its pilot and therefore two two.
Speaker Change #128: For <unk> what is the what is the impact of these new.
Speaker Change #128: In mobility model, but for us is not.
Max: But for us, it's not an issue; nevertheless, we are constantly surveying what is happening around the world. Okay, that was great, guys. Thank you very much. That's all from my side.
Speaker Change #128: Is not an issue. Nevertheless, we are in and constantly survey what is covenant around the world.
Margarita Chun: That concludes our Q&A session. I will now turn the conference back over to Margarita Chun and Federico Barroetave. Thank you for the closing remarks. Well, thank you, everyone, for participating in these calls. We appreciate the questions, and we will talk next time. Thank you. Thank you very much. Ladies and gentlemen, that concludes today's call. Thank you all for joining me. You may now disconnect.
Speaker Change #128: Okay.
Speaker Change #129: Okay that was great guys. Thank you very much that's all from my side.
Speaker Change #129: That concludes our Q&A session I will now turn the conference back over to Margaret Thatcher and for D'amico biotech venue.
Margaret Thatcher: For any closing remarks.
Margaret Thatcher: Well. Thank you everyone for participating in these calls we appreciate the questions and.
Margaret Thatcher: Retail quarter.
Speaker Change #131: Thank you very much.
Speaker Change #132: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change #132: [music].