YPF(YPF) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues contracted by 47% year-over-year and 31% quarter-over-quarter to $1.9 billion, with fuel sales declining by about 50% compared to the same quarter last year [33][34] - Adjusted EBITDA reached $28 million for the second quarter, significantly impacted by the pandemic, while reported EBITDA stood at $171 million [38][39] - Net debt at the end of June was $7.4 billion, approximately $250 million lower than at the end of March, primarily due to an increase in cash position [38] Business Line Data and Key Metrics Changes - Upstream segment's adjusted EBITDA contracted by 79% year-over-year to $156 million, with a margin decline from 44% to 19% [40] - Downstream adjusted EBITDA contributed $123 million, down 16% year-over-year, affected by steep declines in demand for gasoline, diesel, and jet fuel [41] - Gas and energy segment reported a loss of $128 million, primarily due to deteriorating results from Metrogas and a non-cash accounting provision [42] Market Data and Key Metrics Changes - Crude oil production decreased by 10% year-over-year to 201,000 barrels per day, while natural gas production fell by 13% to 35 million cubic meters per day [45] - Average crude oil realization price was $28.9 per barrel, down 51% from the previous year, with prices fluctuating due to local and international market conditions [46] - Natural gas selling price averaged $2.5 per million BTU, down from $3.9 per million BTU a year ago, with expectations for higher prices due to the new Plan Gas 4 [47] Company Strategy and Development Direction - The company aims to become a net oil and gas exporter by fully developing the Vaca Muerta shale play, focusing on both domestic and international markets [14][27] - A company-wide cost reduction program has been initiated, targeting a structural reduction of 30% across operations [55] - The upstream business has been decentralized into two vice presidencies to enhance efficiency and decision-making [24][56] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovering demand for products as COVID-19 restrictions ease, although the timing remains uncertain [13] - The company is focused on maintaining financial stability and managing net financial debt within sustainable levels [28] - Future production is expected to remain below 2019 levels, with a cautious approach to capital deployment until market conditions improve [96] Other Important Information - The company successfully executed a liability management exercise, achieving a 58.7% acceptance level for a bond exchange, significantly alleviating short-term refinancing needs [71] - A temporary reduction in salaries for non-unionized personnel was implemented, ranging from 10% to 25% [58] - The company has set up special sales to review and renegotiate contracts with over 10,000 vendors to achieve cost efficiencies [61] Q&A Session Summary Question: Details on the new gas plan and its impact - Management sees the new gas plan as a positive signal for price stability and expects it to mitigate production decline and reduce the need for gas imports [75][76] Question: Free cash flow generation and breakeven analysis - Free cash flow generation was primarily driven by non-cash items and collections from legacy gas programs, with approximately $500 million generated despite a challenging quarter [82] Question: Update on divestments - The company is evaluating potential divestments of non-core assets to strengthen core activities and improve cash generation [86][87] Question: Sustainability of working capital benefits - Working capital benefits were mainly from legacy gas program collections, with expectations for continued cash generation from these sources [90][91] Question: Future strategic plan and CapEx evolution - The company plans to maintain net indebtedness at sustainable levels and will limit capital deployment to core oil and gas activities, with a new strategic plan expected as market conditions clarify [96][97] Question: Operational concerns regarding conventional production decline - Conventional production is currently about 20,000 barrels per day below pre-COVID levels, but management is targeting a resumption of activity to restore production levels [99]