YPF(YPF) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue reached $5.3 billion, up 7% sequentially and 18% year-over-year, driven by higher seasonal gas sales, increased oil exports to Chile, and better fuel prices [10][11] - Adjusted EBITDA totaled$ 1.4 billion, up 13% sequentially and 47% year-over-year, primarily due to higher gas sales, shale hydrocarbon production, and improved fuel prices [12][13] - Net income grew significantly to $1.5 billion, almost three times the previous quarter, mainly due to a positive income tax impact [14] - Total hydrocarbon production averaged 559,000 barrels of oil equivalent per day, up 4% sequentially and 8% year-over-year, driven by strong shale operations [15] - Capital expenditures (CapEx) were$ 1.4 billion, up 13% sequentially, with 73% concentrated in upstream shale oil operations [15][16] - Free cash flow was negative $173 million, impacted by higher debt service payments and increased upstream activity [16] Business Line Performance - Shale oil production increased by 36% year-over-year, now representing almost half of total production [8] - Downstream processing levels averaged 298,000 barrels per day, with a refinery utilization rate of 90%, driven by efficiency improvements at La Plata Refinery [30] - Fuel sales volumes declined by 9% year-over-year, but local market share remained stable at 57% [32] - Diesel imports decreased to 4% of total fuel sales volumes, down from 7% in the previous year [33] Market Performance - The company became the largest oil exporter in Argentina, exporting approximately 40,000 barrels per day [9] - Oil exports to Chile increased by 37% sequentially, reaching 39,000 barrels per day [42] - The Vaca Muerta South Oil Pipeline (VEMOS) project achieved 50% construction progress, with the first tranche expected to start operations by Q1 2025 [43][44] Strategic Direction and Industry Competition - The company is focusing on increasing shale oil production, particularly in the Vaca Muerta region, which now accounts for 55% of total output [20] - The Andes Project, aimed at divesting mature conventional fields, has successfully executed nine FPAs for 25 blocks, with plans to add seven more blocks [18][19] - The company is advancing key infrastructure projects like VEMOS and the OldelVal pipeline to enhance oil export capacity [44][45] Management Commentary on Operating Environment and Future Outlook - Management highlighted the impact of extreme weather conditions in Patagonia, which affected conventional production but was offset by strong shale performance [6][10] - The company expects to achieve a lifting cost target of$ 15 per barrel of oil equivalent by year-end, up from the original $13 target due to inflation and divestments [25] - Management remains optimistic about the LNG project, with 14 MoUs signed with potential offtakers and ongoing discussions with super majors for equity investment [55][56] Other Important Information - The company issued a seven-year international bond for$ 540 million and repaid $334 million of 2025 notes and$ 166 million of 2027 notes [37] - Net debt remained stable at $7.5 billion, with an improved net leverage ratio of 1.5x [40] - The company is preparing to apply for the RIGI (Regime for the Promotion of Investments in Infrastructure) for the VEMOS project [48] Q&A Session Summary Question: LNG Roadshow and Equity Investors - The company has signed 14 MoUs with potential LNG offtakers and is in discussions with super majors for equity investment in the LNG project [55][56] Question: Lifting Cost Reduction Roadmap - The company aims to reduce lifting costs by focusing on unconventional production, which has significantly lower costs compared to conventional fields [58] Question: Free Cash Flow and CapEx Outlook for 2025 - The company expects free cash flow to turn positive by 2026, with CapEx remaining focused on unconventional operations in Vaca Muerta [64][67] Question: Midstream Infrastructure Progress - The VEMOS project has secured all necessary permits, with construction expected to start soon, and the OldelVal pipeline expansion is on track for completion by mid-2025 [72][75] Question: Production Growth and Shale Oil Guidance - The company maintains its guidance of 250,000 barrels per day of shale oil production by 2027, with potential upside depending on infrastructure improvements [108][111] Question: Downstream Pricing Strategy - The company follows international parity pricing for fuel, with prices adjusted based on market conditions, and expects demand to recover as economic activity improves [93][94] Question: Legal Dispute with Burford - The company is awaiting the next phase of the legal process with Burford, with no further updates provided due to confidentiality [72] Question: Nationwide Crude Production Forecast - The company expects Argentina's crude production to reach 1.2 to 1.4 million barrels per day by 2027, driven by infrastructure projects like VEMOS [130][134] Question: Asset Sales and Cash Flow Impact - The$ 205 million inflow in the cash flow statement is related to the sale of financial assets, not the Andes Project [139] Question: International Bond Issuance for Infrastructure Projects - The company is working on project finance for VEMOS, with LOIs received for $1.5 billion, and expects to finalize financing arrangements in the coming months [144]