Ypf Sociedad Anonima Q4 FY2024 Earnings Call

Good morning and welcome to the YPF Fourth Quarter and Full Year 2024 Earnings Conference Call and Webcast. All participants are in a listen-only mode. After the speaker's remarks, we'll conduct a question and answer session. As a reminder, this conference call is being recorded. I would like to turn the call over to Margarita Chun, YPF's IR manager. Please go ahead.

Good morning, ladies and gentlemen. This is Margarita Chun, YPF's IR manager. Thank you for joining today in our full year and fourth quarter 2024 earnings call. Before we begin, please consider our cautionary statement on Slide 2. 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. Our financial figures are stated in accordance with IFRS, but during the presentation, we might discuss some non-IFRS measures such as adjusted EBITDA. During the presentation, we will go through the main aspects and events that explain the annual and Q4 results, and then we will open the floor for Q&A session. Today's presentation will be conducted by our Chairman and CEO, Mr. Horacio Marin, our CFO, Mr. Federico Barroetavena, and our Strategy, New Businesses, and Controlling Vice President, Mr. Maximiliano Westen. I will now turn the call over to Horacio. Please go ahead.

Thank you, Margarita, and good morning to everyone present on this call. Let me begin by highlighting that 2024 was a transformational year for YPF. We have deployed our 4X4 plan designed to increase the value of the company. In the afternoon statement, we are reshaping our oil production matrix, leaving conventional mature fields and targeting to increase our shale oil production share from 50% to a minimum of 80%. As of today, we achieved significant progress in the majority of the total of 49 mature blocks. We signed SPAs for 24 blocks, and we're in the final stage of agreement to transfer or revert 18 blocks located in the province of Santa Cruz and Tierra del Fuego. On the other hand, we are ready to become the largest shale oil producer in the country, and we continue expanding in the coming years, reallocating and concentrating our investments on Vaca Muerta. In parallel, we are leading the missing project development of VMOS, a new oil export dedicated pipeline, engaging and consolidating the efforts of all major producers in Argentina to ramp up production to 180,000 barrels per day in the second half of '26, jumping to more than 500,000 barrels per day by the second half of '27. The contraction has already started, and YPF's initial capacity will be 120,000 barrels per day, accounting for a 27% stake and expecting to reach more than $3 billion in additional exports by the second half of '27. In the Downstream segment, despite a challenging macro context, we have returned to a 100% free market where we were able to fully normalize local prices of fuels and converge them to international parity. On the other hand, throughout '24, we have been implementing multiple operational efficiency measures to enhance productivity across all businesses. In the Upstream segment, our daily and completion speed for unconventional wells of '24 are already near '25 targets, comfortably exceeding '24 targets. In this sense, last month, we achieved the highest lateral length drilling speed for our shale well in La Angostura Sur block, surpassing 1,747 meters in 24 hours. This lateral length is equivalent to 5,731 feet. We believe further improvement will be achieved through our new Real-Time Intelligence Center inaugurated last December. This new technology and process optimization plan will allow YPF to continue increasing day-to-day efficiency by taking real-time data-driven decisions in drilling and well completion activities in Vaca Muerta with Starlink connectivity. This has been a transformational change in the business of YPF, moving from a monitoring room to a real-time decision-making process center. Thanks to this, we expect to materially improve our well construction cost in the near future. Moreover, we carry out the Toyota Well project based on the efficiency of the car industry to reduce the time of our well construction cycle, reducing our working capital and increasing our profitability from the acceleration in production. Our target by 2025 is to decrease the well construction cycle by 30% from 312 days in 2023. At the initial stage, we developed two prototype lines to be implemented on a large scale in Vaca Muerta in the near future, and the results are promising. We reached an average of 24% reduction at this initial stage. In the downstream segment, we reached a record high in the processing level of our refinery, exceeding 300,000 barrels per day in 2024 and closing the year with 318,000 barrels per day in December, with a refinery utilization of 92%, largely driven by the revamping of our La Plata refinery, which increased its capacity and improved fuel quality by reducing sulfur content. In addition, we achieved a record high production level in 2024 of 5,605 cubic meters per day of premium diesel and 13,915 cubic meters per day of gasoline. Regarding downstream efficiency, during 2024, we created a specialized industrial team to target and monitor efficiency and productivity goals by implementing a series of initiatives, such as optimizing our refinery output, maintenance shutdowns, and power consumption in our industrial complexes, as well as a comprehensive improvement in product storage and logistics. All in all, we recorded total savings of $405 million in 2024. Moreover, we will inaugurate our Downstream Real-Time Intelligence center in mid-March, combining artificial intelligence to boost our efficiency metrics. This center will be the first in Argentina. In terms of financing, YPF took the lead in reopening the markets for Argentine corporates. In January 2024, we successfully issued an international bond in the market, a seven-year bond of $800 million. Following this, we executed two additional bond transactions, $540 million in September and $1.1 billion last January. This progressive strategy enabled us to effectively lower yields to 8.5% while increasing tenors. Moreover, in the local market, we successfully arranged the first syndicate bond transaction in more than four years, marking another reopening of Argentine corporates. We secured a $400 million term loan structured in two- and three-year tranches with participation from 16 financial institutions. Finally, we changed the authorization matrix of the company, modifying internal procedures and increasing the compliance process. Moving on to the next slide, let me highlight that through our exit from mature fields, we are achieving the transformation of YPF since we managed to reduce losses, allocate capital efficiently, and focus on Vaca Muerta, our most profitable asset. Let me also clarify that this is a new process. There is no precedent in Argentina in the ownership of the resource at the provincial level, and the approval requires several provincial authorities to complete each process. Now, let me briefly update you on the progress we made so far. In the province of Mendoza, we already completed a transaction for the Llancanelo cluster. In Mendoza North, after receiving all provincial approvals, we are in the final stage, expecting to close within the next two weeks. In the Mendoza South Cluster, we already obtained the assignment approval and expect the extension approval of the concession to be done next week. Immediately after, we will close the transaction with the buyer company. Regarding the province of Rio Negro, we completed the transaction for the Estacion Fernandez Oro cluster. In the Señal Picada Punta Barda cluster, we are in the final stage of negotiations, targeting to execute the STA during March, and the closing should be no later than April. In the province of Neuquén, we have received all provincial approvals for Neuquén North and South Clusters, and we are just waiting for the corresponding decommissioning. In Chihuido and Puesto Hernández Cluster, we have initiated discussions to transfer or revert back to the province. Focusing on the province of Chubut, we already completed the transaction for El Trevo, El Escalante, and Campamento Central Cañadón Perdido Clusters, while we are very advanced with the process of transferring or reverting Resting Ali back to the province. Regarding the non-operative position in Chubut, we are in ongoing negotiations. Lastly, in the province of Santa Cruz and Tierra del Fuego, we are making progress in negotiations, targeting to transfer or revert the remaining assets back to the provinces. In summary, during these 12 months, we have achieved a material transformation with no precedent in YPF and Argentina. This is the most transformational project that YPF needs to eliminate losses and inefficiencies. I remain committed to moving forward with this project to completion in the next few months. Now, to begin with numbers, I am pleased to share a quick overview of our key accomplishments obtained during this first year. I am proud to report that YPF has accounted for nearly one-third of our Vaca Muerta shale oil production, achieving an impressive output of 122,000 barrels per day in 2024. This marks a 26% increase compared to 2023 and is fully in line with the annual target we set to the market in March 2024. Moreover, as of today, our net production is above 150,000 barrels per day. Looking ahead, we anticipate sustained growth in 2025, concentrating our efforts on our most profitable asset, shale oil from Vaca Muerta. Also, let me highlight that as an operator, YPF produced more than half of Vaca Muerta shale oil production in 2024. The competitiveness of YPF is now more evident to the market based on the unique shale production scale and synergies that the company now consolidates between upstream and downstream segments. In line with this production ramp-up, we almost tripled our oil export revenues in 2024, achieving nearly $1 billion and averaging 35,000 barrels per day. In Q4, we jumped to 41,000 barrels per day, representing roughly 20% of the country's oil exports and making YPF the largest oil exporter in Argentina in 2024. In the downstream business, during the entire year, the company has been consistently adjusting local fuel prices to be in line with international prices. As a result, we narrowed significantly the gap to import parity, decreasing from 20% in 2023 to just 2% in 2024, despite the significant devaluation that took place in December 2023, while our market share remained strong at 56%. Additionally, the recovering price, coupled with the efficiency initiatives mentioned before, resulted in a better comprehensive refining and marketing EBITDA margin of $13.7 per barrel, growing 24% compared to 2023. This margin includes refining, chemical, petrochemical, logistical, and lubricant components. In parallel with the increase in exports, we saw newly fuel imports significantly in '24, mostly due to demand contraction and refinery capacity expansion. It's also worth mentioning that '23 had effective and extraordinary demand driven by local prices considered below import parity. During '24, in line with price recovery, demand declined, particularly in the first half, but gradually improved during the second half, coupled with the improvements in refinery capacity mentioned before. All these positive outcomes contributed to a 15% growth in company sales EBITDA in '24 compared to '23. However, let me clarify that '24 figures have been higher but were negatively impacted by two important factors: roughly $300 million negative EBITDA from mature fields and around $85 million of low EBITDA from the weather impact in Patagonia on conventional production. We are confident that these factors will be almost permanently eliminated once we complete our exit program from mature fields during '25. In terms of investment, we deployed $5 billion in '24, reducing by 5% compared to '23 and successfully meeting our target of $5 billion. Despite total CapEx remaining almost stable, the breakdown changed significantly, lowering conventional activities, particularly in mature fields, and redirecting toward our coal share operations. This facilitated the ramp-up in shale oil production. Therefore, around 64% of the total CapEx of '24 was allocated to unconventional assets, reaching an annual growth of 28%. On the financial side, we reported negative free cash flow of $760 million in '24. Our improved EBITDA during this year was driven by the strong performance of our shale oil assets and the recovery of refining margins as well as tighter CapEx compared to the previous year. Nevertheless, '24 was affected by around $685 million in negative impacts. We included $433 million from mature fields, net of proceeds of $166 million from deferred import payments from '23, and $85 million from weather in Patagonia. Now I will turn the call to Maxi.

Thank you, Horacio, and hello to everyone. Turning to our annual and fourth quarter financial results, revenues reached $19.3 billion in 2024, marking an 11% annual increase, mainly driven by rebounding fuel prices and a rise in oil exports. These gains were partially offset by a contraction in fuel demand, which was exceptionally high during the second half of 2023, due to reduced fuel prices coupled with a more than 200% gap between the official and parallel FX rates. Adjusted EBITDA totaled $4.7 billion in 2024, reflecting a 15% annual increase, mainly boosted by higher revenues in hydrocarbon production. However, as mentioned before, 2024 was impacted by mature fields and weather in Patagonia, while 2023 was affected by a high level of fuel imports and a wide gap to import parity. Net results improved substantially, posting a gain of $2.4 billion in 2024, compared to a loss of $1.3 billion in the previous year. In 2023, the company recorded a non-cash impairment charge from mature fields, while in 2024, there was a positive income tax accrual driven by lower future tax payables. Investments and free cash flow were also explained in the previous slide, and as a result, our net debt rose to $7.4 billion, a 9% increase from 2023, but we successfully reduced our net leverage ratio to 1.6 times, fully aligned with the target. Now, let me briefly explain the quarter results. Fourth quarter revenues were down 10% sequentially, mostly due to the lower seasonal sales of gas and international reference prices, partially offset by higher fuel demand. Fourth quarter adjusted EBITDA was down 39% sequentially, primarily explained by lower revenues on the previously mentioned inventory value reduction in fuel and oil in line with price, and marginally a $60 million extraordinary environmental provision in the downstream segment, partially offset by shale oil expansion and recovery from Patagonia conventional output. In the bottom line, in the fourth quarter, we reported a net loss of $284 million, compared to a net gain of $1.5 billion in the third quarter, mainly attributable to lower EBITDA impairment and a one-off cost related to mature fields, as well as reduced deferred income tax benefits. Fourth quarter investments remained stable compared to the previous quarter, while in terms of free cash flow, we saw a positive turnaround reaching $64 million. Although EBITDA was not fully compensated by CapEx, we collected overdue natural gas receivables and proceeds from certain mature fields, in addition to paying lower debt service. Now, moving on to upstream performance, our total hydrocarbon production amounted to 536,000 barrels of oil equivalent per day in 2024, an increase of 4% versus 2023, mainly boosted by the remarkable growth in shale output, representing 53% of the total, compared to 46% in 2023. Also, let me mention that 22% of the total hydrocarbon production came from mature fields, which amounted to 117,000 barrels of oil equivalent per day in 2024. Crude oil production reached a 6% annual growth in 2024, reaching 257,000 barrels per day, on the back of a solid 26% shale expansion, more than compensating the lower conventional output decline significantly affected by reduced mature field productivity and extreme weather in Patagonia during almost two months. Beyond crude oil, natural gas production grew 3% in 2024, reaching 37.4 million cubic meters per day, mainly driven by the expansion of the Neuquina Basin evacuation capacity through the Perito Moreno gas pipeline and the commissioning of the compressor plant in the same pipeline during July. Focusing on the fourth quarter, natural gas production remained essentially flat year-on-year while declining sequentially, mainly due to the off-peak season. Let me mention that moving forward, our focus for the long term is to grow natural gas exports on a large scale. Therefore, we are not aiming to expand our share in the local market. Lastly, NGL production in 2024 stood at the same level as 2023, averaging 43,000 barrels of oil equivalent per day. Fourth quarter NGL production decreased by 29% sequentially, mainly due to maintenance at mega facilities. Moving to lifting costs, we recorded $15.6 per barrel of oil equivalent in 2024, remaining similar to 2023, as the lower productivity from mature fields in Patagonia weather were partially offset by the ramp-up in shale hydrocarbon production. Excluding mature fields, our total lifting cost has been below $9 per barrel of oil equivalent. Remarkably, during 2024, the lifting costs in our core hub blocks recorded $4.2 per barrel of oil equivalent on a gross basis, reinforcing our 4X4 strategy to focus the entire company on its core production. Fourth quarter total lifting cost illustrates the lower productivity of mature fields, increasing 7% sequentially, while core hub blocks on a gross basis posted an 8% reduction thanks to improvements in productivity and operational efficiencies achieved throughout 2024. Regarding prices in the upstream segment, our crude oil prices rebounded to an average of $68 per barrel in 2024, 9% higher than 2023, while during the fourth quarter it was almost $66 per barrel, reflecting a sequential contraction of 4% aligned with the downward trend in Brent. On the natural gas side, prices reached $3.7 per million BTU in 2024, similar to 2023, and in line with plant gas contracts, while the fourth quarter decreased by 30% sequentially, mostly due to the plant gas off-peak season price. Now, walking through the performance of our shale activities, the steady focus on operational efficiencies allowed us to completely surpass the initial targets set for 2024 last March. In this sense, during 2024, we drilled 207 and completed 189 horizontal wells at our operated blocks, increasing 14% and 17% respectively versus 2023. Regarding tie-ins, in accordance with our shale oil production target for the year, we accelerated the activity, reaching 195 tied-in horizontal wells at our operated blocks, representing a remarkable growth of 29% compared to 2023. Moreover, we continued setting new records in shale oil production, delivering 138,000 barrels per day in the fourth quarter, growing 10% sequentially and 26% year-on-year. As a result, we achieved the annual production target of more than 120,000 barrels per day in 2024. Eighty-five percent of total shale oil output for 2024 came from our core hub oil blocks, including Loma Campana, La Amarga Chica, Bandurria Sur, and Aguada del Chanar. This outstanding performance throughout 2024 reaffirms our confidence in our shale production ramp-up plans and the recent commitments on upcoming midstream expansions of Oldelval and VMOS. In terms of efficiencies within our unconventional operations, as Horacio anticipated at the beginning of the presentation, we fully surpassed the target set in March 2024 for drilling and fracking performance during the year, averaging 309 meters per day of drilling in our core hub fields and 235 stages per set for fracking in unconventional operations. Zooming into the evolution of our hydrocarbon reserves, total proven reserves according to SEC criteria grew by 2% in 2024. The increase was mainly on the back of a 13% increase in our Vaca Muerta shale reserves, which now represents 78% of our total P1 reserves, partially offset by declines in conventional reserves. Proven reserves addition totaled 250 million BOE driven by the progressive developments and expansions of our unconventional operations, particularly in Aguada del Chanar, Loma La Lata Norte, and La Calera blocks. It was partially offset by high total hydrocarbon production, a downward revision of 17 million BOE, mainly due to the strategic change in drilling schedules, as well as a 13 million BOE reduction, mostly due to lower enhanced hydrocarbon recovery and the divestment of conventional blocks. It is worth noting that proved developed reserves saw an annual expansion of 3% in 2024, mainly explained by development activities, new extensions and discoveries mentioned exceeding annual production. On the other hand, proved undeveloped reserves increased by 1%, mainly because of new additions compensating for volumes developed in the drilling of new wells. Considering the shale hydrocarbon production ramp-up in 2024 and the development of our shale reserves, the reserve replacement ratio increased to 1.9 times, with 8.3 years of reserve life. Regarding total proved reserves, this ratio was 1.1 times, with 5.6 years of reserve life. It's important to clarify that excluding mature fields, the total organic ratio for our proved reserves improved to 1.5 times, with 6.8 years of reserve life. Finally, since the SEC proved reserves do not encompass the huge potential of Vaca Muerta, let me tell you in advance that we are going to share our inventory of wells in Vaca Muerta during our Investor Day, which will take place on April 11 at the New York Stock Exchange. Moving on to our downstream segment, during 2024, the company has been constantly updating crude prices to converge to international parities and mitigate the impact of the currency devaluation while preserving market share. As a result, we were able to reduce the gap of import parity from 20% in 2023 to only 2% in 2024. In line with price recovery and several operational efficiencies achieved during the year, refining and marketing EBITDA margins in 2024 were $13.7 per barrel, achieving an improvement of 24% compared to 2023. However, fuel sales volumes decreased by 7% along 2024 to 13.9 million cubic meters, mainly because 2023 was affected by an exceptionally high level of demand driven by low prices, especially in the second half of the year. Despite this, demand started to slightly increase in the second half of 2024. During the year, YPF maintained a strong fuel sales market share of 56%, fully in line with our historical levels and leadership in the market. In terms of processing levels, it was 301,000 barrels per day in 2024, 2% higher than in 2023 and surpassing our annual target. This was primarily driven by the revamping of the topping unit at La Plata refinery in November 2023, combined with the completion of additional work within the framework of new fuel specification projects. Additionally, we expanded our oil pumping capacity from Puesto Hernandez to Lujan de Cuyo complex during 2024. It is worth mentioning that the utilization rate remained around 90% in 2024. Now, let me provide a brief update on the progress achieved in the oil midstream expansions to unlock the evacuation capacity in the Neuquena Basin. By the end of 2024, Oldelval achieved a total transportation capacity of 330,000 barrels per day, and during this month, its capacity will jump to 540,000 barrels per day. YPF holds a 25% shipping stake in Oldelval. It is worth mentioning that the filling process will be gradual, aligning with the production ramp-up and after successfully passing the testing period. We plan to use this additional capacity to deliver our shale oil to the La Plata refinery. Achieving another major objective that the management team targeted for 2024, last December, we formally announced the signing of the project documents and initial shipping commitments to commence construction of VEMOS, together with the major oil producers of Vaca Muerta. The project consists of a 440-kilometer oil export-dedicated pipeline and a marine terminal capable of receiving VLCCs to deliver Vaca Muerta shale oil to Asian markets. YPF's initial shipping capacity will be 120,000 barrels per day, roughly 27% of over 450,000 barrels per day committed capacity at COD targeted by 2027. The design of the pipeline allows for further capacity increases to around 700,000 barrels per day if needed. The construction of the facilities already started last January and now includes contractors' mobilization, earth-moving works, and line pipe delivery. In parallel, VEMOS is making progress on two key avenues. First, the rigging application for governmental approval, and second, the process to secure project finance, targeting 70% debt and 30% equity. On this front, VEMOS has just mandated five international banks for an initial syndicated loan of $1.7 billion.

Thank you, Max. Switching to financials, let's start with cash flow evolution. In 2024, we posted a negative free cash flow of $760 million. First, although our CapEx of 2024 was lower than 2023, it was not fully offset by the improvement in our adjusted EBITDA. It is important to highlight that this annual EBITDA includes two negative effects, around $300 million from mature fields and about $85 million from severe climate conditions in Patagonia. From a cash flow consideration, in 2024, we also recorded a negative $133 million from mature fields, which includes a negative $269 million of additions of assets held for sale, net of $136 million of divestment net proceeds. Finally, when analyzing the company cash performance, during 2024, we must consider that we paid $166 million of temporary deferred import liabilities from 2023, collected lower dividends from affiliates, and disbursed higher debt service. In terms of financing, in Q4, we issued two bonds with a tenure of four years totaling $150 million at yields ranging between 6.5% and 7%. Also, we added $100 million of syndicated loan and around $60 million of short-term trade financing facilities. After the closing of 2024 in January, we successfully issued a nine-year unsecured international bond for $1.1 billion at a yield of 8.5%. The proceeds were mainly allocated to refinance the $757 million of the 2025 notes and to acquire 54% of Sierra Chata block, one of the most prospective Vaca Muerta shale gas blocks. Regarding the 2025 notes, we executed a cash tender offer prepaying $315 million and the make-whole call options for the balance in February. Additionally, last month, we issued two MEP local bonds, $140 million with a two-year tenure at 6.25% and $60 million with a six-month tenure at 3.5%. With these last international bond issuances, we successfully completed our initial plan to de-risk the company debt profile, aligning it with our 4X4 plan. The company now faces less than $1 billion of manageable and mostly local maturities during 2025, consisting of $400 million of short-term trade facilities with local and international banks, $281 million of mainly export-backed bonds, $147 million of local bonds, and $51 million in cash. Having achieved the refinancing of our 2025 bond early this year and considering that most of our '26 maturities consist primarily of bank trade lines and issues with the local capital markets, as of today, we do not need to re-enter the international bond market until approaching the 2027 bond maturity. On the other hand, following the upgrade in sovereign rating, as well as country risk improvement and current perspectives, two global rating agencies have just raised YPF's credit rating. Moody's upgraded from CAA3 to CAA1 with a stable outlook, and S&P upgraded from CCC to B minus. On the liquidity front, by the end of 2024, our cash and short-term investments increased 9% versus the previous year to $1.5 billion in line with our net debt increase, which amounted to $7.4 billion. Despite the increase in net debt, higher adjusted EBITDA reduced the net leverage ratio from 1.7 to 1.6 times, in line with the target for the year. Now, I will return the call to Horacio for final remarks.

Thank you, Federico. Before concluding our presentation and jumping to the Q&A session, let me briefly announce that after important knowledge, results, and experience of the new management team during this first year, on April 11th, we will be holding our Investor Day at the New York Stock Exchange. There, we will present our five-year plan and go through the main drivers of our 4X4 plan, focusing on our financial and production outlook, including certain sensitivity analyses, productivity metrics in Vaca Muerta and the progress of our main projects, among other key aspects of our strategy. This presentation will be led by the YPF executive team, followed by a Q&A session. We are pleased to invite you to our Investor Day and look forward to your participation. Finally, let me close today's presentation by saying we are confident that investors will appreciate the significant agenda that YPF has deployed over the last year in almost all critical areas of the company, focusing primarily on profitability and growth. We are very focused on creating value and establishing YPF as one of the best energy companies. This has been just the beginning. We will continue driving our 4X4 plan during 2025 with even more knowledge, confidence, and conviction. So, with this, we conclude our presentation and open the floor for questions.

Our first question comes from Andres Cardona from Citigroup. Please go ahead. Your line is open.

Hi. Good morning, everyone. Horacio, Max. Looking forward to the strategy update. My question is about the Vaca Muerta expansion and how we should expect the ramp-up. How confident are you in adding the 180,000 barrels by the fourth quarter of 2026? When talking with some industry players, they don't seem to count on those volumes by then. They only expect to see the incremental capacity by the third quarter of 2027. We want to understand why there is a different perception and why are you so confident to deliver by the fourth quarter of 2026? Hi. Can you hear me?

I was muted. Sorry. I don't know who pressed mute. Now, you are hearing me? You can hear me?

Yes.

Okay. I'm sorry. I was muted. I don't know why. We are very confident that the demos we are going to deliver in the fourth quarter of 2026 and also in the second half of 2027. We're very excited that all the partners are in. We finished with all the partners. So, the tariff will be very low compared to what we expected at the beginning because we expect more than 500,000 barrels. Regarding the specific production of YPF, we are going to deliver that. I think it will be efficient for us; we have the production that we have. The thing that we have in the afternoon, I think we can deliver more, but I expect that, okay? So, I'm very confident that from YPF we are going to deliver what we say.

Thank you.

Our next question comes from Daniel Guardiola from BTG Pactual. Please go ahead. Your line is open.

Hi. Thank you. And good morning, Horacio, Federico, and Max. Thank you for the presentation. I would like to touch on two topics, one on prices and the second one on the Sierra Chata decision. Regarding prices, I would like to know if you could please share with us at which price you are currently selling your goods? And considering that we saw a very mixed and bearish movement in prices recently, I'd like to know if you can share with us at which levels of prices you would consider starting to reduce your CapEx for 2025? And in this environment, are you considering hedging a portion of your expected production for 2025? So, that's on prices. The second question is a very short one on Sierra Chata. Can you please share with us what is the price that you paid for the acquisition of this stake from Exxon in this field? And what is the expected run path in terms of production? Thank you very much.

Okay. Because I'm a very transparent guy, and if there is a problem with the microphone, I will ask people who have better English than me because, at the beginning, I’m in the third field.

Daniel, I couldn't hear the last part of the first question.

So, we have a problem because if Margarita doesn't understand me, then we have a very bad microphone.

So, I'm going to go one more time?

Yes.

Okay. Horacio, can you share with us at which prices you are selling your crude oil right now?

Price of the crude oil?

Yes. At which prices are you selling your crude oil right now? Your oil right now?

What we have is the situation with gasoline, specifically our prices in the import quality product. A couple of months ago, I shared with everyone that we will increase the price of gasoline when the price of oil rises, and we will lower it when the price goes down. We do this to maintain the import quality of the product. The price we sell in export is based on export quality, and that is also the price we pay. The price of gasoline reflects the import quality of the product. I'm not sure if I answered that question.

Of course. But I mean, considering that oil prices are below $70 in terms of Brent, at which levels are you currently selling your oil?

No, no. Remember that when we sell oil, there is a timeframe in which we average the price. I'm not sure if the price of the oil will increase, but I would say it will be more favorable in about three months. We're going to sell at the export quality, and the price will decrease by $5 compared to last week. The same goes for gasoline. We have a strategy regarding gasoline pricing that I can't disclose here because our competition has talked about our methods, but we have a system in place to prevent short price spikes. In general, most of Argentina is not accustomed to price fluctuations like in the United States or Europe, so we have prepared a process to minimize spikes, which helps keep people calm. Ultimately, for YPF, it remains the same.

Thank you, Horacio. And at which prices…

Yes, sorry, sorry?

I just wanted to ask you, at which level of oil prices would you consider starting to reduce your CapEx for 2025?

Okay. Keep in mind that in two to three months, we will be approaching the end of our involvement in all the mature fields, and you can see that we are receiving very low prices. If Brent prices continue to decline and remain low, we will definitely need to make some changes. While today might not be the right time to address this, a continued drop in prices will prompt us to reevaluate, as our CFO often emphasizes the importance of strict capital allocation.

Okay. And the last question was on Sierra Chata.

Yes. With Sierra Chata, which is very difficult to see there, because remember that we are a company, but what I can tell you is that we think we made a very good business because all, I would say, all the undeveloped call you as you want, resources or results, because this is a conventional way. We buy at $0.02 per million BTU, which I think is a very good price.

Thank you. Thank you, Horacio and guys and team.

Our next question comes from Bruno Montanari from Morgan Stanley. Please go ahead. Your line is open.

Hi, good morning, everyone. Thanks for taking my questions. The first question is about your free cash flow profile for 2025. I know you will give more color on the Investor Day, but just focusing on next year, the company has been in a way pointing to neutral cash flow in 2025. So I wanted to confirm if that is still the plan, if the base case is for neutral cash flow in 2025. My second question is if you can provide us with an update on the LNG project, so when we could expect the final investment decisions for both the Golar project and then the YPF-led project. My third question is about your lifting costs. I assume that part of the cost increase in the fourth quarter was because of the strong peso. So I'm wondering what we can expect now in the first quarter of the year in terms of lifting costs? Thank you very much.

Okay. Free cash flow when you talk about CapEx, I'm going to present on April 11 at Investor Day all that in very detail. You can have a question on there. We say the free cash flow will be neutral. It depends on what you call neutral. We think we are going to deliver that idea. It will be a minus plus what is logical in this company, okay? But I'm going to present that in April. Update of LNG, we are in a very good situation. We will see there, and also I will explain in more detail on April 11 because at that moment I think we will have a better way and be more sure of what I have to deliver. But I'm very positive about the two projects, with the Argentine LNG project. Very positive that Argentina and YPF itself will deliver this project for us, for the country, and for the shareholders, okay? The last is the cost. As you see, we are maintaining the cost because we work every day in efficiency. Our goal every day, that I come at 6:45, is to deliver efficiency. You cannot imagine how the guy, the VP, or a thing is. Every day I go to him and I don’t know how much he loves me today because every day I go, and we are working in efficiency, line by line. That's why we are very good at that. I don't know if there is another question.

Our next question comes from Tasso Vasconcellos from UBS. Please go ahead, your line is open.

Hi Horacio, hi Federico, hi Margarita. Thanks for taking my questions here. Let me start with one here on the M&A activity. We are actually seeing some increased activity in Argentina. Exxon recently sold their assets. You actually acquired Sierra Chata. Recent news also indicates that both Total and Equinor could eventually evaluate selling their assets as well. We know that Raizen is looking for a potential buyer for its refinery in Argentina. And amid this context here, YPF is for sure a potential buyer for these assets, right? So maybe split the question into two parts. The first one: Does any of these assets actually interest YPF at all? Or do you like one better than the others? The second part of the question, if not these specific assets that I just mentioned, any others that you would be interested in acquiring in Argentina at the moment? These are my questions. Thank you.

The first part regarding capital allocation in Raizen is something I cannot address directly, so you may want to reach out to Raizen or Shell for their insights. As for acquiring a new refinery, the answer is no. We currently hold 58% of the market share and are performing well in the refining sector, but expanding our footprint there is not part of our strategy right now. Regarding Equinor and similar companies, I don’t have any official updates. Our focus remains on active management in Vaca Muerta, which is very important to us. We are quite selective, ensuring we get the best prices, but I can't provide specifics at this moment. It's essential to remember that our active portfolio management and strict capital allocation will dictate our next steps. While YPF is indeed a potential buyer for quality assets in this sector, I cannot answer your question definitively. If you need more details, unfortunately, I can't provide that at this time.

I think it’s very clear. Appreciate it. Thank you.

Our next question comes from Leonardo Marcondes from Bank of America. Please go ahead, your line is open.

Hi, good afternoon, everyone. Hi, Horacio, Federico, and Maximiliano. Thank you for taking my questions here. I have two questions specifically on the upstream segments. So the first one, we know that YPF is the largest player in Vaca Muerta and that the company also owns many blocks in this area, right? So my question is, could you provide details on the company's current well inventory? I mean, how many derisked wells do you guys have, and how many years would it take for YPF to drill all these wells, given the company's current capacity to tie-in wells per year? My second question is, with the conclusion of the divestment, what should we expect from the development of Vaca Muerta? More time per year, higher reserve replacement ratio, and additionally, the company has improved significantly in the development of Vaca Muerta, right? Like better frac speed and so on. So what is the target there? What else can be done to improve these metrics even further? Thank you.

Thank you for all the questions. I will do my best to address them. First, regarding the well inventory, I will provide more details on April 11, but to give you a rough idea, I hope you're sitting down while you listen.

Yes, I can hear.

We have approximately 10,000 wells. You might refer to it as 50, but I'll describe it as gross inventory. I estimate that it's around 50% of the total. On April 11, I will provide a comprehensive update on YPF and will answer in detail then. Currently, we are drilling about 200 wells, and I don't see any issues with timing. Sometimes it's related to the built-in valve and also to the initial year when YPF operated differently with partners. Our current effort is to consolidate budgets with partners and then focus on our fully owned blocks. The main reason we're drilling around 200 wells is to avoid unnecessary tax expenses. We want to invest wisely, and considering our current capacity and the improvements in evacuation methods, the numbers are not the issue. Once the demonstrations are complete, and we assess the capital expenditures, we will certainly increase oil activity. Additionally, it's about concluding investments from other companies, such as ExxonMobil and others.

The allocation of CapEx?

No, no. I mean...

I understand now. When it comes to reducing investments in mature fields, we made significant cuts in 2024 and directed much of that funding towards Vaca Muerta. Our goal is to maximize output from Vaca Muerta without exceeding our current capacity. For 2025, we've allocated $5 billion for all of YPF, which is similar to last year's investment, and we are optimistic about increased production from Vaca Muerta. Regarding the reserve replacement ratio, it stands at 1.9 due to regulatory requirements. I will provide a more detailed explanation during the presentation on April 11, where I'll break down the locations we have and show the potential for YPF to grow in the coming year.

That's very clear. Thank you.

Our next question comes from Vicente Falanga from Bradesco. Please go ahead. Your line is open.

Thank you very much, Horacio, Federico, and Max. I had two questions. The first one on the fourth quarter results. To what extent did the filling of the Oldelval expansion affect the fourth quarter results? Some of your partners in Vaca Muerta highlighted that because of the fill-up of Oldelval, production did not convert into revenues. I wanted to understand if that's the case for YPF, and do you have an estimate of how much? The second question, one very quick one. With the asset sales for the mature fields hopefully being concluded by the middle of this year, where can we expect the lifting costs to fall to immediately? Thank you very much.

The Oldelval result, whether there’s a delay or not, doesn't significantly impact YPF today. We previously explained our evacuation figure or map, and currently, we rely on exports to Chile. Oldelval is primarily for our internal consumption, so it doesn't greatly affect us. Other companies might be impacted, but I'm focusing specifically on YPF. A delay in demonstrations could potentially affect others, not us. Regarding mature fields, we anticipate strong performance ahead and expect total lifting costs to decrease significantly, around 9. We have two mature fields, and the other one is performing well as well. We're positioned well for the future, which was our goal when we joined YPF—to move away from mature fields as that strategy didn’t fit our company size. We are successfully lowering lifting costs and aiming for resilience at low prices, which means when prices rise, we can generate substantial profits. This is our perspective on YPF.

Great. Thank you, Horacio. Thank you very much.

Our next question comes from Guilherme Martins from Goldman Sachs. Please go ahead. Your line is open.

Thanks so much for taking my questions. I have two quick ones from my side here. The first one is on your guidance for shale oil production, right? Please correct me if I'm wrong, but you said you're currently running roughly 150,000 barrels of shale right? While your guidance for 2025 is something above 160. So it could seem quite conservative, given your current run rate. I know you mentioned you will provide further details on your Investor Day in April, but as of today, do you see room for maybe an upward revision of this target? And my second question is on capital allocation. If you could please share your thoughts on what you think global entities are seeking to divest from Argentina and Vaca Muerta, and what are the competitive advantages you believe YPF has over those players? Thanks so much.

Okay. You are anxious like me, okay? I'm anxious, okay? Really, I'm very anxious. April 11th, 40 days from now, Mauricio will see nothing. I will explain later, but I have to. I would like to answer. So today, not today, but yesterday or the day before yesterday, the production of Vaca Muerta was 156,000 per day. So if you see the guidance for 2025, you can realize that we are investing $3 billion there. I'm very confident that we are going to surpass the guidance, okay? That is the first question. Second question, regarding capital allocation in this investment in Vaca Muerta. I explained that before. If the opportunities come and we see that some part is better than what we have, we are going to do what we call active portfolio management. So what we are going to do is to take this and maybe in the full development, if we see that we are not creating value for the shareholders, we will sell the others, okay? But that is the way it works, okay? And I think that’s what I have to work on and what you want from me to do, okay?

Okay. Thank you.

Sorry to those that are still in queue. We are out of time for questions today. I would like to turn the call back over to Horacio Marin for any closing remarks.

Okay. Thank you very much for all the questions. Thank you very much for your help. We will see you on April 11 where you can have hundreds of questions. We are going to be live there. And so we can be up to midnight if you want. Thank you very much.

This concludes today's conference call. Thank you for your participation. You may now disconnect.