Ypf Sociedad Anonima Q3 FY2025 Earnings Call

Good morning, ladies and gentlemen. This is Margarita Chun, YPF IR Manager. Thank you for joining us today in our Third Quarter 2025 Earnings Call. Today's presentation will be conducted by our Chairman and CEO, Mr. Horacio Marin; our Finance VP, Mr. Pedro Kearney, and our Strategy, New Businesses and Controlling VP, Mr. Maximiliano Westen. During the presentation, we will go through the main aspects and events that shape the quarter results. And then we will open the floor for a Q&A session together with our management team. 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. I will now turn the call over to Horacio. Please go ahead.

Thank you, Margarita, and good morning, everyone. Let me start by highlighting that this was another quarter in which we continued to deliver solid operational performance. Despite the contraction in international prices, we maintained strong profitability levels compared to last year, gaining further operating efficiency and consolidating the tremendous progress that has been achieved in our shale operations. Revenues amounted to $4.6 billion, 12% below the previous year, in line with the 13% year-on-year decline in the Brent price in addition to other offsetting effects. Adjusted EBITDA reached approximately $1.4 billion, representing a sequential increase of more than 20%, while remaining flat versus the previous year. The sequential improvement reflects higher shale production, coupled with the successful strategy of reducing exposure to conventional mature fields. The year-on-year comparison shows YPF's ability to maintain its profitability despite the contraction in international prices, driven by an improved production mix with a higher proportion of shale and continuous improvement in operational performance. That exit strategy led us to an impressive lifting cost reduction of 28% quarter-over-quarter and 45% year-over-year. During the third quarter, our shale oil production increased by 35% internally, reaching 170,000 barrels per day. More recently, in October, preliminary figures indicate shale oil production expanded by another 12% over the average of the third quarter, totaling around 190,000 barrels per day. This production level is fully aligned with our annual target of shale oil production of roughly 165,000 barrels per day. Moreover, it will enable us to slightly exceed the December 2025 production target of 190,000 barrels per day. Furthermore, the higher shale oil output that generates a remarkable shift in our production mix has allowed us to improve our EBITDA by around $1.3 billion on an annual basis versus 2 years ago. CapEx activity continues to be focused on developing our unconventional resources, representing 70% of our total quarterly investment. At the same time, we maintain our focus on achieving further operational efficiency in our shale operation. In that sense, let me highlight that during the quarter, YPF completed the drilling of the longest well ever in Vaca Muerta, exceeding 8,200 meters with a horizontal length of nearly 5,000 meters at our Loma Campana block. Moreover, during September, in La Malga Chica, we completed the drilling of a 4,000-meter horizontal well in just 15 days, setting the record as the fastest well ever drilled in Vaca Muerta. Lastly, in early October, we drilled one of the fastest wells in the Rio Grande block located in the southern half of Vaca Muerta. This well has a lateral length of more than 3,000 meters and was completed in just 11 days. Moving on to our downstream segment. During the third quarter, we achieved strong operational performance, reaching the highest processing level since 2009 at 326,000 barrels per day. This processing level was 9% higher than last year, representing a solid utilization rate of 97%. In that sense, we are pleased to announce that La Plata Refinery was named Refinery of the Year in Latin America by the World Refinery Association. Additionally, La Plata refinery ranked in the first quartile across several KPIs in Solomon global refinery benchmarking based on 2024 results. This recognition represents the result of the successful implementation of the third pillar of our 4x4 plan, our efficiency program based on operational excellence and technological innovation. On the financial side, free cash flow was negative as expected for a total amount of $759 million. This negative free cash flow position is mostly explained by the extraordinary effects related to the recent acquisition of the Shell asset from Total Austral for $523 million and the impact of the mature field exit strategy. As a result, net debt increased to $9.6 billion, pushing our net leverage ratio up to 2.1x. However, excluding the acquisition of total assets and one-off costs related to mature fields, the negative free cash flow pro forma would have been $172 million with a net leverage ratio pro forma at 1.9x. Additionally, a few days ago, we have successfully retapped our 2031 international bond issuing $500 million at an 8.25% yield, the lowest interest rate for the international bond of the last years, replacing and improving our average life and financing costs. On a final note, let me briefly comment on the recent announcement regarding Argentina LNG project. In early October, within the Stage 3 of the project, we signed a technical FID with Eni for a fully integrated LNG project of 12 million tons per year expandable to 18. Moreover, recently, last week, we signed a preliminary framework agreement with a new partner, the Arab company, ADNOC. In addition, we continue working with the Phase 1 and 2. All in all, the project continued to demonstrate the interest of international players in long-term investment in Vaca Muerta, which is essential for creating a solid structure for the development and financing of the project. In summary, during the third quarter, we continue progressing to achieve the ambitious target set for the year, delivering solid financial and operational results while we continue to strengthen and prepare YPF for new and even more challenging goals in the future. I now turn to Max to go through some details of our operating and financial results for the quarter.

Thank you, Horacio, and good morning to you all. Let me begin by expanding on Horacio's comment about the evolution of our oil and gas production. During the quarter, total hydrocarbon production averaged 523,000 barrels of oil equivalent per day, declining 4% on a sequential basis and 6% on a year-over-year basis as a result of the divestment program of mature conventional fields, partially offset by the expansion of our shale production that accounted for approximately 70% of the total output, increasing its portion once again and as expected, vis-a-vis the previous quarter. Oil production reached 240,000 barrels per day 3% below the previous quarter and 6% down against last year. Nevertheless, it is worth highlighting that shale oil production recorded an impressive growth of 35% against last year and 17% versus the previous quarter, almost neutralizing the conventional production decline driven by the successful exit strategy of our mature conventional fields that accounted for only 14,000 barrels per day in the quarter. Beyond crude, natural gas production totaled 38.4 million cubic meters per day, down 3% on a sequential basis. This decline reflects an 18% contraction in conventional production from mature fields, partially mitigated by an expansion of 5% in shale gas production. Regarding prices within the Upstream segment, crude oil realization price averaged $60 per barrel in the third quarter, essentially flat on a sequential basis and contracting 12% year-over-year, aligned with the variations of Brent. Natural gas prices increased by 6% quarter-over-quarter to an average of $4.3 per MBtu, supported by the seasonal factor included in the planned gas program between the months of May and September. Now let me dive into the evolution of our shale oil output. YPF reinforces its leading position in the development of Vaca Muerta oil, accounting for roughly one-third of the country's share. In the third quarter, we continued to deliver a solid performance driven not only from our key core hub assets but also from contributions from the North and South hub blocks. In the third quarter of 2025, shale oil production delivered an impressive growth rate of 55% when compared to 2023 levels. Based on preliminary figures, October production reached an all-time high of 190,000 barrels per day, representing a strong increase of 70% vis-a-vis November 2023 and ahead of schedule. As Horacio previously mentioned, based on the current production levels, we expect to comply with the average production target announced for the full year 2025 of around 165,000 barrels of oil per day, and we expect to slightly exceed the exit rate of 190,000 barrels of oil per day as of December 2025. In the third quarter, we continued with the strategy of developing Vaca Muerta beyond our core hub blocks. In this context, let me point out the success story of La Angostura Sur, our flagship South hub block 100% owned by YPF under an unconventional concession valid through 2059, underscoring the long-term potential of the south of Vaca Muerta for YPF. Over the past 12 months, shale oil output from this block has jumped from only 2,000 barrels of oil per day in October of last year to more than 35,000 barrels of oil per day in October this year, representing in financial terms, a field with a pro forma annual EBITDA of more than $500 million. The results achieved so far are impressive. Moreover, the block expects to reach a production plateau of over 80,000 barrels of oil per day in upcoming years with a very competitive breakeven price below $40, demonstrating resilience amid evolving global dynamics. Finally, wells drilled in the block during the initial stage of development have demonstrated promising productivity levels that underscore their long-term potential, recording an estimated ultimate recovery of around 1.3 million BOE per well, including oil and natural gas. Furthermore, the high potential is also driven by a total inventory of roughly 350 wells, of which less than 15% has been developed. Regarding our upstream cost structure, let me point out that the combined strategy of divesting mature conventional fields and growing our shale business has enabled us to generate significant savings in our average lifting cost of more than 40% over the last 2 years, moving from $16 per BOE in the third quarter of 2023 to $9 per BOE in the third quarter this year. This remarkable cost improvement was achieved due to the significant shift in our production mix where unconventional production increased from about 45% of the total output in the third quarter of 2023 to nearly 70% in the third quarter of 2025, while conventional production portion fell from around 55% to 30% in the same period. As a result, since shale lifting costs remained at a very competitive range of $4 to $5 per BOE, YPF was able to improve its cost structure and therefore, its annualized savings would amount to approximately $1.3 billion. YPF will continue and deepen this strategy, supported by the completion of the sale and reversal of mature conventional blocks by the end of 2025, the AndNDEes-1 project and the sale of the rest of the performing conventional fields, the ANDE 2 project, which initial results are expected by the end of this year. Consequently, YPF will become a 100% pure shale player with an efficient lifting cost structure of around $5 per BOE in the near future. Now let me walk you through the performance of our shale activities. In the third quarter, we drilled 54 horizontal oil wells on a gross basis, primarily in operated blocks with a net working interest of 58%, bringing the year-to-date to 159 horizontal oil wells on a gross basis. This keeps us on track to achieve our full-year target of 205 wells in 2025. In terms of completion and tie-in of oil wells during the quarter, we recorded a modest level of activity compared to last year, but year-to-date, we continued growing. In the third quarter, we completed 63 horizontal oil wells and tied in 64 on a gross basis. However, in the first 9-month period of this year, we completed 186 wells and tied in 187 wells, growing around 20% compared to the same period of last year. In terms of efficiencies within our shale operations, during the third quarter, we continued setting new records on drilling and fracking performance. We averaged 337 meters per day in drilling in our core hub, while we recorded 279 stages per set per month on fracking in unconventional blocks, increasing by 7% and 16%, respectively, when compared to the same quarter of 2024. As we have been flagging in previous calls, this constant improvement in operation metrics is the result of the implementation of our real-time intelligence center and the joint efforts of our technical team and key contractors that work relentlessly to introduce further efficiencies to our operations. Finally, regarding the CapEx composition within the upstream business, it is worth noting how YPF managed to significantly transform the portfolio by reallocating investments from conventional to shale activity in the last 2 years. In this regard, in 2023, investments in conventional business represented 35% of the total upstream portfolio, while in the last 12 months of September 2025, CapEx in conventional assets only represented 5%. Furthermore, within the shale portfolio, investments in facilities represented a significant portion of total CapEx over the last 2 years, which is expected to remain steady in 2026 and begin to gradually decline starting in 2027. Switching to our Midstream and Downstream segment, the third quarter processing levels averaged 326,000 barrels per day, a record high since 2009 with our refinery utilization at 97%, representing an increase of 9% and 8% versus the third quarter 2024 and the second quarter 2025, respectively. This remarkable success is mainly driven by the record processing levels of 208,000 barrels per day achieved in September at La Plata refinery, combined with record production of middle distillates reducing to almost 0 full imports. Domestic sales of diesel and gasoline remained strong in the quarter with dispatch volumes rising 3% quarter-on-quarter and 6% year-over-year, reflecting higher demand across all commercial segments, retail, agribusiness, and industrial. Moreover, we managed to modestly expand our leading market share to 57%, which increases up to 60% considering gasoline and diesel produced by YPF and dispatched at third-party gas stations. Furthermore, in the third quarter, YPF achieved an improvement in the premium mix in both gasoline and diesel sales. In terms of prices, during the third quarter, local fuel prices remained broadly aligned with international parities, albeit dropping against the previous quarter based on a very volatile environment. More recently, October preliminary figures show a narrowing of the gap between local fuel prices and import parities while recovering on a healthy midstream and downstream adjusted EBITDA margins of nearly $70 per barrel. Now let me briefly comment on the progress of the quarter regarding the efficiency program for the upstream and downstream businesses. Thanks to the supervision of our upstream real-time intelligence center, we managed to drill 100% autonomously more than 30 horizontal wells in real time using AI complemented with traditional techniques. While in fracking, we became the first company worldwide to perform 100% autonomous fracture remotely from our real-time intelligence center using predictive algorithms. Additionally, we have successfully executed 24 hours of continuous pumping in our fracking operation during 63 hours, fully supervised by our upstream real-time intelligence center. Regarding the downstream segment, as Horacio already noted at the beginning of the call, our La Plata refinery was awarded as the refinery of the Year in Latin America. Also, this refinery achieved the first quartile in several KPIs of Solomon's benchmarking, such as net cash margin, return of investment, operational availability and personnel efficiencies categories. Finally, the record high processing levels in our refineries have started generating a surplus of gasoline and mid-distillates, allowing YPF to export refined products to neighboring countries and replace imports of YPF and other local refineries. For instance, in the third quarter of 2025, YPF exported around 30,000 cubic meters of jet and gasoline to Uruguay. And during the first 9 months of the year, we replaced more than 230,000 cubic meters of gasoline and middle distillates imports. Now let me share further details regarding the Argentina LNG project. As briefly anticipated by Horacio, regarding the Phase 3 of the project in early October, we signed a technical FID with Eni for a fully integrated LNG project of 12 MTPA expandable to 18 MTPA. And more recently, during the last week's APEX conference in Abu Dhabi, we signed a preliminary framework agreement with a new partner, the Arab company, ADNOC, that formally announced their intention to join the Argentina LNG project. Moreover, during the quarter, we continued working on the Phases 1 and 2. The project considers the development, design, construction, and operation of a fully integrated natural gas LNG plus natural gas liquids NGLs project based on wet gas upstream fields located in the Vaca Muerta reservoir. The infrastructure involved in the project includes a liquefaction capacity of 12 MTPA expandable to 18 MTPA through 2 or 3 floating LNG vessels of 6 MTPA of capacity each, a dedicated 520 kilometers gas pipeline, a dedicated 650 kilometers Y-grade pipeline for NGLs and onshore facilities, including fractionation, storage, and port facilities. The CapEx for the entire project is estimated at around $20 billion, with a potential expansion to $25 billion in both cases, including the financial costs. Leverage of the project is expected to be around 70% on the total project cost in addition to the upstream investments required to accelerate shale natural gas production. Consistent with present LNG transactions, the project is intended to be financed through nonrecourse financing with multiple sources of funding, including ECAs, development banks, and commercial banks as potential anchors of the financial structure. The FID is expected by the first half of next year, while the commercial operations for the first floating LNG is estimated by 2030 and following ones from 2031 and 2032. In summary, Vaca Muerta has the scale, the quality, and cost competitiveness to position Argentina as a leading global LNG exporter, and Argentina's LNG project will unlock Vaca Muerta's full potential, enabling exporting its unconventional shale gas production to the world. Now I will turn the call over to Pedro.

Thank you, Max, and good morning, everyone. On the financial front, the third quarter ended with a negative free cash flow position as expected that amounted to $759 million, mainly explained by the recent acquisition of the shale assets La Escalonada and Rincon La Ceniza blocks from Total Austral, closed at a purchase price of $523 million by the end of September. Moreover, despite the third quarter adjusted EBITDA surpassing CapEx deployment and regular interest payments, we recorded negative working capital associated with the discontinued operations in our mature fields, income tax payments from our subsidiaries, and longer collection days from natural gas clients and the Plan Gas program that started to normalize during October. It is worth noting that excluding the one-off items related to M&A transactions and the negative impact of the mature fields exit strategy, our negative free cash flow would have amounted to $172 million in an environment of lower international prices. Finally, on the liquidity front, our cash and short-term investments totaled at $1 billion by the end of September, remaining essentially flat compared to the previous quarter. In terms of financing, during the third quarter, we continued progressing on our financial program by securing local loans obtained from relationship banks and by tapping the local capital market at very attractive financing costs. In that sense, during the third quarter, we issued 2 dollar net bonds for a total amount of $300 million at an interest rate of 7.5% and a tenure of 2.5 years. In addition, we issued $225 million from dollar capital bonds with a 5-year tenure and an interest rate of 8.5%, tendered in the international market to local investors. That, combined with a $300 million international bridge loan, allowed us to finance the recent acquisition of shale assets. More recently, during October, we issued a $100 million net bond with a 15-month tenure at an interest rate of 6%. Considering this last bond issuance, we issued new local bonds for a total amount of $625 million with an average tenure of 3 years and an interest rate of 7.65%. Moreover, aiming to reduce the cost of carry and taking a proactive approach towards debt investors, we scheduled for this month the prepayment of $120 million of our secured notes due 2026, paying in advance the last amortization, which matures next year and thereby redeeming in full the bond ahead of schedule. Finally, let me share 2 very important news regarding YPF's financial strategy. First, during October, we reopened the syndicated corporate cross-border loan market. We signed an export-backed loan for $700 million with 10 international banks with a 3-year tenure and a 6-month availability period as a prefunding strategy for the financing of our 2026 maturities. This transaction was possible after several months of work, showcasing YPF's ability to access cross-border funding. Moreover, the loan was oversubscribed and attracted participation from new banks from Central America and Asia, demonstrating the market support and confidence in YPF. Finally, as Horacio previously mentioned, 2 weeks ago, we successfully returned to the international capital market. After 2 days of virtual meetings with more than 40 international investors, we led the recap of our 2031 international bonds of $500 million at a yield of 8.75%. Demand for this reopening exceeded all expectations, with international and local investors oversubscribing orders 3x, reaching a peak order book demand of $1.5 billion. The proceeds will be used to fully repay the bridge loan for the acquisition of Total Austral shale assets and to finance YPF's investment plan. This issuance represented YPF's tightest new issue yield on an international bond issue in the last 8 years and improved the maturity profile of itself, extending its average life. So with this, we conclude our presentation and open the floor for questions.

Your first question comes from Alejandro Demichelis with Jefferies.

Yes. Congratulations on the quarter. Production has been very strong, particularly on the shale oil side of things. Could you give us some indication of how you're seeing production growing into 2026, 2027? That's the first question. And then Horacio, you mentioned all of the improvements that we are doing on the refining side and so on. We have seen you recently taking full control of the revenue asset. So could you please give us some indication of how you see that asset developing on the rest of the refining portfolio?

Thank you for your question. Regarding production, you can expect similar levels to what we mentioned previously for this year in New York, with an average of around 215 next year and approximately 290 in 2027. We’ll provide more precise figures in the next call, but we believe we are on track with our plans. Concerning refining, integration has been crucial for YPF, providing us with significant logistical advantages over our competitors. This was a key reason for our decision to move forward, despite challenges with our partner. For the gas stations, there will be no changes since we continue to supply them. We plan to optimize those under the YPF brand while keeping the others unchanged. As for the Campo Durán refinery, while it's nearby, our focus is on creating value for all shareholders through initiatives like the Santa Fe Bio project. We are actively pursuing that direction.

Your next question comes from Leonardo Marcondes with Bank of America.

I have 3 from my side. My first question is regarding capital allocation and M&A. We have seen YPF quite active on the M&A front, right? In this regard, what should we expect from the company going forward? I mean, does the company continue pursuing new M&A opportunities? Or is it time to focus on the development of the assets within the portfolio? My second question is regarding the divestments and capital allocation as well. So could you share your plans for Metrogas and also YPF Agro? And when could we expect to hear more news on these matters? And lastly, my third question is regarding the LNG projects. I mean how do you expect to fund this project? And if we should expect any sort of project finance evolving there?

Thank you for the question. For the first question, Pillar 2 of our YPF 4x4 focuses on active portfolio management, which involves buying and selling based on where we can create more value for our shareholders. This year, we identified a significant opportunity in our core assets in Vaca Muerta, leading us to acquire the total asset in that area. While we expect no major changes to our strategy, we do not anticipate being active in major acquisitions in Vaca Muerta or elsewhere next year. Regarding Metrogas, we are in the process of extending the concession by 20 years. After that, we plan to engage with the bank and aim to sell as soon as possible, as we are required to do so by law before our gas plant is fully operational. As for YPF Agro, it does not require capital allocation. We have a successful commercial channel established over the past 20 years, which is why another company has chosen a similar name. Our plan is to partner strategically to enhance value for our shareholders, creating a joint venture where we would maintain 50% ownership. This initiative is currently in progress. Lastly, concerning LNG, we will pursue project financing in collaboration with our partners.

Your next question comes from an indiscernible analyst with Morgan Stanley.

Could you provide more details on what caused the working capital losses this quarter? What should we anticipate regarding working capital gains or losses in the upcoming quarters, and how will this affect free cash flow generation in the fourth quarter? Additionally, could you elaborate on what influenced the lifting costs? Was it solely due to increased shale output, or are there other factors contributing to this decline? How should we expect this trend to continue into the fourth quarter? Lastly, can we expect an acceleration in capital expenditures for the fourth quarter of 2025, and how will your capital expenditures compare to the guidance?

The first question I will turn over to Pedro for a more detailed explanation. However, I can provide a general overview. Regarding the lifting costs, we are transitioning away from mature fields and decreasing production there while significantly increasing production in the Vaca Muerta fields. There are several reasons for the reduction. First, we are committed to improving efficiency every day. Secondly, when production increases, fixed costs tend to decrease. Therefore, we anticipate that we will either maintain or reduce our costs, but I believe maintaining our current low lifting costs is a positive outcome. As for CapEx, we expect to finish the year with slightly less than we initially projected. If you look at the daily reports, our production has surpassed 190, reaching over 284 yesterday, and we even had a day with 199.94. I had a discussion about why we didn’t hit 200, but that’s beside the point. We are close and in a better position than we expected at the start of the year. We are concentrating on the results and identifying the optimal drilling locations, which is why we expect positive results. Now, I will pass it to Pedro to explain more about working capital.

Thank you very much for your question. So as you noted, during the third quarter, we recorded a negative working capital by about $360 million, and that was driven by multiple reasons. The first, the seasonality of the natural gas sales that was accrued in the third quarter and are expected to be collected in the fourth quarter. That's approximately $100 million. Second, we recorded in the third quarter longer collection days from the natural gas clients and from the Plan Gas program that started to normalize during October and November. That's approximately $50 million. Third, in the third quarter, we recorded a positive stock variation in the downstream business for about $60 million. That's the result of higher oil purchases to third parties to restock inventories given the inventory drawdown that we recorded in the second quarter. Then we recorded a particular lag in the OpEx and the CapEx from the mature fields that were out from YPF financial statements since the end of June, and those payments were phased during the third quarter. And finally, this negative free cash flow includes a decrease in the mark-to-market position of our sovereign bonds, which increased and changed, fortunately, during October and November.

Your next question comes from Daniel Guardiola with BTG.

I have a couple of questions here. The first one is on costs. And I would like to know if you can share with us how do you envision the trajectory of your lifting and D&C costs for 2026 and eventually, if possible and onwards, it will be great, especially considering the asset sale you did of conventional assets and the potential renegotiation of contracts with some of the service companies. My second question is on leverage, given the fact we saw an increase in leverage during this Q to 2.1x. And I would like to know if you can share with us what is the maximum leverage at which the company feels comfortable operating at. And in that sense, given that leverage has been going up in the last couple of quarters, I would like to know if you guys have ever considered to hedge your exposure to oil prices to offset any potential volatility in oil prices. So those would be my 2 questions.

Okay. In the next call, I will provide more details about the lifting, drilling, and completion costs. We are actively working with all service companies to lower the unit costs and are currently in negotiations. While I can't provide exact figures yet, I believe we will achieve significant reductions in unit costs, especially considering the dynamics in Argentina. Regarding our debt, it's important to note that we acquired two assets last year, which is why our ratio has increased. We do not plan to increase our debt further; our intention is to maintain it at the maximum level we are comfortable with. In 2023, you will see a reduction in our leverage. However, we felt it was crucial to purchase those strategic assets in Argentina, as they provide significant value in gas and are among the key assets in oil, which we believe will benefit our shareholders in the long run.

Your next question comes from Guilherme Martins with Goldman Sachs.

There is a strong increase in shale operations expected in the second half of the year. I have two quick questions. First, regarding downstream, I understand you weren't able to adjust prices in alignment with international standards in the second quarter. Could you provide more insight into what occurred in the competitive landscape? You mentioned some volatility, but any further details would be appreciated. My second question is about the ongoing divestment of Metro fields. When can we expect the next divestments to be finalized? When should we anticipate production to decline following the exit of those assets? Will there be any additional cash outflows resulting from the exit of those legacy assets? Thank you.

I cannot provide detailed information about our pricing strategies since it might inform our competitors. However, we have implemented a moving average system due to significant price volatility this past quarter. Various factors contribute to this, including exchange rates, oil prices, biofuels, and taxes. Our consumers are not accustomed to frequent or large price fluctuations. We've recently established a unique real-time center for our commercial operations that incorporates AI technology, which supports our new micro pricing policy. Last quarter was particularly challenging due to volatility in Argentina; prices fluctuated greatly, making it difficult to adjust accordingly. Currently, we are in a stable position. Regarding the divestment of our conventional assets, we are set to finalize the last agreement this afternoon, with only one area in Rio Negro left to sign quickly. After this, we will have exited the conventional sector, which is crucial for our shareholders' value. We are committed to fully transitioning to an unconventional integrated company and will be negotiating to divest more assets in the coming months, aspiring to become entirely unconventional by next year.

Your next question comes from Tasso Vasconcellos with UBS.

I have two questions. First, Horacio, can you remind us of the legislations, whether new ones or adjustments to existing ones, that YPF relies on to advance its programs? From what I recall, there weren't many new regulations affecting the oil and gas industry as a whole, but there are specific timings for some projects in the region. I'm not certain if there has been any discussion about the 8% export taxes for the industry, so it would be helpful to get an overview of the political or regulatory landscape. My second question is a follow-up on domestic fuel prices. Could you share any observations regarding the potential for price increases or decreases since you implemented a more dynamic pricing model? Additionally, what can you tell us about the recent reports that some politicians in Argentina are looking to introduce a law requiring a 72-hour notice before adjusting fuel prices? Those are my two questions.

Thank you for your question. Beyond the legislation, if you are talking about the export duty for conventional oil, there is nothing new. I understand your concerns about the new regulation, but as YPF, we are a private company and not involved in regulatory matters. So, I'm not sure about the situation. Conventional oil is not our main focus at this time. I did read in the news about some negotiations, but I don’t have any further details on that. Regarding LNG, the regulations will apply to LNG and its infrastructure, and we anticipate that this will be reflected throughout the chain. As for the second point, yes, I also read the same news, but that pertains to regulation, which I'm not involved in at all.

There are no further questions at this time. I'll now turn the call back to the YPF management team for closing remarks.

Okay. Thank you very much for your attention, for your questions, and you are always very polite with us. So I would like to say thank you for that. And you have to expect that this is a company that will change a lot the way of management, the way of working every day. I'm very proud of all the work that all the employees are doing now and the energy that we are putting. And so you have to expect 2026 to be a very clean year of the results. The problem of this year, and I imagine for you, it is very difficult to see because there is dirt with mature fees with taxes, with deferred taxes that only account I can understand. And when they explain, they are confused. So it's difficult to understand what you are saying. And so you have to look to 2026, a very clean year, and you will see how we are making the value for our shareholders that you can see in this quarter. I relate to you because there are some people that are confused; we say that the production is increasing operation where we are making value because we are reducing the conventionals. And if you annualize the value so far only to change the mixture is $1.3 billion. And this quarter, you can see that. So we are really very proud of what we are doing; all the people that we are an executive committee and all the people that are working there. Thank you very much for all of you.

This concludes today's conference. Thank you for participating. You may now disconnect.