Ypf Sociedad Anonima Q1 FY2026 Earnings Call

Hello, everyone. Thank you for joining us, and welcome to YPF First Quarter 2026 Earnings Presentation. I will now hand the conference over to Margarita Chun, Investor Relations Manager. Margarita, please go ahead.

Good morning, ladies and gentlemen. This is Margarita Chun, YPF's IR Manager. Thank you for joining us today in our first quarter 2026 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. Today's presentation will be conducted by our Chairman and CEO, Mr. Horacio Marin; our Finance Vice President, Mr. Pedro Kearney; and our Strategy, New Businesses and Controlling Vice President, Mr. Maximiliano Westen. During the presentation, we will go through the main aspects and events that shape Q1 results. And finally, we will open the floor for the Q&A session together with our management team. I will now turn the call over to Horacio. Please go ahead.

Thank you, Margarita. Good morning, everyone. We are glad to report a robust beginning of the year across our key operational and financial metrics, delivering on our ambition and guidance for the year. Let me translate the key milestones of the quarter into numbers. Revenues were $4.95 billion, growing 9% quarter-over-quarter, primarily explained by the rising trend of international prices since March, coupled with our policy to align domestic prices of gasoline and diesel with international parities. On a yearly basis, revenue increased by 7%, reflecting strong local fuel demand and record high refinery processing level. Adjusted EBITDA for the quarter amounted to nearly $1.6 billion, representing the highest first quarter level in YPF's history with an outstanding margin of 32%. This represents an increase of 24% and 28% on a sequential and interannual basis, materially exceeding revenue expansions. The main factor that explained this growth were higher shale oil production, improved pricing dynamics and the cost matrix transformation of the upstream segment, now focused on the shale business. On the production side, our shale oil output reached 205,000 barrels per day. That mark represents an increase of 5% versus last quarter and a remarkable growth of 39% against a year ago, representing 76% of our total oil production. This milestone positions us on track to achieve our full year target of approximately 215,000 barrels per day with a December exit rate of 250,000 barrels per day. In addition, let me highlight several operational efficiencies achieved during the first month of the year. First, we set a new fracturing record during the first quarter, pumping continually for almost 110 hours and completing 52 stages in less than 5 days on a pad at Loma Campana field. Moreover, in April, we signed a strategic agreement with a service company, Halliburton, to incorporate 4 fracturing sets in Vaca Muerta through a new electrical fracturing technology. This new contract transforms YPF into the first company outside the U.S. to develop this technology, improving efficiency by reducing the use of diesel engines, saving cost of the operation. In terms of investment, we deployed nearly $1 billion during Q1 with 78% allocated to our conventional operations. On a sequential basis, CapEx decreased by 10%, primarily due to increased maintenance activities in the downstream segment during Q4 2025, and a lower pace of investment in upstream facilities. Interannually, the lower investment is explained by the reduced exposure to conventional assets and the impact of a one-off item booked last year to secure several unconventional concessions. Consistent with the production expansion expected for the rest of the year, we expect to accelerate capital deployment in the following quarters, reaffirming our guidance for the year in the range of $5.5 billion to $5.8 billion. Finally, let me point out that a standout result of the quarter was our free cash flow, which reached an outstanding $871 million. This mark represented an improvement of $1.8 billion against a year ago. This exceptional cash generation was supported by our strong operating performance and the collection of strategic M&A proceeds of around $500 million. As a result, our net leverage ratio improved to 1.57x, down from 1.9x in Q4 '25. Let me recall that in Q3 '25, we reached the peak of 2.1x driven by the M&A of buying new Vaca Muerta assets. Before moving into the financial detail of the quarter, I would like to address a significant commercial decision announced at the beginning of April regarding our local fuel pricing strategy due to a sharp increase in international prices driven by the ongoing conflicts in the Middle East. During March, we were able to largely pass through this increase at the pump. However, in the last week of March, demand began to show signs of contraction for the first time in a while, particularly in gasoline. In response, in April, YPF decided to temporarily postpone further pass-through of international price increases to customers for a period of 45 days. This mechanism operates as a buffer, enabling the reduction of the gap between local prices and import parities after this period by recovering the buffer compensation through an additional pump price. Importantly, let me clarify that this decision was made proactively on our own initiative by analyzing supply and demand through our commercial real-time intelligence center without any government interference and was subsequently adopted by all major operators in the industry. The final objective of this commercial decision was to mitigate potential adverse effects on local demand while reaffirming our import parity strategy in a free market environment. It's also worth noting that during April, YPF maintained a very competitive fuel price level. Moreover, in April, according to our preliminary figures, our midstream and downstream segment reached a very healthy adjusted EBITDA margin of around $24 per barrel. The 45-day period will end around mid-May, at which point we will assess the evolution of the Middle East situation, international prices, domestic demand and macroeconomic conditions. I would like to dedicate a few minutes to share with you the successful development of La Angostura Sur, a block that, in our view, perfectly captures what YPF is capable of when we combine operational excellence with a strategic vision. Just 18 months ago, La Angostura Sur produced 2,000 barrels per day of shale oil. Today, it is producing approximately 55,000 barrels per day. This remarkable ramp-up is roughly 25x growth in 1.5 years. Moreover, La Angostura Sur is now ranked as the #5 Vaca Muerta block and it currently represents approximately 25% of YPF total shale oil production. What makes this block even more compelling from an investment standpoint is its economics with a breakeven price below $40 per barrel, lifting cost of around $3 per barrel and a development level of approximately 19%. There is substantial upside ahead under unconventional concession value through 2059. Our plateau target for this block is approximately 100,000 barrels per day. We have 100% of the equity stake in La Angostura Sur. This means YPF captures the full value of this world-class asset. La Angostura Sur is not just a production story. It's a proof of concept. It demonstrated YPF's ability to rapidly develop Vaca Muerta at scale with capital discipline and competitive costs. We are committed to replicating this model across our portfolio. Now I turn the call to Pedro to analyze in detail our financial results.

Thank you, Horacio, and good morning to you all. Let me walk through our consolidated financial results for the first quarter of 2026. The headline is clear. This was a quarter of exceptionally strong free cash flow, which drove an accelerated deleveraging of our balance sheet, fueled by strategic M&A collections and a strong adjusted EBITDA. As Horacio briefly explained, M&A activity resulted in a net contribution of $504 million to the cash flow of the quarter. This was mainly driven by the final proceeds from the Profertil divestiture totaling approximately $410 million. Additionally, during the quarter, we received about $85 million as partial payment from the sale of the conventional Manantiales Behr field. Total price of this field amounted to $410 million with an earn-out of up to $40 million. The remaining balance is expected to be collected throughout the rest of this year, 2027 and 2028. These proceeds were partially offset by an initial payment of $16 million related to the acquisition of a portion of Equinor assets in Vaca Muerta through a joint venture with Vista Energy, which was closed yesterday and resulted in a total price of around $204 million. Together with the upcoming divestment of Metrogas and the remaining conventional assets from the Andes 2 program, these transactions will further strengthen our financial position and provide greater flexibility to focus on our most profitable core business, Vaca Muerta. The solid free cash flow evolution was also driven by our outstanding performance in all our operations, navigating international volatility and profitable margins and cost efficiencies as well as operating refineries at full capacity and continuously expanding our shale operation. As a result, the higher first quarter adjusted EBITDA comfortably covered investment and interest payments of the quarter. As a result, this substantial improvement in operational cash flow for the quarter led to an increase in the company's liquidity, which ended at $1.7 billion as of the end of March 2026, representing an improvement of $500 million during the quarter. Turning to our financial situation. Let me highlight that YPF's balance sheet is on a strong and improving trajectory with a solid liquidity position and very manageable debt maturities. In terms of financing, we reconfirm our strong access to the capital markets by raising in the first quarter nearly $1 billion across international and local markets as well as bank credit facilities at attractive financing costs. In the international capital market, during the first quarter, we successfully retapped our 2034 bond, adding $550 million at a yield of 8.1%, representing the lowest rate secured by YPF in the international market in the last 9 years. Moreover, we have been very active in the local capital market during the first 4 months of 2026. We successfully issued around $285 million in 2 local U.S. dollars MEP bonds, $161 million at a 3-year tenure with a yield of 6.5% and $122 million at a 4-year tenure with an outstanding yield of 5.5%. Regarding financial and trade-related loans, in February, we were able to partially refinance a local syndicated loan for $176 million, extending additional 36 months its average life. Moreover, this financing strategy, combined with a significant positive free cash flow generated in the first quarter, enabled the company to proactively refinance existing facilities. During the first 4 months of the year, we prepaid approximately $750 million in debt obligations scheduled to mature between the remainder of 2026 and 2028, optimizing our capital structure and lowering our average cost of debt. Looking at our debt maturity profile, the remaining maturities for 2026 totaled approximately $1 billion, primarily composed of around $600 million in local bonds, of which we have already proactively repurchased $100 million as a hedge strategy of our liquidity position, around $300 million of international bonds and the rest corresponding to other local debt. We are well prepared to meet our debt obligations for this year, supported by the substantial liquidity generated during the first quarter at $1.7 billion. Finally, it's worth noting the evolution of the company's net leverage ratio. As of the end of the first quarter, our net leverage ratio stood at 1.57x, down 25% from its peak of 2.1x reached in the third quarter of 2025. The trend is clearly positive, and we expect continued improvement throughout the year as cash generation remains strong. I am now turning to Max to go through our operational performance.

Thank you, Pedro, and good morning, everyone. Let me start by taking a closer look at our upstream performance. Shale oil continued achieving new record high levels in the first quarter, reaching 205,000 barrels per day, a 5% sequential increase and a 39% year-over-year improvement. As Horacio mentioned before, this achievement was primarily driven by the outstanding performance of La Angostura Sur block, which has shown exponential production growth in recent months. These production levels are fully aligned with our plan, keeping us on track to meet our production targets of the year. The strong shale oil production growth fully offset the continuous divestment from conventional oil fields, which declined more than 45% interannually, recording 66,000 barrels per day in the first quarter. On a pro forma basis, excluding the recently divested assets, Manantiales Behr, Malargüe and Tierra del Fuego blocks, our conventional production would have averaged only about 35,000 barrels per day by March. As a result, we continue delivering meaningful savings across our cost matrix, demonstrating a remarkable 42% year-over-year reduction in our upstream lifting costs which dropped to $8.8 per BOE in the first quarter. Furthermore, excluding divested assets, pro forma lifting cost would have averaged around $8 per BOE. Zooming into our shale oil hub blocks, lifting costs reached best-in-class levels of $4 per BOE, primarily driven by significant cost efficiencies in pooling activities, especially in the Loma Campana block as well as the growing share of La Angostura Sur blocks in our production portfolio, which notably has a lifting cost of around $3 per BOE, the lowest among all YPF fields. On the other hand, the natural gas production averaged 32.8 million cubic meters per day down 12% year-over-year, mainly reflecting our continued exit from mature conventional fields, partially offset by shale gas expansion. Finally, let me highlight that on April 23, 2026, the shareholders' meeting of VMOS approved the allocation to YPF of 44,000 barrels per day of additional available capacity of the pipeline. With this decision, YPF's stake in VMOS increases from around 25% to 30%, which is key to supporting the company's production growth in the coming years. In addition, Oldelval is expected to expand its transportation capacity by roughly 150,000 barrels per day by year-end through upgrades to pumping stations and using polymers. Of this incremental capacity, YPF will hold around 40,000 barrels per day and will support higher volumes of YPF's shale oil to our La Plata refinery. Overall, these results reconfirm our upstream strategy robustness, shale oil driving higher efficiency by reducing lifting costs and sustaining a more resilient production output. Now let me share the progress achieved in terms of productivity and operational efficiencies in our Upstream segment, where the continuous improvement in drilling and completion efficiency has positioned YPF as the best-in-class operator in Vaca Muerta. Our drilling speed in our shale oil hub reached 364 meters per day in the first quarter, reaching a 12% improvement compared to 2025. Moreover, our unconventional fracturing speed amounted to 11.2 stages per set per day, growing 15% compared to 2025, supported by a 10% increase in pumping hours to an average of 18.5 hours per day in the first quarter. This performance reflects lower nonproductive time and greater operational consistency. In this sense, let me highlight that in January, we drilled a new horizontal well in just 10 days in La Amarga Chica block, reaching a drilling speed of 520 meters per day. Faster drilling and fracturing means more wells completed in less time, which directly translates into faster production ramp-up and lower costs per well. One of the most important efficiency levers we have been developing is the transition to longer horizontal well designs. We have moved from a standard horizontal length of around 3,000 meters in previous years to nearly 3,450 meters in the first quarter of 2026. Finally, we would like to highlight the continued strengthening of our relationships with key suppliers. In this context, in April, we signed a 5-year contract with Halliburton for electric fracturing services, combining electrification and automation to boost efficiency, maintain greater operational consistency and help to reduce emissions intensity. Moving to our midstream and downstream segment. Our processing levels averaged 344,000 barrels per day in the first quarter, growing by 3% sequentially and 8% interannually and setting another record high processing level. Moreover, this exceptional performance was coupled with record production of premium gasoline and middle distillates, allowing us to avoid imports, supply local peers and export to neighboring countries. Regarding domestic sales of gasoline and diesel, dispatch volumes declined by 3% quarter-over-quarter due to seasonality. On a year-over-year basis, gasoline and diesel volumes grew by 8%, supported by stronger demand across all commercial segments, particularly in agribusiness. As a result, we maintained a solid 57% market share, fully in line with our historical levels, which increases up to 60% when including gasoline and diesel produced by YPF and dispatched through third-party gas stations. Turning to our pricing strategy. Local fuel prices increased by 12% sequentially, primarily reflecting the rally in international reference prices that began in March, which were largely passed through to prices at the pump. Importantly, as Horacio explained earlier, fuel demand during late March fell by approximately 10% compared to early March, which supported our decision to temporarily delay further pass-through of international price increases to the local market for 45 days. In addition, following the price adjustments recorded in March, during April, fuel prices remained competitive. Lastly, our midstream and downstream adjusted EBITDA margin remained strong at $19.1 per barrel in the first quarter. This margin further strengthened to about $24 per barrel in April, driven by elevated processing volumes and the effective pricing strategy outlined earlier. I am now turning to Horacio for updates regarding our Argentina LNG and final remarks.

Thank you, Max. Finally, let me share updates on the LNG projects, the most transformational initiative in YPF's history that is making solid progress on all fronts. Regarding the CESA tolling phase in which YPF holds a 25% equity stake. During the first quarter, CESA signed an SPA for an LNG supply partnership with SEFE, an international energy company based in Germany. This strategic agreement covers a period of 8 years for 2 million tons per year starting in late 2027, representing around 30% of CESA total capacity, which corresponds to the total capacity of the first vessel Hilli. In parallel, CESA awarded the engineering and construction contract for the 480 kilometers gas pipeline and has been advancing on the project finance of the project. Turning to Argentina LNG projects. As flagged on our previous earnings call, this project contemplated the development, design, construction and operation of a fully integrated LNG, condensate and NGL facilities. The founding partners are YPF, ENI and XRG, an international energy investment arm of ADNOC. The project contemplates a total investment, including the upstream segment of approximately $24 billion, which includes the financial costs associated with the funding structure. These figures constitute an upward adjustment versus the most recent CapEx disclosed during the fourth quarter '25 result presentation. However, this adjustment reflects a strategic reallocation of investment between the upstream and midstream businesses, further optimizing the aggregate CapEx of the integrated project. Since the beginning of this year, we have been actively advancing the project financing process. In this context, we conducted a comprehensive market sounding exercise to assess investors' appetite. The response was very strong, with interest from approximately 50 institutional investors and cumulative initial appetite exceeding the project financial requirement, reaffirming the project's financial viability. In addition, during the quarter, we have been diligently developing both our commercial and procurement strategies. On the commercial front, we launched a competitive bidding process and the market response was very positive, far exceeding our initial expectation and demonstrating robust demand. On the procurement side, we are actively advancing the engineering phase for the various procurement packages required for the project. Our goal is to ensure that all necessary preparations are in place to enable a final investment decision by year-end. Moreover, last month, the province of Neuquén approved the assignment of Pluspetrol's 50% interest to YPF in the 3 wet gas blocks identified to develop the Argentina LNG project. Finally, I would like to emphasize that YPF continued to lead the key infrastructure debottlenecking initiatives required to fully monetize the best shale oil and gas resources of Vaca Muerta, one of the world's most competitive basins in terms of breakeven prices. In this context, YPF was awarded the Argentine Country Brand Certification, recognizing the company's role as a key contributor to the country's productive development and its international positioning. This distinction underscores YPF's contribution to reinforce Argentina's global image and supporting the attraction of long-term investment. So with this, we conclude our presentation and open the floor for questions.

Your first question comes from the line of Michael Furrow with Pickering Energy Partners.

Horacio, I was hoping to get your perspective on the local service market in the Vaca Muerta. The play is attracting more international attention. I think YPF is in a good position to offer some insight after signing the recent deal with Halliburton. We've noticed several U.S. oilfield service companies mentioned South America and Argentina specifically as emerging markets for their businesses on recent conference calls. So my question is, are you actively seeing new entrants? And do you think that this is resulting in a more competitive service pricing environment? And if not, what do you think needs to change before more service providers feel comfortable with the Vaca Muerta and Argentina in general?

First, I would like to say that today is Pedro's birthday and also my birthday. So please be polite with us because it is our birthday. Thank you for the question. I was born in 1963, so it's a special day today. Regarding the service contract and unit cost, I think next quarter you will see a reduction in our cost because we have conducted strong bidding with international service companies. We achieved significant reductions because Argentina is an attractive market and business friendly. This week I was in the United States trying to convince service companies to come to Argentina. We need more competition. From my experience in the United States, there are two ways prices come down: one is by having more competition, and the other is to reduce the number of participants. We have executed a process that was very successful for shareholders' value. For this year, we expect improvement. By December, you will see 19 rigs. We secured all the rigs and all the frack fleets. Now we are working for next year. We are also importing the latest technology equipment from the United States. Halliburton will bring the first electrical frac fleet to Argentina. Our real-time intelligence center is working very well and improving a lot. We really need good equipment and technology because that is the area where we are investing and where we are seeing continuous improvement every quarter. We also have procedures to improve our standard times in all drilling and completion by automating rig flooring. So every quarter when it's finished, the people in YPF know that we have a new standard and are always more challenging than before. That is the way we work. I agree with your question: we try to bring more service companies and we are also working so small service companies have to be in joint ventures with Argentine companies to improve quality and efficiency. We know that tomorrow must be better than today, and that is how we're working in YPF.

Thank you for the context. As a follow-up, I'd like to ask about the concession sales that Neuquén province is offering in August. Particularly interested in your opinions on the prospectivity of the northern acreage given YPF's adjacent position and knowledge of the area. Without giving away too much information, are there certain blocks that YPF is interested in? Or is the company comfortable with the current asset portfolio?

In the North, we have what we call the North hub, a core hub and a South core. In the South core, we have all that and we are going to present RIGI, I think, next week. That is a big program. For the North, we are working with more partners. In the South, we are 100% owners and we are working with our partners to have the RIGI and to start. After that, we always need to make our projection and to have the best value for shareholders is a mixture between capital that we arrange from partners and 100% ownership. In that way, we always try to put the maximum or the optimum mix to create value for shareholders.

Your next question comes from the line of Daniel Guardiola with BTG Pactual.

I have a couple of questions from my end. One is on prices. I see that the quarter somehow benefited from a sharp increase in oil prices in March, but I get the feeling that much of the pricing benefit in both upstream and downstream appears to be delayed. So I wanted to ask you, in the case Brent remains high as it is today, above $90, how quickly can you guys now pass through price changes domestically under the current market framework? And it would be helpful if you could please provide some sensitivities in terms of your EBITDA generation for 2026 if oil prices range in 2026 around $80 to $90. So that would be my first question. And my second one is on the lifting costs. We have seen a very sharp decline in lifting costs, declining 42% year-over-year. And of course, we are seeing a more efficient structure in the core hub in the shale oil core hub. And I want to ask you how much further room do you think there is for a structural reduction, especially considering that the company is transitioning from conventional assets towards unconventional assets. But at the same time, high oil prices are perhaps creating inflation pressures in Vaca Muerta. So those will be my two questions.

Thank you for the questions. First, I wouldn't attribute the core business performance only to the sharp increase in prices during March because our strategy to be more unconventional is a major driver as well. Regarding your first question: if Brent remains in the $80 to $90 range or around $90, we are comfortable and can quickly pass through price changes domestically. I prefer not to disclose exact buffer decisions because of competitive reasons, but I do not see a problem for us if Brent remains in that range. For your second question on lifting costs, our teams are working very hard to optimize. You can see the significant reductions in both upstream and downstream in recent periods. We are focused on improving efficiency, leveraging longer laterals, better technology and our real-time intelligence center. We have drones and detailed operational monitoring, and our KPIs are moving in the right direction. I remain positive about further reductions in lifting costs. We have very few conventional assets left and our plan is to sell out during 2026 and become a primarily unconventional integrated company.

Your next question comes from the line of Bruno Montanari with Morgan Stanley.

So the first question is about the LNG project. You do mention you have the two founding partners, ENI and XRG. I'm wondering if on the back of all the energy security concerns and the conflict in the Middle East, YPF is seeing now interest of potential additional partners coming into Argentina LNG and potentially making it viable to discuss the potential expansion of 6 million tons per year. That is my first question. My second question is about the drilling pace, drilling and completion pace in the first quarter now. There seems to have been a temporary slowdown in the beginning of the year. I do understand you are reiterating all the production guidance, but I just wanted to have more color on what happened specifically in the first quarter that led to a slower activity level.

Thank you. With the LNG, we are working with the three founders. In fact, today we are in Milan, the three teams working very hard to finish all the contracts. Our idea is to be ready as soon as possible for project finance. Really, we don't need another partner, but there could potentially be another one. I think the conflict in the Middle East has done two things: it is increasing appetite to finance our project and it may speed up the case for expansion. The expansion could come sooner than we thought before. We already had substantial appetite from offtakers even before the conflict, and negotiations with potential offtakers are progressing well. We are on a very good path to aim for an FID at the end of the year. Regarding the slowdown in drilling and completion in the first quarter, that was primarily due to infrastructure bottlenecks in evacuation capacity. We expect not to see that problem next year. You will see an improvement in incremental production month by month. There was also a change in the system at the end of last year, and I'll let Max provide additional detail.

There wasn't a slowdown in activity in the sense of fewer wells drilled. What happened is that in the first quarter we drilled longer lateral wells—on average about 6% longer than in the fourth quarter. We drilled approximately the same number of wells. Additionally, at the end of last year we accelerated our plan to reduce DUCs (drilled uncompleted wells), which led to extraordinary CapEx in the fourth quarter. During the first quarter, we focused on longer laterals. We are maintaining our production targets for this year, and you will see a ramp-up in activity starting next month as Horacio commented, going up to 19 rigs at the end of the year. We paced activity given evacuation constraints until VMOS is COD. That's our plan.

Your next question comes from the line of Vicente Falanga with Bradesco BBI.

I had one. YPF has now been very successful in accelerating the derisking of the southern cluster. I was wondering what is the timeline for the northern cluster in terms of development? And what are the key milestones we can expect for the next couple of years maybe?

As I mentioned before, the north part is not 100% owned by us. We are negotiating with our partners and I am optimistic we will reach a development phase soon. After that, we will present the rig plan and for sure next year we will start derisking that part. We need to develop it properly and focus on areas which create the most value for shareholders.

Your next question comes from the line of Andres Cardona with Citi.

Unexpected synergy here. One quick question about the productivity of La Angostura Sur. How does it compare with the key Vaca Muerta fields versus your initial expectations. Do you think there is upside on the numbers on the south hub? And how many acres and drilling locations do you have in this new developing area?

In general, productivity in the south hub is very good. We are getting better results compared to historical levels because we now drill longer laterals and are more efficient. The south hub, which we own 100%, will be very productive and very profitable. We have a lot of wells to drill. You will see the rig presentation next week. There are on the order of 1,200 well locations to drill, and they will be important for incremental production and for our peak production at the beginning of the next decade. Regarding potential expansion to 6 million tons, that is something we will discuss with our partners. I prefer those discussions to be progressed jointly with the other founders, but in my view, the Argentina LNG project could see acceleration given market conditions.

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

So I have two questions from my end. The first one is related to the inclusion of the upstream projects into the RIGI framework, right? So my question is, what blocks do you expect to register for RIGI? And how should they change your drilling plans in the mid-term? My second question is regarding the LNG project. It seems that you guys have implemented some changes since the last quarter, right? Because as we compare both presentations, we see that CapEx for Phase 1 have increased to $24 billion from $20 billion. And now you're contemplating what seems to be two pipelines, right? I mean, one for wet gas and one for C5+. So if you could walk us through these main changes here, it would be great.

For RIGI, we plan to include all the possible blocks that can be applied. The registration process is the same for everybody and including the blocks in RIGI should not change the relative preference among blocks. It will not materially change our drilling plan. RIGI is an excellent program and could speed up our peak development. We will detail this at the next Investor Day in New York in April. Regarding the CapEx adjustment from $20 billion to $24 billion, there was no change in the overall economics; rather, it reflects a reallocation of investment from upstream into midstream and processing elements. With our engineering partners we identified that it is more profitable to shift part of the investment toward separation and midstream facilities. The project contemplates separation plants in Neuquén and additional processing in Río Negro, producing three main products: gas for LNG, NGLs for export and liquids for export. The change is a shift in the breakdown of the spend rather than a materially higher aggregate cost; the project finance presentation shows an increase because of this reallocation and the inclusion of associated financing costs. If that created any confusion, we apologize. We believe the project is better structured as a result.

Your next question comes from the line of George Gasztowtt with Latin Securities.

I was wondering if you could please unpack the 102% refinery utilization in 1Q and how sustainable that is? And relatedly, how are fuel inventories running so far in 2Q? And do you think you'll be able to sell some to other refiners again?

Yes, the 102% utilization is sustainable because our downstream teams achieved excellent efficiency improvements without major investments. If there is a scheduled stoppage, utilization will be lower during that period, but if not, we could maintain or even exceed that level. The transformation in YPF over the last two years means we no longer need to import as we used to. We are now supplying the domestic market, helping peers during their stoppages, exporting to neighboring countries and providing diesel for electricity generation. This is good news for shareholders.

Your next question comes from the line of Claudia Rivera with Santander.

My question is, given Brent prices have remained above $100, how should we think about downstream margin dynamics in the second quarter? Do you expect to pass through higher crude costs into domestic pump prices? And what will the timing and pass-through dynamics look like?

If Brent were to remain above $100, downstream margin dynamics would be stronger. As a rough indication, margins could be more than $3 per barrel higher compared to lower price scenarios, which would be an excellent improvement. Our policy is to align with international prices and to pass through changes, but we temporarily delayed pass-through in April because we observed a rapid decline in demand and wanted to avoid a sudden shock to consumers. We implemented a buffer mechanism for 45 days to smooth the transition. Ultimately, we will pass through international price dynamics, taking into account demand, the evolution of the international situation and macro conditions. The timing will depend on those variables, but the pass-through mechanism is in place.

Your next question comes from the line of Matthias Cattaruzzi with AdCap Securities.

I have a few questions. First, what's going to happen after the fuel freeze after May 15? Then in your 2026 guidance of CapEx, you guided to a neutral to slightly negative free cash flow at a Brent of $63-$65, and now we are well over that range. Is your CapEx going to change? You got the infrastructure constraints. We are seeing a really low CapEx in the first quarter. Can you guide us through what's going to be 2026 and then what's going to be 2027? And then I got an additional question about the acquired capacity at VMOS. Can you tell us if it's going to affect the production curve in 2026? Are you going to expect a higher ramp in the beginning and middle of the year?

Beginning of next week we will have a meeting at YPF and decide what will happen after May 15; we will communicate that decision afterwards. Regarding 2026 CapEx guidance: if prices are higher, you should expect higher cash generation and potential reallocation, but we cannot accelerate capital spending this year beyond certain limits because of existing bottlenecks in evacuation capacity. We expect to reach evacuation bottlenecks around October-November, which constrains the ability to accelerate production this year. However, in 2027 we expect to accelerate investments and production ramp-up as evacuation capacity improves. As a rule of thumb, higher Brent drives significantly higher EBITDA, but exact sensitivities will be provided in our updated guidance and at our Investor Day. Regarding the VMOS capacity acquisition, this incremental capacity helps with evacuation and will support higher volumes to our La Plata refinery; you will see the effect progressively through the year and more meaningfully next year as pipeline and terminal upgrades complete.

Your next question comes from the line of Tasso Vasconcellos with UBS.

Horacio, I wanted to move back here on how you're thinking in terms of capital allocation for YPF, get some additional color from your side. You had a lot of success in the 4x4 plan that you released when you first assumed the company. You had a lot of success in focusing the core assets and the operations of the core assets, divesting from some other assets. So maybe if you can make a summary on everything that you accomplished since you assumed the company. And of course, looking forward, what do you still view as adjustments required for YPF? Where would you want to invest more, especially in this scenario of higher Brent and YPF making more money? And of course, anticipating dividends at some point could also be a possibility. Anyway, I can just get some additional color on how you're thinking about capital allocation as a whole for YPF. That's the question.

Thank you. Capital allocation is a rigorous process for us. We run what we call CapEx week where we discuss all projects in detail and allocate capital from the most economic to the least economic initiatives. Our priority in allocation is upstream unconventional. When I arrived I focused on making YPF an unconventional-centric company because Argentina's conventional assets are mature. So we reallocated capital to unconventional and that is the company's objective: to be an unconventional integrated company. We are close to achieving that with several divestitures of remaining conventional assets. Within upstream we maintain a portfolio approach, balancing partner-funded projects with 100% owned developments. The good news is many of our 100% stakes are very profitable, so if partners are not available we can still increase production quickly. If prices remain at higher levels, we will generate more cash and allocate incremental cash to increase production, to support LNG, and to create shareholder value. We constantly reassess priorities to optimize returns and will consider other uses of cash, including potential distributions, as the balance sheet and cash flow profile improve.

We have reached the end of the Q&A session. I will now turn the call back to Horacio Marin for closing remarks.

Okay. Thank you very much for all the questions. Thank you very much for being on this call. I want to say to all the colleagues who work here that I'm very proud to work with YPF. We are working hard, but with passion. A company with passion has extraordinary results. That is what YPF is doing now. I always say in the memory of my grandmother: I breathe YPF, I sweat YPF, I think YPF, I love YPF. Thank you very much.

This concludes today's call. Thank you for attending. You may now disconnect.