Ypf Sociedad Anonima (YPF) Q2 2026 Earnings Call Transcript

Hello everyone. Thank you for joining us and welcome to the YPF second quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Margarita Chun, IR 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 second quarter 2026 earnings call. Before we begin, please consider our cautionary statement on slide two. Our remarks today and answer to your questions may include forward-looking statements, which are subject to risk 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 bta today's presentation will be conducted by our chairman and ceo mr oracio marine our finance vice president mr pedro kerny and our strategy new businesses and controlling vice president mr maximiliano western during the presentation we will go through the main aspects and events that shape Q2 results, and finally, we will open the floor for Q&A session together with our management team. I will now turn the call over to Horacio. Please go ahead.

Thank you, Margarita, and good morning. Q2 was a landmark quarter in YPF's history with 10 major milestones achieved across all our operations. These results reflect the magnitude of the transformation that YPF has achieved since the launch of the 4x4 plan supported by strong market dynamics. The main drivers of this transformation are shell growth, the replacement of conventional assets, cost control, capital discipline and operational efficiency. As a result, we are reshaping the company into a very profitable integrated shale player. We are building a more profitable, more resilient and more export-oriented integrated shale company. Adjusted EBITDA reached 2.8 billion dollars, positioning the quarter as the best in the company's history. A 70% increase versus the second high record that was in Q3 2014, and the third one was last quarter. To put this in perspective, in the first half of 2026, we generated nearly $4.4 billion of a shot EBITDA, already above the full year EBITDA reported in 2023. This exceptional performance dropped a just evident margin to 43%, its highest level in the last two decades, supported by higher prices, seasonal demand, solid operational execution, and operational efficiency. As a result, the outstanding performance was reflected in the income statement. operating result reached 1.8 billion dollars a new record high in the company history while no result was 1.2 billion dollars represented the second best quarterly performance ever achieved by ypf the first net results was q3 last year in terms of cash generation free cash flow reach 824 million dollars top three in our history while liquidity closed at the highest level ever achieve of 2.5 billion dollars as a result net leverage decreased to 1.1 times its lowest level in more than a decade and the scoring the continued improvement in YPF's financial position. From an operational standpoint, the quarter reinforced the continued transformation of YPF production mix. Shale oil production reached 213,000 barrels per day, with shale oil now representing 80% of total oil production. This confirms the increased relevance of unconventional assets with the company portfolio and the continued progress in scaling up Baca Muerta as YPF's key growth driver. In parallel, we continue increasing the number of rigs operated by YPF in Baca Muerta oil window. As of today, we are operating 16 rigs, significantly higher than the 12 rigs by December last year, and expecting to reach 21 rigs by early 2027. On the other hand, let me share with you an important step to accelerate Vaca Muerta. In May, we submitted the RIGI application of Loma La Lata Oil, a project 100% owned by YPF, with a production plateau of roughly 240,000 barrels per day. It represents the largest oil export program in Argentina's history and the largest project submitted and reed so far. The project requires cumulative investment of $25 billion over 15 years and is expected to generate more than $100 billion in oil export revenue over its lifetime. Loma La Lata Oil Positions, YPF and Argentina to build a world-class energy export platform. Given the scale of the project, the approval process may be structured across separate SPVs. We will provide more details later when we have news. Finally, our downstream operation continues to deliver exceptional performance. Refinery processing reached 351,000 parts per day, reflecting the highest level of refinery utilization ever achieved. It enabled us to generate surplus production and gasoline amidst distillates reaching 43,000 cubic meters per day and sitting a new record high. Overall, these results reflect a quarter of exceptional execution with record profitability, a strong cash generation, a reinforced balance sheet, and continued operational improvement across the company's main business segments. Before moving to the next slide, let me take a moment to highlight several recent developments that are highly important to the execution of our 4x4 planning strategy. First, regarding the second pillar of our 4x4 plan, active portfolio management, last week we signed agreement for the sale of two clusters of the under-projects in the province of Mendoza, The operating Chachagüen field and the non-operating El Corcovo and CNQ7A blocks. Together, these transactions were closed at a price of $405 million and remained subject to the final approval before closing. Importantly, once these conventional fields are excluded from our production profile, approximately 95 percent of our oil production would come from shell operations it marks another concrete step toward our objective of becoming a pure shell player more recently we have just obtained the approval of our board and signed the sale of the 70 percent equity stake in metrogas subject to closing moving to mystery in oil they must remain on track to reach COD by the end of Q4 this year with the progress of around 80% as of July expecting fresh oil by early 2027 turning to Argentina LNG we have signed an agreement with the promise of Nequen to establish the project regulatory and fiscal framework. In addition, we successfully brought ENI and XRG into the upstream development with each partner acquiring a 32% interest in the five blocks that will be fully dedicated to Argentina LNG, while YPF retained the remaining 36% stake. This is a highly relevant milestone on the path toward the final investment decision as it improves the project after infundation and reinforces the development of integrated energy value change we will provide further details later in the presentation in terms of our local fuel pricing strategy in mid-may we extended the buffer mechanism for another 45 days alongside a 1% adjustment. The buffer mechanism successfully preserved local fuel market dynamics during very volatile international contexts, while allowing our midstream and downstream to reach a very healthy, evident margin of around $30 per barrel. Finally, regarding YPF stock split last week, We successfully completed a 10-for-1 split in the local market, BIMA, with the goal of improving accessibility and affordability for local retail investors in comparison with our peers. In parallel, we adjust the ratio of ADR to shares from 1 to 1 to 1 to 10, with no economic impact on ADR holders. Importantly, this split doesn't affect shareholders' economic interest, ownership percentage, or voting rights. In addition, users of YPF applications with cash accounts will be able to buy and sell YPF shares directly through the app starting this Friday, August 14. this represents another meaningful step in expanding access to YPF heat equity story to a wider investor base now let me share more details on our Loma Lalata oil project a key driver to accelerate the development of the South house in Baca Muerta's oil window in late May YPF applied to show in the riggi the large investment incentive regime for the spv loma lalatoi this is a large riggi project and argentina's major up in oil export initiative the spv is fully owned by ypf developing five blocks with well inventory of over 1150 walls and unconventional concession until 2059 these blocks are langostura sur one and two already delivering exceptional productivity with solid economics currently with seven rigs in operation beside the expansion to barrial grande Langostura Southwest and Langostura North. In terms of investment, we estimate total CAPEX of around $25 billion over the next 15 years. It will be mainly allocated to drilling and completion activities, leveraging shares infrastructure to maximize efficiency. A plateau beyond 2032, production is expected to reach around 240,000 barrels per day, 100% dedicated to export markets through Vemos, while also contributing around 10 million cubic meters per day of gas to the local market. This will translate into estimated annual revenue of approximately $7 billion, considered both oil and gas, with an average Brent price of $70 per barrel. It's worth mentioning that given the scale, long-term horizon and external export focus supported by RIGI, this project is a transformational initiative of Argentina long-term oil development, an important value creation for our shareholders. In this sense, based on the scale of the project, the approval process may be structured across different SPVs. Now, I turn the call to Pedro to analyze in detail our financial results.

Thank you, Horacio, and good morning, everyone. As Horacio mentioned, this was a record-breaking quarter for YPF. We deliver record earnings, margins, and cash generations, reduce leverage to its lower level in more than a decade, and achieve strong operational performance across all our businesses. Revenues reached approximately $6.6 billion in the second quarter, up 33% sequentially and 42% year-over-year. The increase was supported by stronger international prices, as well as higher refinery processing levels, generating surplus of fuel exports and seasonal demand for diesel and natural Adjusted EBITDA totaled $2.8 billion, increasing 76% sequentially and 2.5 times year-over-year This performance reflects the shift to shale, high refiner utilization, discipline cost management, efficiency gains across the company, and a better pricing scenario On the production side, our shale oil output continued expanding, reaching 213,000 barrels per day, increasing 4% sequentially and 47% interannually. As Horacio mentioned, excluding the conventional assets under the investment process, around 95% of our oil production would have come from shale formation. In terms of investment, during the second quarter, we deployed over $1.3 billion, allocating 77% to our unconventional operations. CapEx increased by 37% sequentially and 16% interannually, primarily due to the signing bonus for the unconventional concessions of the five blocks dedicated for Argentina LNG project. Also, it was driven by the higher investment in facilities at Langostura Azul and Norte fields. For the rest of the year, we expect further acceleration in line with the production ramp-up. On the financial front, despite the acceleration in capital expenditures, we generate a very strong frequent flow of $824 million, which I will discuss in grade a little later. As a result, our net leverage ratio declined to 1.1 times, marking the third consecutive quarterly reduction since the Q3 of last year and reaching its low level in 11 years. Now, let me walk through the evolution of our free cut flow during the second quarter. The positive free cut flow represents the third highest free cut flow in YPF history and was primarily driven by the all-time high EBITDA of $2.8 billion. This outstanding result comfortably funded our accelerated CAPEX program of over $1.3 billion, aligned with the expansion of our shale operations and key infrastructure projects. It also covered the $188 million payment related to the acquisition of Equinor assets in Baca Muerta, as well as the $150 million interest payments. In addition, the negative working capital variation was mainly explained by higher seasonal natural gas sales. It is important to note that the higher plant gas price is fully reflected in the EBITDA during the quarter. However, given the related collection terms, most of these incremental sales are collected during the following quarter. This temporary working capital effect was partially offset by $85 million in dividends collected from affiliates. It is worth highlighting that excluding the money activity, the company would have delivered an even stronger performance, generating free cash flow of approximately $1 billion. As a result, our cash liquidity position increased to nearly $2.5 billion at the end of June, compared to approximately $1.7 billion at the end of March. This further strength the company liquidity position and marked the highest cash balance in our history. This improvement provided us with significant flexibility to execute our ambitious investment plan for the second half of the year while comfortably covering our debt maturities. Turning to our financial position, we have continued improving our net leverage radio since the third quarter of last year. This quarter, it declined to 1.1 times, nearly half the peak level reported in the third quarter of last year, primarily driven by a better international prices environment, reaching the lowest net leverage level in more than a decade. In addition, the strong liquidity position achieved during the quarter allow us to pursue proactively liability management activities focused on reducing our overall cost of debt by prepaying higher-cost facilities with shorter tenors. In this context, in April, we issued a new local bond for $122 million with a four-year tenure and at 5.5% yield, taking advantage of a market opportunity to secure low-cost loan tenure financing. The proceeds were used to prepay a higher cost loan maturing in 2028, generating interest savings while further optimizing our debt maturity profile. Additionally, we amended our $450 million syndicated export refunding facility executed in the fourth quarter of last year, extending the drawdown period by two months and pushing the final maturity by one year. As a result, most principal maturities are now concentrated in 2029. During the second quarter, we also prepaid approximately $220 million of local bonds and trade facilities maturing primarily in 2027 and 2028. Separately, in June, we We signed a mandate letter with IDB Invest to establish the framework conditions to structuring a potential AB loan facility of up to $500 million. Despite not representing a financial commitment, it provides additional flexibility and optionality to address potential funding needs for next year. More recently, in August, we successfully reopened a local bond originally issued in April, raising an additional $170 million with a three-and-a-half-year tenure and a five-and-a-half percent yield. The proceeds will be used to repurchase our $140 million bond maturing in February 2027, further improving our debt maturity profile while reinforcing our commitment to proactive liability management and funding optimization. Looking at our debt profile, Remaining maturities for the second half of this year amount to approximately $700 million. Nearly 40% corresponds to local bonds, 28% corresponds to amortizing international bonds, while the reminder is composed of other local and international financial loans. Finally, following the recent sovereign rating upgrade, in May, Fitch upgraded our rating to B- with a stable outlook. S&P upgraded YPF's rating to B in June, and Moody's also upgraded the company from B2 to B1 in July. This lasting rating is the highest YPF has achieved in recent years, broadly in line with the level the company held between 2017 and 2018. Overall, these upgrades, together with our broad access to capital markets and financing opportunities, reinforce both the momentum and sustainability of our credit story, reflecting the strength of YPF's financial position and the market's confidence in our strategy and credit profile. I will now turn it to Max to walk through the operational performance.

Thank you, Pedro, and good morning to everyone. Let me dive into the evolution of our upstream performance in the quarter. Our upstream strategy continues to deliver outstanding results with shale oil driving growth, improving efficiencies, and consolidating YPS position as a best-in-class Bacamorta player. Importantly, shale oil output continues to more than offset the conventional divestments, supporting a more resilient and higher margin production base. In that sense, shale oil production continues the growth path, hitting a new record high, reaching 213,000 barrels per day in the second quarter, representing a sequential increase of 4% and a 47% year-over-year. This performance was primarily driven by the strong contribution from Langostura Sur, followed by higher production recorded in the north hub of Vaca Muerta. In addition, since May, we have incorporated the production associated with our 4.9% stake in Mandurria Sur block and our 15% stake in Bajo del Toro block, both recently acquired from Equinor. Looking ahead, we expect shale oil production growth to accelerate during the second half of the year as key infrastructure projects and other facilities, like the oil treatment plant in Langostura Sur, continue to move closer to startup, including BEMOS, which reached around 77% completion as of June 2026. Shale oil expansion fully compensated the continuous divestment from conventional assets, which dropped 49% year over year. Excluding the conventional assets that are under the divestment process, conventional production would have been roughly 18,000 barrels per day in the second quarter. total lifting costs excluding specific well service costs continued the downward trend decreasing 31 percent year over year at 8.4 dollars per boe in the second quarter reflecting the structural improvement in our cost base excluding the divestment assets mentioned before lifting cost would have been below seven dollars per boe focusing on our shale oil hub we continue to operate at best in class levels at around four dollars per boe essentially flat on a sequential basis turning to natural gas the production average 37.3 million cubic meters per day down 6% year-over-year, primarily reflecting the exit from conventional fields, partially offset by the expansion of shale gas production, mainly led by La Calera block. Additionally, let me point out that during the second quarter, a well-located and rincón de Mangrucho block reached production of 1.3 million cubic meters per day, becoming the highest producing well within the basin's dry gas window. Our capital allocation is currently focused on the oil window of Vaca Muerta, reflecting the greater flexibility of oil demand supported by higher evacuation capacity, while natural gas still remains largely constrained by domestic consumption. Looking ahead, the development of integrated LNG projects is expected to unlock significant incremental demand, leveraging YPF's substantial acreage position, world-class resource-based and Biocamuarta gas window. Overall, these results highlight the consistency of our upstream strategy, where shale development not only drives production growth, but also enhances efficiency, lower costs, and supports structurally stronger and more profitable results. Moving to our midstream and downstream segment, our processing levels set a new record in the second quarter, averaging 351,000 buyers per day, reconfirming the reliability and flexibility of our refining system. It grew by 2% sequentially and 16% interannually, where during the second quarter last year La Plata refinery was under maintenance. This exceptional operational performance together with a new record production of gasoline and mill distillates enable us not only to fully meet domestic demand without imports, but also to supply local refiners and expand exports. Looking ahead, we expect processing to gradually normalize towards ordinary levels as scheduled maintenance activities will take place during the second half of the year, thereby ensuring sustained operational reliability and long-term efficiency. Regarding domestic sales of gasoline and diesel, dispatch volumes increased by 7% quarter-over-quarter, driven by an expansion in diesel seasonal demand on a year-over-year basis gasoline and diesel volumes grew by 10 percent supported by stronger demand particularly in diesel across all commercial segments as a result we increased our market share to 59 percent from 57 percent in the first quarter and up to 61% when we consider gasoline and diesel produced by YPF and dispatched through third-party gas stations. It is worth mentioning that beyond local demand, in the second quarter, YPF exported nearly 100,000 cubic meters of gasoline and diesel. In terms of pricing strategy, as Horacio explained before, In April, we decided to temporarily postpone further price adjustments alongside a 1% increase. This temporary measure, which concluded in late June, acted as an effective buffer, allowing us to preserve fuel demand during a period of elevated volatility, while progressively reducing the gap with import parity as market conditions evolved, maintaining a competitive position in the local market lastly let me highlight that our midstream and downstream adjusted ABDA margin expanded to nearly $30 per barrel in the second quarter benefiting from strong processing volumes and a successful execution of our commercial and pricing strategy now let me briefly walk you through the progress of our upstream efficiencies during the quarter. We continued to deliver consistent improvements in productivity across our shale operations driven by execution and ongoing efficiency gains. Starting with drilling activity, we continued setting new efficiency gains in our core shale hubs. During the first half of 2026 we reached 354 meters per day 9% above 2025 average and recording roughly 30% increase compared to 274 meters per day recorded in 2023 in our unconventional fracking activities we also delivered strong efficiency gains across our key operating metrics during the first half of the year we recorded 11.4 stages per day 18 percent higher against 2025 levels and representing a remarkable expansion of 50 percent compared to 2023 while pumping hours per day rose to 19.2 hours 14 percent and 32 percent above the average of 2025 and 2023 respectively it is worth highlighting that in june we achieved record levels of fracking completing nearly 1400 stages and representing around half of the country's activity moreover during july we achieved another major hydraulic fracturing milestone by pumping continuously for 203 hours and completing 86 stages at Banduria Sur block. It represents over 8 days and 11 hours of uninterrupted operations. This achievement was monitored through our real-time intelligence center and reflected a fully remote and autonomous fracturing operation completed with zero incidents all these records performances in baka muerta brings us even closer to permian level operating standards in the downstream business in the second quarter we continued to strengthen yps position as a key player in argentina's energy transformation as part of our innovation program we visited tesla's tiger factory in texas one of the most advanced industrial facilities in the world and signed a letter of intent to explore collaboration opportunities in fast charging networks and energy storage combining tesla's technology leadership with ypf nationwide infrastructure platform this initiative reflects our commitment to modernizing our energy system, advancing innovation and supporting the adoption of next generation energy and mobility solutions that will enhance the country's competitiveness and long-term sustainability. Moreover, as I mentioned before, our outstanding processing levels resulted in a surplus of gasoline and mid-distillates production, enabling YPF to avoid imports, supply local peers, and expand our exports. Additionally, during the quarter, we completed the works related to the new fuel specification project at our Lujan de Cuyo refinery, marked by the successful startup of the new diesel hydrotreating unit in July. In parallel, we made progress on engineering works for new hydro-treating units at De La Plata and Plaza Winkle refineries to ensure full compliance with diesel specifications. Importantly, all these improvements are the result of continuous optimization efforts across all of our operations, supported by better well-planning, disciplined execution, and a more efficient integration with our service providers. I am now turning to Horacio to continue with updates regarding LNG projects.

Thank you Max. Let me share the progress we achieved on the LNG projects. Regarding the tolling phase, I would like to highlight the recent approval of San Mateo Gas Pipeline SPV under the RIGI framework. The project contemplates the contraction of a 470-kilometer gas pipeline connected Trattachene in Bacamuerta to the San Mateo half. It's expected to have transportation capacity of approximately 27 million cubic meters per day by mid-2028. the project will require a total investment of around 1.3 billion dollar and is expected to be funded by a project financing scheme with 70% debt and 30% equity importantly the project finance is progressing very well and is already at the advanced stage with financial closing expected during q3 this year turning to argentina lenji project the most relevant milestone of the quarter was the agreement signed in june between ypf and the government of neguen this set the long-term regulatory and fiscal framework applicable to argentina lenji all of these steps provide a more predictable and competitive foundation to continue advancing the project we also made significant progress in the upstream segment of the project through the agreement to incorporate E&I and XRG into the APCO Argentina LNG 1 the upstream SPV that will hold 100% of the five wet gas block dedicated to the project and the DC structure E&I XRG with each call 32% interest YYPF remain the operator with a 36% stake this reinforces alignment across the entire value chain enhanced execution capabilities and represents another important step toward reaching the final investment decision on the execution front we have recently selected the front runners of the epc of the gas angel pipeline as well as the integrated gas treatment plan in addition on the financial side we have completed all the documentation required to open the virtual data room with the ecas which was successfully launched in July this mark another important milestone in the project finance process and further demonstrate the continued progress of Argentina LNG overall Argentine LNG continues to gain momentum this project will not only accelerate the development of aka Marta but also have the potential to reshape argentina export profile over the coming decade finally i would like to share our revision to our 2026 guidance this reflects a strong international price environment and its direct impact on profitability cash generation and balance sheet strength we are assuming a brand price of 75 dollars provided for the second half of the year. This assumption remains subject to the high volatility seen in international markets over recent weeks. Under this scenario, the average Brent price for the year 2026 would be around $82 per bar, 30% above our previous assumption of $63 per bar. As a result, we now expected a shot debita in the area of $8 billion, representing a significant increase from our previous guidance for around $6 billion. This improvement is supported by a higher rent environment, operational efficiency, and strong refined product crack spreads. And let me highlight that this new guidance compares very favorably with YPF 2023 EBITDA. In fact, under exactly the same comparable brain condition, in just three years, YPF is doubling the EBITDA from $4 billion to $8 billion. dollars this clearly reflects the strength and discipline of the 4x4 plan and our ability to create tangible and sustainable value for our shareholders on the operating side we remain fully on track with our shared oil production targets we continue to expect average oil oil production of around 215 thousand birds per day during 2026 and to reach an exit rate of approximately 250 thousand birds per day by the ERN with respect to investment we expect to accelerate deployment during the second half of the year this is mainly driven by progress in facility construction maintenance activity rescheduled for the second half and the faster development of the sauner half of Baca Muerta through Loma Lala Taoy. As a result, we're increasing our full year capital guidance by approximately 5%. The new range is $5.8 to $6.2 billion, remaining around 70% allocated to shale operations. despite the minor increase in our capex plan we expect to end the year with a positive free cash flow position of around 2 billion dollars this figure includes M&A proceeds already collected and assuming the proceeds expected from transaction currently under execution this strong cash flow outlook is also reflected in our balance sheet expectation we now anticipate net leverage to decline significantly to nearly one time this compared with our previous guidance range from 1.6 to 1.7 times in summary this revised guidance reinforced the strength and resilience yps business model a more favorable pricing environment is related into higher profitable a strong cash generation, and lower debt. At the same time, our strategic priorities remain unchanged. Most importantly, this provides further evidence that the 4x4 plan is delivering concrete results position YPF for a stronger, more profitable, and more financially robust future. With this, we conclude our presentation and open the floor for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Michael Furrow with Pickering Energy Partners. Michael, your line is open, please go ahead.

Hello, good morning and nice quarter thanks for having us on the call and for taking our questions i'd just like to start with capex came in deadly below expectations this quarter particularly on the upstream side of just under 1.1 billion so uh just given the song start to the year and the acceleration of spinning and activity in the second half of this year uh could you help us get a better understanding of the shape of capex or activity levels for the remainder of 2026. okay good morning thank you much for the question.

You saw the guidance, no? We are going to accelerate because our results and we secure the rigs and we secure also the sets, the fracture sets. At the end of the year, we're going to have 19 rigs and now we have 16. The labor that we think that we are going to finish at the end of the year, it will be $6 billion. The production, the end of the production for in December, $250. For sure, we are going to accelerate next year. We secure the rigs also for next year. In February, we are going to have 21 rigs.

Great. I appreciate that, Horacio. Maybe just following up on that point, the shale productivity continues to look strong across the asset base and and to us at least it seems like the company's more on more than on track to hit its 26 guidance and 250 000 barrel per day shale exit rate so rossio are you seeing the same thing and and what would need to happen in the back half of the year to put that target out of reach for you are talking for next year and okay for the d150 000 uh shale exit rate correct okay okay okay OK, we have the rigs, and we are finished the drilling.

So we need to fracture all the walls. And the only thing that we have to have from the facility point of view is a PTC in Langostura Sur. We think that in September it will be the COD. and with that, we can reach the number without problems.

All right. Thanks for your time and nice quarter. I'll turn it back.

Okay. Thank you.

Your next question comes from the line of George Gazdout with Latin Securities. George, your line is open. Please go ahead.

Good morning to you all and congratulations on the record quota. I have two related questions this morning on Black and Wester's evacuation capacity. For the first one, we've seen a few reports of delays to the Wacomastasur monoboy delivery out of the Middle East, and I was wondering if you had any comments on that. And as a follow-up, Olil Valle is looking to temporarily increase capacity and duplicate using polymers and upgrades to pumping stations.

And as its largest shareholder, I was wondering what your expectations for that initiative were and whether the additional capacity could allow YPF to sustain its production ramp if Wacomastasur were delayed. thank you okay regarding demos for the mono boy we are closing our fingers we have in the vessel and now is passing the almost straight so maybe next week we will have very good news okay um regarding uh as we say plan b from in vemos we bought another one that is going for sure not to feel in dubai because of the straight okay and so we think that we have everything on on on track and uh it will be success the the pass of the vessel from the trade. That is what we have today. The valve, we are going to use all our capacity. Remember that we need capacity for the free refineries and also for export. Our plan is to export by Bamos. And because of the production that we are going to have next year, that I will going to say in in invest in better life i i think it's in april next year in new york we are going to use the majority of the capacity that we have thank you very much no thank you your next question comes from the line of andreas cardona with city andreas your line is open please go ahead.

Hi, good morning. Horacio Federal, congratulations on this very strong record quarter and also the execution of the capital allocation front. Two quick questions on my side. Given the projects being approved under the regime, does the industry see the need to accelerate the development of the vaca muerta sewer phases that were originally planned for 2020 and beyond and on the capital allocation for all you have complete many of the processes previously announced which ones are still pending and are you also reviewing the portfolio to assess potential additional divestments thank you okay um to answer the first one well i know where we

are going what is our north for ypf and also as i said before we are going to present to you next april uh our numbers is only industry need to improve the the demos uh 20 could be if they go as quick as us, I think in 28, could be 28, if not from 29 beyond, okay? But we have the plans to do that, okay? We have. From the capital allocation for the portfolio, with Metro Gas, we just finished all the selling that was no core. From the core ones, I would say no core, from a andes what is the conventional after the signature last last week from mendoza fields ypf is going to be a company with 95 percent of production from back and water that means that we can say that we are almost just one i say unconventional integrate company the other The other thing that is necessary to sell, we are in process to sell those fields also. So maybe at the end of the year, it could be 100 or 98 or 95 or 99. But I think we finished that very difficult process that when we start, that everybody could doubt at that moment because it was something difficult to do in in argentina and i think we were very successful so uh i think i answered your question i don't know it's okay or you need more explanation of oh i don't know if i answered everything okay thank you Your next question comes from the line of Milin Carvalho with JP Morgan.

Milin, your line is open. Please go ahead.

Hello, everyone. Good morning. Congrats on the very solid results. And thank you for taking my question. I would like to explore a little bit more on the downstream side. So you had very strong results, very strong margin, despite prices being a little bit below international parity. So, could you comment on what are your plans for the rest of the year in terms of fuel prices? If oil declines should fuse follow, or should we see YPF sustaining prices to compensate for what we are seeing in this period below parity? Additionally, on the utilization rate, you have been running above the 100%.

Should we expect maintenance in the second half? okay thank you for the two questions i'm going to the second and after to the first it will be more i would say long for the second we think because we have some topic at the i would say in the fourth quarter no in the fourth quarter uh we think that we are going to have a an average of 100 from the the refinery or all ypf from the prices as everybody i don't know what people that follow ypf we we can remember that we make a buffer prices because the demand was very difficult it's going going down down down down and it could be negative we call at that moment for the buffer we call ypf help you now we are in the in the face of you have YPF that is a compensation and it depends on the price it will happen our policies international prices and also we see the the offer under demand the supply on demand sorry and remember whether we have a real-time television center where we are the unique company that we can see all the pumps in real time we see the demand minute by minute so we have plenty of information to take very good decisions okay and and so we have different policies micro prices policies that will continue and and and so we see the the price of oil i think nobody knows 15 days ago, it was in almost 70. Today is 85, 86. So it's very volatile. And it depends on that will happen in the second half of the year. It's okay or I miss something?

Thank you.

Okay, thank you. of any an exergy into the upstream jv what are the next key milestones towards

FID and perhaps what remaining commercial or regulatory risks still need to be addressed before the project becomes fully sanctioned thank you one because I am the to feel I will ask the guys and with open so you will see that and after the answer, ¿qué me pregunto? No, no, hablámelo, que lo escuchen. Tell me in English what it was, decime que me pregunto.

It was about the project of Argentine energy and what are the things that are pending on that project.

Okay, sorry, I was confused. and sorry about my english the argentine lng we are working very hard we finish all the documents all the documents we are in in the ddr process with eca's and banks and that we have all the technical finishes and we already build the plant in you can the EPC of the five pipelines what is the gas pipeline and the oil pipeline we are going to be in two months no more than that the material of the pipeline and also in a couple of months, no more than that, it will be also the big, I would say refinery, but it's not refinery. It's the big plan of NGLs and conditioning the gas for the LNG that that it will be in Rio Negro. That is a big, big one area. So from the point of the project, We are very ready to have the FID at the end, in the fourth quarter, and start as soon as possible after that all the work and all the, how do we say, contractions, everything on that. And from the point of the contracts, as I say, we finish all of that with the promise of Ukraine and the promise of Rio Negro, we have everything done. We have all the loss of LNG. We have all the procedures. And also we have that our partners now are partners of us in the upstream. and so we are very ready to have the FID this year and that will be very important for YPA, for all the partners and I think also for our country.

Thank you.

Your next question comes from the line of Leonardo Marcon with Bank of America. Leonardo, your line is open. Please go ahead.

Hi, everyone. Thank you for picking my questions. I have two from my end here. Also, the first one is also on the Argentina LNG project. What LNG price are you assuming for the FID, and what is the IRR target are you underwriting for the project? My second question is regarding the capex for the upstream, right? I mean, with the improvement in drilling and frag speed, right, could you share your current drilling and completion cost? And additionally, on that point, is there still room for further efficiency gains? Thank you very much.

Okay, let's go to the first. This project is very robust. I don't know if you know that is so good because we have in we are in the window of wet gas that this project produce or the revenues is half in roughly half or half liquids half gas so it's very very robot what are the price that we use is futures in general what in white period use market prices okay uh but it's very robust really this is a very good project because you have a a natural catching between the fluids for the project and for the investment talking about you say you come you go totally to a different one that is the our price, our cost for the wealth, if you take 3,000 meters of horizontal length, I have to explain to everybody of you that we are using 3,500 now, what is more profitable because we have very good efficient because of the real-time intelligence center, because our professionals. But if I take 3,000 meters of lateral length, we are around $11.5 million for the cost of the wealth.

Got it. Thank you very much.

Your next question comes from the line of Matias Cataruzzi with ADCAP Grupo. Matias, your line is open. Please go ahead.

Hi, Horacio. How are you doing? Hi, team. This was an amazing quarter that you presented, so congratulations on it. I have a few questions regarding capital allocation and the divestment process. You'll be having 1.2 billion of extra cash this year, combined with an excellent EBITDA for this year with high oil prices. Are you expecting to accelerate CAPEX, the leverage this year, or are you preparing for capex contributions for the argentina lng project is inorganic growth on the pipeline or will you bring forward the dividend distribution expense expected for 2028 and then i got one more question about what should be the second half of the year r&m margins going forward, and how do you see the buffer so far? It ended in July, but how do you see downstream prices going forward?

And we'll be seeing a trajectory back to the 12 to 14 dollars per barrel of R&M margins you previously guided or she's expected to keep at these levels okay first of all with the capital allocation you have you have to remember now we the year was totally different that all the analysts thought we prepare for very low prices and the life was different it was high prices so we have better results but also we work always it doesn't matter the price in optimization and efficiency operational efficiency in yps are extremely good today so we have that is i explained in February we had 21 weeks but if you're comparing in last December we have 12 for guacamole so we say the incremental and you will see in April when we talk with you at the investor like the there is a what else you asked me for capital location no I think it's greater um also argentina lng and also about the the vemos and the uh and the equation okay we think that we have a good program we have the the capital and also we can have some we are we are working in improve our debt. If we need more money, it depends on the price. I think the market should know that we are doing very well and manage very well YPF. We don't see big difficulties for developing Argentina and Lenzi at all. That's why we're preparing for that. We're preparing for all those projects, but with low prices. So I think we are very good shape. Regarding the prices in downstream, we don't see that it's going to work down, okay, to 12 or 14. We think that we can have good margin. Why? Because we improve so much the operational efficiency in all our refinery. And also, we are improving a lot in the logistics, in the logistics, that we have excellent margin because we have an excellent system. YPS has, in my point of view, the best global system for downstream. as i explained before of the prices i already explained what we think okay okay and one last question on ypf agro uh is it still considered core uh is it do you have a sale process ongoing in ypf agro we made a bidding process and it was not success and because we were not success we decide because it very it was very difficult to take out really okay so or what we thought that to make for for a private investor was not good uh we don't know But what we decide is to take out, we make like EPA for Agro out of downstream, and we put now in another vice president what is in the new energies, because we are making more focus. And today I was discussing before this call for two hours, how to deliver more efficiently. And I think we are going to have very good results in the future. And we are going to make a new company, YPF Aero, but it will be 100% of YPF.

Okay. Thank you so much. And congratulations on the quarter.

We have reached the end of our Q&A session.

I will now turn the call back to Horatio for closing remarks. okay thank you very much for everybody and thank you very much for the congrats we are all the all the team of ypf we are very proud to work in our company and to make value for all of you and and so we are going to continue to make value that is our goal and that is our problem thank you very much this concludes today's call thank you for attending you may now disconnect.