YPF Sociedad Anonima

Thank you for standing by. My name is Mandeep and I'll be your operator today. At this time, I'd like to welcome everyone to the YPF 2Q 2024 earnings webcast presentation call. All lines being placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Margarita Chun, IR Manager. You may begin.

Good morning, ladies and gentlemen. This is Margarita Chun, YPS IR Manager. Thank you for joining us today in our second quarter 2024 Earnings Call. This presentation will be conducted by our CEO, Mr. Horacio Marin, and our CFO, Mr. Federico Barretta-Veña. During the presentation, we will go through the main aspects and events that explain the quarter results, and then we will go to open the floor for Q&A session, together with our senior management. 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 EBITDA. On the other hand, as of this quarter, the company decided to actively define CAPEX instead of reporting the total PP&E acquisitions as the best approximation. In this sense, we also included acquisitions of intangible assets and excluded items charged to operating costs during the period, among others. It is worth mentioning that this new definition does not alter the accounting standards of the company. It simply provides a clearer view of the CAPEX. Therefore, the analysis of CAPEX since this quarter and the comparative period is based on the new definition. I will now turn the call over to Horacio. Please go ahead.

Thank you, Margarita, and good morning, everyone. Let me start today's presentation by describing the key milestones and development of the quarter. First of all, during Q2, we produced 20% more shale oil than Q2 last year, highlighting our strategy to focus on back and water formation. In line with this growth, we are able to export 25% more crude oil through the Trans-Indian pipeline compared to the previous quarter. This was combined with zero fuel imports in our downstream business while continuing to reduce the gap between local fuel price to import parity to 5%. Operationally, in the afternoon, we hit a new record in drilling and fracking speed. Both key metrics in thermal efficiency are fully in line with our guidance for the year. In the downstream segment, we also reached an all-time high production record of gasoline in May at La Plata Refinery. A few days ago, we made significant progress in the Andes project. We successfully executed six SPAs for six clusters represented a cornerstone for the transformation of our production matrix in order to maximize our profitability. We also started the construction of the first tranche of Paca Muerta South Oil Pipeline, and we are making progress putting together the producing consortium for the second tranche. Finally, together with our strategy partner, we select the location of the Argentine LNG production in the province of Rio Negro. We will be sharing details regarding all the news after presenting the quarter results. Now, I will turn the call over to Federico to go through the details of the second quarter's figures.

Thank you, Horacio. Revenues reached nearly $5 billion, 15% up sequentially, mainly driven by higher seasonal sales of gas and local diesel demand, as well as better fuel prices and growing oil exports to Chile. These effects were partially offset by gasoline demand contraction and lower conversion production that affected our Patagonia's operation due to extreme snowstorms and climate conditions that started by mid-June and continued until early August. Interannually, revenues grew 13%, mostly on the back of a rebound in fuel prices, plus even higher oil exports, partially upset by a 6% drop in fuel demand. Adjusting the VDA totaled $1.2 billion, 3% down sequentially, due to a cost increase in dollar terms, reflecting the catch-up with December's devaluation and a drop in conventional output that I mentioned before. Interannually, it recorded an expansion of 20%, maintaining a steady EBDA margin of 24%. This consistently highlights our operational efficiency, despite challenging conditions as we had in Patagonia during this period. Our bottom line continued positive at $535 million, 19% down sequentially, mainly due to lower equity income and increased exploration expenses. Interannually, the bottom line was 41% up on the back of better operating performance besides lower amortization linked to the impairment of conventional mature fields. Total hydrocarbon production averaged 539,000 barrels of oil equivalent per day, rising 2% sequentially and 5% interannually, driven by a solid performance in our shale operations, which is our core business and current focus. In terms of investments, we deployed $1.2 billion, 3% up sequentially, and we started with the construction of the first tranche of Baca Muerta Sur oil pipeline. In addition, to the investments in refineries to reduce sulfur content. Interannually, CAPEX was 6% down, mainly as a consequence of last year's inflationary context. Notably, over 70% of the quarter's investment was concentrated in the upstream, mostly for shale operations. On the financial side, we reported a negative free cash flow of $257 million. Although the adjusted BDA was similar to the deployment of our CAPEX, Q2 was mainly affected by higher seasonal sales, thus increasing working capital in addition to regular debt service, partially offset by a dividend collection from affiliates. As a result, we posted a slightly higher net debt of $7.5 billion, while maintaining lent leverage ratio at 1.7 times, fully aligned with the target of the year. Now I will turn back the call to Horacio to continue with the operating performance.

Thank you, Federico. In the afternoon segment, the total hydrocarbon production grew by 2% quarter-in-quarter and 5% year-on-year, driven once again by Shell's contribution, which continues its upward trend and now represents more than half of the total output. Net crude oil production continues at high levels, reaching almost 250,000 barrels per day, on the back of a 20% interannual shell expansion, offsetting the drop in conventional production due to extreme climate conditions in Patagonia. Our operational activities were affected by heavy snow that resulted in the shutdown of our facilities for safety reasons. During June, our production decreased by around 45,000 barrels per day during 13 days. Since the beginning of August, the climate has improved and we continue to resume activities to normal levels. Despite this contraction, it's worth highlighting that 9% of the conventional output came from tertiary production, increasing by 6% interannually and minimizing This impact and the natural decline in mature fields. Beyond crude oil, natural gas production grew by 7% in line with increased evacuation capacity from Neuquina Basin through the new Nestor-Kindner pipeline. Additionally, the installation of the new two-work spanner in Noma-Lelatra contributed to a 10% increase in NGL's production. Moving to lifting costs, we record $16.2 per barrel of oil equivalent in Q2, remaining stable interannually, but 25% higher sequentially, primarily due to the catch-up of costs in dollar terms with December devaluation, coupled with the lower conventional production already measured before. This cost inflation also impacted the listing cost of our core half blocks that stood at $4.7 per barrel of oil equivalent on the gross basis, recording a larger increase due to specific higher pulling and maintenance costs. Regarding prices in the afternoon segment, crude oil realization prices averaged $71 per barrel in Q2. four percent up quarter on quarter as a result of a better pricing environment in the local market and our trend in international prices on the natural gas size prices reach four dollars per million bto mostly driven by the seasonal winter price of plant gas that started in may Now walking through the performance of our shale activities, in Q2, we drilled 58 horizontal wells in our operating blocks, all of them oil, 35% more than quartet on quartet and 26% more year on year. It's worth noting that shale oil production hit a new record, delivering 130,000 barrels per day. 87% of the shale oil production came from our core hub oil blocks, Loma Campana, La Marga Chica, Bandurria Sur, and Aguada del Chaniar. In terms of efficiency within our shale operation, we achieved another quarter of outstanding drilling and fracking metrics, averaging 292 meters per day of drilling and 237 stages per set per month on fracking, fully in line with our guidance for the year. Also, it's worth mentioning that last June, we achieved the highest lateral length drilling speed for one shale well in Angostura Sur block, surpassing 1,500 meters in a single day. Considering all these metrics we plan to ramp up shell oil production in the second half of the year to achieve the target of more than 120,000 barrels per day on average for 2024. As a final conclusion, let me highlight that today's production has reached nearly 120,000 barrels per day in line with our target average of the year. Moving on to our downstream segment, processing level averaged 299,000 bodies per day, recording refinery utilization rate of about 90%. Although the processing level was essentially flat compared to the previous quarter, it decreased 2% interannually, mainly due to limited availability at the La Plata Refinery, affected by a shutdown. extreme weather conditions, and a brief eruption in the pipeline during a few days, which was already restored. Despite this decline, let me mention that we set the record high gasoline production in La Plata refinery, thanks to the new gasoline hydro treatment plant and the revamping of existing units as part of our new fuel specification project to reduce sulfur content and improve fuels quality. In this sense, during Q2, we also continue making progress on the revamping of Lujan de Cuyo Industrial Complex, expected to be fully operational by next year. Fuel cell volume experienced a sequential reduction of 2%, mostly due to an 11 drop in gasoline sales. mainly due to a contraction in retail premium demand. It was partially offset by a 5% expansion in diesel size on the back of the seasonal demand from agribusiness and higher sales to the industrial segment. It's worth noting that besides the solid performance of our refineries, we effectively address the increased diesel demand by reducing inventory levels, thereby avoiding fuel imports. Interannually, fuel sales declined by 6%, particularly affected by diesel demand contraction across both retail and . However, let me point out that we are witnessing roughly a 5% demand recovery in July versus June. In terms of prices, during Q2, we continue adjusting local fuel prices, mainly aiming to mitigate impact of the devaluation and narrowing the gap to international parities. As a result, average fuel prices measured in dollars increased by 3% sequentially and 14% interannually, while the spread versus import parity decreased to 5% in Q2. compared to 7% in Q1 and 13% in Q2 last year. Lastly, efficiency-wise, since the beginning of the year, we have been focusing on the optimization of our cost structure, implementing several measures, such as the reduction of specific fuel consumption of boilers and logistic rearrangements, among others. Also, during Q2, we created a new specified and focused team to plan, monitor, and promote the new efficiency and productivity standard within the downstream business. I will now turn the call over to Federico to go through our financial results for the quarter.

Thank you, Horacio. Switching to the financial front, Let us start with cash flow evolution. Although our adjusted EBDA was similar to the deployment of our CAPEX, working capital items pressured the liquidity, such as increased seasonal billing of natural gas, payment of imported goods and services deferred from last year, and higher purchases of crude oil to third parties due to lower conventional production, partially upset by late collections from Q1. These effects were partially upset by dividend collection from affiliates. Considering also the regular interest payments, free cash flow came at a negative $257 million. In terms of financing, during Q2, we paid the amortization of two international bonds for a total of $268 million, and we issued a local hard dollar bond for $178 million at a yield of 6% with a two-year maturity. Additionally, we continued securing trade facilities and other loans. After Q2, we issued a local dollar-linked bond for $185 million at a 0% yield with a two-year maturity and promising notes $400 million at 0% yield with maturities of up to 18 months. On the liquidity front, our cash and short-term investment decreased by 13% sequentially to $1.4 billion as of the end of June. Therefore, our net debt increased to $7.5 billion while maintaining a stable net leverage ratio of 1.7 times. Regarding our maturity profile, as of the end of June, the company faces dead maturities in the next 12 months for $1.4 billion, mostly short-term trade facilities for $611 million, both with local and international banks, which we are planning to refinance. The remaining portion includes international bonds for $312 million, and local bonds for $177 million, among other loans. I will now turn back to Horacio to continue with the presentation.

Thank you, Federico. Let me briefly recap on the progress we made regarding our conventional mature field strategy. Last February, we obtained the approval of our Board of Directors to exit from around 50 blocks that contributed less than 1% of the company adjusted EBITDA in 2023, with an investment of around $800 million. This important move allow us to reallocate resources to our most profitable asset located in Vaca Muerta, enhancing our focus on high return shell projects and optimizing our overall portfolio. In April, we launched the first stage called Andes Project, making the official sale of 30 blocks, grouped in 11 clusters. During the virtual data run phase and Q&A session, we attracted significant interest, totaling over five hand interactions from various players. By June, we opened bids and received more than 60 offers from the over 30 local and international independent companies. Following a 30-day comprehensive analysis of all qualified bidders, this week we have been able to execute six SPAs with different companies for six clusters. Also, we are currently progressing on the SPAs of the remaining clusters. Regarding the blocks that are not included in the Andes project, most of them located in the provinces of Santa Cruz and Tierra del Fuego, we have already initiated negotiation and expected to move forward with the assignment and our reversion to the provincial energy companies in the near future. Otherwise, we will consider the possibility to include these blocks in the second Andes project. As an updated summary of this strategy initiative, we maintain our confidence about closing the transaction for all the blocks by ERN on track with the prospective timeline and terms approved by our board last February. Now, let me comment on the progress achieved in the oil midstream expansion to unlock the evacuation capacity in the Neuquena Basin. Regarding the evacuation to the Atlantic by the end of May, We initiated the construction of the first tranche of what we named Vaca Muerta South Oil Pipeline, or VEMOS project, connecting Vaca Muerta Formation to Allen. Currently, Allen serves as the access point to the local system, facilitation, transport to the province of Buenos Aires. Once the second tranche of VEMOS is operational, it will also be connected to the oil export dedicated port of Punta Colorado in the province of Rio Negro. The first stage has a length of around 130 kilometers with a cap of roughly $200 million. We expect this facility to become online in Q1 next year with a starting capacity of more than 350,000 barrels per day to be initially UTILIZED CURRENTLY WITHOUT THE ONGOING EXPANSION EXPECTED BY ERN THE VEMOS FOUR TRANCHES CAPACITY SHALL BE EXPECTED TO OVER 450 000 VALUES PER DAY BY THE SECOND HALF OF 2026 WHEN THE SECOND TIME STARTS THIS OPERATION THE SECOND TRANCH OF VEMOS HAS A LENGTH OF ROUGHLY 400 40 kilometers with a capex of about 2.5 billion dollars. The design starting capacity is 180 thousand barrels per day, planned to be expanded to around 500 by 2027. Also, the pipeline system will be designed to reach more than 7,000 barrels per day of total capacity easy basing requires. This project is a game changer for YPF and Argentina, increases significantly the export capacity and the bottlenecking shared resources of back and mortar formation. This tranche of vemos will be a fully export dedicated infrastructure and its offshore terminal will be located at the deep water port that will allow BLCCs, the oil mega vessels that transport around 2 million bars. Besides lower tariff, these vessels open up new international market opportunities for all Argentina produces, such as the Asian market. YPF is currently leading the development of the project as the main shipper, and we are starting it as an export consortium pilot by which the local oil producers are operators of a commercial formation, shall be able to commit and secure a portion of transportation capacity. In terms of progress to date of this strategic initiative, let me share that from the technical point of view, we have already completed the basic design engineer for the pipeline, and we are progressing the design review of the storage terminal system. Simultaneously, we have secured all key government approval environmental permits, and we are in the process of receiving final quotation for the EPC and light pipe supply. Right now, we are focusing on all effort to speed up the progress of receiving LOIs from the different export producer based on terms that will allow to start the project finance arrangement. So far, we have received LOIs covering around two-thirds of total project transportation capacity, and we are optimistic to conclude this process during Q3. Also, we have the intention to apply for the RIGI once fully regulated. Continue our focus on growing oil export and accelerating evacuation to the Pacific. During Q2, we increased our oil export to Chile, delivering 29,000 barrels per day through the Trans-Indian Pipeline, reaching an export revenue of nearly $220 million. Note that this is 25 more than Q1 and represents now 11% of our oil production. These exports one year ago were only 3%. Before ending our presentation and going to Q&A, let me briefly comment on the progress made regarding our LNG process so far. By end of July, YPF and its strategic partners defined the location of the project in the province of Rio Negro. The decision was taken after a deep analysis of technical, economic, environmental, geographic, fiscal, regulatory aspects. In this sense, YPS decided to hire, at this expense, Artur Delito, who reconfirmed our analysis conclusion. Also, let me recall the importance of this project. We once completed, expected to contribute around $15 billion annually to Argentina export revenues, significantly boosting the country's balance of payment. I will mention in previous call, we expect to own between 25 to 30 percent of the total energy capacity, engaging the rest of the industry to join this project. On the other hand, it's worth mentioning that a few weeks ago, the initiative regime for large-scale investment, also known as RIGI, was enacted. Providing a series of incentives, we consider as a key way to place back a mortal shale gas in the global market, transforming YPF Argentina in a world-class energy exporter. So with this, we conclude our presentation and open to the floor questions.

Thank you. We will now begin the question and answer session. If you've dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star one again. If you're called upon to ask your question or are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. For today's session, we ask that you please limit yourself to one question and one follow-up question. Again, press star one to join the queue. Our first question comes from the line of Bruno Montaneri with Morgan Stanley. Please go ahead.

Good morning, everyone. Thank you for taking my questions. I have two quick ones here. The first one, Would the company still be interested to look at potential shale oil acreage, which is available for a sale in Argentina? It's widely known that Exxon is leaving the country, so to the extent you could comment on that, it would be great how it would potentially complement the company's portfolio and much more focused on shale. And the second question is about lifting costs. We understand the reasons behind the increase in in the quarter, so looking for any trends you can provide us for the coming quarters, if lifting costs would remain stable at the levels from Q2, or if there could be any relief into the coming quarters, that would be great. Thank you very much.

Okay, thank you very much, Bruno. First question. As you mentioned, the Pillar 1 of YPF is to focalize in the most profitable asset or i egotist vaca muerta oil so in for our goal always we are going when there is a selling of very good asset because it's a way to improve the profitability and the and the profitability for all the shareholders. Saying that, this is a confidential process. So I cannot, sorry about that, but I cannot give you more information on that, OK? Regarding the lifting costs, in this quarter, we had particular issues. But your question is for what I see. I think that it will be in the second half. And we are foreseeing and we are working to have an average for all. I would think that we would have a different lifting cost in both quarters, but we are increasing. Remember that we are producing today. Yesterday, our production of unconventional, the daily rate, the daily report was 127 bars per per day, but this is a very good increase. We are foreseeing that for the end of the year, we will have 140,000 virus a day of unconventional, which is totally our focus right now. And we're foreseeing that the lifting cost for the second half, it will be $4.4 per virus. It sounds OK, the answer for you?

Sure, just to follow up, this 4.4 is just for core ShaleHub, right?

For core, yeah. Yeah, yeah. What is important? The important for our EBITDA is the unconventional.

All right.

Remember that we have the answer, the Andes project, and we are going out of our conventional fields.

All right.

Our next question comes from the line of Luis Carvalho with UBS. Please go ahead.

Luis Carvalho Hi, everyone. Thank you for taking the questions, and congratulations on the results. I would like to touch base on two main points here. The first one is about the, I would say, the free cash flow profile for the next couple years, right? The company is unlikely to generate cash this year, of course, because of the investments that have been made. But when I look to the debt profile, in 2025, you had something close to $2 billion to be paid and sequentially in 26 and 27. So my point here is that I would like to understand from you how you see the external risks, like if the crude prices drop or if there's any delays in terms of the production ramp up or the pipeline construction being implemented in order to allow you to flow the production or any kind of other bottlenecks that could put your, I don't know, your balance sheet in a bit more dedicated situation, you know, a bit forward. The second thing is about the crude and few prices. Of course, we've seen a significant improvement, you know, when we compare it to the past. But when we look in terms of CAPEX and OPEX, that are still, I would say, at a bit higher level. So if you can share a bit of your expectations in terms of CAPEX and OPEX reduction or, you know, efficiency gains for the second half of this year and 2025, it would be great. Thank you.

Thank you, Luis. We can start with the first one.

Yeah. It's a lot of questions. For a second language guy, it's a very long question, OK? Luis, and thank you for the question. I know you personally, so I remember you. If I not answer what you are expecting, please ask me again, because it was a long question. I tell you, I tried to answer the first part of the question. Our expectation of net cash flow are exactly the same as when we arrived here. And we are following very well the track of the results. For 2024, we will be balanced of neutral in operational point of view. So our net cash flow will be negative because of our interest payments, OK, or debts, OK? For next year, we are foreseeing that it will be neutral, in the order of neutral. But we are working so hard, so hard, so hard that maybe you will have some difference, OK, for going up, OK? Because we are working so hard. in efficiency. For their own, we have foreseen positive cash flow. All of that is without, not talking about energy, that we are looking for project finance. No, no, not to invest a lot in the next year, so we will be different. And also, it will be without M&A, OK? The prices, if the prices goes up, okay, you will have much better results, okay, much better results. And why we decide to go out for the mature field? Because we are not efficient on that. Because in that way, this company with lower price will be more resilient. But from next year on, because of our program, our focus, and where we are going, we will be resilient for very low prices because we'll be almost, I would say almost, an unconventional company with very efficient way of work. We are the best company in the results of the operational. So I'm very happy to work in this company, work hard with all the team, because we are going to have very low efficiency. It's not in the question, but maybe for everybody and to share with you. For the acting side, we started a new program, what we call Toyota World, and we signed a contract with the Toyota company. We are going to try to put the efficiency of the car industry in the world. That is very disruptive program. Everybody is very happy on that. And also, I would say the service company come to see me from the United States, the CEOs from Europe, and everybody knows that it will be a change in efficiency in Argentina. This is very disruptive, and it will be extraordinary for the efficiency way of work because we will be focused in reducing the wealth cycle, and that will deliver much more EBITDA for the coming years from now. From the downstream part, we already have a very, very ambitious program that is called Growing by Efficiency. that we have more than 100 initiatives in the Plata. We do the Plata Refinery because it's the biggest that we have, the biggest that is in Argentina, and it's a very big refinery. We have more than 100 initiatives that they will put the margin much more up. My goal when I come with YPF and all the team of downstream is to have the margin in this refinery and the refinery YPF in a very good benchmark with the American refinery. So we need to increase by efficiency our margin. And we are in there, OK? I don't know if I answered your question. If I lose something that you ask me, please repeat, and I will answer.

No, no, very clear, and thanks for the complete answer, and looking forward to seeing you in person again soon. Thank you. Okay, thank you.

Our next question comes from the line of Vincent Falanga with Bradesco. Please go ahead.

Hello, everybody. Thank you for taking my questions. I have two also. The first one, congratulations on the drilling speed metrics. Do you think there's still room to increase the 1,500 meters per day, or are you already close to a limit? What will be your dream target here in terms of meter drills per day? Then my second question, when will YPF and the other interested parties decide on how to split the interest on the Vaca Muerta sewer pipeline. Could we have a decision already this year, maybe next? Thank you very much.

First of all, I would like you to know... Thank you, Vicente, for the question. First of all, I would like for you to know me because I am a crazy guy, okay? I'm not using adidas in my life. I'm sorry if I took adidas, but I love. Impossible is nothing in life. So what I'm going to do, I don't really, the technical limit for me is the ceiling. I don't care if I cannot improve, but I push, and always when you push, always you obtain something. Every time that you think I arrive at the limit, you have to go out of the company. That means that you are a, I am an old man. That means that you are an old man from the mind. So I like you to know me. I am a crazy guy. I don't want, I don't like that you arrive to the limit. For me, it's not the limit. The guys of downstream, they don't imagine what I'm here. As soon as we have that margin, we will have another new problem. OK, that is for the first part. For the second part, you ask me,

Taking the Vaca Muerta.

The Vaca Muerta. OK. We have already signed a two-thirds of the compromise for that project. I'm totally focused. I'm focused on everything. But we are totally focused on that because I don't want to make losing money for the shareholders that pay me my salary. And so we cannot delay one day, OK? You know that we are discussing with one big company in the United States, and we are in good shape, but as soon as we have an agreement, I will tell you. But our program is to mobilize the equipment in November, and that program is the program. Yesterday, we said that we are doing that with all the industry in the same table. And we think that in a couple of weeks, we will have 100% already signed, and it's our focus. From the part of the split, remember, YPF has to lead the industry, and we are leading the industry. Our idea is to do as simple as possible. The more simple, because the midstream is not the focus of our company or any company of the upstream, the others. So the focus is to make and increase a lot the production. We are going to increase a lot the production and conventional. So as simple as it is, what we are doing is the following. The percentage of your pain is the percentage of your capacity. And we are going to make like an ISPV with all the companies. And at the beginning, we are saying not to have a lot of partners. Any partner that has more than 10% of the share, it will have a share in the board of that company. If you have less than 10%, we are not to have a board because if not, it will be very difficult to manage the company. Okay, I think I answered your question. Tell me if you are comfortable or you need more detail.

Yes, no, that was very complete and interesting. Thank you and looking forward to meeting you soon. Thank you very much.

Our next question comes from the line of Alejandro Demechales with Jefferies. Please go ahead.

Hi, good morning all. Thank you very much for taking my questions. I'll ask you two questions, if I may, please. The first one is, you mentioned the shale growth that you're expecting by the end of this year, $140,000 a day. What can we expect, say, for 2025, 2026, 2027, That's probably the first question. Then the second question is, you gave us a good update on Andes, but also when we look at the quarter, you mentioned that some of the refining margin impact was because of third-party oil purchases. So once you are out of those conventional fields, should we also expect that your refining margin is structurally lower because you need to buy more third-party oils?

Thank you so much. We can start with the first question, Ale. And then if you can, you can repeat the second question, if you don't mind. The first question was about the shade production of 25-on-1.

25-on-1. We are working. Thank you, Alejandro, for the question. We are working in short-term, medium-term, and long-term strategy all day. um for uh i would like i prefer to give you the guidance and i compromise here with you and also with all the guys that they are in this call that the day you invest on next year i give you the guidance for the three years with very good i i i it's not that i'm i cannot tell you because there are some some issues or things that I would have a better idea for by the next of the year. And I prefer, if you don't mind, in March, I think it's in March, I prefer to give you a very clear answer for everybody, and my personal compromise on the result, okay? If you don't mind. Is it okay for you, or...?

Yeah, it's okay. But can you give us then how many more weeks do you expect to add, say, in 2025 then?

Okay. It depends on several questions that you have. There was today. Today we think that it will be 15 because next year it will be a year of not growing because there will be a growing capacity on Odelval. Remember that Odelval, by the end of December, they will increase the total capacity for all the industry in the order of 15,000 barrels a day, and in April, 200,000. And so we are going to... Always we are going to go efficiency, reducing world capital as much as we can so and fill our capacity. If we have spare capacity and we don't have the race to reach, for sure we are going to to agree and remember that it's an open access here, okay? And also always I will look at the EBITDA, CAPEX, and profitability of the company. I'm not going to be crazy into higher rates and not deliver efficiency for all the shareholders, okay? Okay.

That's great. Thank you. And yes, so the second question that Margaret asked me to repeat was, once you get out of the conventional fields, you will need to buy more conventional oil from third parties for your refiners, right? So the question is, would that also put a bit of an impact or pressure on your refining margins structurally?

Yes, but remember that I have to talk about Argentina. Argentina, we are almost now in international prices. The policy of Argentina and the change of Argentina in the oil is to go in that region. they will be not different to have or not to have that. And remember also that we have increasing in our production. And also we are with some exit that we have in the Andes. We have some agreements of buying the oil. In the Mendoza part, we are the... For everybody, the best way, efficiency, to sell the oil is to YPS, because it's a hinterland that is like closed. It's not easy to open that. So that is more easily to do. The other is also San Melanito from us. It will be as it is today. They will be at the refinery, but our goal is because we are going to increase the production in the next years. I cannot say next year because it will be the other. We are focused also in the export. As soon as we increase a lot, I think that question doubt will be out because you realize that we are going to be a company that We can buy here easily, and we can export a lot, okay?

Okay, that's great. Thank you very much.

Oh, thank you.

Our next question comes from the line of Andres Cardona with Citi. Please go ahead.

Good morning, Horacio, Freddy. Congrats on the results I have. two questions. The first one is about any progress on non-core asset divestiture beyond the conventional crude processes that you have mentioned. If we can expect any announcement over the next 12 months. I remember you wanted to focus on the core business and mentioned some assets that could be divested there. So any update? And the second one is There were some interesting highlights about early results on Palermo 8K. So if you can share some thoughts about those. Thank you.

Okay. Thank you, Andre, for your question. You hear Margarita, and I don't know why he tell me Andre, because I know that you're Andre. But anyway, remember, because... They don't like my English, so that's why always they repeat me the names on that, but sorry about my English. It doesn't matter. I put the best that I can, okay? For the defense, you're talking about Pillar 2, but I'm totally, I make always control of myself. The Board of Directors approved last month and we start the process of seeing a proposal, and after we come back to sell, is YPF Brazil, which is a lubricant company, YPF Chile, which is a, we are selling some lubricants and sheds. Those are If you see David Dyer, it's not for YPF. So we are going to sell that. Also, we are in the process to see and sell Refinor, that for us is not a key asset. We start the negotiation and go into the way to go out there because it's not for YPF also. If you are talking about Metro Gas, we are going to sell, but not today because there, If I sell today, I think I'm not doing my job for you, for the shareholders, properly. Because I'm selling when Argentina will improve a lot in the macro, and when it's reducing, the macro will be stabilized, the price of MetroCabo is up. So it's not like I'm not focused on that in this company. The guy that is working there, The general manager has totally the idea that we are going to sell, but we are waiting on that because I think they are, as I will repeat, it's better for you and for all the shareholders, okay? And ProFertil, you can say also in the noise down thing, but we call it gas energy business because it's Profertil use our gas is very, very profitable. And so because it's very profitable, it's my incoherence in, say, focusing energy, but I have now a good slogan to maintain, that it's gas that makes food. So energy making food. So In there, I take out my area. It is very profitable, so we are going to maintain. We are going to see what happens with the selling on the other. And at that moment, we are going to look at partners to duplicate the plant. Remember, no, remember, no, but this is, you don't need to put money there. It's the project final or with the new project. A partner will see how to do that, okay? And in white tech, what is the research and development company, we are totally focused now in energy. There is no more talking about harvest or crops or nothing to do with that. And also last month or last week, I don't remember exactly the date, Sorry for that, but it was, I think, two weeks ago, we started a new program, what we call BACA Muerta, what is to work with the oil industry to solve a common problem for the industry. I don't know if it's okay for you, or you need more detail from me.

This is Great Color, and I just wanted to ask about YPF Loose. What are your thoughts on that asset?

Ah, well, okay. YPF Loose, no, sorry, sorry. I forgot YPF Loose. YPF Loose is a wonderful company, and we are always, we have EBITDA, positive EBITDA. It's good. We are growing. They don't need capital from YPF Group. We always refinance with the new projects, and we are growing now. We are a company that produces renewables for 700 megawatts, and we are an oil and gas company that consumes 420 megawatts. So we are in good shape in the transition period, okay? You can make the numbers there. Palermo-Aique, sorry, I forgot that, but Palermo-Aique is one week ago. I would say we are producing only water, but it's not like saying that it will be water, okay? Because it's one week ago, we take out very low water percentage of the fracture. We are in less than 5%. of total water that we use in the treatment. It has a very good pressure, very good pressure. The pressure is double the water, what means similar to shells that produce. The reduction in pressure we have in a choke of four millimeters is very good. It's comparing with my experience in another, in another shelf, and the well is in the order of 700, 760 meters, and the rate is very good. We are in 4 millimeters in 100, and if I remember wrong, it's 150. It's 150 kilometers for this 1,000 barrels a day. And so we are expecting, and really, I cannot tell you it will be oil. The pressure is a very good index on that. And I think in the coming weeks, you will see the result. And we are expecting that the first oil, if it comes, comes in the next weeks. OK?

Thank you. Thank you, guys. And congrats on the progress.

your business thank you our next question comes from a line of marina mertens with latin securities please go ahead hi good morning thanks for taking my questions i have two questions so the gap between local prices and international varieties has narrowed significantly if rent continues to decline how do you foresee local prices adjusting Could they converge or even exceed export parity? And the second one, regarding the downstream segment, this quarter it showed higher prices, reduced volumes, and normalized margins. How do you anticipate these dynamics to play out in the next quarters? Thank you.

OK.

First part of the question. The current prices of today, our weighted average is in the order of 3% lower than import parity products. If they continue to reduce, that is your question, we will reach import parity. And when you have import parity, if you are a free market, you have to... to take into account the free rider could make you in a problem because they can import and make money, okay? So there we have to understand, and I understand that you are abroad and for you it's very difficult to now say what happened in Argentina, but so far what we are doing is in a free market. And here, you can imagine that the thing that happened in the same United States for same country. So if you reduce a lot, I always declare that I will be the first guy to reduce the gasoline. But also, if the price increase a lot, I will increase the prices. Sometimes when there is prices to the fruit very, very high. It's happening in all the countries that you cannot in one day to increase that, even in different countries also. But we have to, and we are working as it will be a free market and decide on demand and supply and see what is the competence and all that, okay? I understand that for everybody it's difficult to understand that, but we are doing that. And the second part is with the margin, Marina. The second part, you asked me for the margin of the downstream, no? Yes?

Yes.

Yes. OK. This quarter, particularly because of several problems now, because of maintainer stoppage, also because of the problems in the weather in the south, we could not refine, even though we have a record. We could not refine all the quarters as expected because we didn't have the oil to do that because of that problem. Problem and maintenance, OK? So as you make two numbers, because you cannot reduce in the figure, and so that's why our margin, I don't like also, OK? Our margin was a little less than expected. What you have to spare for the second half is that it will be better than that, but don't imagine to duplicate. Duplicate is our program, what we call growing by efficiency. That will take time. We are working hard. So I think I answered the question. Tell me if it's okay for you or you need more details.

No, it's okay. Thank you.

Thank you, Marina. And since we are running out of time, we are going to take the next question as the last one.

Our final question comes from the line of Leonardo Marcon with Bank of America. Please go ahead, please.

Hi, guys. Good morning. Thanks for picking my question. My first question is related to the divestment of the conventional assets. Although the sales for some assets under the divestment plan have already been signed, do you guys see any risk for the conclusion of these sales as they still need to be approved by the provinces? And my second question is more regarding the capital allocation. With the conclusion of all the assets under sale, their cash generation should improve by around $750 million in the next year, right? So I would like to have a better grasp on what could we expect from the company in terms of capital allocation in the next year. So if you could provide more color on what are the expectations here. If we could think about this then, or if this cash should go to accelerate projects in Waccamoreta.

Thank you. Thank you, Leo. Sorry, Leo, but I was lost in some of the further questions. To be fair with you, it will be open, the microphone. And I will ask Margarita to tell me in Spanish. So everybody knows Spanish will know that Margarita explain me your question and after I answer the question in English.

So one second. Go ahead. Okay. Y por último, una vez que estemos fuera de Campos Maduros, la capital allocation.

Okay, okay. Thank you, Leonardo, for the question. Decime lo primero que me dijiste. Okay.

Don't be.

That is life. Okay. I'm not ashamed because I have to ask you. Okay. We already signed six. I think in six clusters of 11. I think in the, I would say in the couple of days or more, I expect it. If not, I will be very, how do you say, very optimistic. No, very optimistic. No, I will be disappointed with the value of working merchant acquisition. Okay? Okay. So I think we are going to sign two more in the next week. The other that they have there, there is one that is important because we have first to discuss a contract, export contract. We are trying to give that export contract to another company and after it will be already out. The other two, we are negotiating, and I think we are going to be out. I'm going to be out first of January. We will not have those. If not, I don't know what I will do with the guy of my acquisition, but it will be good. I'm sure that we will be out of there. Regarding the provinces, as soon as we have that, we discuss with them, and so on. When we sign, we know that we expect, because I have to say that, we expect that it will be approved, okay? So I think that we are in very good shape, really very good shape. The only thing that I have received from WhatsApp and from people of the industry is congratulations because what we did, people in Argentina think that we are superb. I'm not superb. The guy who made acquisitions, sometimes they're superb, sometimes... They are not, but in that way, they are superb. So I'm very happy on that. After that, we have two provinces that we are discussing, and also I am very positive that we are going to be out of that. So what we are doing with the capital, if, if, I can put all that capital in Vaca Muerta, I will put there. If not, it will be a safer capital for you because if I save the capital and make more EBITDA, but I have the opportunity to put more production on board, I'm going to lose your money. But next year, because we are going to have like a bottleneck in the capacity, if we have to save the money, save for the next year, we will save for the next year, okay? But we are not going to waste your money never in my life.

It's okay?

That concludes our Q&A session, I will now turn the call over to Horacio Moren, CEO, for closing remarks.

Okay. Thank you very much for all the questions, and we are very happy to have the work that we are doing in YPF, and also we are very happy of your questions because it's a way that allows us to improve. Our goal is to improve the profit for you, okay? This is our goal. There is no other goal. Thank you very much.

This concludes today's call. You may now disconnect.