Welcome to third quarter 2018 YPF Sociedad Anonima earnings conference call. My name is Sylvia and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. [Operator Instructions] I will now turn the call over to Sergio Giorgi. Mr. Giorgi, you may begin.

Right. Thank you, Sylvia. Good morning, ladies and gentlemen. My name is Sergio Giorgi, Vice President of Strategy and Business Development for YPF. I would like to thank you for joining the YPF third quarter 2018 earnings webcast. The presentation will be conducted by Diego Celaá, Head of Investor Relations and myself. During the presentation, we will go through the main aspects and events that explain our third quarter results. And finally, we will open up the call for questions. We will be making forward-looking statements. So, I ask you to carefully review the cautionary statement on slide two. Also, our financial statement figures are stated in Argentine pesos and based on International Financial Reporting Standards. In addition, certain financial figures have been adjusted to reflect additional information to let you better understand our key financial and operating results. Diego will present now the financial results for this quarter. But before, I would like to provide just few elements of context. It was a difficult quarter for Argentina as we continue to see high currency devaluation, higher interest rates and economy starting to soften. During the quarter, the country agreed with IMF to increase the total amount of the program from $50 million to $57 million and to accelerate its disbursal. Local oil was traded at an average price of $65 per barrel and our average gas price was $4.76 per MMBtu. Total hydrocarbon production dropped 4.3% vis-à-vis the same quarter of 2018, mainly driven by a decrease in NGL production linked to a scheduled maintenance stoppage. However, as we explained during October investor day, we faced some gas curtailments too and we will detail these later on. We continue with our efforts to fight conventional production decline and increase our unconventional production every quarter at the same time that…

Thank you, Diego. As we have been flagging, and as we showed recently in our investor day in New York, safety is a core value for YPF as our daily work is done in places with flammable liquids, high pressure in confined spaces, we need to be very vigilant and ensure that all the safety measures are taken, so that we can produce, treat, transport and sell our products without harming our workers, the environment or the communities. As you can see in the chart, the current injury frequency rate, an indicator that measures the number of people injured every million hours worked, has been improving substantially in the last few years, proving that the actions that we have been taking over the last few years regarding safety measures are paying off. Despite this figure, recent events have reminded us that it’s important to remain extremely vigilant as we are now entering a phase of increased activity, particularly in our upstream operations. Let’s move now to analysis of the third quarter production. Total hydrocarbon production dropped 4.3% vis-à-vis the same quarter of 2018 to 529,000 barrels of oil equivalent per day. As we mentioned before, this drop was mainly driven by NGL production that decreased 44.6% to a total of 26,900 barrels per day as a consequence of a scheduled maintenance stoppage in our affiliated company, Mega, and its main client. Crude oil production in the third quarter remained stable compared to the same quarter a year ago of 227,500 barrels of oil per day, while sequentially has increased by 1% compared with second quarter of 2018. Regarding natural gas, it is worth mentioning that Argentina is gradually shifting from a gas importer to a gas exporter. The good results obtained by YPF and by other operators developing shale gas…

Thank you. [Operator Instructions]. Our first question comes from the line of Bruno Montanari from Morgan Stanley.

Hi. Good morning, everyone. Thanks for taking the questions. First question is on refining. Considering the sharp devaluation of the currency, I think that the ability of YPF sustaining positive margins in the quarter was positive. But, of course, margins are much lower than in prior years. So, can you comment on the trends for refining margins [indiscernible]? Have we seen the trough? And can we expect that gradual recovery from now on, or should we still expect some muddle through before things get better for this particular metric? Second question is on costs. We have also seen interest cost dilution from the devaluation of the pesos on your lifting cost. So, can we expect more of the dilution to come on the E&P business in the coming quarters? And, finally, on gas prices, what is the current price realization versus what was reported in Q3? And if you can give the recap on outstanding receivables from different incentive programs and with gas distribution companies, that would be great. Thank you very much.

Yeah. Thank you, Bruno. So, in terms of refining margins, we believe we have seen the worst and we expect to recover the markets moving forward gradually. And our idea is to stay at the margins that we historically have. Concerning the cost, we have been helped both by improvements and by devaluations. So, we don’t see more dilution moving forward next quarter. And in terms of prices, Diego will answer that. Diego Celaá: Hi, Bruno. Regarding gas prices, third quarter, we registered $4.76 per MMBtu, including almost $0.30 coming from the Plan Gas. For fourth quarter, we are expecting to see a slight reduction there due to the reduction in the prices coming from Gamesa and also, since October, we have the new prices [indiscernible] companies. So, probably, price will be slightly below that $4.76, more close to $4.50 per MMBtu, including the subsidized coming from the Plan Gas.

Great. Thanks a lot. And then, just on the receivables from the programs on the balance sheet, any news there? Diego Celaá: The receivables, yes, we have – you remember, we have the $760 million coming from the Plan Gas receivables of 2017. That is already scheduled to start collecting starting next year in January in 30-month installments in dollars. Then we have close to $210 million that are coming from the difference of the FX of the period from April to October. That difference was originated with different companies. Actually there, we don’t have the details when we will start to collect that. Probably, that is going to start happening next year. But the amount – the outstanding amount there is $210 million. And, finally, we have already in areas close to $100 million coming from this year Plan Gas that we still haven’t collected any of the demand. We are expecting that to start happening soon.

Great, thanks a lot.

Our next question comes from Frank McGann from Bank of America.

Yeah. Thank you very much. Just to follow-up a little bit on your new guidance for production to be done 3% or 4%. When you’re looking at the fourth quarter, I was just wondering, in terms of the Mega project, if I understand right, the net effect from that was probably 8,200 barrels of oil equivalent per day. If you could confirm that, is that what we would expect the pickup would be in NGLs in the fourth quarter? And then, as you’re looking with the conversion to full development in phase 2 of Loma Campana, full development in a couple of the other projects, should we start to see a little bit more acceleration sequentially over the next several quarters in output? And then, just an accounting issue, in terms of depreciation, looking at the depreciation in dollar terms, if I’m correct, there’s been a little bit of volatility over the last several quarters. Then I would have thought that would have been more stable in dollar terms, given that you have your functional currency as the dollar. But if you could explain exactly what causes that distortion, it would be helpful.

Thank you, Frank. So, in terms of guidance for production related to Mega, so, yes, we had a situation with Mega during this quarter where the maintenance took longer than planned. And on top of that, the main client of Mega also had problems. So, this resulted in a decrease in NGLs production. The figure that you say, 8,200 is correct. We expect to recover some of this, but not all of it. Then in terms of production moving forward, as we said, we’re going to launch the new development. It will take some time. So, we don’t expect to see an increase in production over the short term. But, yes, over the medium and long-term for certain. And, finally, in terms of depreciation, what we are seeing now is a higher level of reserves coming forward. So, this is affecting – of course, subject to audit, but this is affecting the depreciation.

Follow-up. Does that mean that the reserve assumption that you have now is higher than what it would have been, say, in the second quarter?

What we are, I would say, affirming it’s our guidance to have the reserve replacement ratio above 1 and we’ll be comfortable about that value.

Okay. Thank you very much. Diego Celaá: Just to complement, Frank, we usually start reviewing the reserve in the third quarter. That’s why, in the second quarter, we didn’t have this yet kicking in into the depreciation, okay? That’s why we start changing the base of amortization in this quarter.

Okay. Thank you very much.

Our following question comes from Florencia Mayorga from TPCG.

Hi, Sergio. Hi, Diego. Thanks for taking my question. And congratulations for the results and strong credit metrics in the quarter. Just a couple of questions. One, I would like to know what is the impact that you’re expecting off the gas leak located at the Bandurria Sur problem during the first week of November. And also, a follow-up regarding the payment of the receivables related to gas distribution companies. How much are you expecting to receive from that? Thank you.

Okay. Thank you, Florencia. So, related to Bandurria, what happened is that we have a well-controlled incident during the current operation that ended up with a superficial oil spill around the well location and an oil spread that affected approximately 2.2 ha of land. So, there was no personnel injured during this incident. We currently have around 100 persons working around the location. We already recovered 95% of the oil spill. And we are now recovering the affected soil in order to start remediation. We are working in full combination with the authorities that have full access to the location and the procedure has been implemented. At the same time, we are conducting a thorough investigation of the causes of this incident in order to put in place, if necessary, additional procedures or reinforce training. Finally, well, this is non-material for us in US terms and we are insured against this type of incident. Diego? Diego Celaá: Hi, Florencia. Just for the question regarding the receivables coming from distribution companies, as I mentioned before, we already have $210 million in areas there. And the expectation is to start collecting that next year. But we still need the details coming from the government that has already publicly said that they will be paying back to producers.

Thank you so much, Sergio. Diego Celaá: You’re welcome.

Our next question comes from Pavel Molchanov from Raymond James.

Thanks for taking the question. At the investor day last month, you specified a five-year budget of between $4 billion and $5 billion per year. Is that going to be applicable in 2019 or should we assume a somewhat lower level of spending, given that you’ve been spending only about $3 billion this current year?

Hi, Pavel. Yes, indeed. Our five-year plan calls for an investment of between $4 billion to $5 billion per year. For 2018, we still have to define our budget. It’s not yet finished. But we’ll probably be at the low end of that value.

Okay, that’s helpful. As you're thinking about gas exports to Chile, as you mentioned, how much higher would gas pricing in the export market versus the $4.80 that you are averaging domestically?

Yes. Difficult to say now, but let’s expect the same values around $4 or $4.5.

Okay, understood. Thank you.

Our next question comes from Santiago Biagini from AR Partners.

Hi, everyone. Congratulations on the results. And thanks for taking my questions. I’d like to ask a couple of questions. The first one is related to the OpEx in the E&P business. This quarter, we saw cost dilutions after devaluation. Considering that average cash cost per BOE stood almost unchanged year-over-year, what would be the reason behind this? Peso denominated cost didn't move at all or is it cost in dollar terms that increased year-over-year? And the second question, if I may, is related to incentive plan for gas production. Are there any news regarding the projects that the company has already presented and are pending approval? Should we expect YPF to subscribe anymore projects to incentive plan going forward? Or are the projects that the company has already signed, are they the only ones that we would expect going forward? Thank you very much. Diego Celaá: Hi, Santiago. This is Diego. Regarding your first question on the OpEx of our lifting sites, if you look at those figures in pesos value, you would not see that dilution or that reduction in the cost. But when you see that in dollars, it is the right way to see our numbers. You are seeing that lifting costs have been reduced 16.5% over the last quarter in 2017, moving from $12.6 per BOE to the current value of $10.5 per BOE. So, if you look those figures in dollars, you will see that reduction.

Concerning the incentive plan, we have presented 11 projects that have been – all of them approved by the province. Four of them have also been approved by the national government and we expect the remaining seven to be approved soon. So, that’s not changing.

Perfect, thanks.

Our following question comes from Gabriel Barra from UBS.

Hi. Good morning, everyone. Thanks for taking my questions. I have two questions. The first one is regarding the price policy of your business. We saw an increase in company market share in gasoline and diesel during this year. So, my question is, what could we expect in the next year regarding the market share level? And do you expect to keep the same market share? And the second is regarding the lawsuit filed by the Burford group against the government and YPF. I don’t know if there’s any update regarding the lawsuit. Thank you.

Hi, Gabriel. So, in terms of price policy, whereas we don’t officially say what is our price policy, if you look at the chart that we presented, you can infer it. So, yes, we have increased our market share during this quarter, and the plan for next year is to maintain it around those levels. Maybe slightly below. So, this is what I can say in terms of price policy. In terms of lawsuit, Diego will give you some answer. Diego Celaá: Hi, Gabriel. In terms of the Petersen case – that is also by Burford – the current situation is that – it’s currently suspended because we have presented an appeal to the Supreme Court to decide on whether this is going to continue to be sued in the US or in local tribunal. So, we are still waiting for that. We don’t have any additional news there. That’s the current situation.

Okay, thank you.

[Operator Instructions]. And we have Lilyanna Yang from HSBC. Lilyanna, your line is now open.

Hi. Thank you for the opportunity. Regarding your production, they were a little bit like nine months year-over-year versus the full-year guidance. So, can you still catch up on that? And do you reiterate your guidance of volume growth for the coming few years? Thank you.

Hi, Lilyanna. Yes, when we did our five-year plan, we have already seen this reduction. So, we included in our plan.

Okay, thank you.

Our following question comes from [indiscernible] from HSBC.

Hi. Good morning. Thank you for the opportunity. Just a quick question from my side. You mentioned three FIDs by year-end. They should be La Amarga Chica, Bandurria Sur, but what’s the third one? Thank you.

Hi, Venesius [ph]. So, it’s Loma Campana phase 2 that we presented just couple of minutes ago, La Amarga Chica and Bandurria Sur. These are the three.

Okay, thank you.

We have no further questions at this time.

Okay, thank you very much to all. We’ll keep in touch. Bye. Have a nice day.

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.