YPF Sociedad Anónima (YPF) Q3 2018 Earnings Report, Transcript and Summary

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 we keep on decreasing well cost, increasing well productivity and preparing to launch new and profitable developments. Regarding fuel pricing, we continue with our efforts to catch up with import parity and we believe we have done most of the task, as you will see later on. In terms of business development, we would like to highlight the recent acquisition of the failed company, Oil Combustibles assets. It's main asset is the San Lorenzo terminal, which contains the largest port in the entire Parana River and over 310,000 cubic meters of storage capacity which is already physically integrated with YPF. The acquisition is extremely valuable for us since it will allow reducing the cost of fuel imports, supply more efficiently the north of the country and support a future regional expansion. In summary, despite the difficult environment, our results were strong and we continue generating enough cash flow to invest in new developments and to cover our debt maturities. With this, I would like to turn the presentation to Diego who will present the financial results. Diego Celaá: Thanks, Sergio. And good morning, everybody. Let me start with our third quarter results highlights. Revenues were up by 83.5% in pesos and EBITDA by 116%, expanding our EBITDA margin up to 30%. Total hydrocarbon production was 4% below last year. In line with the first half of the year, in this third quarter, we were free cash flow positive as operating cash flow more than doubled, reaching ARS 32.2 billion and exceeded CapEx for more than ARS 10 billion. Moving into our main financial figures measured in dollars. In the he third quarter, the dollar currency appreciated by 86% when compared with the same quarter of 2017. Revenues showed a slight reduction of 1.2%, driven by lower prices in dollars from our main products, gasoline and diesel, while exports remained flat due to a combination of higher international prices and lower exported volumes. In turn, price for natural gas was down, in average 3.3% as the former Plan Gas expired in December 2017 and less volumes are now eligible for the new incentive plan from conventional new gas. Regarding operating costs, lifting and refining costs in dollars decreased by 18.6% and 36.2% in absolute terms respectively. Royalties, which is the only cost component fully denominated in dollars, were up close to 12% with higher crude oil royalties due to the higher crude oil prices and lower for natural gas. Crude oil purchases were down 9.7% in dollars as we processed in our refineries lower level of crude oil than a year ago, while our crude oil production remained stable. As a result, adjusted EBITDA was up by 16% in dollars. Finally, total CapEx for the company amounted to $850 million, almost 8% lower compared to the third quarter of 2017, reduction that is mainly explained by the dilution of some peso items inherent to our CapEx driven by the currency devaluation. Upstream CapEx in the quarter amounted to $704 million, 2.9% lower than Q3 2017. Our activity was mainly focused in drilling and workover, which represented 71% of the upstream CapEx, followed by buildup of facilities were 20% share of the total and acceleration and other activities 9%. During the quarter, we drilled and brought into production a total of 95 new wells, including 19 shale wells and another 19 wells in tight gas formations. In Downstream, CapEx was $114 million. Activity was focused on refining, which represented 50% of the downstream CapEx, followed by logistics we have 27% share of the total, then marketing representing 17% and, finally, the chemicals were 6%. Now, let’s switch back to Argentine pesos to go over the more detailed analysis of our quarter. As we did last quarter, now we are focusing the analysis in adjusted EBITDA of our business segments instead of operating income to better provide a better understanding on how each business segment contributes to the cash generation of the company, putting aside the FX impact on depreciation and amortization which are, in fact, a non-cash effect. Moving on to adjusted EBITDA, it has come up 116% compared with the third quarter of 2017. This was mainly driven by the better operating results obtained in the Upstream business segment, which showed an increase of ARS 19.7 billion pesos vis-à-vis a year ago. Revenues of the segment increased by 112%, mainly as a result of higher crude oil and natural gas prices in pesos. While on the other hand, cash costs of this segment increased by 77%, well below revenue increase as lifting costs and other OpEx were partially diluted by the devaluation. The Gas & Power segment also showed better operating results of ARS 1.5 billion. On the one hand, better results were recorded from our subsidiary natural gas mainly due to the change in the estimation methodology and the termination of purchase price of natural gas to producers and in accordance with the latest policies of the National Secretariat of energy in this regard. On the other hand, it is worth highlighting that from Q1 2018, YPF [indiscernible] is no longer consolidated in the business segment results. And in the third quarter of 2017, this company has contributed with ARS 440 million of our EBITDA. The Downstream segment results show a decrease of almost ARS 2.3 billion. This is basically explained by higher crude oil and by fuel purchases which are denominated in dollars, partially offset by increases in gasoline and diesel prices in pesos during the quarter. However, revenues in this business segment managed to increase by 83%, driven by a solid demand of our main products in the two first months of the quarter, coupled with higher prices in pesos, although lower in dollars, for gasoline and diesel, as explained before, higher sales of LPG, jet fuel and petrochemical products and higher exports on higher international prices. It’s worth mentioning that refining costs show an increase of only 18.5% compared to the same quarter of 2017 as the currency depreciation play a beneficial role as well. The cash generation in the third quarter of the year reached a total of ARS 32.2 million, a 138% increase above the operating cash flow a year ago. This increase of ARS 18.7 billion was mainly due to an increase in adjusted EBITDA of ARS 19.8 billion and some working capital variations that were almost offset by each other. This operating cash flow more than exceeded the ARS 23.4 billion CapEx of the period and contributed with the deleverage process as guided in our recent investor day held two weeks ago. Finally, this cash generation including the dollar-denominated sovereign bonds still held in treasury results in a strong cash position of ARS 72.4 billion at the end of the third quarter 2018. As we can see in the chart on the right, we are fully funding our CapEx program with our own cash generation, reaching a total of ARS 24 billion of cumulative free cash flow during the first nine months of the year. The previously explained cash position is enough to cover our term maturities of the year and most of the first half of 2019. It is important to highlight that, during September, the company made a tender offer to purchase for cash the outstanding amount of the senior notes during December this year, taking advantage of it strong cash position. As a result, $176.2 million of the $452.2 million outstanding has been repurchased, reducing the total outstanding to only $276 million, being this one of the most important maturities for the balance of the year. Bear in mind that all of this year’s maturities have been already pre-funded by the $1 billion bond issuance done in December 2017. Our leverage ratio continued to come down to 1.7 times net debt to adjusted EBITDA, within our 2 times target for the year, while the average life of the debt remains in the six-year area. The average interest rate in pesos increased to 36.7%, while the average cost of our debt in dollars remains stable at 7.3%. With this, I would like to turn the presentation back to Sergio who will explain our operational results.

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 resulted in a situation where the gas offer meets more often the gas demand and, therefore, we face a situation during the third quarter where we have to curtail some gas production mainly in our conventional fields. This resulted in a 1% decrease in our natural gas production compared to the same quarter last year, reaching 43,700,000 m³ per day. Natural gas production would have been 2% up instead of the minus 1% mentioned before if we haven’t had to curtail gas production. Indeed, we could have produced approximately 1,300,000 m³ per day of additional gas in the quarter. The situation will undoubtedly be solved in the medium term and long-term, but it poses a challenge for the short term. We have activated some short-term levers in terms of generating more demand, like exporting gas to Chile where we expect between 1,000,000 m³ per day to 2,000,000 m³ per day exports and installing a small scale LNG barge in 2019 that will allow us exporting up to 2,500,000 m³ per day, so that we don’t have to face this curtailment again. We are also actively working on medium and long-term levers, like a sizable LNG export terminal and petrochemical projects. Until then, and in order to avoid oversupply, we are redirecting more investment toward our already derisked oil production assets, and the optionality for our shale acreage allow us to do so. When we break down the sources of our production, we can observe that shale production contributed with 21,000 additional BOEs per day in the quarter, while tight production show a decrease of 10,000 BOEs per day, mainly related to a lower production of natural gas liquids as a consequence of the schedules stoppage in Mega, as explained before. As you can observe, growth is coming from our shale fields and, clearly, most of the decline came from our conventional fields. So, we would like to do a deeper analysis of these in our next slide. In this slide, you can see that our conventional production decreased by 9% vis-à-vis a year ago. As mentioned in the previous slide, production was affected by natural gas demand restriction observed during the quarter, which volumes of approximately 1,300,000 m³ per day or 8,200 barrels of oil equivalent are impacting the natural decline bar in the chart and also by the lower NGLs production due to the scheduled maintenance stoppage in Mega, as explained before. Having said that, we continue with our efforts to actively manage the decline of our conventional fields through primary, secondary, tertiary recovery and natural gas compression in order to extract a maximum value while remaining always profitable. While primary recovery is currently the main contributor to improve the recovery factor of our conventional fields, as we detailed during our investor day a few weeks ago, we are also working very hard in terms of adjusting secondary and tertiary recovery and we have run successful pilots on both, which makes us confident that we will be able to smoothen the decline in the near future. Moving now to unconventional, net shale production of the quarter reached 57,500 BOE per day, showing an increase of almost 58% compared to a year ago. If we add to our net shale production the 91,000 BOEs per day of tight gas and liquids, our total unconventional production of 148,000 BOEs per day represents now almost 28% of our total production. In terms of our activity as a shale operator, during the third quarter, we produced 97,400 BOEs per day and we connected a total of 19 new shale horizontal wells. In relation to costs, in our shale operations, the development costs in Loma Campana continues in the good trend, staying during the third quarter of the year in the $11 per BOE area; and operating expenses continued to improve, staying now at the $6 per BOE area. As we recently disclosed in our investor day, we would like to show again in this slide the progress achieved in Loma Campana during the last three years regarding well productivity since we started drilling horizontal wells. YPF has been gradually increasing the length of our horizontal drains, moving from 1,500 m in 2016 to 2,500 m in 2018. This has resulted in an increase in the number of frac stages for well and increasing production per well and an increased EUR per well. The average 2018 EUR per well is now at 900,000 barrels of oil equivalent, which represents a 35% increase versus two years ago. The cumulative wells production is also showing an increase of 40% when compared with values from two years ago. We have also put into production the first 3,200 m horizontal drain well, with 40 frac stages, a peak production of 1,500 barrels of oil per day and an estimated EUR in the order of magnitude of 1.5 million barrels of oil equivalent per day. We will be monitoring this well in order to define if this is going to be our new design from now on. Plus, in addition to increasing the length of our laterals, we’re also working in a number of different initiatives in order to continue optimizing our operation and reducing our cost, including high-density completion, increasing the number of wells per pad, the use of soluble plugs, new well design, use of spuder rig combining with the high-spec rig, increasing the propane plant efficiency, transgeo navigation, use of data analytics and many others. Based on all these improvements, we are planning the next developmental phase for Loma Campana, for which we’re lying [ph] with our partners. This slide summarizes the key figures for our Loma Campana second phase of development. We will drill with 4 to 5 rigs, completing around 300 new wells in the next five years. We expect to reach a plateau of about 120,000 BOE per day by 2023, growing 150% during the next five years. We will invest around $700 million per year in this development. As we mentioned during investor day a couple of weeks ago, in addition to Loma Campana phase 2, we’re also actively working with our partners to launch two other shale oil developments before the end of the year in La Amarga Chica where we are in partnership with Petronas and in Bandurria Sur where we are in partnership with Schlumberger. Moving now to our Downstream business segment, during the quarter, the volume of crude oil processed in our refineries was 280,000 barrels of oil per day, 4.6% lower than the third quarter of 2017, mainly as a result of scheduled maintenance stoppage in our industrial complexes. Regarding sales, total volumes were essentially flat as an increase in domestic volume was almost offset by lower exports. Although demand for our main products, diesel and gasoline, increased, total volumes in the local market all increased 1% as they were negatively affected by a significant reduction in fuel oil demand from power generation plants as there was more availability of natural gas. Now, to provide more detail about fuel demand, on this slide, we can see on the left-hand side how gasoline sales evolved every month compared with the previous two years; and on the right-hand side, the same for diesel oil. Gasoline and diesel demand increased by almost 3% and 9% respectively during the quarter. However, during September, the market started to show some deterioration in response to the contraction of the economy and a slowdown in consumption. In October, our preliminary figures are showing that sales volumes of both products were up compared to September, following the usual seasonal trends, but still below the volumes sold in October last year. Market share for both products continued to be strong and above 2017, with 55.7% in gasoline and 59.1% in diesel. Market share for our premium products, Infinia gasoline and Infinia diesel were 61.4% and 59.9% respectively. However, we have seen some transfer in demand from premium products to regular products. As we have been explaining in the last few months, the spike in FX coupled with an increase in international prices that happened in April put an increasing pressure to our Downstream margins as prices for gasoline and diesel were reduced in dollar terms. As we always do, and to avoid a sharp negative effect in our client base and the overall economic activity, we decided to adjust our prices gradually, and this is what we have been doing and what we will be showing in the next slide. Local crude oil prices averaged $65 per barrel during the quarter, almost 15% below Brent price as a consequence of negotiation between producers and refiners. As a consequence, our Downstream EBITDA per refined barrel, and without considering the reevaluation of inventories, decreased to $4.70 in the quarter. Finally, as we did in our investor day, we would like to address one more time what we have been doing in terms of prices and where we are heading. So, the blue line in the graph represents the evolution of the blended price of fuels in pesos since crude oil prices were liberalized in Argentina one year ago. We use import parity as the main indicator of where we should stand at a minimum. The green line shows the evolution of the import parity plus the international reference for heating oil, RBOB, and domestic biofuels. Looking at the graph, it is clear that, since April, we have been below import parity; and despite the significant price adjustment that we put in place every month, we are not able to fully catch up during the quarter as peso devaluated and crude prices were at multiyear highs. However, we have now reached import parity level in most of our fuel products, except for our regular diesel, which is still below. We will continue monitoring the market conditions and make the necessary adjustments. We do care about protecting demand. As you have observed in previous slides, in a difficult economic environment, constant or permanent price adjustments result in demand softening. Therefore, we haven't increased prices more aggressively because we believe it will have been negative to our business. This is a competitive market. Prices will be adjusted based on competitive factors as we have been and will continue to be going forward. In this slide, we would like to address our outlook for the year. Our production recovery has been challenged by the situation described before of the gas offer meeting the gas demand as we have to curtail some gas production, in addition to the longer maintenance of the Mega plant and its main client. As a result, we are revising our production target for the year that we were expecting to be around minus 2% for 2017 based on technical factors to between minus 3% to minus 4%. The final value will depend on the demand of gas during the fourth quarter of the year. However, besides this reduction, we want to highlight again our ability to continue delivering on financial target despite this challenging environment. We are, therefore, reaffirming again our guidance for 2018 of 10% growth in EBITDA in dollar terms, while net leverage should stand comfortably below the 2 times guidance. The Vaca Muerta acreage that we have been de-risking has shown excellent results. Well productivity has been improving every year as well as efficiency and cost. So, we are well-positioned now to launch new profitable developments. Along these lines, we are working on three new FIDs with our partners before the end of the year that will begin to provide higher production by mid-2019 and others will follow later on. Finally, the combination of higher oil prices and the new developments will allow us to comfortably achieve the target of keeping our reserve replacement ratio above one. With that, we would like to address your questions. Thank you.

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.