Good day and thank you for standing by. Welcome to the YPF 2Q 2021 Earnings Results Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Santiago Wesenack, IR manager. Please go ahead.

Good morning, ladies and gentlemen. This is Santiago Wesenack, YPF's IR Manager. Thank you for joining us today in our second quarter 2021 earnings call. I hope you all continue to be safe. This presentation will be conducted by our CEO, Sergio Affronti; our CFO, Alejandro Lew; and myself. During the presentation, we will go through the main aspects and events that explain our second quarter results. And finally, we will open up for questions. Before we begin, I would like to draw your attention to our cautionary statement on Slide 2. Please take into consideration that our remarks today and answer to your questions may include forward-looking statements, which are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by these remarks. Also note the exchange rate used in calculations to reach our main financial figures in dollar terms. Our financial figures are stated in accordance with IFRS. But during the call, we might discuss some non-IFRS measures such as adjusted EBITDA. I will now turn the call to Sergio.

Thank you, Santiago. Good morning, ladies and gentlemen. Thank you for joining us on the call today. During the second quarter, we delivered very strong financial and operational results and profitability continued improving even surpassing pre-COVID levels. Adjusted EBITDA for Q2 reached $1.1 billion, a 41% jump when compared to the previous quarter and 14% higher than the same quarter in 2019. This improvement was partially supported by higher realization prices across the board, including not only the pump prices that are with similar dollar levels to those registered on average in 2019, but also higher pricing for natural gas, petrochemicals and non-oil products. Besides domestic demand for gasoline and diesel continued their recovery trend despite the setback presented by the mobility restrictions temporarily reestablished since the last week of April until June. During the quarter, diesel demand was almost back to the pre-COVID levels whereas gasoline demand was the most affected is still standing at about 18% below pre-pandemic levels, although keeping the recovery trend to stand in July about 7% below. But our profitability improvement did not only come from improved prices. We have delivered the production recovery that was announced at the end of last year, while prioritizing operational efficiency. Despite the disruptions originated in the 20-day blockade in the Province of Neuquén during April, which had a significant impact in our operations. We managed to grow our total production by 6% sequentially in Q2, further growing by another 6% during July, reaching an average of 490,000 barrels of oil equivalent per day. Shale production led this recovery as it jumped by 22% sequentially in Q2, primarily as a result of 35% expansion in shale gas and even higher 48% jump when considering only our operating areas, comfortably meeting our planned gas for commitments. On the crude…

Thank you, Sergio. And good morning to you all. I am glad to say that our results for the second quarter, have continued to show a very significant improvement. Our revenues increased by 26% sequentially reaching over $3.3 billion in the quarter, mainly supported by higher realization prices across all segments and the continuous growing trend in oil and gas production. However, our revenues still remain below pandemic levels, standing 9% below the levels of the second quarter of 2019, mainly on lower volume sale of gasoline and net fuel prices at the pump measuring dollars, which to an average about 5% below. Going through the evolution of OpEx, although it expanded by 18% sequentially, it came 17% below pre-pandemic levels of Q2 2019, or an even larger reduction of minus 20% if we excluded non-recurring standby costs related to the blockade in Neuquén during April. These results, reconfirm our continuous commitment towards maintaining structural cost efficiencies gained as part of our company-wide cost reduction program, introduced last year. More specifically, during the quarter, we managed to keep overall lifting cost per barrel of oil equivalent around 10% below pre-pandemic levels, but increasing by 5% sequentially as expected higher unit costs in the conventional fields surpass the effects of lower unit costs in the unconventional side, where the average lifting costs student $4.60 per barrel of oil equivalent during the quarter. On the back of the recovery in revenues, and the focus on cost efficiencies, adjusted EBITA for the quarter jumped 41% sequentially reaching $1.1 billion or 14% higher than the pre-pandemic fear of the second quarter of 2019. Furthermore, our EBITDA margin increased by over three percentage points in the quarter to 32% standing at the high end of our metrics for the past few years. It is also…

[Operator Instructions] Your first question comes from the line of Bruno Montanari with Morgan Stanley.

Hi, good morning. Thanks for taking my questions. I have two questions. The first one is a little bit more color about the CapEx deployment in the second half of the year. I understand that you are reaffirming the guidance, but looking at execution in the first half, then some inclined one for the second half, the company would need to increase the spend by around 60%. So just I was wondering operationally, this is roughly easy thing to do because that's a level at which the company has not invested for a few quarters. So what needs to happen or what needs to change in terms of execution in order for CapEx to reach that level and in case you’re both short of expectations on CapEx if there are any implications for them some targets either this year or next years or next year. And the second question is more about the timeline for further liability management for the 2022 maturities. You do have one of the international volumes do it in the second quarter of 2022. So wondering if the plan is to hope that you are able to access the dollars and just rebate that to the cash balance or if the company sees the space to issue more dollar linked debt in Argentina or eventually try to do another bond repurchase and a rollover. Thank you very much.

Good morning, Bruno. And thank you for your questions. Let me go with the first one, CapEx, yes, as you have just said we need to ramp up our activity in the second half. Clearly the first half was a little bit below or behind schedule primarily in the first quarter as we have mentioned in our previous earnings call clearly as we – it took a little bit longer to ramp up activity us versus what was expected. However, in the second quarter, we feel much more comfortable with the evolution you need to bear in mind that we had the blockade in Neuquén for 20 days, which clearly affected our operations there with focusing back on more time in general in the Neuquén region. So when adjusting for that, we feel comfortable that the CapEx that we need to deploy in the third and fourth quarter are manageable, of course, it’s a challenge. We are not going to say that it’s not a challenge, but we feel comfortable that we can achieve and be up to the task. And that’s why we are reaffirming our plan for the year the $2.7 billion being comfortable that we should be able to mobilize all the investment needed in the second half. Clearly we have already started with our July already increased activity and the CapEx numbers for July are already surpassing the average for the previous quarter. And so I would tend to say that although it’s a challenge, we feel – we still feel comfortable that we should be able to fully execute it by year end. And because of that is that we are also reaffirming our target for production for the year. I would say that with the bias on the second half to the upside as…

Very thorough. Thank you very much for that.

Your next question comes from the line of Frank McGann with Bank of America.

Thank you very much. Just to follow-up a little bit on the CapEx and production issue. Clearly, if you’re – as you indicated, as you spend more in the second half and into the beginning of next year. You should have – one would expect at least the potential for a nice acceleration and output. And I was just wondering how you’re thinking of next year really is as much as anything else. Can – could we see a pretty substantial pickup both on the oil and on the gas side as a result of the increased spending that you are seeing? And how do you think about the long-term, it’s been so long since we can think about the long-term during of the pandemic and other issues that you have a resource, of course, that seems to have almost unlimited potential is if you have the capital to deploy. Do you see potentially very material upside here as we look out over the next two, three years. And it’s not – when might we see that if you think we still could. And then secondly, just in terms of costs obviously inflation remains pretty high. You’ve been pretty aggressive on the cost side as well. Do you see cost pressures building a bit at this stage?

Okay. Hi, Frank, thank you for your questions. Complimenting on CapEx, yes, as you have mentioned that we do expect a significant increase – significant, these are relative words, right? But we do expect continuous growth in oil and gas production into next year, particularly into oil, not that much into gas, as you probably know, the – with a new plan gas, the year round demand for gas is pretty much satisfied. Then you have the peak seasonal demands during winter months, which based on the current realities of midstream infrastructure as well as economics. It’s hard to supply those – that big demand with we look at production and we still see at least in the near future that demand being supply through the input of LNG and natural gas from Bolivia. So on that regard, even though, we are seeing some incremental demand from other sources, such as GNC in English, well natural compressed gas. We are seeing some extra demand or some further demand on that front. And we have signed actually some medium term contracts on that front for an average of about 2 million cubic meters per day. So we are seeing some marginal incremental demand, but at least for the next few years, we will not expect a significant increase in gas production. Hence, most of our activity will be focused on clearly maintaining current levels of gas, but then increasing total crude production where we see potential for further progress particularly in Vaca Muerta, particularly in our hub core to compensate and more than offset the natural decline in conventional fields, even though we are continue to – we continue to make good progress in mitigating the natural decline in mature fields, not only through secondary production, but also through enhanced recovery.…

Okay. Thank you very much.

Your next question comes from the line of [indiscernible] with Bank of America.

Good morning. Thank you very much for the call. Congratulations on the good results. I was just hoping you could give us a little bit more of your perspective on prices for the second half of the year, given that there will be some elections coming up and if the increases you’ll be able to keep closer to international parody that you’ve already achieved. My second question, I think you’ve answered it has to do with access to FX on the upcoming maturities very complete answer. And then I was hoping you could give us a little bit more information on what your expectations are for your lifting costs and your all in cost for the full year? And maybe end up with what is your investment plan that your CapEx committed on the ESG front, which is becoming increasingly important to investors. Thank you very much.

Thank you, Ann. I’m delighted to take the question about pump prices. As we commented along our previous calls, campaign adjusting prices of the pump since August of last year to accommodate our need to restore dollar margins, so return to healthy cash flow generation. Statutory realignment process in the past, an aggregate nominal price increase in pesos in the order of 60%, which permitted to pass through tax hikes by fuel increases and leading to about a 40% improvement in net margins in pesos taking our net contributions in dollars back to 2019 average levels. This process resulted in a price mix that is currently well balanced when considering local goods prices that have been freely negotiated between producers and pioneers are the variable discount to international reference prices to avoid passing through the volatility, implant to the local pump. Therefore, the future evolution of pump prices will depend on the evolution of local crude as well as macro economic variables, such as inflation and evaluation, which we will continue monitoring closely. For as long as these key variables remain within expected parameters, we don't foresee any relevant adjustment in pump prices in the near future. And when you compare with respect to the import quality in terms of the comparison to import quality, our local prices are currently about 10% to 16% below on average, where the gasoline been somewhat further discounted than diesel. However as we mentioned before, the pump prices are currently reasonable set based on the pricing of local crude, which is allowing for healthy margins along the value chain without generating unnecessary pressures on local consumers.

Thank you. And as you mentioned I think the question on FX is, I think it was fully answered right on or let me know if you need anything else there. And in terms of lifting costs, we do expect for the remainder of the year to remain relatively stable on average to the levels that we have seen in this last quarter in the order of $11 per barrel of oil equivalent. Clearly, we see a trend where the average lifting cost on the conventional side probably goes up a little bit by the end of the year and that being compensated by a further reduction in the lifting cost on the unconventional. But all-in-all, we see that level of $11 probably in coming years being able to review that a little bit as we increase the share of shale on the overall mix but all-in-all, we would tend to say that we would probably see it relatively stable as an increase in the conventional side is compensated by a further decrease in unconventional and further proportion of unconventional in the mix. And then on your last question on ESG in terms of specific CapEx, we don't have a specific amount allocated. Although, clearly we continue to work on the reduction of CO2 emissions, mostly through the reduction of flaring and methane emissions at our refineries and very specifically, we continue joining the efforts or allowing for the efforts that are being devoted by our subsidiary, 75% owned subsidiary YPF Luz, as mentioned in the past. Clearly, we see YPF Luz as our strategic arm in the – I would say in the marathon towards energy transition. As you know, they have reached COV on a wind farm earlier this year and they are expect on the status for a little bit over 50 megawatts. And they are targeting COV on Cañadón León and other wind farm for over 100 megawatts for later on this year. And I would say that they are also working on other projects for probably for to be announced later this year or next year on the renewable side. So more specifically or very specifically, we continue to look on those investments as part of our general strategy on energy transition. While also analyzing of course CO2 reductions – emission reductions on our activities and other potential sources of energy transition as a strategic view for the medium and long-term.

Excellent. Thank you very much.

Your next question comes from the line of Marcelo Gumiero with Credit Suisse.

Good morning, everyone. Thank you for taking the question. Congratulations on the Luz. Most of my questions were already answered, but I have a follow up on CapEx as well. So looking forward to Q2, how do we expect the balance between YPF increasing CapEx due to the reduction, also collaborating [indiscernible] another second question on the new hydrocarbon law. If you could provide us any topics that are being discussed and what’s the new charges and new topics that interests YPF? Thank you very much.

Thank you, Marcelo for your questions. I'm going to start with the hydrocarbon law. And as you know, there has been significant talk recently about a new hydrocarbon law that should be brought to by the executive power to Congress in the near future, the objective of faster investment in our sector to accelerate the profitable development of oil and gas, or we serve some resources at our country has, while also incentivizing investment industrialization projects. This has included the explicit the will from President Fernandez, who has publicly stated his intention to present a new bill to Congress this year. And as far as we understand, the executive power is consulting with several factors within the sector, with two other different deals, with the intention of presenting a bill project that provides the right sign to the broadest possible audience. Even our leading role in the industry, we are a key actor that is also maintaining an active dialogue with the government authorities, providing our own views on the matter, but will not be able to say at this point, what the final bill to be presented to Congress and what would include and what the actual timing of such presentation could be. But we would expect such new legislation to primarily provide the right incentives to accelerate profitable growth by dissipating some macro risks that currently distort the true opportunities that lie in our underground. With respect to our main focus or aspirations in terms of what the law might include. We are very much interested in the incentives to promote investments by offering a specific export contest while also guarantying access to the FX market for portion of tax exports. Although we are currently a net buyer of crude to supply our refineries, we do expect to become a net exporter in few years, as we continue to factoring the full potential of our [indiscernible]. In addition, we are also focused on the opportunities to expand our natural gas production and to that extend, if the new law provides some scheme to allow the around export to regional markets would be very interesting, it was – would also be very interesting to see incentives, to facilitate investments in mature conventional fields, where we see that there is a field value to be extracted, although economics make it more difficult to allocate capital. Finally some specific fiscal benefits that could speed up industrialization projects such as one being considering by preferred deal or free up capital by more enticing tax credits would be very welcome to take there. Alejandro if you want to take the…

Yes. Thank you, Sergio. Marcello on your other question, on CapEx versus deleveraging as mentioned during the presentation, we are now expecting to be around or even below two times leverage by the end of this year that is faster than expected the leveraging process than we have previously anticipated, clearly in line with the faster recovery in profitability, which allows us also to continuously reduce the net debt. For the medium term, we do see that level of two times leverage reasonable based on the opportunities that we have to further develop our resources on a very profitable way. So we do not – we do not see a need to further deliver or we do not see the convenience of further delivering, because we do see that, that we can add more value for our shareholders by maintaining these levels of indebtedness or leverage to maximize the potential growth as soon as possible primarily from Vaca Muerta resources. So we clearly we'll be adjusting opportunities on the CapEx side, which are plenty to the realities of our cash flow generation in a way to be as cash neutral as possible in coming years, maintaining that level of or trying to the best possible to maintain that level of two times leverage relatively stable.

Thank you very much for the answers.

Sure, Marcelo.

Thanks.

Your next question comes from the line of [indiscernible].

Good morning and congratulations on your results. I would like ask a follow-up question regarding your net international trade balance. Right now, quite some periods your international trade balance has been negative mainly due to the influence of premium refined products, such as gasoline, diesel, and premium gasoline. Now, you mentioned aid to be net exposures, both crude oil and with demand rising in Argentina after the pandemic restrictions have ease. What's your guidance or what's your view on your trade balance? Are you going to keep importing premium diesel and gasoline, or is it something that should be had been growing better in the next year? Thank you very much. And again, congratulations on your results.

Thank you, Constantino [ph] for the congratulations. On your question when you look at the broader trade balance, we are – we've been for the past few years, structurally and net exporter, not of a few words or not of hydrocarbon-related specifically, but when looking at the full spectrum of all of our exports including other type of refined products, as well as non-oil products on average, we've been a net exporter in the order of I would say on average $500 million to $1 billion a year all in all. We do expect that to continue. And again, we do see incremental activity on the non-oil side. And so we do expect to continue to be a net exporter down the road. But looking in specifically into your question about fuels, we do see a structural need in the country, once demand completely stabilizes to continue importing some particularly premium diesel in line with what we have been doing in the past. And so we would expect to continue doing that. We will not see as efficient to invest in further refinery capacity to supply that excess demand when that actually takes place. Bear in mind also that there's a lot of debate also on the long run as to what demand for refined fields could be. So at this point, we will not see any for the country to invest in expanding refinery capacity. But as mentioned before by Sergio, when [indiscernible] also about the question about the hydrocarbon, we do see ourselves as becoming a net exporter of crude primarily in a few years, not in the very short term. But in a few years, as we continue expanding our production in Vaca Muerta, which further compensates the natural decline in the mature fields. We do see YPF being a net exporter and the whole country being a net exporter in a very significant way probably that will take a few years, but we do see that possibility. And that would be – that would more than compensate the imports of refined products, which might include premium diesel and to some extent, some premium gasoline as well.

Very insightful. Thank you very much.

Your next question comes from the line of [indiscernible] with UBS.

Hi, good morning. Thank you for taking my questions. On the regulatory framework, can you provide how the Plan Gas moving forward and have negotiations and payments done for the program? I mean production has went up, but just on the financial side of the things. And also how YPF is seeing the interest in activities in Argentina by other companies that could either lead to divestment from YPF, as opposed to in the past or potential partnerships. And if you can also provide on how YPF strategy to optimize the company's portfolio has been advancing in the past few months? Thank you.

Hi, Matthews. [ph] Thanks for your questions. Regarding the new Plan Gas as you have just said, clearly we have experienced a tremendous ramp up in activity, which led to a significant increase in production as mentioned during the presentation, which allows us to not only comply, but exceed our commitments that were challenged as we had mentioned in the previous call. We have put ourselves in an interesting challenge, which require a significant assumption in activity in natural gas production and the good thing, or the good news is that we were up to the challenge. Managing through to increase our production in the Neuquén ranges to a little bit over 31 cubic meters, a million cubic meters per day, on average for the period of May to July, which was the one that was to basically to comply with, based on the contractual agreements on the new planned gas which were a little bit below that about 1 million cubic meters per day below the mark that we had achieved. So on the production side, we managed to we up to the task. On the financial side, although as we had said before, there were some delays at the beginning of the program then the government paid on time, the bill for the April subsidy. And now in terms of the specific monthly bill for May, they are running a few days and behind schedule that should have been fully paid or the 75% preliminary payment was due in late July. So we had about 10 days behind schedule as far as we understand the well, the payment instruction was already issued by an authorized by the Secretary of Energy. So it should be a moderate of hours if not days for us to collect on that amount…

Thank you, Matthew for the question about portfolio management and allocation. As we commented, we continue focusing our strategy on our core oil and gas activities and prioritizing the rapid development of our valuable Serbs with a particular focus in Vaca Muerta, in that regard, even the significant improvement in our ability to generate healthy cash from our operations. We are not actively looking for the best features to fund our CapEx plan, but rather to contribute to an optimized capital allocation. We therefore continue having active conversations with key international players for the possibility of entering into new farming agreements in Vaca Muerta, but do not foresee any relevant deal to be concluded in the near future as evaluation, assessment continue to be well apart. In addition, along the same lines that we commented during our last calls, we are also analyzing and having some preliminary dialogue with a potential interested parties on a group of mature conventional areas that might be subject to some form of investment. This particular case, we are prioritizing capital allocation under the assumption that there could be assets with further potential to be developed by a focused new player that shall render benefits to all parties including the provinces that's capitalized from renewed investments in the assets leading to incremental oil and gas production, and hence more royalties. In summary, our strategy going forward, will be focused on optimizing capital allocation, analyzing all potential opportunities, including not only these investments, but also potentially strategic new investments with a clear view on prioritizing the profitable and rationale development of our world-class resources.

Thank you. Very comprehensive and congratulations on strong results.

Thank you.

The question comes from the line of Ezequiel Fernández with Balanz. Ezequiel Fernández: Hi, good morning. This is Ezequiel Fernández from Balanz. It was great to see these results and thank you for the pretty complete materials as always. I have three questions. First, if you could comment it on the new bio, your slow and what the reduction in mandatory fuel cards and the prohibition for oil companies to get involved in by fuel production mean for YPF? Second, and going back to what [indiscernible] and asked about fuel pricing and you commented as well. We should see fuel prices at the pump, but same level measured in pesos, I believe till year-end and maybe going into a bit more detail on that. What do you think it’s going to imply for the internal crude prices measured in dollars on the downstream spread in the second half, basically who might absorb more of the expected devaluation till year end? And my final third question is related to conventional crude production. And what are you planning there in terms of maybe secondary or tertiary recovery efforts?

Hi, Ezequiel. Thank you for your comments and your questions. Very briefly on the first question about by appeals. We do see constructively the new law basically using the capture requirements with bio-fields taking it down to 5%, which see that as very reasonable and of course that also alleviate some supply pressure we have seen on the – particularly on biodiesel. We are producers, so we are not being able to deliver all the volumes required by the downstream segment. So all in all we do see that's very constructive and of course that will permeate healthy stabilization of both markets, right. Of the biofuels market and clearly on the refining side as well, and within out we – we don't seeing at this point any particular challenge given these, these new requirements are not being able to integrate the biofields into the genital downstream chain. In terms of pricing what they are asking is a very delicate question, right? And we see a head, a very delicate balance, as we have mentioned in the presentation. The local group has not been fully tracking international reference prices, particularly under the – basically on the understanding both on the producer side and as well as on streamers, clearly we have a different reality by being fully integrated. But clearly the value chain needs to have some equilibrium and didn't all the market understands that the local economy today cannot fully absorb the complete evolution of international prices into our pump. Down the road as long as these variables remain relatively stable, as Sergio had mentioned, we do not expect any relevant increases in peso terms at the pump, as you clearly stated that would imply some degradation of our dollar margins between now and the next few months. Of course,…

That's great, and thank you very much for the complete answers. Thanks.

Thank you.

There are no further questions. This concludes today's conference call. Thank you for participating, you may now disconnect.