Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the YPF Second Quarter 2023 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] Thank you. And I will now turn the conference over to Pedro Kearney, YPF Planning and Finance Manager. You may begin.

Good morning, ladies and gentlemen. This is Pedro Kearney, YPF Planning and Finance Manager. Thank you for joining us today in our second quarter 2023 earnings call. This presentation will be conducted by our CEO, Pablo Iuliano; and our CFO, Alejandro Lew. 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 answers 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 expectations contemplated by these remarks. 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 Pablo. Please go ahead.

Thank you, Pedro, and good morning to you all. Let me start highlighting that this was another quarter in which we continued delivering a solid operational performance. During the second quarter, total hydrocarbon production totaled 513,000 barrels of oil equivalent per day, remaining stable quarter-over-quarter and increasing 2% on year-over-year basis, mainly driven by a sound performance in our shale operations, which recorded an interannual expansion of 18%. I would also like to point out the positive evolution of our crude oil production, which continued growing, increasing by 1% sequentially and by 7% when compared to the same period of 2022. Adjusted EBITDA reached $1 billion in the quarter, decreasing 4% sequentially and 34% compared to the second quarter of 2022. The lower outcome compared to the previous quarter came especially on the back of a slight decline in domestic fuel prices in dollars terms and further cost pressures, mostly offset by higher seasonal natural gas sales. And our bottom line came in at $380 million in the second quarter, accumulating more than the $720 million during the first half of the year. In terms of our investment activities, we continue ramping up our CapEx plan, which expanded 6% sequentially and 52% on a year-over-year basis, accumulating nearly $2.7 billion during the first half of the year, being on track to fully deploy our ambitious plan for 2023. On the financial side, free cash flow totaled a negative $284 million primarily driven by the Maxus settlement agreement signed in April, taking our net debt to $6.312 billion and increasing the net leverage ratio to 1.4x. Excluding the impact of this agreement, the free cash flow would have been flat during the quarter. In this regard, let me point out that on August 2, following the satisfaction of all conditions and…

Thank you, Pablo. Let me begin by expanding on Pablo's comments about the evolution of our oil and gas production. During the quarter, our total hydrocarbon production averaged 513,000 barrels of oil equivalent per day, growing very modestly compared to the previous quarter and increasing by 2% year-over-year. Crude oil production recorded a new sequential increase of 1% during the quarter, representing the seventh consecutive quarter of oil production growth, coupled with a strong interannual expansion of 7%, which allows us to remain on track to meet our targets for the year. Beyond crude, natural gas and NGLs production remained stable on a sequential basis, staying at 37 million cubic meters per day and 43 barrels of oil per day, respectively. The positive interannual evolution in oil and gas production came as expected on the back of our total shale production, which continued delivering solid results, expanding by 18% on a year-over-year basis, with a remarkable increase of 28% in our shale oil production. On the conventional side, we managed to maintain our oil production stable versus the previous quarter mainly as a result of our continued focus on tertiary production, which increased 17% sequentially and 32% versus the same period of 2022. The positive evolution in tertiary production came primarily from solid results in Manantiales Behr, our flagship project, which represents more than 70% of our EOR production and the evolution of the pilots deployed at Chachahuen in Mendoza and El Trébol in Chubut. Moving to costs. Lifting averaged $16 per barrel of oil equivalent across our upstream operations, 10% above the previous quarter, primarily due to higher maintenance and pulling activity combined with an accelerated inflationary environment not fully compensated by the local currency depreciation. However, lifting costs for our shale oil core hub operations remained almost stable…

[Operator Instructions] We will take our first question from Anne Milne with Bank of America.

Given the relatively flat production for the year, although you did have strong growth in shale, I was wondering if you could give us some, I don't know, guidance or some framework for looking at the additional infrastructure that you're putting in place right now that you did review and what we should expect for year-end? That's my first question. And then the second question is, what will you be watching in terms of the upcoming primary elections and then presidential elections in terms of policies that could affect YPF?

Thank you for your questions. As per your first question, we briefly mentioned in the presentation that in line with the guidance provided earlier on in the year, we believe that the results so far are a good advance towards those estimates. So we would expect to continue focusing primarily in our growth in oil production. We continue to expect to be at around 8% growth year-over-year by the end of the year, which so far in the second quarter, we are -- we ended up 7% above the second quarter of the last year. And so we expect to -- we still expect to be at around 8% for the full year. And particularly, we expect oil growth to accelerate in the second half, primarily in the fourth quarter. Probably expect in the third quarter to be relatively flat and further growth to materialize in the fourth quarter, where we expect fourth quarter over the fourth quarter of last year to be -- to remain in line with guideline at about 10% growth. On the other side, on natural gas, given the lower demand that we saw in the first half of the year, we will probably see some lower growth, or actually, to be probably relatively flat on a full year basis compared to last year. That is, as I said, in terms of natural gas. So basically, the oil infrastructure that is being deployed will serve mostly the purpose of allowing for this expansion in crude oil production. While natural gas -- and as presented before earlier in the year, we are clearly prioritizing crude over gas. And hence, we are, again, not that much concerned about this lower growth in natural gas that we expect for the rest of the year. In terms of policy after the elections, I believe I mentioned in the past that we -- it's hard to predict, but we expect that given the strategic positioning that Vaca Muerta has, and has been commented by several different candidates in the presidential elections, we believe that our policy should remain supportive for the constructive development of our sector, which is a sector that, as mentioned before in several occasions, could provide a significant swing in the balance of payment through not only the substitution of gas imports but also through the further incremental oil exports. As well, the debottlenecking of Vaca Muerta and the different producers in the basin and in the Neuquina basin, continue with our growth plans. And as was presented by YPF, particularly in our view, to double up our oil production in 5 years' time. So given those -- given that opportunity, we would expect policy to remain supportive for our sector.

[Operator Instructions] And we will take our next question from Walter Chiarvesio with Santander.

I have 2 questions on the cost front. The first one is related to SG&A that, at least for me, was negatively surprising. It has been taking a higher share of revenues in the last couple of quarters. And I would like to know from you if this is just salary increases or payroll because it has been increasing quite above inflation in the last couple of quarters. What is the outlook for rest of the year? If there is any actions that the company could take to reduce that and if you're going to do something about that? That is the first question. The second question is related to lifting costs. We can see that lifting costs in the core hub is relatively stable, which lead us to conclude that the conventional lifting cost is growing. Is that because of the tertiary recovery costs in Manantiales Behr? And if that is going to be a norm looking forward?

Thanks for your questions. As it relates to the first question on SG&A, at least on the way I'm looking at the numbers, and we can definitely come back to that later on. But we see SG&A in the first -- in the second quarter growing sequentially at a similar pace that the average OpEx for the company. And definitely, that's a result of the general context of increasing costs, primarily inflation running above the devaluation of the currency, and that pushing our dollar costs higher. In general terms, in terms of head count, we have not experienced any particular swing. And so I would tend to say that, that's the result primarily of the general cost pressures in line with the rest of the OpEx. In terms of lifting, what I can comment is that, clearly, on the -- in the core hub, we managed to compensate the higher costs with the particular increase in shale production, particularly shale oil. That's compensated. That's clearly what allowed us to manage to compensate the higher costs with higher production, and hence, maintaining the lifting relatively stable at the core hub. Opposite to that, in the rest of upstream, not only conventional but also in shale gas blocks, we have seen an increase in per unit costs clearly related to, on the one hand, the incremental OpEx costs, nominal OpEx costs in dollar terms and then also in conventional, particularly in conventional gas, a reduction in total production. So all in all, what we can say is that as long as we continue to succeed in growing our total production base, we will definitely expect to stabilize, and at some point, manage to reduce overall lifting costs on an aggregate basis for as long as we also manage to get under control the different OpEx, particularly in the upstream segment. Of course, that's a challenge. But that's something that we are clearly focused on in obtaining and in reaching efficiencies in our cost basis to get our per unit costs stable, and ideally, to decline.

Just a follow-up, would you expect an improvement in margins during the second half of the year or stable?

Well, margins are based on different variables, right? So clearly, we continue to see further cost pressures on the cost side. And as I said, we are working across all our business units to get efficiencies, to get costs under control. And hence, we would expect at least to maintain -- for the most part, OpEx -- we are working to maintain OpEx at least stable in the second half. In terms of revenues, well, that will depend on different variables, right? Clearly, the way we manage to work on our pricing policy and also how the evolution of the currency takes place in coming months.

[Operator Instructions] And we will take our next question from Luiz Carvalho with UBS.

I have basically 3 points that I would like to hear and get a bit more color. The first one is the lifting costs trend. We saw lifting costs close to, I don't know, $13 per -- I don't know, per BOE last year. And now we are headed to close to $16 when you're seeing some, I don't know, industry, mainly on the service industry, cost pressure. So I would like to hear in terms of what are the perspectives on the lifting costs? The second thing is about the funding. I mean the company burned a bit of cash this quarter, and very comprehensive. But when we look to the projects and mainly on the logistics front, I would like to, I don't know, have a bit more visibility how your -- the company is thinking about the funding, mainly that by 2024, you have, I don't know, almost $1.2 billion of that. We understand that it can be postponed, can be negotiated, but just trying to understand, let's say, the probably 18 months funding strategy. And lastly, if I may, on the pricing front, the company did a great job over the past year reducing the gap between the domestic prices and import parity, right? It came from, I don't know, 40%, 30% last year to an average of, I don't know, as you pointed in the slide, 13%, right, this year over the last 3 months. So just trying to understand how we should look this forward, maybe with the current, I don't know, FX and the current oil environment. So how we can -- how can you guys -- what are you seeing in terms of price parity scenario for the next couple of quarters?

Thank you very much for your questions. Let me start with the last one in terms of what to expect in terms of pricing. As you have said, we managed to reduce the gap to international parities over the last 12 months, reaching a low level of 13% gap in the second quarter, down from 19% in the first quarter and from over 30% in the second quarter of last year. Clearly, that was a combination of our strategy to increase prices in peso terms to at least compensate for the evolution of the currency, which in the beginning of the year, we only managed to do it partially successfully as our prices declined by about 8% by the second quarter compared to the fourth quarter of last year. But clearly, given the downward trend in international prices, that helped alleviating and reducing the gap between local prices and international prices. Since the end of the second quarter, given the recent rally in international prices both in crude and in spreads, we have seen the gap increasing once again, on the one hand, given that we have continued moving forward with increases of the pump that have not fully managed to pass through the evolution of the currency. And hence, by today, we are standing about 10% below the dollar prices of the end of last year. And then further to that, given the rally in international prices, our gap today stands probably closer to 30% to international parities. So that will be the negative news. Now what we expect for the rest of the year, we would continue to look for adjustments of the pump, trying to mitigate the evolution of the FX, and to the largest possible extent, to looking at reducing the gap to international parities. However,…

And ladies and gentlemen, there are no further questions at this time. So I will now turn the call back to Mr. Alejandro Lew for closing remarks.

Well, thank you very much, everyone, for joining the call today, and have a great day.

Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.