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Operator: Ladies and gentlemen thank you for standing by. At this time I would like to welcome everyone to the YPF First Quarter 2023 Earnings Webcast. [Operator Instructions]. It’s now my pleasure to turn today’s call over to Pablo Calderone, Investor Relations Manager. Sir, please go ahead.

Pablo Calderone: Good morning ladies and gentlemen, this is Pablo Calderone YPF, IR Manager. Thank you for joining us today in our first 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 first quarter results, and finally, we will open up the call for questions. Before we begin, I would like to draw your attention to our customary statement on slide 2. Please take into consideration that our remark 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 expectation contemplated by industry 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 tell the call to Pablo. Please, Pablo, go ahead.

Pablo Iuliano: Thank you, Pablo, and good morning to you all. We are glad to report a solid beginning of the year across our operational and financial metrics, where our total hydrocarbon production continued with a positive trend, bringing to market over 511,000 barrels of oil equivalent per day, representing an increase of 2% on a sequential basis and 1% when compared with the same period of 2022. Moreover, I would like to highlight the evolution of our crude oil production, we just commented during our strategic outlook presented a few weeks ago, is the focus of our short-term growth strategy recording a 3% sequential increase and a robust 7% inter-annual expansion. Adjusted EBITDA remains strong in the quarter, surpassing once again the $1 billion mark, expanding 12% from the previous quarter and 5% on a year-over-year basis.

Sequential improvements come as a result of higher hydrocarbon production and higher processing levels at our refineries, accompanied also by lower OpEx, partially offset by lower realization prices of our refinery products when compared to the previous quarter. The solid operating results permit our bottom line to come in positive territory once again, with net income reaching $341 million in Q1. In terms of our investment activities, we started the year investing $1.3 billion, 78% higher than the first quarter of 2022. Contract to meet our ambitious plan for the year where the main focus was once again directed to shale operations, which concentrated more than 50% of the total investment. On the financial side, free cash flow was almost flat during the first quarter at a negative $17 million, stacking our net debt to $6 billion, resulting in a flat net leverage ratio at 1.2 times.

On a final note, let me briefly comment on the positive recent development related to the international legal contingencies. In the Peterson and Eaton Park case on March 31, the New York court found that YPF has not contractual liability and always no damage to the claimants, and accordingly dismissed plaintiff’s claim against YPF. We believe this ruling should be of significant value to dissipate to a large extent our potential contingencies and should plaintiffs seek to appeal the decision. YPF will continue to defend itself in accordance with applicable law. In the Maxus case on April 6, YPF and Repsol signed a settlement agreement with the Maxus Settlement Trust, providing for a full release and discharge of all claims in exchange for payment of $287.5 million each, subject to the satisfaction or waiver of certain conditions, including court approvals and other procedural events.

We are convinced that this legal decision will present a fair and reasonable outcome for YPF and will allow the company to continue focusing on generating value for all our stakeholders. In summary, we are pleased with the result achieved during first Q23, and although we know it is a year full of challenges. We believe we have taken the initial step to deliver on the ambitious goals we set for the year. I now turn to Alejandro to go through some further details of our operating and financial results for the quarter.

Alejandro Lew: 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 delivered 511,000 barrels of oil equivalent per day, highlighting a strong interannual expansion in our crude production, reaching the highest quarterly mark since 2016 at 238,000 barrels per day. And beyond crude, natural gas production increased 2% on a sequential basis, while NGLs remained essentially flat. The positive evolution in oil and gas production on a sequential basis came once again, and as expected, on the back of the solid increase of 6% in our total shale production. Moreover, during this quarter, our total conventional production remained flat when compared to the previous quarter, mainly as a result of our continuous strategy of extending tertiary production, which recorded an expansion of 7% versus the previous quarter, and almost 50% against the same quarter of 2022.

In that sense, in Manantiales Behr, our flagship project, tertiary production represents almost one-third of the total production of the block. And in the other three pilots being deployed at Chachahuen, in Mendoza, El Trebol in Chubut, and Los Perales in Santa Cruz, we have continued harvesting promising results. Moving to costs, lifting averaged $14.6 per barrel of oil equivalent across our upstream operations, representing a minor increase when compared to the $14.5 in the previous quarter. More particularly for our shale core hub operations, lifting costs increased by about 8% as higher activity and energy costs during the quarter overran the expanded production, but still remaining at a very competitive level of $4 per barrel. Regarding prices within the upstream segment, crude oil realization prices averaged $67 per barrel in the first quarter, representing a minor increase compared to the previous quarter, but leading to a significant reduction in the discount to Brent prices, which declined by about 7% in the same period.

On the natural gas side, prices remained sequentially flat, averaging $3.1 per million BTU, aligned with the plant gas prices for the summer season. Zooming into our shale operations, during the quarter, we completed 38 new horizontal wells in our operated blocks. We also continued increasing the rhythm of drilling activity to enlarge our inventory of drilled and uncompleted wells. In that sense, during the first quarter, we drilled a total of 48 new horizontal wells, 34 of which were in oil-producing blocks, and 14 targeting shale gas, representing a new quarterly record mark in terms of drilling activity. It is also worth noting that during this quarter, we continued with the strategy of developing Vaca Muerta beyond our core hub blocks. In that regard, during the first quarter, we tied in four oil wells at our fully-owned Loma Marisa block, and we have just finished drilling one well at Las Tacanas block, targeting natural gas production.

The new tie-ins during the quarter led our shale production into further expansion. On a sequential basis, our shale oil production increased by 9%, and our shale gas production expanded by 4%, averaging over 92,000 barrels of oil per day, and about 17 million cubic meters per day of gas. And when compared to the same period of 2022, shale oil production expanded by 31%, aligned with our strategy of accelerating the monetization of our shale oil operations. In terms of efficiencies within our shale operations, during the quarter, we lost some ground in terms of the development costs at our core hub operations, averaging $9.9 per barrel of oil equivalent, primarily on the back of continuous cost pressures, although operating metrics remain healthy.

And it is also fair to highlight that the development cost for our core hub operations reported in previous quarters was revised slightly upwards as a result of some retracted tariff adjustments as well as updated EOR estimates of some specific wells based on actual productivity recorded in recent months. Finally, regarding our investment in facilities required to unlock our shale oil production, in January we put in operations our third crude oil treatment facility in Vaca Muerta, located at Bandurria Sur, with an initial processing capacity of 4,000 cubic meters per day, which is targeted to be expanded to 12,000 cubic meters per day during the year. Let me now briefly comment on the progress made in relation to the midstream oil projects aimed at unlocking the evacuation capacity of the Neuquén Basin.

First, regarding the expansion of the existing system to the Atlantic, Oldelval has made steady progress on its second stage of expansion, aiming at adding about 20,000 barrels per day of transportation capacity to the system, expected to reach commercial operation during the third quarter of this year. In addition, OTE has achieved solid progress in the critical path of its expansion project, having initiated the preliminary works for the construction of two new storage facilities of 50,000 cubic meters each and the offshore terminal at Puerto Rosales. In terms of financing, on top of the large portion of the total CapEx to be funded through prepaid ship or pay contracts, both companies, Oldelval and OTE, tapped the local capital markets with three-year local notes of $50 million each, thus securing a further portion of the funding required by the projects.

Moving to the Pacific route, the Transandino pipeline of the OTA/OTC system responded well to the in-line inspection test, resulting in only minor repairs that were already executed. Thus, the pipeline is now in operating conditions to resume exports to Chile in coming weeks after over 15 years of being idle. In addition, we have continued making good progress in the construction of the Vaca Muerta North pipeline that will allow us and other producers of the basin to direct the crude oil produced in the core operations of Vaca Muerta to the Transandino pipeline and further north into our Luján de Cuyo refinery. The project is at about 60% completion and is expected to start operations between September and October of this year. Finally, we have also achieved solid progress on the engineering design process for the Vaca Muerta Sur pipeline and export terminal, having achieved about 70% completion.

In addition, we are progressing steadily with the environmental impact studies for the full project. It is important to highlight that even though the project is and will continue to be led by YPF, we have already initiated conversations with other major players of the Neuquina basin who already showed interest in participating in the project. Switching to our downstream operations, let me start by highlighting that in 2023, the company has decided to reorganize the business segments considered for financial reporting by separating the downstream activities into those related to the midstream oil refining, transportation of oil and refined products, and petrochemical production into a new segment called industrialization from the commercial activities of refined and petrochemical products, natural gas, and trading activities that were grouped into another segment called commercialization.

This segment reclassification is aligned with the organizational change that separated this business under the leadership of two different vice presidents. Now, regarding our domestic sales of gasoline and diesel, total dispatch volumes decreased by 3% when compared to the previous quarter, driven by a contraction of 6% in diesel sales, mainly due to the lower seasonal demand in the agribusiness that was particularly affected by the severe drought that the country experienced in recent months, and partially upset by a 2% increase in gasoline demand, which set a new quarterly record. In a year-over-year comparison, diesel demand remained almost flat, while gasoline sales stood 7% above a year ago. In terms of refinery utilization, the revamping of a topping unit at the La Plata refinery that eliminated bottlenecks in the processing of light crude oil, accompanied by the revamping of the pump station Puesto Hernandez in the Neuquina Basin allowed us to increase processing levels to 307,000 barrels per day, 5% higher than the previous quarter and 9% above a year ago, achieving the highest quarterly mark in the last 13 years.

In addition, during the quarter, we managed to maximize our refinery conversion levels, reaching a record of gasoline and middle distillates production. However, in spite of the higher refinery output, total fuel imports increased during the quarter, representing 12% of total fuels sold in Q1, in order to build up inventories that remain below historical average levels in the preceding quarter. In terms of prices, during the first quarter, we continued with our strategy of adjusting prices of local fuels in a way to mitigate, to the largest possible extent, the effect of the depreciation of the currency, while reducing, or at the minimum avoid extending, the gap between the pricing of local fuels vis-à-vis international parties. Consequently, average fuel prices measured in U.S. dollars decreased 3% sequentially, but stood 16% above Q1 2022.

And the gap between local fuels prices versus import parity declined to an average of about 20% in the first quarter, while further declining to about 15% in April, and more recently, during the first days of May, to a smaller discount of about 10% on the back of the continuous general downward trend in international prices. Finally, on the financial front, the beginning of the year resulted in another quarter delivering sound operating cash flow, which increased 12% sequentially to about $1.5 billion on the back of the higher adjusted EBITDA, coupled with positive working capital contributions. This strong cash generation was almost enough to fully fund our investment plan, payments of interest, and other expenses, resulting in a slight negative free cash flow of just $17 million.

And despite this minor negative free cash flow that led to a marginal increase in our net debt to $6 billion, the higher 12-month rolling adjusted EBITDA permitted to maintain our net leverage ratio flat at 1.2 times. In terms of financing, during the first four months of the year, we have already raised over $1 billion through tapping the local capital markets in two occasions, in January and in April, and by securing several trade-related loans from relationship banks, obtaining net new funding of over $500 million, $294 million of which took place in Q1, and the balance during April. It is worth highlighting that this funding took place at very attractive financing costs, benefiting from the average rush in the local market, as demonstrated by the negative funding cost of minus 5% achieved on our recent two-year dollar-linked local note.

Furthermore, during March, we entered into a fully committed short-term revolving credit facility, denominated in pesos, with three local financial institutions, for an equivalent of $120 million. It is worth noting that this is a product that is not widely available in our local market, but that we eagerly pursue as it provides us with flexibility to manage our liquidity more efficiently. All-in-all, these financings provide the right platform to secure our funding plan for the year, including the liquidity required for the settlement of the Maxus legal case. On the liquidity front, our cash and short-term investments increased to $1.3 billion as of March 31st, compared to $1.1 billion as of the end of December of last year. And in terms of cash management, we have continued with an active asset management approach to minimize FX exposure, considering the prevailing regulations that restrict our ability to hold assets abroad.

In that sense, in a context of limited available dollarized instruments in the local market, and given our increased liquidity, we ended the quarter with a consolidated net FX exposure of 21% of total liquidity. Finally, when looking into our debt profile, I would like to highlight that our healthy liquidity position comfortably covers our debt amortizations for the next 12 months, and a very manageable debt profile for the rest of the year. And with this, I conclude our presentation for today and open the call for your questions.

Operator: [Operator Instructions] Your first question comes from the line of Walter Chiarvesio with Santander. Your line is open.

Operator: Your next question comes from the line of Carlos Moraes with Morgan Stanley. Your line is open.

Operator: [Operator Instructions] Your next question is from the line of Paula La Greca with TPCG. Your line is open.

Operator: Your next question comes from the line of Luis Carvalho with UBS. Your line is open.

Operator: Your next question is from the line of Marcelo Gumiero with Credit Suisse. Your line is open.

Operator: Your next question is from the line of Ezequiel Fernandez with Balanz. Your line is open.

Operator: There are no further questions at this time. I will now turn the call back over to management for closing remarks.

Alejandro Lew: Well, thank you very much, everyone, for joining this call and for your continued support. And we definitely remain open for any further questions that you may have, and have a great day.

Operator: Ladies and gentlemen, thank you for participating. This concludes today’s conference call. You may now disconnect.