Good morning. My name is Rob, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the YPF Fourth Quarter 2021 Earnings Webcast Presentation and Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Pablo Calderone, YPF Investor Relations Manager, you may begin your conference.

Good morning, ladies and gentlemen. This is Pablo Calderone, YPF Investor Relations Manager. Thank you for joining us the call today in our full-year and fourth 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 fiscal year and fourth quarter results. And finally, we will open up the call 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 using calculations to reach our main financial figures in U.S. dollars. Our financial figures are stated in accordance with IFRS, but during the call, we may discuss some non-IFRS measures such as adjusted EBITDA. I will now turn the call to Sergio. Please, Sergio, go ahead.

Thank you, Pablo. Good morning, ladies and gentlemen. Thank you for joining us on the call today. One year has passed since we were announcing the worst annual results for this company in its recorded history. And at that time, I said that I had rejoined YPF with the firm determination to restore the company through the storm. And now one year later, we are proud to present a fully recovered reality, delivering exceptional results on all fronts in light with guidance that we have provided. In 2021, we managed to restore profitability that resulted in solid positive free cash flow that in turn translated into healthy reduction of our net leverage. Adjusted EBITDA for the year ended in line with guidance at $3.8 billion, exceeding pre-pandemic levels of 2019 by about 6%, and the positive cash flow generation achieved along seven consecutive quarters allowed for an aggregated reduction in net debt of around 17% or $1.3 billion when compared to December 2019 levels. We have also accomplished a much needed recovery in our oil and gas production, managing to grow it sequentially along the year after five years of continuous decline, delivering over 14% growth in the fourth quarter compared to the same period in 2020. This was particularly possible on the back of strategy that combined financial prudence together with company effort to become more efficient across our operations, allowing us to fully execute our targeted CapEx program. And at the same time, these efforts permitted us to restore a positive path in terms of proved hydrocarbon reserves, reaching remarkable growth in our reserves of around 24% and historical high reserve replacement ratio of 2.3x. Our production achievements were the result of a conscious effort to simultaneously tackle the natural decline in our conventional fields and the unparalleled…

Thank you, Sergio, and good morning to you all. As already commented by Sergio, 2021 marked a significant turning point for our company, not only recovering historical profitability levels and reducing our net leverage to sustain our levels, but also managing to stabilize our oil and gas production after five years of continuous decline. Our revenues increased over 41% year-over-year reaching a total of $13.2 billion and standing only 4% below pre-pandemic levels of 2019. This increase was mainly supported by the recovery in fuel sales, both on higher volumes lease back as well as higher average prices in dollar terms. In addition, our revenues in 2021 were also positively affected by higher prices on those products that correlate with international prices, such as lubricants, propane, petrochemicals and virgin naphtha, that represent close to 20% of our total revenues, as well as higher natural gas sales, which represented about 15% of our total revenues, primarily on the back of our participation in the new Plan Gas. On the cost side, total OpEx in 2021 expanded by 1% compared to the previous year, while declining by 13% compared to 2019. Although the savings ended slightly below our expectations with respect to pre-pandemic levels, we are still satisfied with our performance as cost efficiencies secure within the program launched in 2020, continue to be well in effect in 2021. And these savings were achieved despite mounting inflationary and salary pressures that pushed our cost structure higher in dollar terms, given the context of a slow pace of currency devaluation. Adjusted EBITDA closed at $3.8 billion in line with guidance and consolidating a remarkable recovery year-over-year, even exceeding the pre-pandemic results of 2019 by 6%. Furthermore, our adjusted EBITDA margin reached 29%, standing at the high end of our metrics for the last…

Thank you, Alejandro. Before moving into the Q&A section, I would like to provide you with a quick glance at our 2022 outlook. First and foremost, we shall continue prioritizing profitability and financial potency in a challenging macro environment. Uncertainties related to the future evolution of the global economy together with geopolitical tensions and/or impact on international oil prices will probably add to local volatility. In such a context, we shall maintain our focused effort to deliver profitable production growth through an enlarged CapEx program in great measure financed through operating cash flow. We are therefore committed to maintain our proven financial approach, establishing a maximum net leverage ratio target of 2x in line with what we have commented in previous calls. To that end, we expect to continue adjusting prices of the pump in a proven and sustainable way to counteract the FX of the depreciation of the currency, while also aiming to reduce at least partially the spread between local and international prices. However, we shall remain conscious of the Argentine economy reality that will probably make it difficult for our sector to fully track running international prices. Nevertheless, we feel confident in our ability to fully execute our CapEx program of $3.7 billion, which represent an increase of more than 40% when compared with the amount deployed in 2021. These investments will once again be concentrated in our option activities where we plan to deploy $2.8 billion, $1.6 billion of which going into our conventional operations. Within the investments in unconventionals, we shall invest more than 50% on a net basis in our core hub shale oil operations encompassing the Loma Campana, La Amarga Chica and Bandurria Sur blocks. And from now on, including also our Aguada del Chañar block constituting the first shale oil block within…

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

Hi, good morning. Thanks for taking my questions. I have three questions. First, your budget for CapEx this year is increasing $1 billion. So I'm curious to what you are assuming on the budget happens with oil price in Argentina. So do you expect oil to remain at this $57, $60 per barrel level? Or do you plan to increase crude oil practice as well? The second question is about mid to long-term debt maturity. There is quite a bit of debt coming due in 2023, 2025. So today, what is the strategy of the company to cover those maturities, I imagine you'll still invest a size of amount in CapEx to recover production. And third, taking into consideration, the very high level of oil prices today, has the company been approached by interested parties to acquire acreage in Vaca Muerta? And would you be willing to monetize a portion of the excess acreage to help bridge the funding requirements in the coming years? Thank you very much.

Thank you, Bruno, for your questions. I'm going to take the question about on prices and local prices of oil and let me answer in a broader sense. As already commented during the presentation, we will continue monitoring evaluation of key variables, such as the depreciation of the currency and international oil crisis to determine the merits of further adjustments of the plan. However, given the increased volatility that international markets have experienced in recent weeks, we do not expect to fully track international prices, but rather accept some alignments, particularly as we shall remain very conscious of the undergoing economic situation in the country. With respect to the discount versus import quality, and after a significant reduction in the spread to import quality in every December when Brent prices moved around $70 per barrel, the rise during the last couple of months, particularly spike on the back of the last couple of weeks has to spread higher. Consequently, after bottoming at about 10% an average of all fuels by early December, the discount to import quality has been increasing since then finish in January at about 30%. And by the end of February remaining close to that level, as the price adjustment performing early February compensated to further appreciations international prices up to that point. However, the most recent rally in international crisis that took Brent above $110 generated further distortion. We would expect to remain active to maintain our dollar margins at least stable. This year, while at the same time evaluating the convenience to reduce the gap to international quality. All in all, we expect to continue working in a collaborative effort with most factors in our sector to continue moving out the full effect of this volatility to local consumers. Alejandro, why don’t you take the second question on maturities?

And just to complement that as well on the general context on our view on pricing as it relates to budgetary purposes, we basically run our budget at the beginning of the fourth quarter. So the assumptions on crude oil prices and pump prices was taken at that time. So clearly, when putting the context of current prices, our budget would be conservative in the sense of the prices that were assumed both in terms of crude and pump prices. So clearly, we could have some upside there, but of course, as Sergio was saying, we will need to be very prudent in monitoring the evolution of the volatility to see how that the rally in international prices and the volatility brought by the evolution of prices globally will end up impacting both local crude and pump prices, and in that sense affect our budget for the year. Then into the maturities, as you were asking debt maturities for 2023 to 2025, what we see is that the shorter-term, mostly 2023 and 2024 maturities are within levels that we feel very manageable for - basically for historical standards for YPF, and what we expect for our ability to manage them in the future there in the order of $800 million to $850 million each year, mostly composed of international bond maturities and of course, we cannot say or predict what availability we will have in terms of access to funding in international markets. But what we do have is as was mentioned in the presentation, during 2021, there was actually net leverage allowed us to reduce very significantly, the balances that we have outstanding with financial institutions, mostly our most relevant relationship banks, as well as the local market. So in that sense, we see that we have ample room.…

Your next question comes from the line of Konstantinos Papalios from Plenti. Your line is open.

Hi. Good morning, and congratulations on your results. I'd like to ask two questions today, more related to your income statement. There's $338 million other cost figure on your upstream income statement. What cost does it entail and why did it increase so fast on a quarterly basis? And also regarding downstream financials, could you shed some light on your margins on fuel imports? Are they positive or negative? And what was their impact on downstream EBITDA in this fourth water? I'm referring to diesel, ultra-low- sulfur diesel and gasoline imports for the local market? Thank you very much.

Hi, Konstantinos. Thank you for your questions. As it relates to your income statement question and the line of other income or expenses, it mostly relates as you will find out going deeper into financial segments with some adjustments on the provisions for legal contingencies during the quarter. So when you will go into that specific line, it mostly relates to that, of course also when comparing to the previous quarter also has some positive results in the third quarter that are not present this quarter related to the divestment of some real estate assets that generating other income in the third quarter. But then when you look at specifically the charge in the fourth quarter, as I said, is mostly related to, with the evolution of that specific account on provisions for legal contingencies in general. Of course that evolution has a mix of the printing, but generally speaking, it's the best assessment in terms of provisioning our contingencies by the end of the year. And then on your question of fuel imports, clearly, during the quarter and as Sergio mentioned during the presentation, we have increased the amount and the volume of fuel imports primarily related with the significant growth in demand that we experienced in the quarter. As was mentioned already in the presentation, total demand for fuels in the local market increased by 90% in the quarter, part of that was sourced through higher processing levels, which increased by 6% but then the reminder, was taken care through fuel imports. Mostly as – clearly as you know, we keep on acquiring about 20% of our crude purchases of our – the total crude process from third parties and so also given the discounts international prices versus local crude prices. It became a little tougher to source…

Our next question comes from the line of Andres Cardona from Citigroup. Your line is open.

Hi, good morning, everyone. Thanks for the presentation. Congratulations on the financial results and also – very solid start for the quarter. I have three questions. I'm not going at the very beginning of the question you said that you were revising [indiscernible] EUR estimate 1.5 million barrels of oil equivalent for some projects. Can you say what type of projects are these? I imagine it's La Amarga Chica, Bandurria Sur and Loma Campana among right here? The second question is if you are seeing a relevant inflation cost pressure in the upstream segment in particular? And the last one is if you can remind us how much is the receivables of our Plan Gas as of the end of last year? Thanks.

Thank you, Andres. On the EUR question, it is very specific on Loma Campana – on the Loma Campana block, that is we are targeting activity specifically related to [indiscernible] segment of that Loma Campana block and in that specific area we adjusted our type well, and in the context of our type well for the well in the leg of 2,500 meter of horizontal drilling, basically 2,500 meters horizontal leg. We have adjusted the average EUR by 17% higher to 1.5 million barrels. So it is very specific to that block, and to that segment, but clearly we are seeing the new engineering that we are putting together and the extension in the average horizontal leg on our tied wells that overall EURs are trending upwards. And so clearly that helps also our improved development costs. On our upstream costs, yes, definitely, we are seeing inflation pressures both from service inflation and particularly wage pressures and salary pressures, mostly given that those levels inflation and salaries are running faster than deprecation of currency. So in dollar terms, we are seeing pressure on our lifting costs both in the conventional and the unconventional segments. However, it would be interesting to say that when you look at the average lifting cost for the year, we were still about 8% below 2019. When looking specifically at the fourth quarter on average, we were relatively in line with 2019, but then on the different of the composition of that average lifting cost, we can point out that our overall lifting costs on conventional blocks went up clearly on a unit basis, right? It went up, but that is primarily as a result of the significantly lower production coming out of our conventional activities. Just to put it in context, our production, when comparing…

Your next question comes from the line of Regis Cardoso from Credit Suisse. Your line is open.

Hi guys. Sergio, Alejandro, Pablo, thanks for taking my questions. Couple of follow-up questions of topics we've already sort of glanced on or touched on. First is, considering the cost inflation. I wanted to get a sense if you believe you need price adjustments to make up for the cost inflation in order to achieve your EBITDA expectations or I mean whether you already embedded in that guidance sort of the expectation that you would have declining margins on the back of that inflation, right? And then still on the topic of the price adjustments, of course, now oil prices trending significantly higher at $110 per barrel Brent. How do you see this play out in Argentina? Do you think you would be able to pass-through these higher prices or instead would you expect the government to fund the importation of the gasoline, assuming that the country might become net imported throughout 2022? And then just finally, if I may, one question regarding the number of drilled and then completed wells. The number of wells has declined from 76 in 2020 to 47 now. I just wanted to get a sense of how should we interpret this? Is this because we're being more efficient in tying up the wells or is it in any way something that you have less wells to put on stream now, or that your activity has slow down in the fourth quarter? Thanks.

Hi, Regis. Good morning, and thank you for your questions. In terms of your first question about cost inflation and how we treated it for budgetary purposes. Of course, when putting together our budget, we put together our own assumptions in terms of macroeconomic variables and how they will translate into our cost base. And so when we put out our guidance in terms of CapEx and the potential free cash flow effect of that CapEx, saying that we might be in the neutral to slightly negative territory. We do have contemplated our assumptions on inflationary pressures. As I said, that also contemplated conservative prices in terms of fuels and crude, and it's hard to say at this point, how both things will end up playing out, but at least started trying to answer your question. At least we can say that we will take into consideration the impact of inflation and how it plays out with our view on the evaluation of the currency during the year in terms of their impact on our cost structure. What I can say is that clearly that generates an increase based on our budget assumption that will increase our cost base generally speaking. And again, that is considered in our assumptions for EBITDA generation and free cash flow for the year. Then on your question of price adjustments and the evolution within the current context, clearly Sergio has already touched upon that issue in terms of our view very specifically related to the current situation of prices above 110. What we can say is that, again, repeating what Sergio was saying, we need to remain cautious and prudent in figuring out how the different bios play out. And also as mentioned in the presentation, we are very focused on at least maintaining…

Your next question comes from the line of Ezequiel Fernandez from Balanz. Your line is open.

Good morning, everybody. Thank you very much for the materials and the time on the call. I have three questions. I would like to go one by one, if you don't mind. My first question is related to the refineries utilization. YPF is near 80%, if I'm not mistaken on this last quarter, and this is important not only for the company, but also for the country from an FX reserves perspective. How high you think you can go in 2022 in terms of utilization? And would you expect perhaps older refineries that have been inactive during 2020 and 2021, not owned by YPF other refineries in Argentina to go online this year? And if this higher utilization is going to translate into lower exports on the country as oil crude exports?

Hi, Ezequiel. To start with that question, yes, as mentioned utilization at our refineries recovered in the fourth quarter. Part of that has to do with the increasing demand. Part of that also has to do with lower utilization in the third quarter, given some program maintenance work that we were executing during the quarter, primarily between, July and August. So that pushed our utilization rate and average to 85. And although improved from the previous quarters and coming out of the pandemic that is still below the average of 90, that we used to have in the past. And now, how we expect that down the road, it has to do with, I was just commenting, before in terms of the negotiations between downstreamers and upstreamers, in terms of sourcing local crude to further increase the utilization rate on the refineries. So based on that and given the spread of local crude prices to export parity, we probably don't – we would like to see, but we probably are not going to see a significant further increase on the overall utilization rate of the refineries. Of course, we also don't expect local demand to continue increasing at the levels that we experienced in the fourth quarter. Actually for the first quarter, we are already seeing demand being stabilized and potentially even a little bit lower than the fourth quarter, particularly in January local demand decelerated, and then it bounce back a little bit in February, but of it all in the first quarter, we are likely to see a little bit of a lower demand compared to the fourth quarter. And then given that and allow the same level of utilization rate at our refinery so potentially slightly higher during the year, what we are likely going to see is that total imported volumes are going to remain high probably on a year-to-year basis higher than 2021 because the ramp-up in imports, last year took place mostly in the fourth quarter. So on average quarters probably below what's happened in the fourth quarter because as we commented before the fourth quarter was also initially high because of the build-up in inventories. So most likely on average, we are going to see lower level of inputs compared to fourth quarter, but on a year-over-year basis our total volumes likely to be higher than 2021.

Okay. Thank you. And I don't know if you can touch a little bit on what might happen with some other refiners in Argentina, could go online this year or not?

Well, generally speaking, we do know that some of our competitors are having some major maintenance as we speak, so that can also generate some extra imported volumes. Beyond that, I particularly don't know of any specific issues on the refinery system overall during the year. So unfortunately, no more color that I can share at this point. I will definitely talk to our downstream experts. And if we have any particular additional color, we will definitely revert to you.

Your next question comes from the line of Luiz Carvalho from UBS. Your line is open.

Hi, everyone. Thanks for taking the question. I believe you want to come back to me. One on the cash flow and [indiscernible] slides 12 and 13 of the presentation, they're really helpful. But 2022, when we tried to reconcile the cash flow for the current year, I know even considering significant increase on the EBITDA level, we still see like a lower, I would say cash position than the 1.1 that you ended the year. I mean, you still have some debt to be paid and $3.7 billion on CapEx and we are consigning to the cash flow in 2022 with I don't know, $0.4 billion, $0.5 billion in cash. So just trying to understand first, if that makes sense considering no debt roll over and in that prompt how you guys are now planning to renegotiate with $700 million that you have that expiring in 2022. And the second question is with regard to the IMF agreement with Argentina, I mean, there are lots of moving bars, but lots of parts that touching about the energy sector and the government subsidies in that front. So just trying to understand also how these agreement might impact, if point to, or negatively the company and the sector with regards to the freedom to price to follow the international markets, pricing looking forward? Thank you.

And we do have a follow-up question from the line of Ezequiel Fernandez from Balanz. Your line is open.

Sorry, operator, can you hold on one second because we need to answer Luiz’s question. Sorry, Ezequiel hold on a minute, please.

Yes.

Luiz, good morning. Let me address your questions. Clearly, on the cash flow issue. Of course, we are not yet disclosing our budget in terms of adjusted EBITDA for the year. I will do say that we are not expecting any significant increase compared to the results on 2021. And as you clearly say, we do have an ambitious CapEx plan, that has to be financed. But then also we need to bear in mind that, well, on the one hand, our total cash expense for the year, is expected to decline as the average amount of that has trended downwards compared to the average of 2021. And then we also say that we do have some positive working capital variation expecting in 2022, mostly related with the collection of some receivables that we still have in our balance sheet by December. Part of that related to gas distribution, for example, clients, that we are collecting during the year and some other working capital adjustments that we are forecasting. And then of course, we are also saying that we might end up having relatively small negative free cash flow during the year that which – it might require some incremental debt. Although we are saying, also that incremental debt will be capped not to exceed a net leverage ratio of 2x during 2022. And clearly, on that regard, as I said before, given that the nominal maturity that we have during the year are mostly taken care for already, and the receivable maturities are very small. And given that the total balance in upstanding facilities with relationship banks, as well as our exposure to the local market, it’s at the minimum in many years, we do feel that we have ample room to tap on those sources to fund those…

Ezequiel Fernandez, your line is now open.

Thank you. Hi, again. So basically I had two questions, should be quick. The first one is related to in your budget for 2022, or your guidance. How much are you contemplating to get us inflows from working capital management? And my other question is related to the – well the new hydrocarbons law is probably not moving forward or at least is stalled in Congress, but it seems that the chapter on fuel tax offset could be sent for approval in a couple of months. I don’t know if you have any updates on that front?

Sorry, Ezequiel. Can you repeat your first question because the line was little cut off and we couldn’t really grasp it?

Sure. In your guidance, in your budget for 2022, how much are you considering, how much money is coming in due to working capital management?

Okay. Again, as we are not – because if we specifically talk about working capital, we are putting together full assumptions on adjusted EBITDA et cetera, right. And unfortunately, let me at this point in time, not be so specific, because clearly we see some volatility and that's why we prefer to be proven that this time and not fully disclosing our specific budgets in terms of adjusted EBITDA and specific working capital. What I do can say is that, as I mentioned on Luiz's question, we will expect some positive impact not huge, not major, but we will see some positive impact on the working capital contribution.

Great.

And in terms of the hydrocarbon law, yes, clearly as we speak, we don't have too much clarity on what will end up happening with it. Clearly given general views, we would tend to say that it might – the actual project that was presented to Congress might not actually be approved. Basically, we understand that there are some concerns about the complexity and the technicalities incorporated into that law, into that project. But we will see – we do expect to see maybe a shorter and more specific project or law that we’d touch upon certain aspects that need to be addressing the near future. Part of that is the fuel tax and that you were asking about. So we do expect that that to clarify and put forward in the near future to provide more stability and clarity in the way of anticipating the evolution of that component.

Great. That's all from my side. Thank you very much.

Sure. Thank you.

And your next follow-up question is from Konstantinos Papalios from Plenti. Your line is open.

Thank you very much. Just to follow-up on Cardoso question on refinery utilization, we are forecasting higher, fewer needs for the power duration sector in Argentina during the prices – the international price for LNG. So why you forecasting a positive impact on the power sector gas oil needs? And does it perhaps mean that you could score higher crack spread on eventual additional volumes for diesel and fuel oil towards the power generation sector? And just one quick one, you mentioned the bottlenecking infrastructure for evacuating volumes from black and white of course, could you share with us ballpark estimate on the CapEx required to fulfill this goal and how much evacuation capacity would it add? Thank you very much. And again, congratulations on your results.

Thank you, Konstantinos for your comments. [Indiscernible] to the second question. As you know, total production from all producers out of the Neuquén Basin down very significantly in 2021 from about 250,000 barrels per day in December 2020 to an average of about 320,000 barrels in December 2021. It's a level not seen since [indiscernible] and this incremental production, with an excellent news was a result of example oil production, led by our company, increasing production by 62% over a year, and reaching almost $140,000 barrels per day loss in last December. This ramp-up in production was more pronounced than previously expected by the industry, and that resulted in – to anticipate investment in midstream or into the bottleneck and enable the continuous expansion of Vaca Muerta. And this investment large portion of which is – and will be carried out through our midstream subsidiaries total value, which we have 37% and 10%, which we have a 30% participation include different initiatives. In the future of the value under go into revamping of four compression stations that have been ideal for over 10 years, which will add about 25,000 barrels or about 10% of allocation capacity to [indiscernible] in the second quarter of this year, and for investment is around $50 million. And revamping of the other four pump stations currently in operation, and more than 500 kilometers of new loops are expected to further up about 200,000 barrels per day of additional capacity during 2023, CapEx estimates by around $400 million to $450 million. On this note, investment plans also contemplate the expansion of a storage capacity at Puerto Rosales by our subsidiary – to provide further export flexibility through advantage. In Paraguay works are also being performed, current facilities on the Trans Am oil pipeline, OTA OTC, which…

And there are no further questions at this time. I turn the call back over to Sergio for some closing remarks.

Thank you very much guys for your interest for following YPF, for your comment and reports, and have a good day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.