Earnings call transcript: YPF Q3 2025 reveals earnings miss, stock rises

YPF Sociedad Anonima, reporting its third-quarter 2025 earnings, disclosed a significant earnings miss, with an EPS of -0.53 against a forecast of 0.7702, marking a surprise of -168.81%. Despite this, the stock rose 4.22% in premarket trading, suggesting investor optimism about the company's operational strides.

Key Takeaways

• YPF's Q3 2025 EPS missed expectations by a wide margin.
• Revenue fell short of forecasts, at 4.6 billion dollars.
• Shale oil production increased 35% year-over-year.
• The stock rose 4.22% in premarket, indicating positive investor sentiment.
• Operational achievements in shale and LNG projects highlighted.

Company Performance

YPF's overall performance in Q3 2025 was a mix of financial challenges and operational successes. While the earnings miss was significant, the company showed robust growth in shale oil production, which increased by 35% year-over-year. This operational success, along with strategic initiatives in LNG projects, may have contributed to the positive market reaction despite financial setbacks.

Financial Highlights

• Revenue: 4.6 billion dollars, 12% below the previous year
• Adjusted EBITDA: 1.4 billion dollars, flat year-over-year
• Net Debt: 9.6 billion dollars
• Free Cash Flow: -759 million dollars

Earnings vs. Forecast

YPF's actual EPS of -0.53 was a substantial miss compared to the forecast of 0.7702, resulting in a negative surprise of 168.81%. Revenue also fell short of expectations, coming in at 4.6 billion dollars against a forecast of 4.72 billion dollars. This performance marks a significant deviation from expectations, highlighting financial challenges.

Market Reaction

Despite the disappointing earnings, YPF's stock rose 4.22% in premarket trading, closing at 37.79 dollars. This increase may reflect investor confidence in the company's operational achievements and future growth potential, particularly in shale oil production and LNG projects.

Outlook & Guidance

YPF's forward guidance includes ambitious production targets, with plans to reach approximately 215,000 barrels per day by 2026 and 290,000 barrels per day by 2027. The company is also focusing on an LNG project expected to start operations by 2030, with an estimated CAPEX of 20-25 billion dollars.

Executive Commentary

CEO Horacio Marín emphasized the strategic importance of Vaca Muerta, stating, "You have to expect 2026 a very clean year of the results." Maximiliano Weston, Strategy VP, highlighted the potential of Vaca Muerta, saying, "Vaca Muerta has the scale, the quality, and cost competitiveness to position Argentina as a leading global LNG exporter."

Risks and Challenges

• Financial strain from high net debt and negative free cash flow.
• Revenue decline poses questions about sales performance.
• Continued volatility in global oil prices may affect profitability.
• Execution risks related to ambitious production and LNG targets.

Q&A

During the earnings call, analysts focused on YPF's divestment strategy for conventional assets and potential partnerships for YPF Agro. The company also addressed plans to reduce unit costs and leverage by 2026, reflecting a focus on financial stability and operational efficiency.

Full transcript - YPF SA (YPF) Q3 2025:

Margarita Chun, IR Manager, YPF: Good morning, ladies and gentlemen. This is Margarita Chun, YPF IR Manager. Thank you for joining us today in our third quarter 2025 earnings call. Today's presentation will be conducted by our Chairman and CEO, Mr. Horacio Marín, our Finance VP, Mr. Pedro Kernig, and our Strategy and New Businesses and Controlling VP, Mr. Maximiliano Weston. During the presentation, we will go through the main aspects and events that shape the quarter results, and then we will open the floor for a Q&A session together with our management team. Before we begin, please consider our cautionary statement on slide two. 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 the expectations contemplated by these remarks.

Our financial figures are stated in accordance with IFRS, but during the presentation, we might discuss some non-IFRS measures such as adjusted EBITDA. I will now turn the call over to Horacio. Please go ahead.

Horacio Marín, Chairman and CEO, YPF: Thank you, Margarita, and good morning, everyone. Let me start by highlighting that this was another quarter in which we continued to deliver solid operational performance. Despite the contraction in international prices, we maintained strong profitability levels compared to last year, gaining further operating efficiency and consolidating the tremendous progress that has been achieved in our shale operations. Revenues amounted to $4.6 billion, 12% below the previous year, in line with the 13% year-on-year decline in the Brent price, in addition to other offsetting effects. Adjusted EBITDA reached approximately $1.4 billion, representing a sequential increase of more than 20% while remaining flat versus the previous year. The sequential improvement reflects higher shale production, coupled with the successful strategy of reducing the exposure to conventional mature fields.

The year-on-year comparison shows YPF's ability to maintain its profitability despite the contraction in international prices, driven by an improved production mix with a higher proportion of shale and continuous improvement in operational performance. That exit strategy led us to an impressive lifting cost reduction of 28% quarter-over-quarter and 45% year-over-year. During the third quarter, our shale production increased by 35% interannually, reaching 170,000 barrels per day. More recently, in October, preliminary figures indicate shale oil production expanded by another 12% over the average of the third quarter, totaling around 190,000 barrels per day. This production level is fully aligned with our annual target of shale oil production of roughly 165,000 barrels per day. Moreover, it will enable us to slightly exceed the December 2025 production target of 190,000 barrels per day.

Furthermore, the higher shale oil output that generated a remarkable shift in our production mix has allowed us to improve our EBITDA by around $1.3 billion on an annual basis versus two years ago. CAPEX activity continued to be focused on developing our unconventional resources, representing 70% of our total quarterly investment. At the same time, we maintain our focus on achieving further operational efficiency in our shale operation. In that sense, let me highlight that during the quarter, YPF completed the drilling of the longest well ever in Vaca Muerta, exceeding 8,200 meters with a horizontal length of nearly 5,000 meters at our Loma Campana block. Moreover, during September in La Malga Chica, we completed the drilling of a 4,000-meter horizontal well in just 15 days, setting the record as the fastest well ever drilled in Vaca Muerta.

Lastly, in early October, we drilled one of the fastest wells in the Real Grande block, located in the south half of Vaca Muerta. This well has a lateral length of more than 3,000 meters and was completed in just 11 days. Moving on to our downstream segment, during the third quarter, we achieved strong operational performance, reaching the highest processing level since 2009 at 326,000 barrels per day. This processing level was 9% higher than last year, representing a solid utilization rate of 97%. In that sense, we are pleased to announce that La Plata Refinery was named Refinery of the Year in Latin America by the World Refinery Association. Additionally, La Plata Refinery ranked in the first quartile across several KPIs in Solomon's Global Refinery benchmarking based on 2024 results.

This recognition represents the results of the successful implementation of the third pillar of our 4x4 plan, our efficiency program, based on operational excellence and technological innovation. On the financial side, free cash flow was negative, as expected, for a total amount of $759 million. This negative free cash flow position is mostly explained by the extraordinary effects related to the recent acquisition of the shale asset from Total Austral for $523 million and the impact of the mature field exit strategy. As a result, net debt increased to $9.6 billion, pushing our net leverage ratio up to 2.1 times. However, excluding the acquisition of Total Austral assets and one-off costs related to mature fields, the negative free cash flow pro forma would have been $172 million, with a net leverage ratio pro forma at 1.9 times.

Additionally, a few days ago, we have successfully retapped our 2031 international bond, issuing $500 million at 8.25% yield, the lowest interest rate for an international bond of the last years, replacing and improving our average life and financing costs. On a final note, let me briefly comment on the recent announcement regarding the Argentina LNG project. In early October, within the stage three of the project, we signed a technical FID with ADNOC for a full integrated LNG project of 12 million tons per year, expandable to 18. Moreover, recently, last week, we signed a preliminary framework agreement with a new partner, the Arab company ADNOC. In addition, we continue working with the phase one and two.

All in all, the project continues to demonstrate the interest of international players in long-term investment in Vaca Muerta, which is essential for creating a solid partnership structure for the development and financing of the project. In summary, during the third quarter, we continue progressing to achieve the ambitious targets set for the year, delivering solid financial and operational results where we continue to strengthen and prepare YPF for new and even more challenging goals in the future. I now turn to Max to go through some details of our operating and financial results for the quarter.

Maximiliano Weston, Strategy and New Businesses and Controlling VP, YPF: Thank you, Horacio, and good morning to you all. Let me begin by expanding on Horacio's comment about the evolution of our oil and gas production. During the quarter, total hydrocarbon production averaged 523,000 barrels of oil equivalent per day, declining 4% on a sequential basis and 6% on a year-over-year basis as a result of the divestment program of mature conventional fields, partially offset by the expansion of our shale production that accounted for approximately 70% of the total output, increasing its portion once again and, as expected, vis-à-vis the previous quarter. Oil production reached 240,000 barrels per day, 3% below the previous quarter and 6% down against last year.

Nevertheless, it is worth highlighting that shale oil production recorded an impressive growth of 35% against last year and 17% versus the previous quarter, almost neutralizing the conventional production decline driven by the successful exit strategy of our mature conventional fields that accounted for only 14,000 barrels per day in the quarter. Beyond crude, natural gas production totaled 38.4 million cubic meters per day, down 3% on a sequential basis. This decline reflects an 18% contraction in conventional production for mature fields, partially mitigated by an expansion of 5% in shale gas production. Regarding prices within the upstream segment, crude oil realization price averaged $60 per barrel in the third quarter, essentially flat on a sequential basis and contracting 12% year-over-year, aligned with the variations of Brent.

Natural gas prices increased by 6% quarter over quarter to an average of $4.3 per MBTU, supported by the seasonal factor included in the Plan Gas program between the months of May and September. Now, let me dive into the evolution of our shale oil output. YPF reinforces its leading position in the development of Vaca Muerta oil, accounting for roughly one-third of the country's share. In the third quarter, we continue to deliver a solid performance driven not only from our key core hub assets but also from contributions from the north and south hub blocks. In the third quarter of 2025, shale oil production delivered an impressive growth rate of 55% when compared to 2023 levels. Based on preliminary figures, October production reached an all-time high of 190,000 barrels per day, representing a strong increase of 70% vis-à-vis November 2023 and ahead of schedule.

As Horacio previously mentioned, based on the current production levels, we expect to comply with the average production target announced for the full year 2025 of around 165,000 barrels of oil per day, and we expect to slightly exceed the exit rate of 190,000 barrels of oil per day as of December 2025. In the third quarter, we continued with the strategy of developing Vaca Muerta beyond our core hub blocks. In this context, let me point out the success story of La Angostura Sur, our flagship south hub block, 100% owned by YPF under an unconventional concession valid through 2059, underscoring the long-term potential of the south of Vaca Muerta for YPF.

Over the past 12 months, shale oil output from this block has jumped from only 2,000 barrels of oil per day in October of last year to more than 35,000 barrels per day in October this year, representing, in financial terms, a field with a pro forma annual EBITDA of more than $500 million. The results achieved so far are impressive. Moreover, the block expects to reach a production plateau of over 80,000 barrels of oil per day in upcoming years, with a very competitive break-even price below $40, demonstrating resilience amid evolving global dynamics. Finally, wells drilled in the block during the initial stage of development have demonstrated promising productivity levels that underscore their long-term potential, recording an estimated ultimate recovery of around 1.3 million BOE per well, including oil and natural gas.

Furthermore, the high potential is also driven by a total inventory of roughly 350 wells, of which less than 15% has been developed. Regarding our upstream cost structure, let me point out that the combined strategy of divesting mature conventional fields and growing our shale business has enabled us to generate significant savings in our average lifting cost of more than 40% over the last two years, moving from $16 per BOE in the third quarter of 2023 to $9 per BOE in the third quarter this year. This remarkable cost improvement was achieved due to the significant shift in our production mix, where unconventional production increased from about 45% of the total output in the third quarter of 2023 to nearly 70% in the third quarter of 2025, while conventional production portion fell from around 55% to 30% in the same period.

As a result, since shale lifting cost remained at a very competitive range of $4-$5 per BOE, YPF was able to improve its cost structure, and therefore, its annualized savings would amount to approximately $1.3 billion. YPF will continue and deepen this strategy, supported by the completion of the sale and reversal of mature conventional blocks by the end of 2025, the Andes I project, and the sale of the rest of the performing conventional fields, the Andes II project, which initial results are expected by the end of this year. Consequently, YPF will become a 100% pure shale player with an efficient lifting cost structure of around $5 per BOE in the near future. Now, let me walk you through the performance of our shale activities.

In the third quarter, we drilled 54 horizontal oil wells on a gross basis, primarily in operated blocks, with a net working interest of 58%, bringing the year-to-date to 159 horizontal oil wells on a gross basis. This keeps us on track to achieve our full year target of 205 wells in 2025. In terms of completion and tie-in of oil wells during the quarter, we recorded a modest level of activity compared to last year, but year-to-date, we continued growing. In the third quarter, we completed 63 horizontal oil wells and tied in 64 on a gross basis. However, in the first nine-month period of this year, we completed 186 wells and tied in 187 wells, growing around 20% compared to the same period of last year. In terms of efficiencies within our shale operations, during the third quarter, we continued setting new records on drilling and fracking performance.

We averaged 337 meters per day in drilling in our core hub, while we recorded 279 stages per set per month on fracking in unconventional blocks, increasing by 7% and 16%, respectively, when compared to the same quarter of 2024. As we have been flagging in previous calls, this constant improvement in operation metrics is the result of the implementation of our real-time intelligence center and the joint efforts of our technical team and key contractors that worked relentlessly to introduce further efficiencies to our operations. Finally, regarding the CAPEX composition within the upstream business, it is worth noting how YPF managed to significantly transform the portfolio by reallocating investments from conventional to shale activity in the last two years.

In this regard, in 2023, investments in conventional business represented 35% of the total upstream portfolio, while in the last 12 months of September 2025, CAPEX in conventional assets only represented 5%. Furthermore, within the shale portfolio, investments in facilities represented a significant portion of total CAPEX over the last two years, which is expected to remain steady in 2026 and begin to gradually decline starting in 2027. Switching to our midstream and downstream segment, the third quarter processing levels averaged 326,000 barrels per day, a record high since 2009, with our refinery utilization at 97%, representing an increase of 9% and 8% versus the third quarter 2024 and the second quarter 2025, respectively. This remarkable success is mainly driven by the record processing levels of 208,000 barrels per day achieved in September at La Plata Refinery, combined with record production of middle distillates, reducing to almost zero fuel imports.

Domestic sales of diesel and gasoline remained strong in the quarter, with dispatch volumes rising 3% quarter on quarter and 6% year-over-year, reflecting higher demand across all commercial segments: retail, agribusiness, and industrial. Moreover, we managed to modestly expand our leading market share to 57%, which increases up to 60% considering gasoline and diesel produced by YPF and dispatched at third-party gas stations. Furthermore, in the third quarter, YPF achieved an improvement in the premium mix in both gasoline and diesel sales. In terms of prices, during the third quarter, local fuel prices remained broadly aligned with international parities, albeit dropping against the previous quarter based on a very volatile environment. More recently, October preliminary figures show a narrowing of the gap between local fuel prices and import parities, while recovering on a healthy midstream and downstream adjusted EBITDA margins of nearly $70 per barrel.

Now, let me briefly comment on the progress of the quarter regarding the efficiency program for the upstream and downstream businesses. Thanks to the supervision of our upstream real-time intelligence center, we managed to drill 100% autonomously more than 30 horizontal wells in real time using AI complemented with traditional techniques. While in fracking, we became the first company worldwide to perform 100% autonomous fracture remotely from our real-time intelligence center using predictive algorithms. Additionally, we have successfully executed 24 hours of continuous pumping in our fracking operation during 63 hours, fully supervised by our upstream real-time intelligence center. Regarding the downstream segment, as Horacio already noted at the beginning of the call, our La Plata Refinery was awarded as the refinery of the year in Latin America.

Also, this refinery achieved the first quarter in several KPIs of Solomon's benchmarking, such as net cash margin, return on investment, operational availability, and personal efficiency categories. Finally, the record high processing levels in our refineries have started generating a surplus of gasoline and middle distillates, allowing YPF to export refined products to neighboring countries and replace imports of YPF and other local refineries. For instance, in the third quarter 2025, YPF exported around 30,000 cubic meters of jet and gasoline to Uruguay, and during the first nine months of the year, we replaced more than 230,000 cubic meters of gasoline and middle distillate imports. Now, let me share further details regarding the Argentina LNG project.

As briefly anticipated by Horacio regarding the phase three of the project, in early October, we signed a technical FID with ENI for a fully integrated LNG project of 12 MTPA, expandable to 18 MTPA. More recently, during last week's ADIPEC conference in Abu Dhabi, we signed a preliminary framework agreement with a new partner, the Arab company ADNOC, that formally announced their intention to join the Argentina LNG project. Moreover, during the quarter, we continued working on the phases one and two. The project considers the development, design, construction, and operation of a fully integrated natural gas LNG plus natural gas liquids and NGLs project based on wet gas upstream fields located in the Vaca Muerta reservoir.

The infrastructure involved in the project includes a liquefaction capacity of 12 MTPA, expandable to 18 MTPA, through two or three floating LNG vessels of 6 MTPA of capacity each, a dedicated 520 km gas pipeline, a dedicated 650 km Y-grade pipeline for NGLs, and onshore facilities, including fractionation, storage, and port facilities. The CAPEX for the entire project is estimated at around $20 billion, with a potential expansion to $25 billion in both cases, including the financial costs. Leverage of the project is expected to be around 70% on the total project cost, in addition to the upstream investments required to accelerate shale natural gas production. Consistent with present LNG transactions, the project is intended to be financed through non-recourse financing with multiple sources of funding, including ECAs, development banks, and commercial banks as potential anchors of the financial structure.

The FID is expected by the first half of next year, while the commercial operations for the first floating LNG are estimated by 2030 and following ones from 2031 and 2032. In summary, Vaca Muerta has the scale, the quality, and cost competitiveness to position Argentina as a leading global LNG exporter, and Argentina's LNG project will unlock Vaca Muerta's full potential, enabling exporting its unconventional shale gas production to the world. Now, I will turn the call over to Pedro. Thank you, Max. And good morning, everyone. On the financial front, the third quarter ended with a negative free cash flow position, as expected, that amounted to $759 million, mainly explained by the recent acquisition of the shale assets like Caranara and Rincón de la Ceniza blocks to Total Austral, closed at a purchase price of $523 million by the end of September.

Moreover, despite the third quarter adjusted EBITDA surplus, CAPEX deployment, and regular interest payment, we recorded negative working capital associated with the discontinued operations in our material fields, income tax payments from our subsidiaries, and longer collection dates from natural gas clients and Plan Gas program that started to normalize during October. It is worth noting that excluding the one-off items related to M&A transactions and the negative impact of the material fields exit strategy, our negative free cash flow would have amounted to $172 million in an environment of lower international prices. Finally, on the liquidity front, our cash and short-term investment totaled at $1 billion by the end of September, remaining essentially flat vis-à-vis the previous quarter.

In terms of financing during the third quarter, we continue progressing on our financial program by securing local loans obtained from relationship banks and by tapping the local capital market at very attractive financing costs. In that sense, during the third quarter, we issued $2 net bonds for a total amount of $300 million at an interest rate of 7.5% and a tenor of two years and a half. In addition, we issued $225 million from Dollar Cable Bonds with a five-year tenor and an interest rate of 8.5%, tender in the international market to local investors. That, combined with a $300 million international bridge loan, allowed us to fund the recent acquisition of shale assets. More recently, during October, we issued $100 million net bond with a 15-month tenor at an interest rate of 6%.

Considering these last bond issuance, we issued new local bonds for a total amount of $625 million, with an average tenor of three years and an interest rate of 7.65%. Moreover, aiming to reduce the cost of carry and taking a proactive approach towards debt investors, we scheduled for this month the prepayment of $120 million of our secure notes due 2026, paying in advance the last amortization, which matures next year, and thereby redeeming in full the bond ahead of schedule. Finally, let me share two very important news regarding YPF financial strategy. First, during October, we reopened the Syndicate Corporate Cross-Border Loan Market. We signed an export-back loan for $700 million with 10 international banks, with a three-year tenor and a six-month availability period, as a preponderant strategy for the financing of our 2026 maturities.

This transaction was possible after several months of work, showcasing YPF's ability to access cross-border funding. Moreover, the loan was oversubscribed and attracted participation from new banks from Central America and Asia, demonstrating the market support and confidence in YPF. Finally, as Horacio previously mentioned, two weeks ago, we successfully returned to the international capital market. After two days of virtual meetings with more than 40 international investors, we led the recap of our 2031 international bonds of $500 million at a yield of eight and one quarter. The month of this reopening exceeded all expectations, with international and local investors oversubscribing orders three times, reaching a peak order book demand of $1.5 billion. The proceeds will be used to fully repay the bridge loan for the acquisition of Total Austral shale assets and to finance YPF's investment plan.

This issuance represented YPF's tightest new issue yield on an international bond issuance in the last eight years and improved the maturity profile of itself, extending its average life. With this, we conclude our presentation and open the floor for questions. At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question comes from Alejandro Demichelis with Jefferies. Yes, hello. Thank you very much for taking my question. First, congratulations on the quarter. Production has been very strong, particularly on the shale oil side of things. Could you give us some indication of how you're seeing production growing into 2026, 2027? That's the first question.

Horacio, you mentioned all of the improvements that you are doing on the refining side and so on. We have seen you recently taking full control of the Refinor asset. Could you please give us some indication of how you see that asset developing and the rest of the refining portfolio? Thank you. Okay. Good morning. Thank you very much for the question. Regarding the production, you can expect the same that we talked in line with what we see in New York this year, but that average for next year in the order of 215 and 27 in the order of 290. We can give you a better number in the next call, but we think that we are in line with all the program, okay? Regarding the refining side, the Refinor is what was important for the E grade.

The E grade was very, very important for YPF because they give us a very good logistical advantage comparing with our, I would say, our competitors. That is why we decided to take that step because it was a difficult situation with the partner in that matter. For the gas stations, there is no difference because we were supplying those gas stations. We are going to take the best one with the YPF brand, and we maintain the other with Refinor as is today. On the other side, the refinery, which is in Campo Durán, is closed. Our idea is to make value for all the shareholders by doing some of the SOR, what we say in Santa Febillo, okay? We are working in that direction. That's fantastic. Thank you. Your next question comes from Leonardo Marcondes with Bank of America. Hi, everyone.

Thank you for taking my questions. I have three from my side. My first question is regarding capital allocation and M&As. We have seen YPF quite active on the M&A fronts, right? In this regard, what should we expect from the company going forward? I mean, does the company continue pursuing new M&A opportunities, or is it time to focus on the development of the assets within the portfolio? My second question is regarding the divestments and capital allocations as well. Could you share your plans for natural gas and also YPF Agro? When could we expect to hear more news on these matters? Lastly, my third question is regarding the LNG projects. I mean, how do you expect to fund these projects, and if we should expect any sort of project finance involved with there? Thank you very much. Okay.

Thank you very much for the question. For the first one, is Pillar 2, our YPF 4x4, what is active portfolio management? That means buy and sell. It depends where you can make more value for shareholders. We were active out with the batch of fields, and we see there was a big opportunity this year for the, I would say, core asset in Vaca Muerta. That is why we decided to buy the total asset of Vaca Muerta. What you are going to expect, I do not see that there will be a lot of changes in our strategy, but we do not see that we will be active next year for major acquisition in Vaca Muerta and not in the others, okay? That is what is our thought. Regarding MetroGas, MetroGas, we are in the process of having the extension, the 20-year extension of the company, the contract.

More than contract is the concession. They tell me concession here because remember that I am an old man. I don't remember all the wars. There are people here that they say, "You are wrong. It's a concession, okay?" It's a concession. Our idea there is that after that, we start with the bank, and we are going to sell as soon as possible, okay? For the law, we have to sell because of the I don't know how the I asked Germán, that is the lawyer. No, que tenemos la necesidad de hacerlo por la competencia. For the vertical integration that we have the company, we have to sell before the Plan Gas is out. We are going to sell that. YPF Agro is not necessary capital allocation.

What is there is that we are YPF Agro is a wonderful commercial channel that was built by YPF in, I would say, 20 years ago or so, and it is extremely successful. That is why there is the other company that are refinery also, they call with the name an Agro. They copy the idea of YPF. Our idea is, because we have no knowledge of selling soja on the other things, is that to have a strategic partner that can make more value for us and for all the shareholders, and to have a mixed company where we put the CFO inside, and we will have 50 and 50%, okay? That is the idea, and they will be very close now. They are on the street right now, okay? That is the second question that you asked.

Regarding the LNG, you're right, it's a project finance that we are going to do with our partners. You're right. Perfect. Thank you very much. Your next question comes from Luisa Belin with Morgan Stanley. Hi, team. Thank you for taking my questions. First one on my end is, could you give us more color on what drove the working capital losses this quarter, and what should we expect in terms of working capital gains or losses in the coming quarters, and how this should contribute to free cash flow generation into 4Q? Second one is, if you could give us more color on what drove the lifting costs. Was it just higher shale output, or are there any other factors which explain this decline and how we should expect this into 4Q as well?

If I may, a third one, if we should expect an acceleration of 4Q2025 CapEx, and how should the year CapEx stand versus the guidance? Thank you. The first question, after that, I will pass to Pedro so they can explain in more detail than me. I can tell you the more general, but I will pass to Pedro. For the second one in the lifting cost, remember that we are going out of major fields and reducing the production from there, but you are increasing a lot the production, as you see in the presentation, in the Vaca Muerta fields. There are several reasons why we reduce. First, we have a key here in Pillar 3 that we have to make efficiency every day in our life. The second thing is, when you increase a lot the production, you reduce the fixed cost.

You have to expect that we are going to maintain or reduce. I think to maintain is a good number, but we have it. I think we are in a very low lifting cost, okay? In order of four, it is very low. Which more you ask, is there any other factor we explain this decline? I explained that. I think I answered that. In the fourth quarter, 2025, the CapEx, no, we think that we are going to end up in the year with a little less CapEx than we said at the beginning of the year. With the production, if you see the well, you see no, you do not see that, but I see the report, the daily reports, and we are now in more than 190. Yesterday was in order 284. We have some daily 199.94.

I started discussing with the guy why it's not 200, but it doesn't matter. We are close, and we are in better shape than we thought at the beginning of the year. We are focusing in looking at the results and looking at the best places to drill. That is why we are expecting those results. With the CapEx, I say, I pass to Pedro so they can explain about the working capital. Hi, Luiza. Thank you very much for your question. As you noted, during the third quarter, we recorded a negative working capital by about $360 million, and that was driven by multiple reasons. The first, the seasonality of the natural gas sales that were accrued in the third quarter and are expected to be collected in the fourth quarter. That is approximately $100 million.

Second, we recorded in the third quarter longer collection days from the natural gas clients and from the Plan Gas program. That started to normalize during October and November. That's approximately $50 million. Third, in the third quarter, we recorded a positive stock variation in the downstream business for about $60 million. That's the result of higher oil purchases to third parties to restock inventories given the inventory drawdown that we recorded in the second quarter. We recorded a particular lag in the OpEx and the CapEx from the material fields that were out from YPF financial statements since the end of June, and those payments were faced during the third quarter. Finally, this negative free cash flow includes a decrease in the market position of our selling bonds, which increased and changed, fortunately, during October and November. Your next question comes from Daniel Guardiola with BTG.

Hi, good morning. Thank you, guys, for taking my questions. I have a couple of questions here. The first one is on costs, and I would like to know if you can share with us how do you envision the trajectory of your lifting and the asset costs for 2026, and eventually, if possible, and onwards. It will be great, especially considering the asset sale yield of conventional assets and the potential renegotiation of contracts with some of the service companies. My second question is on leverage, given the fact we saw an increase in leverage during this Q to 2.1 times. I would like to know if you can share with us what is the maximum leverage at which the company feels comfortable operating at.

In that sense, given that leverage has been going up in the last couple of quarters, I would like to know if you guys have ever considered to hedge your exposure to oil prices to offset any potential volatility in oil prices. Those will be my two questions. Okay. With the listing and the drilling and completion cost, I can give you more details in the next call. We are working very hard to reduce the unit costs with all the service companies, and we are in negotiation during the week, okay? I cannot tell you exactly, but I think we are going to reduce the unit costs in very important because Argentina is another country. That is why we are going to work on that. In the listing, I think I answered that, okay?

You have to expect that we are going to be in that region, okay? That we say. Regarding our debt, I think you have to take into account that last year we bought two assets, okay? That's why the ratio goes up. We are not going to increase. It's not our goal that we think that we are in the maximum that we want to be. During 2026, you are going to see a reduction. Take into account what is the. We bought two good assets in Argentina, the best in gas and the best. I don't say the best in oil, but one of. In the core that is very important. That's why we thought that was important to buy those assets and make more value in the future, in the near future, for all the shareholders. Your next question comes from Guilherme Martins with Goldman Sachs.

Hey, Margarita, Horacio, Pedro. Thank you for having my question. Hopefully, it's a little stronger, but for sure, our prediction is being seen in the second half of the year. I have two quick questions here. My first one is on downstream. I understand you guys were not able to price in line with international parity in Q2, right? I would just like to get a little bit more color on what happened in the competitive environment. You mentioned volatile dynamic, but any additional color would be grateful. My second question is, if you guys could please provide an update on the ongoing divestment of MetroGas, when we should see next divestment being concluded, when we should see production continue to decline following the exit of those assets, and whether we should see additional cash outflow from the exit of those legacy assets. Thank you. Sorry. Okay.

Talking about prices, we have a policy that I cannot open totally open because if not, we are going to say to our competitor. We have moving average because there was in the last quarter, this quarter, there was a lot of volatility in prices. Remember that we have the exchange rate, the oil price, the by-fuels, and the taxes. In our country, the consumers need to. We are not accustomed to have changes on prices every day, okay? Big changes. We have a moving average. I don't know if you remember that we built a new real-time intelligence center in the commercial side that is unique. I don't know if it's unique in, I don't know if it's unique in the world, okay? We have there everything that you can imagine with USAI and a lot of things.

From there, we are working with the new policy of pricing that is micro-pricing. We are working and always trying to maintain our policy in. The last quarter was the big volatility also in Argentina. You know that there was a lot of volatility. That is why it was very difficult to go up because sometimes it goes up, sometimes it goes down. Now we are in good shape. The second one was about the ACEANDES and all that stuff. Today and in the afternoon, we are going to sign Tierra del Fuego. That was the last one. We have only one area that is in Río Negro that we are going to sign very quickly. After that, we are out of all what we call ANDES1, okay? It was important for the value of shareholders.

With ANDES2, we are in the process of negotiating now to go out from conventional. Those conventional are areas that make value for all, but it's very important because we have the determination to go to be an integrated and conventional company. That is our goal, and we are going to negotiate in the next month to be out more than we can of those assets and to be next year or, if we can, to be totally unconventional company. Very clear. Thank you so much. Your next question comes from Tasso Vasconcellos with DBS. Hi, Horacio, Pedro, Margarita. Thanks for taking my question. I have two here on my side. First one, Horacio, can you remind us what legislations, I mean, either new legislations or adjustments on existing ones that YPF still relies on to move forward with any projects?

As far as I remember here, there were not many new regulations that the oil and gas industry as a whole depend on, but there are some specific times on some projects to be included under the REGI. Not sure if there is actually, not sure if there is any kind of discussion on the 8% export taxes for the oil industry. I think it would be great to have a broader recap on this political or regulation landscape. The second question, actually, a follow-up on these domestic fuel prices, you just mentioned about what did you notice in terms of upside or downside potential since you established a more dynamic pricing model, the real-time center, and so on?

What can you tell us about the recent news saying that some politicians in Argentina wanted to create a law in which you need to give a 72-hour notice advance before adjusting fuel prices? Those are my two questions here. Thank you. Okay. Thank you for the question. I do not know if thank you for the question, but beyond REGI, no. The REGI, if you are referring to the export duty for conventional, there is on the new. I know exactly what you say in the new because remember, we are YPF. We are a private company, and we are not in the, I would say, regulation side. Really, I do not know. And conventional, remember that now is not our core, okay? I read in the news they sent to you that they are negotiating on that, but I have no idea what will happen.

Regarding REGI, for sure, the REGI will be applied for LNG. It is applying for infrastructure and for LNG. For LNG, we expect it to be in all the chain. The second one that you say that there is a yes, I read in the newspaper they sent to you, but that is regulations. I have to answer the same. I'm not working in regulation at all. There are no further questions at this time. I'll now turn the call back to YPF's management team for closing remarks. Okay. Thank you very much for your attention, for your questions. You are always very polite with us, so I would like to say thank you for that. You have to expect that it's a company that will change a lot the way of management, the way of working every day.

I'm very proud for all the work that all the employees are doing now and the energy that we are putting. You have to expect 2026 a very clean year of the results. The problem of this year, and I imagine for you, is very difficult to see because there is dirt with MetroGas fees, with taxes, with deferred taxes that only account, I can understand. When they explain, they are confused. It is difficult to understand what you are saying. You have to expect 2026 a very clean one, and you will see there how we are making the value for shareholders that you can see in this quarter. I would like to for you because there are some people that are confused when they say the price is not increasing.

The price is increasing at quality where you're making value because you are reducing the conventionals. If you analyze the value so far, only to change the mixture is $1.3 billion. This quarter, you can see that. We are really very proud of what we are doing, all the people that we are an executive committee and all the people that are working in YPF. Thank you very much for all of you. This concludes today's conference. Thank you for participating. You may now disconnect.

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