YPF SA Q3 FY2026 earnings call

• Production Growth: Shale oil production hit 224,000 bpd in Q3, up 5% sequentially and 32% YoY, approaching the year-end target of 250,000 bpd. Conventional oil production declined to ~37,000 bpd due to divestments.
• Cost Efficiency: Total lifting costs dropped to $7.8/BOE. Excluding divested blocks, lifting costs fell below $7/BOE. Shale hub lifting costs remain at best-in-class levels of ~$4.2/BOE.
• Operational Excellence: Drilling speed increased 29% vs 2023, and fracking activity improved significantly. A new drilling record of 4,770 meters lateral length was achieved.
• Refining & Downstream: La Plata refinery named 'Refinery of the Year' for the second consecutive year. Processing volumes rose 5% YoY despite scheduled maintenance. YPF maintained a 58% domestic market share.
• Strategic Acquisitions: Completed acquisition of remaining 25% stake in YPF Luz for $430 million, gaining full control of the renewable energy asset.
• Asset Divestments: Sold non-core assets including Mendoza blocks and 70% of Metrogas, generating ~$2.2 billion in total proceeds since December.
• LNG Progress: Received a $6 billion financial proposal from US EXIM Bank for the Argentina LNG project. Final Investment Decision (FID) targeted for November 26, 2026.

Revenue reached $6.6 billion, up 41% year-over-year. Adjusted EBITDA was $2.5 billion (84% YoY increase) with a margin of 38%. Free cash flow was $901 million. The company does not break down financial performance by specific product segment in absolute terms within the provided text; however, it highlights that upstream and downstream both performed very well. Upstream is driven by shale oil production averaging 224,000 bpd (up 32% YoY), while downstream processing averaged 344,000 bpd. Downstream adjusted EBITDA margins expanded to approximately $32/bbl.

• CapEx: Maintaining full-year CapEx target of $5.8–$6.2 billion, with upstream investment expected to increase in Q4 to support higher output.
• Production Targets: On track to reach 250,000 bpd shale oil production by December 2026.
• VMOS Timeline: VMOS first oil export expected early next year (March 2027), with construction 85% complete.
• RIGI Projects: Will submit three new RIGI projects in the North Hub in the near term; total gross CapEx for these projects is ~$44 billion.
• Future Production: CEO indicated that 2027 production levels will be significantly higher than previously stated, promising further details in April.

• Geopolitical Volatility: International conflicts impact freight costs (increased 10x) and commodity price volatility, affecting Brent discounts and global markets.
• Infrastructure Bottlenecks: Potential constraints in evacuation facilities, not just pipelines, could limit acceleration of upstream activity.
• Regulatory Approvals: Pending final regulatory approval from ENRE for the Metrogas sale and provincial approval for the Mendoza blocks sale.
• Demand Elasticity: Domestic fuel demand elasticity limits pricing power; aggressive price hikes could reduce demand and hurt export competitiveness.
• Drilling Mechanics: Longer laterals face mechanical bottlenecks and pressure loss during fracturing, which may diminish returns on additional lateral length beyond standard wells.

Q: Michael Furrow asked if operational or infrastructure constraints would prevent accelerating upstream activity in 2027 given high cash generation and RIGI advancements.

A: Horacio Marín confirmed YPF is in a strong financial position to accelerate, noting that daily Vaca Muerta production already hit record highs above 252,000 bpd. He emphasized that while financing is not an issue, development pace is limited by evacuation facility bottlenecks rather than pipeline capacity. He hinted that 2027 production figures would "surprise" investors positively when updated in April.

Q: Bruno Montanari inquired about the productivity comparison between the Northern Hub and the core shale hub, and the status of the US EXIM Bank financing for the LNG project.

A: Marín explained that the Northern Hub has slightly lower EUR (estimated 10% less) compared to the South Hub but remains highly profitable. Regarding LNG, he stated that the US EXIM Bank letter of intent is secured for up to $6 billion, with final closing expected mid-next year. He reaffirmed that the FID for the LNG project is scheduled for November 26, 2026.

Q: George Gasztowtt sought clarity on the consumer buffer scheme, specifically regarding the widening gap to import parity and how much remains to be recovered.

A: Marín defended the buffer policy as essential for maintaining social license and demand elasticity in Argentina, citing public support. He explained that prices are managed dynamically based on daily calculations to avoid sudden spikes that consumers cannot afford. He noted that when international prices drop, YPF will collect funds to recover the gap, ensuring stability without disrupting domestic demand.

Q: Leonardo Marcondes asked about the timeline for completing asset sales and the productivity/EUR implications of drilling longer laterals (e.g., 4,800m).

A: Marín reiterated that asset sales are progressing fast, with updates on production acceleration plans coming in April. Regarding long-lateral wells, he acknowledged they have higher EUR but noted diminishing returns due to mechanical bottlenecks and pressure loss during fracturing. He stressed that the focus is on maximizing efficiency and profitability rather than chasing records, copying best practices from U.S. operators to reduce choke usage and improve planning.