YPF SA (YPF) 2020 Q1 法說會逐字稿

Welcome to the Q1 2020 Sociedad Anónima SA Earnings Conference Call.

My name is Richard, and I'll be your operator for today's call.

(Operator Instructions)

I will now turn the call over to Sergio Giorgi.

You may begin.

Thank you.

Good morning, ladies and gentlemen.

My name is Sergio Giorgi, Vice President of Strategy, Business Development and Investor Relations of YPF.

Thank you for joining us today.

In this occasion, we will present YPF 2020 first quarter results.

Before we begin, please review carefully the cautionary statement on Slide 2. We will be making forward-looking statements that refer to our estimates, plans and expectations that could differ materially due to factors we note on this slide.

Also, note that exchange rate calculation used to reach our main financial figures is in U.S. dollars.

As you all know by now, we are currently in a transition period between CEOs at the company.

So before starting the presentation, we will have some brief comments by Guillermo Nielsen, YPF Chairman; and Sergio Affronti, the new CEO; and then both Ignacio Rostagno, Head of IR and myself, will be conducting the presentation and answering the questions.

Please, Guillermo, go ahead.

Thank you, Sergio, for your introduction.

Welcome, and thank you very much to all of you, the investors that are listening to you today as well as the media that is covering this meeting.

During the recent YPF Shareholders' Annual Meeting, which took place 2 weeks ago, I depicted how the COVID pandemic and the drop in oil prices was affecting our operations and strategy, and how we had quickly reacted to preserve our cash flow and the value of our company as well as which steps we plan to take once the scenario is stabilized in order to keep delivering products to our clients and creating value for our shareholders.

The speech I gave at that Shareholders' Meeting as well as the rest of the meeting documents are available on our website for your reference.

And things have not changed that much since last week so I would rather direct you to looking at this material in our website.

Now I am proud to introduce to you the newly appointed CEO, Mr. Sergio Affronti, which will be conducting the company on a daily basis, facing a scenario as no other scenario in the history of the oil and gas industry.

But I'm very confident that Sergio, joining the management team, will be able to successfully lead YPF during this time.

I will leave you with him so that we can move to the first quarter earnings.

Thank you very much.

Many thanks.

And good morning, everyone.

We are going through unprecedented times, given the COVID-19 pandemic.

So first and foremost, I wish that you and your families are staying safe.

After 27 years in the oil and gas industry, having held several business and management positions both internationally and in Argentina, I'm thrilled to be back at YPF, a company in which I started my career in 1993 and to have the chance to work again with so many wonderful people that I have seen grow over the years.

I've been here for a little more than a week now, working closely with Daniel and the rest of the management team to ensure a swift and effective transition to take the actions that are necessary in the current environment.

One of my most important tasks is to redefine the company's strategy that will build on a strict capital allocation process to ensure sustainable growth, deleveraging the company to strengthen our balance sheet will be a cornerstone of our strategy.

Redefining the company's strategy will surely require modifications in our organization.

We will go back to basics.

We evaluate our portfolio and generate the basis for future growth by focusing on our routes as the highly efficient world-class oil and gas operator.

By doing so, I am confident that we will become a company that is more solid, resilient and a true industry leader with a strategic relationship with the Argentine government, the provinces and all our stakeholders.

We are uniquely positioned to leverage a large-scale resource, with both conventional and shale development with a strong foothold in the domestic market with growing energy needs.

The opportunity to lead the way to transform Argentina into a net exporter of energy, aligns us with broader interests of the industry and our country.

In the current environment with low commodity prices and depressed demand, I'm not shy to stretch this point.

I'm fully aware of the company's current situation and the urgent need to improve efficiency across our Upstream and Downstream operations, both in CapEx and operating costs.

We need to become leaner to be able to move faster.

I would like to thank Daniel on behalf of all YPF employees and our Board members for all of these years of hard work and dedication, first as CFO and then as CEO.

And we all wish him the best in his future endeavors.

I look forward to building a strong relationship with the investor community and we will certainly have time over next months to get to know each other better.

But because I have only been here for a week, I apologize, but I will not be answering questions today.

Please Sergio, go ahead.

Thank you.

As you all know, we are living in unprecedented situation with the outbreak of the coronavirus pandemic.

Therefore, before moving to the main highlights of the quarter, I would like to share with you the 3 main action lines that we have taken to cope with this challenging situation.

As we always say, protecting our people is not a priority but it is a value.

For this reason, one of the 3 main action lines we launched is related to the safety of our personal clients, suppliers, communities and operations.

And in order to ensure we take decisive actions in real time, we're creating an ad hoc COVID Committee, led by our Vice President of Environment, Health and Safety.

This committee is coordinating all actions and protocols on a daily basis.

We are following strict health and safety protocols and updating them accordingly.

The results so far are impressive, and we are very happy to have planned ahead and invested accordingly so that more than 97% of the positions that do not require face-to-face attention have been filled through remote work, connecting with each other using top technology and just maintaining a few skeleton crews in the field and sites, while maximizing the use of off-site control rooms.

The second action line is linked to adapting our operations.

We defined a business continuity plan in close coordination with the different business units.

Here, too, we have been very dynamic as we managed stopping very quickly and in a safely manner, all drilling and completion activities across the country.

We ensured early storage capacity for the excess oil and refined products.

For crude oil, we hired 3 barges at very competitive rates, securing around 1.5 million barrels of additional storage capacity.

Besides, we stopped purchasing oil to third parties and adjusted our production and refinery utilization to the demand by operating only 2 of our 3 refineries.

In April, the average utilization was 47% without processing crude at the Plaza Huincul refinery.

Fortunately, as of last week, due to the recovery in demand, we resumed operations in Plaza Huincul and our 3 refineries are now operating, reaching a 55% utilization rate as of last week.

We managed as well to export crude oil and refine products, compensating local demand reduction.

Despite this context and following strict protocols, we maintained fully operational our retail network.

The third action line is linked to preserving our balance sheet with strong focus on cash.

This COVID situation fund our balance sheet with $1.16 billion of cash and equivalents in hand.

Of course, a link to the isolation measures taken in the country, our sales and therefore, cash generation were affected almost for one day to another due to the drop in demand.

This situation negatively impacted working capital position, as we still have disbursements to do for the previous months' operations.

Indeed, sales volume dropped initially, more than 60%, and our cash position was affected but it has now stabilized.

And the good news is that it seems that we reached a bottom in sales by mid-April.

We start -- we already started to see an increase in sales of around 10 percentage points, and we have not yet restarted activities for which we will adopt a gradual approach linked to the path of the recovery in demand, prioritizing cash and also considering that we have oil and refined products in storage, some curtailed production and even some drilled but uncompleted shale oil wells.

We will see these impacts on the results of the second quarter.

As Sergio said, we are working on identifying significant OpEx and CapEx reduction opportunities across the whole company and we're in the process of reviewing those with him.

These reductions will go on top of those identified at the beginning of the year as we are now focusing more on cash preservation growth.

In the financing front, we are working successfully with banks to keep on refinancing short-term maturities and tapping the local market.

Ignacio will comment later on what we did in the quarter and how we are facing this challenging context.

With this, I will let him carry on with the presentation, I will join back for the concluding remarks and Q&A.

Thank you, Sergio.

First, I would like to highlight that we maintain our commitment to ESG priorities.

In this line, the injury frequency ratio improved again this quarter to an all-time record of 0.16.

Concerning our main operational and financial figures of the quarter, they were partially impacted by the mandatory isolation measures implemented across the country in mid-March 2020.

Production, as we will show later, came at 510,000 barrels of oil equivalent per day, which represents a 5% increase compared to first quarter of 2019 as we continue increasing our net shale production.

However, compared to the previous quarter, it dropped 3%, mainly as some production services were not available due to the lockdown and we experienced some losses in Mendoza province due to climate effects.

Regarding our crude oil realization price, it averaged $48.50 per barrel, almost unchanged quarter-over-quarter but below last year's first quarter prices.

As a consequence of the excess offer, natural gas market prices were also below the previous year's utilization price.

Indeed, our selling price averaged $2.8 per million BTU, including $0.11 of subsidies compared to $3.70 per million BTU, 1 year ago.

Regarding our main financial figure in dollar terms, total revenues show a reduction of 15% year-over-year to $2.8 million, mainly driven by lower demand and lower prices for our main products, gasoline, diesel and gas.

Adjusted EBITDA was down by 17% in dollars, maintaining EBITDA margins stable at 30%.

IFRS 16 and IAS 29 effects are not included in our adjusted EBITDA and financial debt.

In addition, it is important mentioning that our adjusted EBITDA does not include $104 million from the acceleration of the promote of Schlumberger's share -- stake in Bandurria Sur following the sale of its stake to sell in Equinor in January 2020.

Capital expenditures were around $600 million, mainly focused on our Upstream business.

Finally, operating cash flow stood strong at $961 million, allowing to end the quarter with a similar cash position than at the beginning of the quarter.

As mentioned, total hydrocarbon production came 5% higher than the previous year.

Crude oil production showed a minor drop to 225,000 barrels of oil per day.

It is worth mentioning that by the end of July 2019, we completed the divestment of mature fields that represented an average of 800 barrels per day in the first quarter of 2019.

Despite being in our supply gas market, our gas production increased 10% to 38 million cubic meters per day.

This is mainly linked to our strategy of regaining natural gas market share.

Consequently, we were able to reduce the production curtailments from 9.5 million cubic meters per day in the first quarter of last year to only 1.1 million cubic meters per day this year.

In turn, NGL production increased 8% to 45,000 barrels per day, given the lower restrictions in natural gas production.

Moving now to shale.

As shown in the graph on the right, production continues to increase every quarter and now represents 23% of our total production compared with 15% in the first quarter of 2019.

Net shale production reached a record high of 117,000 barrels of oil equivalent per day, 63% higher than the same quarter last year.

Production at our 3 shale oil development fields increased during the quarter, driving net shale oil production to 43,000 net barrels per day as we connected a total of 22 new shale horizontal wells.

This new production represents a 41% increase compared to the first quarter of last year.

In addition to those new wells, before the lockdown, we were operating with 13 drilling rigs, with which we built a considerable inventory of drilled but uncompleted wells, 71 for shale oil and 10 for shale gas.

In fact, some of them are already fractured and only need to be connected.

Once the lockdown is lifted and it is safe to return to the operations and the market conditions are set, we can complete those wells and bring additional production.

This will help reducing CapEx and have available production with shorter cycles of cash generation.

Changing to our Downstream business.

Until Argentina entered the restrictive lockdown, demand of our main products of this business, gasoline and diesel was very similar to last year's level for the month of January and February.

Since mid-March, the fuel market was negatively impacted with a sharp decrease in demand of 80% for gasoline, while diesel volumes dropped by 50%.

The diesel reduction was partially mitigated by wholesale, with a strong agribusiness activity explained by the harvesting season.

As a result, gasoline and diesel sales during the quarter ended up decreasing 10% and 8%, respectively, compared to the first quarter of 2019.

As said, with the quarantine process getting flexible, we are seeing a recovery in volumes and a positive trend.

We ended up April with a decrease of 72% in gasoline and 38% in diesel compared to the same month of 2019.

Our aggregate market share during the quarter slightly dropped but remained strong at 55%.

In particular, market share for our premium products remained above 60%.

Besides local sales of other refined products, such as shale fuel and fuel oil were also affected by the lower demand driven by the shutdown.

However, we were able increase our export volumes by 13% compared to the quarter last year, with higher sales of fuel oil and virgin naphtha, among others.

As mentioned, we immediately reacted to the falling demand when the lockdown started and adjusted the processing levels.

Therefore, during the quarter, we processed on average 275,000 barrels of crude oil per day with a utilization rate of 86%, down from 91% in the previous quarter.

Analyzing the quarter figures, utilization averaged 90% in the first 2 months of 2020 but then decreased to 77% in March.

However, when compared to the first quarter of 2019, the depreciation rate increased by 2% as last year, volumes were affected by incidents in the Topping D furnace of La Plata industrial complex and power outages in La Plata and Lujan de Cuyo industrial complexes.

Moving to the chart on the right, we can see that gasoline and diesel prices were slightly above the prices of the previous quarter as the 90-day increasing price decree expired by mid-November.

And we did some catch-up with import parity and stay at those values.

Turning to cash flow.

The cash generation from our operations in the first quarter of the year reached a total of $961 million, levered by the $851 million of EBITDA and working capital collections.

Here, we consider planned gas 2017 collections that were canceled for approximately $75 million in the quarter.

Financial discipline is one of our key priorities.

During the quarter, our investments effectively paid reached $792 million, almost 10% below last year's quarterly average levels.

This CapEx payment carries $180 million from the last month of 2019 investment program, plus $70 million of materials already purchased for future CapEx.

In addition, by the end of January, Schlumberger sold their stake at Bandurria Sur to Equinor and sell, which triggered the acceleration in cash of the promote for their initial entrants at that block in 2017.

Then our cash flow from operations was enough to fulfill our CapEx, although not enough to face interest payments.

During the quarter, we tapped the local market twice for an amount of approximately $220 million, regarding maturing facilities, which are our main bulk of maturities in the short term, we have ruled over a considerable amount of them and have not seen any significant reduction in those lines.

Our cash position by the end of the quarter is helping us to go through the currently challenging scenario.

And we continue working on initiatives to reduce CapEx and OpEx to strengthen our balance sheet.

When looking ahead, the scenario is existent.

Our efforts will be focused on rolling over our short-term maturities, as we have been doing for the last quarters.

Then more than half of our debt matures in more than 4 years.

In fact, the average life of YPF's stand-alone basis is more than 5.5 years.

Our target is preserving liquidity.

We believe our nominal debt is in manageable levels as our leverage ratios stood slightly about 2.2x net debt to adjusted EBITDA.

We are proactively working in different finance initiatives.

We're working closer with banks, seeing their support to roll over the banking facilities when explaining to them our cash preservation strategy and the resilience our business has.

These facilities are quite atomized in terms of counterparties, including local and foreign lending.

What we consider our next significant debt in the capital markets is a $1 billion bond due March 2021.

Our objective is and has been for the last month, to roll over the maturity and market conditions.

We still have almost 1 year to do so.

Under this scenario, we are monitoring the market to [do liability] management when conditions are to be met.

With this, Sergio will say some concluding remarks.

Thank you, Ignacio.

As you can see, our first quarter results were aligned with our previous expectations.

The current situation forces us to reshape our 2020 approach.

For this reason, we are withdrawing our previous 2020 guidance.

During this presentation, we have shared with you the 3 main strategic action lines we have taken to cope with this unprecedented situation.

We will continue protecting the safety of our people, clients, suppliers and contractors as it is at these particular times that we need to stand by our values.

We will be adjusting CapEx and OpEx along all business units and corporate units.

We will continue adapting our crude processing levels to demand and stocks.

We will follow a strict capital allocation process investing in those most profitable ventures.

Finally, as we mentioned during this presentation, liquidity and cash preservation and our priorities, while we will continue managing our short-term maturities.

With that, we'd like to address your questions.

In this occasion and considering that we are still working in adjusting our future plans, looking at different scenarios, we are requesting to focus your questions in relation to the first quarter results.

Thank you.

(Operator Instructions) Our first question on the line comes from Luiz Carvalho from UBS.

Welcome and good luck to the new management, looking forward.

I basically have two questions, if I may.

The first one is trying to understand your liquidity position.

I mean over the 2020 and '21, the company has something close to $3 billion in debt expiring.

And with the cash position of close to [$1.1 million, $1.2 million] over, you'd say, from the first quarter, right?

Of course, you have a cash generation, but when we saw the last business plan, company was almost free cash flow breakeven with the oil price at $60.

So I just would like you to help to try to conciliate or reconciliate using the cash availability and cash generation versus the debt that you have expiring in the next 2 years?

The second question is about the crude oil barrel creation.

Today, there are some news from the government stating that or giving more details about how this work in terms of the -- how can I say, the adjustments in terms of -- that's going to be on a quarterly basis.

And if Brent exceeds the oil price of $45 for 10 consecutive days, the domestic reference price will no longer be valid.

So how do you understand this would work with your -- how can I say, Upstream part of the business and match that with the Downstream potentially pressure if you're not able to pass through the higher oil price to the domestic market?

So I'm just trying to understand what is the final balance to the company here with higher oil prices, let's say, in the Upstream, but as a consequence, a bit less -- a bit of a pressure on the refining margins looking forward.

And on top of that, due to the potential depreciation of the currency.

Thank you, Luiz.

I hope that you and your family are safe now.

So let's start by the barril criollo.

First of all, okay, let's clarify that, establishing a barril criollo or a minimum price for oil, we still have to see the final decree would be a government initiative, where we, YPF, of course, we are involved as one of the several stakeholders.

Having said that, any decision concerning oil or even fuel prices are, of course, of strategic importance for YPF as we are both producers and refiners.

So we look at that with much detail.

In general, the main idea of this initiative would be under the current disruptive scenario to ensure that the temporary minimum supporting price for local oil that would provide all the players of the industry with some short-term visibility and incentive to plan investments ahead based on their revenue generation capacity.

So what we know so far, well, there would be a minimum price for local oil, $45 has been mentioned as the price for Medanito, adjusted them by quality and an obligation for the refineries to purchase local crude requirements based on demand and after using their own oil, right?

So this minimum price would exist until Brent or reference price catch up with local price and would be revisited periodically.

In addition, export tax will go to 0, if international prices are under this minimum price, with a maximum of 8% when the local prices are equal to international.

And on top of that, there would be no local fuel tax increases until October.

This is what we know so far.

In terms of potential estimated short-term impact for YPF, it is still quite early to model it.

We still need to see the final document and we need to track the evolution of demand over the next weeks related to the flexibilization of the quarantine in the country.

Remember that in normal operating conditions, we purchased around 20% of the oil we refined, give or take, 50,000 barrels per day.

But this is not the case today as we are not refining at full capacity.

And we are not purchasing any third-party oil and probably will not be doing that for some time, as we have more than 7.2 million barrels of oil in stock as well, a considerable amount of refined products in stock.

So we need to see how the demand is recovering, then we need to use the oil and the refined products that we have in stock.

We need to reopen our curtailed production.

We need to reduce the amount of drill and completed wells, and then we'll be in a position, depending on demand, of purchasing third-party oil.

Now under the current uncertainty, we have different scenarios but it's difficult to give a date when we're going to resume purchasing oil to third parties, would take a couple of months.

And probably, we will start purchasing less volumes compared to those we were purchasing before the crisis until the demand catch up, right?

So that we can say about the barril criollo.

Now for this -- your second question about liquidity position, Ignacio will comment on that.

Yes.

Luiz, well, we have shown in the presentation our objectives.

And of course, one of that is to cope in terms of strengthening the balance sheet.

I would say that the situation found us fortunately in an acceptable amount of cash and equivalents in hand.

Of course, with this lockdown that we are currently going through, we have been affected, I would say, by working capital.

But at the same time, we are now -- seen a stabilization, as we said, with a gradual recovery of demand.

So we expect to see a recovery and regain cash generation in the upcoming terms.

Now I seen it more globally, as you mentioned, when you -- we have withdrawn our guidance.

It's true that we are not going to see the same situation or the same expectations that we have before, but the cash preservation for us is a key priority.

And in that sense, we have -- we are adjusting -- we are focusing on reducing and adjusting our CapEx in order to try to reach to levels of being even in terms of cash flow and cash generation at the end.

So that hasn't changed.

And in fact, it's what we are working on right now.

Okay.

And just a follow-up, Ignacio, if I may.

That has been quite a recurrent question from my end, I mean, over the past conference calls.

How do you see the divestments or potential divestments in this scenario?

I mean, of course, the potential buyers may have lower appetite for some of the assets.

But if divestment -- a potential way to raise more cash in order to, I don't know, cope with the -- let's say, the current -- with a lower generation, cash generation for the short term.

Yes, Luiz, as you know, we always have a series of divestments ongoing and planned.

Let's talk about the last one that we have performed.

So over the last, let's say, 3 -- the last 3 weeks, we have closed the transaction for the farmout of the offshore block, CAN 100 with Equinor.

And we closed the transaction and we have been paid.

And we expect to close the transaction for the sale of 11% of the Bandurria Sur transaction even this week.

So we have not seen any change in the appetite of our buyers.

And of course, now we are planning ahead of what are going to be the next series of divestments.

As I said before, that we always have opportunities to optimize the portfolio, and we will continue on such speed.

Our next question on line comes from Vicente Falanga from Bradesco.

Sergio and Ignacio, wish you all plenty of success.

I hope your families are healthy.

I have 2 questions here.

First of all, how is YPF's utilization of its storage capacity right now?

I know you mentioned 7.2 million barrels, wanted to know how much does that represent out of the total storage capacity.

And what can we expect for output in the second quarter?

And then just a follow-up on Luiz' liquidity question.

As we approach the end of the year, if Argentina's country risk remains excessively high, does it make sense for you to try and issue bonds to replace those $1 billion more or less in bonds maturing in 2021?

Or are you going to try to pay these off?

Yes, thank you, Vicente.

So let's give a bit more detail on our storage capacity.

So we have today around 8 million barrels of oil storage capacity, of which we are using around 90%.

So give or take, 7.2 million to 7.5 million barrels of oil that we are storing.

That includes 3 cargoes that we have, with 1.5 million of light oil.

And that's what we have in terms of oil storage.

We have been doing as well some exports.

We exported 1.5 million of Escalante and Cañadón, Seco crude.

Because of their low-sulfur quality, they are very well demanded.

And with -- under the current context of the price of demand, they are still, I would say, demanded internationally.

So we took the opportunity to export that.

In terms of refined products, we have approximately 40 million barrels of storage capacity and we are approximately around 75% of capacity.

And this includes, of course, our [refineries' tanking and the polyducts].

That we can say regarding the storage capacity.

We are seeing now that the demand of fuels is increasing.

And this week, the country is flexibilizing the quarantine in the majority of the province.

So we see that the tendency of the demand is going to increase.

So we believe that in terms of stories, probably the worst is behind us, right?

Now the second question was related to liquidity, and...

I can take that.

Vicente, so concerning liquidity's question, in fact, we are very active.

And even the last weeks and months, we have been analyzing and monitoring the market.

Of course, the situation, it's more difficult, let's say, to do something.

But we expect to have the market, at least the local one that we have been doing so this year, with good results.

And of course, in terms of future, for sure that if we see a good recovery in terms of all the [sovereign] and the possibilities are there, for sure, we will be doing something.

Just -- I don't know if you can comment on the outputs for the second quarter, if there's any expectations that you guys are observing already in April and May?

Yes.

I forgot about that, sorry.

So there's no one answer to that because it depends on several variables.

As you know, we have some curtailed production.

Today, approximately, let's say, between 10% to 12% of our production is curtailed, give or take 30,000 barrels.

Half of that is in Loma Campana, and the other half is in other conventional fields like Puesto Hernández and Chihuido.

And as we said, we have as well some considerable inventory of drilled and uncompleted wells in the shale oil, around 70 wells.

So we will be adjusting with demand.

And as we said before, it is difficult today to give one number because we have the different scenarios.

It will depend, one, how the quarantine is flexibilized and the demand catches up.

So we cannot give one number and this is why we have withdrawn the guidance, right?

Our next question on line comes from Regis Cardoso from Crédit Suisse.

Sergio, I hope you -- all the success in the new role, taking over the company.

So if we could just maybe go back on the impacts of the COVID-19 announced, if you could maybe comment for the second quarter so far, what was the lowest point and what was the recovery you have seen so far in terms of impacts to your Upstream production?

So the production curtailments you had to do as well as refinery utilization rates.

It would be -- I would appreciate an update on that approach.

Also, you mentioned -- so second question, right, you mentioned that you would adapt in both your OpEx and particularly CapEx to this new tougher reality in order to preserve cash that is very good to hear.

We do believe financial discipline is paramount as of this moment but it's -- it will likely have impacts in terms of production curve in the medium term.

So is there any comment you can make in terms of how you balance out those CapEx savings and the impacts in terms of decline rates for the production curve?

Thanks, Rajid -- Regis, sorry.

So okay, first one, impact of COVID.

As we said during the presentation, we have like 3 main objectives for the short term.

The first one, of course, is linked to the safety of our operations, our people, our clients and our providers, right?

So based on that, as we said, we defined a COVID Committee, which is chaired by our HSE manager, which is following the situation on a daily basis.

And we are adjusting protocols to ensure that we are and we remain safe, right?

For this reason, for instance, once the quarantine was put in place, we stopped all of our drilling, fracturing and completion and work over operations in a safe manner.

And as well, the construction activities and we just kept skeleton crews in the sites in order to -- and at the same time, we managed to get our retail network open, right?

And we are happy, in fact, because more than 95% of the people that usually work at the office have been able to work at home, and we are happy as well that we have invested last year in all the technology that is needed to achieve that, right?

So that's -- I would say, on the HSE, I would say, objective.

The second objective is related to adapting our operations to the current situation, right?

So the first thing that we did is with all the -- I would say, the lines, the Upstream, Downstream and Gas & Power, we established a business continuity plan.

And as I said before, first of all, in the Upstream, we stopped all the drilling operations in a safe manner.

We just get a few pooling units for critical maintenance, skeleton crews at the fields.

We adjusted production levels to demand and storage capacity, as I said before.

And as well, we stopped majority of the construction activities in terms of infrastructure.

In the Downstream, we have been very quick in an increase in our storage capacity, as I said, with these 3 cargoes that we're hiring at very low pricing.

We adjusted the refinery capacity at a certain time, we stopped 1 of our 3 refineries, but it's now working again.

We -- and I would say, we kept open our retail.

That's in terms of operations.

And the third impact, of course, of the sale objective is linked to the cash preservation.

As we said before, this crisis I would say, found us with more than $1.1 billion of cash and cash equivalents in hand.

And of course, linked to the quarantine, we have our sales and therefore, the cash generation affected almost from one day to another.

At the beginning of the quarantine, our fuel sales went down between 70% to 80% and the diesel sales between -- around 50%.

So -- and we still have to pay the bills for the previous months, right?

So we have affected -- we have been affected in our working capital, give or take, let's say, 20%.

But now this has been stabilized, as I said before.

For one side, we have stopped all the main CapEx activities because we are not drilling or completing wells.

And at the same time, demand is recovering, right?

Now that's, I would say, mainly related to the impact of COVID.

Your second question was related to CapEx and OpEx.

Well, as we said, first of all, if you compare -- the first thing I have to say is that we identified CapEx and OpEx reduction, I would say, opportunities all across the chain, right?

In the Upstream, of course, they are related to drilling and completion activities, but as well some infrastructure.

In the Downstream, mainly pushing 1 year the new specifications project and as well delaying some other projects and reducing the marketing budget in Gas & Power by pushing the majority of the project.

We are just going ahead with the gas storage project because we are already injecting there, and this is a good business for us.

And as well, we have identified OpEx reductions across the chain.

And this includes, I would say, salaries for all the employees as we have been hearing probably since yesterday.

Now -- I cannot give you now one number of how we're going to reduce this number.

If you remember, the previous guidance that we gave was around $2.8 billion for the year that we have withdrawn since.

If you look at the CapEx for the first quarter, was just below $600 million.

And we've just been affected there like half of 1 month.

And this month, we are already 1/3 of the quarter, where we have been not doing drilling or completion activities.

So you can consider that this quarter, the second quarter, the CapEx will -- probably much lower than the first quarter.

Now looking ahead, we have to deal with uncertainty.

We need to look at how demand is recovering.

We need to look at our cash preservation strategy.

And then we will define on a case-by-case basis, but this is all that I can tell you for the time being.

If I may just follow up very quickly, you mentioned demand falling some 70% at its [trough].

How did that affect your refining, utilization and production?

Do -- I mean if you have a number, right, in terms of utilization rates dropped to as low as 60% or even below that.

And if you have like the latest one, just so we have an idea how well that has recovered.

That's one follow-up.

And the second is just whether you -- in those revisions you're studying for CapEx, if you believe that demand could decline in -- I'm sorry, if production could decline in any of the scenarios.

Or if you believe, in many cases, you'll be able to either maintain or increase production.

Just those 2 follow-ups.

Okay.

So today, more or less in terms of production, we have around 10% to 12% of our production is curtailed.

As I said before, around 30,000 barrels of oil per day.

Half of that is in Loma Campana, having the request of our partner.

And the remaining half is mainly coming from conventional fields at Chihuido and Puesto Hernández, right?

So in terms of refining, I would say that at the worst, our refining capacity was at 50% and is now recovering.

As of last week, we were between 55% to 60%.

So it's already increasing, and we will see how this is catching up with the partial reopening of the country and the flexibilization of the quarantine, right?

Now how it's going to be, the production of the year?

It's a very tricky question.

And one thing that we can say is that once we have to put, again, in place our production, as I say, half of this production is coming from Loma Campana, where we can increase the -- we can start the production very quickly.

We just need to ensure that we follow the choking procedure.

So once we decided to open up production between 7 days to 10 days later, you are already producing those wells.

And you know what happen when you stop an unconventional well, pressure starts to build up.

And at the beginning, you have a little bit of more production than you have before stopping and then it stabilizes.

So we can plan ahead and put all this production again very quickly.

And the second half, let's say, it's conventional fields.

When you stop producing conventional fields where you are injecting water -- well, water has a little bit more mobility than the oils.

At the beginning, you have more water coming and this will take, let's say, around 20 days to stabilize, and then you will find the same production done before.

Now there are plenty of variables to define how much are we going to be producing by the end of the year, so I cannot give you a number.

But you also need to add to the question that we have a considerable amount of drilled but uncompleted wells in the shale oil, in our 3 main developments, around 70 wells.

Some of them already fractured, so we just need to drill out the plugs and connect.

So we can increase production very quickly, considering that -- what I just said and the curtailed production.

That's all I can tell you so far.

Our next question on line comes from Pavel Molchanov from Raymond James.

You talked a lot about the decline in demand within Argentina.

I'm curious, what has been happening with the export of natural gas to Chile and any other countries where you have been having some gas exports in recent years?

Well, as you -- Pavel, as you know, early in 2019, and when we saw that there was an excess gas in the system, we decided to activate levers to increase the gas demand, right?

And these levels include exporting gas to Chile again, bringing along a floating LNG unit to export gas but a liquefied gas.

And as well, other levers like underground storage and long-term levers that are not included in your question.

So yes, in fact, we exported gas to Chile.

We exported LNG.

Now we are entering in the winter season.

So winter season, those exports are reduced and will eventually stop.

Understood.

Let me also ask about the ESG strategy.

I think it was late last year, you announced some low-carbon initiatives, including YPF Ventures with Sustentator and so forth.

To what extent have these projects been curtailed due to the capital -- CapEx cutbacks that you have talked about?

Okay.

Thanks for that question.

So first of all, our ESG strategy is in full motion.

As we mentioned during the last quarter results, we have been tracking our performance against our peers.

And we have been doing -- our teams have been doing an excellent job doing that.

Remember that the first time that we compare ourselves with the MSCI Index, we were kind of bottom line.

And we realized that this wasn't because we were bad, but because we were not selling what we were doing.

So we start doing hard work.

And on 2018, we catch up and got, I would say, just in the middle of the line, in the average, just above the average of our peers.

And during the last MSCI qualification, we qualified again and we were in the top 15%.

So we are very happy with that.

It's in full motion.

And now, as I said before, we are analyzing CapEx and OpEx reductions all across the chain.

So probably we'll get impacted.

But it's still early to give figures, right.

Our next question on the line comes from Bruno Montanari from Morgan Stanley.

Good luck to the new team.

A follow-up on liquidity, how long do you think you can wait before taking the final decision for the bond refinancing next year?

And perhaps that the company might need to take on a higher cost debt.

So I assume you're not going to wait until March, right?

So when do you pull the plug and decide on what to do finally?

And a second follow-up on CapEx.

Aside from COVID and the oil price, just thinking about the operations, what would be the lowest CapEx you can do without having any serious operational problems?

So how low can you go?

And if I can throw in a third one quickly, are you seeing any type of working capital pressure because of extended payment terms from your client base for any chance?

Yes.

So yes, related to the CapEx, as I said before, we withdraw our guidance because we are calculating, right?

So we can go as low as necessary.

And of course, operational problems would be more related to OpEx rather than CapEx.

And -- but this is something that we are reviewing.

So I'm afraid I cannot give you a number because we are still revisiting and looking at different scenarios.

We still need to see how the demand is catching up and revisit investments all across the chain.

So I'm afraid I cannot give you more information concerning that.

And the second was concerning liquidity.

Liquidity and the bond.

Bruno, yes, specifically, saying -- speaking about a deadline, there's not a deadline, though.

We are not imposing us a deadline.

We are actively looking at different alternatives, of course.

And -- or the good thing that we have is that we still have an advantage of almost a year until it matures, okay?

So in that sense, we have time.

And we don't have a deadline that we have out -- imposed.

We will be monitoring the market as long as this time passes.

And we look forward to doing [a liability] management as we have already mentioned.

In terms of the working capital, we want to say we are actively managing it, okay, with -- we have mentioned about the cash preservation strategy.

And in that sense, we are looking and analyzing, I would say, every dollar and peso that enters into the company and the one that goes out with top care into that.

So that's the way that we are dealing with all the working capital itself.

Our next question on line comes from Barbara Halberstadt from JPMorgan.

Just wanted to follow up on the liquidity.

Actually, you mentioned you tapped the market for just over $200 million in the quarter.

If you could just give us a little bit more color on the terms for the local bonds that have been placing?

And also give us just more of an update of how much you have been able to issue locally year-to-date on top of the $200 million.

Barbara, thank you for your question.

In terms of the [decisions] that we did, they were all local, okay?

We tapped the market in the quarter twice.

The market, a few local markets you may know that have the same penetration as the international market.

But so far, we have been successful in reaching to this market.

I would say that the [agencies] are more short term.

They are based more on peso rather than dollar, although we also issued some dollars, but mainly, it's pesos.

We have tried to extend the maturities but we are seeing that, still, the market is quite short in terms of the terms.

So basically, that's the idea over the local market.

We will try to maximize the access to [it].

We see that there is some appetite.

Of course, in this current situation, we will probably need to see some settlement, but we will keep on focusing on this market as long as we have this opportunity to take advantage of.

And just a quick follow-up, how much have you issued year-to-date locally?

Or the $200 million is just for the quarter, right?

Yes.

That's for the quarter.

Then we did another issuance of around $25 million in April.

Our next question on line comes from Anne Milne from Bank of America.

(Operator Instructions)

A couple of questions.

I was wondering if you could tell us how all of your activities affected your lifting cost and your cash production cost for the quarter and what your cash breakevens were.

Another question I have is on the natural gas market, which has been very competitive.

How has this affected all of this?

Prices seem to have gone even lower.

Maybe you could tell us what you're doing to sort of guarantee minimum price levels there?

And I guess -- have you -- well, this week, one of the rating agencies, S&P, lowered their convertibility and transferability risk in Argentina, YPF was downgraded.

When you have had to repay some of your trade creditors, have you had used your own money offshore?

Or have you been able to access foreign exchange from the central bank?

Anne, yes.

So concerning the natural gas market, as we have been saying since early 2019, there is more gas in offer than demand.

And this is why we have been activating all those levers I just mentioned, short-term and medium- and long-term levels.

And of course, this has been reflected in prices, right?

So yes, we have seen a decrease in prices in the natural gas market.

Now if you look at what happened on this first quarter compared with the previous year, you see that we have gained market share.

And this was a commercial decision that we took in order to reduce the curtailments.

And if you -- I'm trying to remember, but in first quarter of last year, we were curtailed around 9 million cubic meters per day, and you don't see that on this quarter, right?

So of course, this has a consequence in prices.

And we believe that the market will eventually stabilize.

And the good news of this is that we and our competitors as well, we have demonstrated that we can develop shale gas fields at competitive prices below import parity but probably at higher prices than the prices that we have seen under the last gas standards, right?

Second question was related to breakevens.

So we don't provide a -- one breakeven.

So what we have been saying, so far, is that in our shale oil fields, specifically in Loma Campana, we have given a $30 per barrel breakeven.

And of course, there we have very competitive development costs around -- sometimes below $10 per barrel.

We have an OpEx that is around $5 per barrel.

And drilling wells in Vaca Muerta have been very efficient in doing that, just to give some figures, drilling a 2,500 meter horizontal well and fracking it with around 38 trucks is costing us approximately $11 million, all included from drilling to connection.

It will take us approximately 200 days to drill a 4-well and connect the 4-well pads and 300 days for a 6-well pad.

So this is the numbers that we are providing.

And of course, we have identified a series of improvements that we need to do to keep on reducing our development cost, right?

So far, we know and we have proved that Vaca Muerta has an excellent productivity, sometimes higher than the U.S. [analogs], and we need to continue working in reducing our OpEx -- our CapEx and our OpEx.

And the third question was related to...

Anne, this is Ignacio.

This is concerning your question relating to access, let's say, to the FX.

In terms of all the refinancing activities, but I would say, generally speaking, in terms of services that are provided from abroad, we do not have any restriction or problem at all to access the official effects.

So that's what we have been doing with no problem at all, and that's the current situation.

No.

We don't expect any change in that sense.

Our next question on the line comes from Walter Chiarvesio from Santander.

Wish all the success to Sergio.

My first question is regarding -- I heard in the -- from other companies and in the press that an -- E&P players are selling crude oil at very low prices, even below $20.

And my question is regarding that.

Why isn't more room to improve benefits by buying to third parties are very low prices while trying to cut more on production in order to create the margin versus the pump price?

That is one.

The second is I saw in the press this morning that the government plans to freeze the pump prices for 6 months until October.

And in your case, means that the implied price of the crude oil wouldn't be really $45, if that's happened, because even if the currency will rule out a currency jump, [if this could jump in] the official effect, even following the crawling peg movement that the central bank is following, we should expect depreciation of the currency from now until October by no less than 10% or 15%.

So the real price is not $45 per barrel.

So how do you think that will evolve in the future in your case?

Those are my 2 questions.

Walter, so on your first question, let's say that we are currently not purchasing oil to third parties, as we said, we are managing stocks.

And we took the opportunity to buy some crude at lower prices as you said.

But today, it's more a question of demand, right?

So we still have some curtailed production.

We still have some oil in stock.

And we still have some refined products in stock.

So we take into account all this and, of course, try to do the best economic decision in real time, right?

Your second question was mainly related to barril criollo.

I have been saying already a lot of things about that.

And it is still too early.

And we still need to read the decree and see all the dynamics to see how this will play.

And as we always do, we will manage this.

But the first thing that we need to do is to see how the demand is recovering and what's the use of our stocks and how do we stop curtailment.

And our final question comes from Andrew De Luca from Barclays.

So I wanted to follow up on liquidity.

You guys have been mentioning the importance of preserving cash, but your comments suggest that you've likely seen a deterioration in liquidity since the end of the first quarter.

So my question is, can you just provide us with a degree of how much it's deteriorated since the first quarter, maybe where it stands today or where it ended in the month of April?

And then the second question I had is you mentioned that you refinanced some bank facilities during the quarter, could you just clarify if these facilities were rolled under the same terms?

Andrew, yes, concerning what we have been mentioning about the reduction, I would say, due to mainly the working capital, what -- earlier, and Sergio mentioned it already, we are saying that around 20% has been impacted in our cash.

And nowadays that we are seeing a recovery in demand, then working capital is starting to regain again.

We will keep on, and as I mentioned, actually managing our working capital to restore more liquidity in that sense.

Now given that, at the same time, we are not having new expenditure in CapEx now.

Then in terms of the facilities that we have rollover, more or less, we are on the -- on more of this entire terms.

We could -- we have seen a slight increase in grades.

And yes, what we have also seen is a reduction in terms more for the trade facilities.

We are doing it and rolling over them around, I would say, 180 days, but that's more or less the terms.

We haven't seen any material change in those ones.

And at this time, I see we have no further questions, I'd like to turn the call over to our presenting team for closing comments.

Okay.

So thank you very much for attending this conference.

And as always, our IR team, Ignacio, [Soledad] and myself, we are available for catch up later.

So stay safe, and see you later.

Thank you very much.

Goodbye.

And thank you, ladies and gentlemen, this concludes today's conference.

Thank you for participating, you may now disconnect.