YPF SA (YPF) 2013 Q3 法說會逐字稿

Welcome to the YPF Sociedad Anonima Third Quarter 2013 Conference Call.

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

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session.

(Operator Instructions)

Please note that this conference is being recorded.

I would now like to turn the call over to Alejandro Chernacov.

Alejandro, you may begin.

Great.

Thank you, Adrianna.

Good morning, ladies and gentlemen.

My name is Alejandro Chernacov, Head of Investor Relations at YPF.

I would like to thank you all for joining YPF's Third Quarter Earnings Webcast.

This presentation will be conducted today by our CFO, Mr. Daniel Gonzalez.

During the presentation, we will go through the main aspects and events that explain our results and, finally, we will open up the call for questions.

I need to let you know that we will be making various forward-looking statements during the presentation, so I ask you to carefully review the disclaimer that's on slide two.

Our agenda today will include the review of the third quarter result, an update of our financial situation, and a brief summary of the quarter's results.

Let me remind you that all financial figures are stated in Argentine peso and in accordance with International Financial Reporting Standards, IFRS.

Please, Daniel, go ahead.

Well, thank you, Alejandro, and thanks, everybody, who is joining us this morning for the review of what we believe was an outstanding quarter for YPF, both from an operational as well as a financial point of view.

In this third quarter, revenues increased by 39%, operating income doubled, net income was up by 87%, and EBITDA grew close to 73%.

Cash generation topped ARS9.4 billion, increasing close to 170%, but I will explain in more detail how we got there.

Activity continues to ramp up, with CapEx up 94% on a quarter-to-quarter basis.

And production-wise, I think this quarter marked an inflection point.

In previous quarters, we had seen the end of the multi-year decline, but on this one we are showing solid and sustainable growth.

Total hydrocarbon production increased by 1.7%, crude oil by 2.5%, to reach a total of 235,000 barrels of oil per day, and natural gas grew by 2.6% to 35.6 million cubic meters per day.

We get again into further detail when discussing the upstream results.

Downstream continues to surprise us with a better than expected recovery from the damage caused by the fire at the La Plata Refinery.

Crude processed was 292,000 barrels of oil per day, only 4.6% less than when the Coke A unit was up and running.

And finally, on September 23 we signed an agreement with Dow to develop shale gas from the Vaca Muerta formation in the El Orejano block, which was another milestone in our objective to profitably develop a shale, monetize our resource base, and help the country return to oil and gas self-sufficiency.

Let me get into the numbers, and let's analyze, as we do it every quarter, on an operating income basis.

For this quarter, operating income was ARS3.4 billion, which is 104% higher than the third quarter of 2012.

Revenues grew by approximately ARS6.9 billion, or 39.5%, which is mainly driven by ARS3 billion increase in the liquid fuels sold in the local market, ARS1.6 billion increase in the natural gas sold, and this was mainly due to the offset of impact of the new gas plan that established a price of $7.00 per million Btu, and ARS1.1 billion increase in exports.

Total cost of sales were up by 31.4%, broken down in purchases, which were up 33.7%, and other cost of sales, which were up 30.1%, including the increase in the appreciation by ARS800 million.

SG&A was up 40%.

So, in most cases, cost increase were well below our revenue increase, therefore allowing us an improvement in operating income and EBITDA margins.

When we break up the operating income by business segment, we can see that the increase in the quarter was driven by both the upstream as well as the downstream business segments, which marks a very consistent performance across the Company and enabled us to achieve an operating income margin of 14%, which was approximately five points higher than a year ago.

Let me try to explain this in the following couple of slides.

Specifically in the upstream business, operating income reached ARS2.1 billion, a remarkable 127% increase over the third quarter of 2012, as revenues were up on increased volumes and increased prices and costs were up less than proportionally.

Crude oil revenues increased by ARS1.7 billion as a consequence of our 22% increase in the price per barrel in terms of Argentine pesos and the 2.5% increase in production.

Natural gas revenues increased by ARS1.6 billion as a result of an average price increase from $1.70 dollars per million Btu a year ago to $3.90 per million Btu this quarter.

This price increase is a consequence of the new gas plan to incent a growth in production.

YPF delivered that increase in production, growing by 2.6%, and therefore benefited from a $7.50 price in a volume close to 30% of our total production.

On the cost side, we are satisfied with this quarter's evolution as we are confirming the normalization in production costs, which were essentially flat in dollar terms, compared to what we had seen a year ago when we had to work very hard with oil contractors and labor unions in order to [autiquate] past tariffs.

This quarter, operating costs grew by 26% against last year, with production costs up ARS950 million, mainly as a consequence of stronger activity and higher rates in construction, repair, and maintenance contracting.

Depreciation was up ARS750 million and royalties were up another ARS300 million on account of a higher peso-denominated crude oil price at the wellhead.

I think it's worth taking some more time in this quarter's production evolution, where we saw consistent growth both in natural gas as well as crude oil.

With regards to crude oil production, Q3 2013 against Q3 2012, we were up 2.5%, producing 235,000 barrels of oil per day, which was a level that the Company was producing two years ago.

Comparing against the immediately preceding quarter, the second quarter of this year, we were up 3% in crude.

An important note is that this increase in crude oil is driven both by a conventional as well as the unconventional production growth.

This quarter, conventional production showed a 1% increase against a year ago and a 2% increase against the immediately preceding quarter.

This was fueled by both the increased drilling activity and the reshaping and optimization processes we have been doing at a field level.

On the unconventional side, oil production in the third quarter of 2013 was 93% higher than the same quarter of 2012 and 46% [quarter] than the second quarter of 2013, producing almost 8,000 barrels of oil per day.

So, we are sustaining our view that there is still plenty to do on the conventional side as we continue to develop the unconventional.

In terms of natural gas, the increasing production is even more telling, given the steep declines we were coming from.

And let us bear in mind that natural gas has become a very profitable business for us given the new pricing scheme.

Q3 2013 against Q2 2012, we were up 2.6%, producing 35.5 million cubic meters per day.

And against the second quarter of 2013, we grew 7.8%, or 2.6 million cubic meters of additional production per day.

As a consequence in this quarter, total hydrocarbon production was up by 1.7% to 496,500 barrels of oil equivalent, compared with 488,000 BOEs in the same period of 2012.

A little bit more on production.

On this slide, you can see the evolution of the net production coming from those fields where YPF is the operator.

Here is where we have 100% control of the operational decisions, and therefore where we are increasing activity is higher.

So, in comparison with the third quarter of 2012, total net production of YPF-operated fields grew by 3.4% in crude oil and 4.7% in natural gas, as you can see in the graph, following very clear upward trend.

Increasing activity is obviously a recently high production growth, rig count at 63 drilling rigs in which 19 are on the unconventional wells and 85 workover rigs, again show quarter-to-quarter growth as we have been showing in the previous quarters.

Moving on to the downstream, we operated this quarter at a normalized level after the previous quarter's incident in the La Plata Refinery.

We were able to continue providing higher volumes to a growing gasoline market and somehow a flatter diesel market, reducing imports from the second quarter and, most importantly, maintaining the necessary pricing discipline.

This quarter's operating income was ARS1.5 billion in the downstream, showing an increase of 57% compared with the third quarter of last year.

Revenues were up 34%, or ARS4.8 billion, and such increase is mainly due to a higher average price in terms of Argentine pesos for gasoline of 28.5% and for diesel of 26.8%, resulting in higher income of ARS926 million and ARS1.7 billion, respectively, gasoline and diesel.

In terms of volumes, and despite keeping market share essentially flat, gasoline sales increased 6.8%, resulting in higher revenues of approximately ARS280 million, while diesel sales dropped 1.4% but having no impact on revenues due to the change in product mix.

Also, it is important to mention the additional revenues achieved due to stronger exported volumes in our agro products, which amounted to ARS780 million and the recovery in fuel oil sales that reached ARS817 million.

On the cost structure, operating costs increased by 32.8% compared with the third quarter of 2012.

The largest impact, almost ARS1.6 billion, came from crude oil purchases, both from volumes acquired from third parties as well as volumes transferred from our upstream segment, and both of them at a higher average price.

Also, diesel imports increased ARS395 million, mainly as a consequence of higher prices in terms of Argentine pesos, and no gasoline imports were registered during this quarter.

Biofuels purchased to the market increased by ARS324 million.

SG&A and other production costs were up ARS500 million and ARS484 million, respectively.

From an operational perspective, our downstream team made an impressive recovery from the fire, reconfiguring the La Plata Refinery, implementing batch processing in our topping units, diminishing the impact of the bottlenecks generated by the removal of the Coke A unit, and better complementing the operations with our other two refineries.

Therefore, the volume of crude oil processed during the quarter was 292,000 barrels per day, which was only 4.6% less than the same quarter of 2012.

As previously mentioned, demand continues to be strong.

Year-to-date, the gasoline market grew 10.6% and diesel market 1.7%, and we continue to enjoy more than 55% of the liquid fuels market share and are not expecting any significant change.

In the third quarter, total capital expenditures for the Company amounted to approximately ARS8 billion, which is a 94% increase compared with the third quarter of 2012.

Upstream CapEx increased to a total amount of ARS6.6 billion.

Most meaningful investments have taken place in Loma La Lata, in Loma Campana, both on the conventional and unconventional side, in Chihuido, in Manantiales Behr, and in El Trebol, and we have seen in those areas in order to increase the recovery factors.

But in addition to that, development activities have started in the Chachahuen in the province of Mendoza.

In downstream, capital expenditures was ARS1.3 billion, and this quarter we finished and started up the Continuous Catalytic Reformer at our chemical complex in Ensenada and we continue on schedule with a replacement works for the coke unit that we lost in the fire.

Now let's move on to the financial situation.

We ended the third quarter of 2013 with a stronger financial situation encompassed by a larger cash cushion, similar debt, and, given the EBITDA growth, a lower net debt to EBITDA ratio.

During the quarter, operating cash flow was almost ARS9.4 billion, which is 168% higher than the third quarter of 2012.

However, such increase includes the initial contribution of $300 million, or approximately ARS1.7 billion, by Chevron, an amount which was initially recorded in accounts payable in the balance sheet.

So therefore, the cash flow from operations financed 100% of our CapEx and the proceeds from Chevron just strengthened our cash position, which grew from ARS5.1 billion to ARS6.9 billion at the end of the quarter.

Although we continue to efficiently raise financing in the local market, a few days before the end of the quarter we priced the first YPF international bond issuance since 1999.

That was $150 million floating rate note, due 2019 and secured with an offshore collection account for our agro exports, and at a yield of Libor plus 750 basis points.

At the end of the third quarter, the average cost of the Argentine peso-denominated debt was 19.8%, while the average cost of our dollar-denominated debt was 5.4%.

And the peso-denominated portion of that debt was 49.5% and the average life of our total debt was 3.6 years.

On August 28, during this quarter, we paid our cash dividend of ARS0.83 per share, representing almost -- a dividend yield of almost 1%.

As we have already announced on September 23, we signed a shale gas development agreement with Dow Chemical.

The goal is to jointly develop shale gas from Vaca Muerta formation in the block called El Orejano, which has an area of 45 square kilometers, or 11,000 acres, and it's located in the province of Neuquen.

YPF will be the operator and a first phase of work includes 16 wells to be drilled in a period of 12 to 18 months.

The agreement contemplates an initial investment of $188 million, of which $120 million will be provided by Dow by means of a convertible financing, which, as I said, can be converted in equity in the project, and YPF will invest the additional $68 million.

If Dow exercises a conversion option, YPF will contribute 50% of the participation in the block and 50% equity interest to a joint venture to be formed by both partners for the exploitation of the area.

If Dow does not exercise a conversion option, the financing will be repaid in a term of five years.

To wrap up, I would like to make a brief summary.

I think we are delivering as promised.

Execution is usually tougher than planning, so we are satisfied that we are proving that our plan is possible.

We are very pleased to have increased both in crude oil and natural gas production after years of a declining trend.

And this is not just an outlier quarter; the October numbers are already showing the same trend.

We are recovering nicely from the La Plata Refinery incident with higher than expected production and crude processing capacity.

We continued to see strong demand and price increases are averaging 27% in a quarter-over-quarter comparison for both gasoline and diesel.

As previously announced, we closed our second shale development agreement with a sound partner, and we are making progress, as expected, towards a final closing with Chevron.

We are monetizing natural gas production at profitable levels due to the new $7.50 per million Btu price.

On a nine-month cumulative comparison, we increased prices by almost 90%, from $2.00 to $3.80, and this renewed profitability added to our oil business performance, drove an increase in margins, which translated in higher cash flow generation to finance our aggressive CapEx plan going forward.

And we have done all of this by maintaining a very solid capital structure.

So, a very good quarter.

And with this, I would like to conclude the formal presentation and open it up for questions.

Thank you.

We will now begin the question-and-answer session.

(Operator Instructions).

And our first question comes from Marcus Sequeira from Deutsche Bank.

Go right ahead.

Thank you very much.

Good morning, everyone.

First, on production.

I'd like to know if you, based on conversations that you have with other companies in Argentina, if they could follow you guys and increase investments to increase production as well.

And also, on the Chevron deal, when do you expect works to start and what kind of contribution that should have in terms of production next year?

And just one final question.

Given your estimates for next year, how much financing you would need for 2014?

Thank you.

Thank you, Marcus.

On the production side, in terms of the production coming from other operators in Argentina, what we are seeing is that in the last, I'd say, quarter to two quarters production has stabilized.

So, I think we can say that the rest of the companies have probably six to nine months behind YPF, but probably towards a similar trend.

We will see that in the next few quarters.

But again, if you see the production trend of the last few years, you will see that the curve flattens in the last couple of quarters.

So I think that is definitely good news.

In terms of Chevron, the update of the works is that we continue to drill as expected.

We are at approximately 100 wells drilled already and producing as we have already said.

We are not giving guidance, though, in terms of how much production will come from this area next year, but it's evolving, I'd say, very, very in line with the plan.

And we are expecting a final closing of this transaction before year-end.

On your final question, regarding financing needs for next year, although we still do not have a budget for 2014, I would expect that our CapEx will be similar, if not slightly higher, than this year's.

And we are running CapEx in the order of $5 billion to $5.5 billion this year, so you should expect at least a similar level for next year.

As I said, we work to try to prefund the needs of the next six to nine months.

We have cash in hand of $1.2 billion as we speak.

We still have almost $1 billion that needs to come from Chevron.

The $120 million needs to come from Dow; none of that has been dispersed so far.

And we have yet not tapped the local lines of credit.

So, I'd say from a liquidity perspective we are extremely comfortable.

And we will continue to monitor international markets as we have done so far.

I discussed when we saw the opportunity, we came out to the market with a very small transaction, this $150 million note, but a very successful one to us, with a yield below 8%.

So we will continue to monitor and be pragmatic and opportunistic in terms of international markets.

Thank you very much.

Thank you.

And our next question comes from Ricardo Cavanagh from Itau BBA.

Yes, well, thank you.

This is Ricardo Cavanagh from Itau BBA.

Well, Daniel, thanks for the presentation.

And looking at the quarter-specific numbers, EBITDA was huge, basically [it meets our price need] on a very positive way.

And in the same way that you reconstructed the variation on a year-over-year basis, I'm wondering if it's possible to reconstruct the [almost 3 billion] increase on a quarter-over-quarter basis of EBITDA.

What I'm heading to perhaps more on the numbers specifically is if we should assume that this level of EBITDA in the neighborhood of 7.7 billion is likely to be sustained over the next few quarters, because then we would be speaking about a very relevant increase from what we have been seeing until this quarter basically.

Thank you, Ricardo.

What I can tell you is that there are no one-time events or items occurring on this third quarter.

There's nothing extraordinary of this quarter that can lead us to believe that we cannot replicate this in the future.

Now, having said that, we are usually not of the opinion of just extrapolating one quarter and annualizing that for the foreseeable future.

But again, from a conceptual point of view, I think that we are delivering according to the plan and there's nothing that we've seen this quarter that we do not think that we can replicate in the future.

Having said that, I'd like Alejandro to walk you through some of the conceptual changes with very broad figures and maybe we can follow-up separately with more detail if you need.

Good morning, Ricardo.

Ricardo, this is Alejandro.

Going back to Q2 2013 EBITDA, we had close to ARS5 billion, right?

From that, going forward to ARS7.7 billion that we had during this quarter.

I'd say the biggest differences there or the biggest impacts that explain what happened were close to ARS855 million on the natural gas exports provision that we had to do last quarter.

Then we also had last quarter [the heat] of the La Plata Refinery, which we said was close to $150 million, so let's say close to ARS900 million, I say from which close to two-thirds of that are increases in purchases, both mainly in imports and some crude oil that we had to buy at a local market.

Also, due to the fire last quarter, we had reduced our fuel oil sales, so you see that we had close to ARS550 million in fuel oil sales this quarter stemming from the refinery.

Also, prices from our diesel and gasoline products increased quarter-over-quarter close to 5% in peso terms, volumes increased close to 2% in peso terms.

I'd say those things together are close to another ARS800 million.

Then also, we had over 7% increase in natural gas volumes, as Daniel said before, valued at $7.50 per million Btu, so there I'd say you have an impact of close to ARS450 million.

And adding all that together and subtracting costs, net from also changes in FX rates, which are close to ARS1.2 billion, it's how you drive from Q2, more or less, to Q3.

So, to sum up, the two issues that we had last quarter is, one, the refinery, then you had a fuel oil and gasoline increases, natural gas increases, and to subtract that, like $1 billion in costs -- ARS1 billion in costs.

Okay, Alejandro --

A little bit more than --

No, perfect.

Thank you.

Thank you very much.

Thanks a lot.

And our next question comes from Gustavo Gattass from BTG.

Go right ahead.

Good afternoon, guys.

Congratulations as well.

Let me ask two questions.

And I know you just kind of answered one of them, but I just wanted to confirm.

When I look at the E&P results and try to look at the E&P costs that you guys had on a per barrel basis, we seem to have seen quite a significant drop in costs quarter-over-quarter.

And I was initially considering the possibility that something in the Chevron deal, with the inflow from the cash, might have brought about a reversal of expenses from the past or something that you allocated to Chevron that was previously allocated as YPF costs.

I just wanted to confirm, is that really not the case?

Everything here is clean and perfect with regards to how we're going to be seeing it in the future?

That would be the first question.

And the second question, I was just wondering if you could talk about at all -- I know you just said you are not going to be talking about how much of the production comes from the area in the deal with Chevron, but was any of the 12,000 barrels of oil equivalent that you guys had, something that when the deal becomes fully implemented will have to not appear in the YPF numbers?

So, is there going to be an accounting offset in the future that we should be aware of?

Okay.

Hi, Gustavo.

Thank you for the question.

On the first question, yes, I can confirm to you that nothing on the Chevron transaction has impacted our cost structure, because basically we received cash of $300 million and we registered liability in accounts payable of $300 million also, okay?

So it has not touched cost structure in any way.

I'm not sure I completely understand what you're looking for in the second question.

Can you try to clarify that for me?

Yes.

Let's assume, for example, that the Chevron deal was in place already.

So, everything had been settled and Chevron already had a stake in this new production.

Would the reported production be the same as you reported this quarter?

Okay, no, that's a good question.

Well, we are actually reporting approximately 13,000 BOEs per day of production coming from Loma Campana area.

So when that transaction closes, approximately 50% of that production will go away because it will be Chevron's production.

Does that answer your question?

Yes, it does.

Yes, it does.

And if I could just ask you a question with regards to just the pace of improvement and how you guys are seeing the outlook from here, we seem to have had a reasonable acceleration in what you were able to deliver in growth and production, and particular in the unconventional.

Has the Company's perception of how much is possible going into 2014 changed, or is this a situation where you now see just more confidence on what you guys were thinking about before, or is it getting better?

I think we are confirming what we were expecting.

As you know, we came out at the beginning of the year with very aggressive production targets for this year, which were so aggressive that I kept telling people that I doubt that we would be able to hit them and it is likely that we will not hit them; that was plus 1% in natural gas and plus 4% in crude oil.

We have not provided a guidance on growth -- on production growth for 2014.

We will, hopefully, as soon as we have our 2014 budget, so, let's say, in the next 30 to 45 days.

But I believe that we are going to be growing ahead of the growth rates that we expected for 2013 and that we probably will not achieve in 2013.

Okay, perfect.

Thank you.

And our next question comes from Frank McGann from Bank of America.

Go right ahead.

Hi, good morning.

Yes, I was just wondering if you could potentially talk about cost trends on a couple of different levels -- one, in terms of just general oil services cost trends, as well as in the work you're doing for the non-conventionals.

What is the current average well cost that you're seeing and how has that changed over the last 12 to 24 months and how do you see that going forward from here?

And perhaps maybe you could just give an indication of how many wells you plan to drill in non-conventional over the next 12 months, that'd be interesting to know.

And then secondly, in terms of the flour and oils export business, just wondering, how should we think of that, and what is the profitability of that?

I know it does generate revenues over offshore, which can be used profitably by the Company.

But I'm just wondering how we should think of that both from a profitability standpoint and from a growth standpoint in terms of generating cash flow outside of Argentina over the next couple of years?

Okay.

Thank you, Frank.

On the oil services costs, I think we should focus on two areas.

First, as a trend, we do not expect any meaningful increases in dollar terms, okay?

We have put a lot of effort in controlling costs in the upstream, and I think that we have successfully done so.

As I mentioned, the increase was only 26.5% on this quarter versus the same quarter of last year.

But the second point I wanted to make reference to, and it's very dependent on how these costs finally evolve, is labor cost.

We still do not have clarity on what our labor cost increases are going to look like in 2014, and that will obviously directly impact all the oil services costs.

So, we should have clarity on that front, I'd say, in next 60 days.

Our collective agreement with the union is due by the end of December and it was an 18-mont agreement, so we will soon start having conversations regarding the evolution of that for 2014.

That will have a direct impact on our cost structure, but also an indirect impact through our suppliers.

On the --

Can I --

Go ahead.

Has there been no increase over the last 18 months, then, in labor costs, or have they been scaled in over that period?

There was a 25% increase in the 18-month period that went from June 2012 to December 2013.

Okay.

And it was gradual over that period, not mostly at the beginning?

It was mostly at the beginning, but not 100% on day one.

Okay, thanks.

Okay?

On your question regarding drilling in the unconventional, our initial expectation -- and this is a very broad figure, Frank, again, because we don't yet have a budget for next year, but we're going to be drilling above 150 wells, okay?

And you had a third question, Frank, about the exports of flours, the agro products?

I do not have a margin figure for that.

I cannot tell you what the margin is, but we will try to come up with those numbers for you.

Frankly, I don't have them.

What I can tell you is that today we are exporting a run rate of $400 million per year and we expect to double this figure in the next couple of years.

So, we expect a significant increase in the exports generated by the borrowing, which is how we come by these products, but, as I'm sure you imagine, the margins there are not significant, but those are just additional margins to what we could have extracted just by selling in cash.

Okay.

And these volumes come from essentially the oil service companies that do this in order to be able to import?

So, what is the source of these -- of the amounts that you get from bartering?

No, this comes from our agro clients, okay?

We sell them diesel oil mostly, but also fertilizers and other products.

And it is very common in the agro market in Argentina, and it's not just on our products, that the bartering exists, and basically the clients exchange oil or diesel oil, let's say, for grain.

And what we do is we have crushers that do the (inaudible) for us and crush the grain, and we actually export, in the case of soy, which most of it, the soy mill and the soy flour, okay, and the soy oil, sorry.

Okay, perfect.

Thanks.

And our next question comes from Andre Sobreira from Credit Suisse.

Go right ahead.

Andre.

Hi.

Good afternoon, everyone.

Thanks and congratulations on the quarter.

A couple of questions.

One, in terms of activity and number of rigs, have you reached the number of rigs that you think you need to use in the future, or how much do you expect the rig fleet to grow in the next years?

And two, from the recent debt negotiations, Daniel, how is your feeling for the market?

Do you think it will have more opportunities to go abroad?

And how's your feeling for the domestic debt markets?

Thank you.

Okay.

On the drilling rigs, let me make a comment first.

We went out with a tender a couple of months ago, looking for 15 to 20, not 100% of those to grow, but basically a combination of growth and replacement.

And we had a very positive outcome.

We received offers for over 70 rigs -- I think it was actually 72 or 75 rigs, which we are probably going to be allocating soon.

Now, as I said, part of those rigs, we are not going to be allocating 70, okay?

We are going to be allocating 15 to 20, which is what we actually went out for.

A good part of that is going to be replacement.

As I said, we are operating a lot of old rigs.

We are at 63 right now; we plan to be at year-end approximately 66.

And the idea is for the end of next year to be at approximately 75, okay?

So, we will continue to increase our rig count, but obviously not with the aggressiveness or the speed that we have been growing since the 23 rigs that we were operating a year-and-a-half ago to 63 that we are operating today.

And in terms of the markets, what we are seeing is renewed interest from the fixed income investor base generally.

This transaction, I forgot to mention this $150 million transaction actually started as a consequence of our reverse inquiry, so it basically came from a client, which is not different to what we had done earlier in the year when we sold back to the market approximately $80 million of our 2028 bonds outstanding that we had repurchased as a consequence of the change of control and we sold them back to market at par.

So again, this case was, I think, a proof that we are seeing renewed interest.

To what extent that renewed interest will be enough to supply a meaningful transaction from us, I don't have enough clarity yet.

As you know, a lot has to do with the macro situation, less so with YPF in itself.

I think from a credit perspective, the market is generally very satisfied with our numbers and the way we are going, but we depend a lot on some things occurring in Argentina.

So, as I said, we have an [MTM] program in place.

We updated it permanently.

So when we see a window of opportunity, we will have the flexibility of tapping the market in a matter of weeks.

Okay, thank you very much.

(Operator Instructions).

And our next question comes from Santiago Wesenack from Raymond James.

Go right ahead.

Hello, everyone, and thanks for taking the question.

First of all, congratulations on a great quarter.

And I just have one quick question related to the pricing for the downstream segment.

What should we expect in terms of diesel gasoline and petrochemical pricing for the next quarter?

Thank you.

Well, Santiago, thank you for the question.

It is a great question; it's going to be difficult to give you a great answer.

We go step by step.

I think we have been extremely successful so far.

Every quarter that we've shown that we've been increasing prices equal or ahead of our cost increase, we plan to continue to perform that way.

I think everybody understands how important it is for YPF to have the necessary cash flows and the necessary appetite for the market to fund us in order to fund a very aggressive CapEx program.

And a good part of those cash flows will come from the liquid fuels that we sell in Argentina.

So, we will continue to pursue price increases as needed and, again, in order to at least offset our cost increases.

So, I know that this was something that there was a lot doubts about in initially; hopefully we have dispersed most of those doubts with reality, which is what we have been doing so far.

Now, I would love to, but I'm not in a position to give you an estimate of how price will or will not increase in the following quarter.

I'd say as a trend you should expect to see price increasing above our cost structure increase.

Perfect, great.

Thank you.

And our next question comes from Frank McGann from Bank of America.

Go right ahead.

Yes, thanks.

In terms of the crude mix for the refineries, there's been some shortage, apparently, of Medanito oil, and as a result there's some potential to need to import some lighter crudes and perhaps export more heavier crudes.

And I was just wondering, from your standpoint, how do you see that?

How do you see that affecting your business going forward?

Any potential effect on profitability as a result of that?

Well, Frank, it is true what you're saying.

There's a scarcity in the light crude production and there is an excess of heavy crude.

As you know, we produce both.

The good news for the long-term is that all the production coming from the shale is light crude, okay?

Now, it's difficult to say if from time to time in the short-term there will be a need to import light crude or not.

There's a significant price difference between the two.

I think the heavy crude is below $70.00 and the light crude is above $80.00 right now, approximate.

I think the average is slightly below $80.00, but what we are purchasing for the next couple of months is probably slightly above $80.00.

So, it is something that obviously we are keeping an eye on and, as I said, in the long-term it shouldn't be an issue because a good part of the increased oil production will come from the shale, and that is mostly light crude.

Okay, great.

Thank you very, very much.

And we have no further questions at this time.

Well, thank you, Adrianna, and thank you, everybody, for joining us today.

If you have any follow-up questions, do not hesitate in contacting Alejandro or myself.

Have a good day.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may now disconnect.