YPF Sociedad Anónima Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 11, 2026

Key Takeaways

  • Positive Sentiment: Record financial performance: Q2 adjusted EBITDA reached $2.8 billion, with a 43% margin, $824 million of free cash flow, and liquidity of approximately $2.5 billion. Net leverage declined to 1.1x, its lowest level in more than a decade.
  • Positive Sentiment: Management raised 2026 adjusted EBITDA guidance to approximately $8 billion from $6 billion, increased CapEx guidance to $5.8–$6.2 billion, and still expects roughly $2 billion of positive free cash flow and net leverage near 1.0x.
  • Positive Sentiment: Vaca Muerta shale oil production rose 47% year over year to 213,000 barrels per day, with YPF targeting a 250,000-barrel-per-day exit rate in 2026. The company expects to operate 19 rigs by year-end and 21 rigs by February 2027.
  • Positive Sentiment: YPF advanced major growth and export projects, including the $25 billion Loma La Lata Oil development, the VMOS pipeline targeted for first oil in early 2027, and Argentina LNG, where Eni and XRG each acquired 32% stakes in the upstream venture and a final investment decision is expected by year-end.
  • Neutral Sentiment: Portfolio simplification continued through the planned sale of Mendoza conventional assets for $405 million and YPF’s 70% stake in Metrogas, potentially raising the share of oil production from shale to roughly 95%; however, refinery utilization is expected to normalize toward 100% in the second half as scheduled maintenance occurs.
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Earnings Conference Call
YPF Sociedad Anónima Q2 2026
00:00 / 00:00

There are 12 speakers on the call.

Operator

Hello, everyone. Thank you for joining us, and welcome to the YPF second quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Margarita Chun, IR Manager. Margarita, please go ahead.

Speaker 1

Good morning, ladies and gentlemen. This is Margarita Chun, YPF's IR Manager. Thank you for joining us today in our second quarter 2026 earnings call. Before we begin, please consider our cautionary statement on slide 2. Our remarks today and answers to your questions may include forward-looking statements, which are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by these remarks. Our financial figures are stated in accordance with IFRS, but during the presentation we might discuss some non-IFRS measures such as adjusted EBITDA. Today's presentation will be conducted by our Chairman and CEO, Mr. Horacio Marín, our Finance Vice President, Mr. Pedro Kearney, and our Strategy, New Businesses, and Controlling Vice President, Mr. Maximiliano Westen.

Speaker 1

During the presentation, we will go through the main aspects and events that shaped Q2 results, and finally, we will open the floor for a Q&A session together with our management team. I will now turn the call over to Horacio. Please go ahead.

Speaker 2

Thank you, Margarita, and good morning. Q2 was a landmark quarter in YPF's history, with 10 major milestones achieved across all our operations. These results reflect the magnitude of the transformation that YPF has achieved since the launch of the 4X4 plan, supported by strong market dynamics. The main drivers of this transformation are shale growth, the replacement of conventional assets, cost control, capital discipline, and operational efficiency. As a result, we are reshaping the company into a very profitable, integrated shale player. We are building a more profitable, more resilient, and more export-oriented integrated shale company. Adjusted EBITDA reached $2.8 billion, positioning the quarter as the best in the company's history, a 70% increase versus the second-highest record that goes in Q3 2014, and the third one was last quarter.

Speaker 2

To put this in perspective, in the first half of 2026, we generated nearly $4.4 billion of adjusted EBITDA, already above the full-year EBITDA reported in 2023. This exceptional performance drove adjusted EBITDA margin to 43%, its highest level in the last two decades, supported by higher prices, seasonal demand, solid operational execution, and operational efficiency. As a result, the outstanding performance was reflected in the income statement. Operating results reached $1.8 billion, a new record high in the company history, while net result was $1.2 billion, representing the second-best quarterly performance ever achieved by YPF. The first net result was Q3 last year. In terms of cash generation, free cash flow reached $824 million, top three in our history, while liquidity closed at the highest level ever achieved of $2.5 billion.

Speaker 2

As a result, net leverage decreased to 1.1 times, its lowest level in more than a decade, underscoring the continued improvement in YPF's financial position. From an operational standpoint, the quarter reinforced the continued transformation of YPF's production mix. Shale oil production reached 213,000 barrels per day, with shale oil now representing 80% of total oil production. This confirms the increased relevance of unconventional assets with the company portfolio and the continued progress in scaling up Vaca Muerta as YPF's key growth driver. In parallel, we continue increasing the number of rigs operated by YPF in Vaca Muerta oil window. As of today, we are operating 16 rigs, significantly higher than the 12 rigs by December last year, and expecting to reach 21 rigs by early 2027. On the other hand, let me share with you an important step to accelerate Vaca Muerta.

Speaker 2

In May, we submitted the RIGI application of Loma La Lata Oil, a project 100% owned by YPF, with a production plateau of roughly 240,000 barrels per day. It represents the largest oil export program in Argentina's history and the largest project submitted under RIGI so far. The project requires cumulative investment of $25 billion over 15 years and is expected to generate more than $100 billion in oil export revenue over its lifetime. Loma La Lata Oil positions YPF and Argentina to build a world-class energy export platform. Given the scale of the project, the approval process may be structured across separate SPVs. We will provide more details later when we have news. Finally, our downstream operations continue to deliver exceptional performance. Refinery processing reached 351,000 barrels per day, reflecting the highest level of refinery utilization ever achieved.

Speaker 2

It enabled us to generate surplus production in gasoline and middle distillates, reaching 43,000 cubic meters per day and setting a new record high. Overall, these results reflect a quarter of exceptional execution, with record profitability, a strong cash generation, a reinforced balance sheet, and continued operational improvement across the company's main business segments. Before moving to the next slide, let me take a moment to highlight several recent developments that are highly important to the execution of our 4X4 planning strategy. First, regarding the second pillar of our 4X4 plan, active portfolio management. Last week, we signed an agreement for the sale of two clusters of the under projects in the province of Mendoza, the operating Chachahuén field and the non-operating El Corcovo and CNQ7A blocks. Together, these transactions were closed at a sale price of $405 million and remain subject to the final approval before closing.

Speaker 2

Importantly, once these conventional fields are excluded from our production profile, approximately 95% of our oil production would come from shale operations. It marks another concrete step toward our objective of becoming a pure shale player. More recently, we have just obtained the approval of our board and signed the sale of the 70% equity stake in Metrogas subject to closing. Moving to midstream oil, VMOS remains on track to reach COD by the end of Q4 this year, with the progress of around 80% as of July, expecting first oil by early 2027. Turning to Argentina LNG, we have signed an agreement with the province of Neuquén to establish the project's regulatory and fiscal framework.

Speaker 2

In addition, we successfully brought Eni and XRG into the upstream development, with each partner acquiring a 32% interest in the five blocks that will be fully dedicated to Argentina LNG, while YPF retains the remaining 36% stake. This is a highly relevant milestone on the path toward the final investment decision as it improves the project's upstream foundation and reinforces the development of an integrated LNG value chain. We will provide further details later in the presentation. In terms of our local fuel pricing strategy, in mid-May, we extended the buffer mechanism for another 45 days alongside a 1% adjustment. The buffer mechanism successfully preserved local fuel market dynamics during a very volatile international context while allowing our midstream and downstream to reach a very healthy EBITDA margin of around $30 per barrel.

Speaker 2

Finally, regarding YPF's stock split, last week, we successfully completed a 10-for-one split in the local market, BYMA, with the goal of improving accessibility and affordability for local retail investors in comparison with our peers. In parallel, we adjust the ratio of ADR to shares from one to one to one to 10 with no economic impact on ADR holders. Importantly, this split doesn't affect shareholders' economic interest, ownership percentage, or voting rights. In addition, users of YPF application with cash accounts will be able to buy and sell YPF shares directly through the app starting this Friday, August 14. This represents another meaningful step in expanding access to YPF's equity story to a wider investor base. Now, let me share more details on our Loma La Lata Oil project, a key driver to accelerate the development of the South Hub in Vaca Muerta's oil window.

Speaker 2

In late May, YPF applied to join the RIGI, the Large Investment Incentive Regime for the SPV Loma La Lata Oil. This is the largest RIGI project and Argentina's major upstream oil export initiative. The SPV is fully owned by YPF, developing five blocks with well inventory of over 1,150 wells, an unconventional concession until 2059. These blocks are La Angostura Sur One and Two, already delivering exceptional productivity with solid economics, currently with seven rigs in operation. Besides the expansion to Barreal Grande, La Angostura Suroeste and La Angostura Norte. In terms of investment, we estimate total CapEx of around $25 billion over the next 15 years. It will be mainly allocated to drilling and completion activities, liberation, shares infrastructure to maximize efficiency.

Speaker 2

At plateau beyond 2032, production is expected to reach around 240,000 barrels per day, 100% dedicated to export markets through VMOS, while also contributing around 10 million cubic meter per day of gas to the local market. This will translate into estimated annual revenue of approximately $7 billion, considering both oil and gas with an average Brent price of $70 per barrel. It's worth mentioning that given the scale, long-term horizon, and strong export focus supported by RIGI, this project is a transformational initiative of Argentina long-term oil development and important value creation for our shareholders. In this sense, based on the scale of the project, the approval process may be structured across different SPVs. Now, I turn the call to Pedro to analyze in detail our financial results.

Speaker 3

Thank you, Horacio, and good morning, everyone. As Horacio mentioned, this was a record-breaking quarter for YPF. We delivered record earnings, margins, and cash generations, reduced leverage to its lowest level in more than a decade, and achieved strong operational performance across all our businesses. Revenues reached approximately $6.6 billion in the second quarter, up 33% sequentially and 42% year-over-year. The increase was supported by stronger international prices as well as higher refinery processing levels, generating surplus of fuel exports and seasonal demand for diesel and natural gas. Adjusted EBITDA totaled $2.8 billion, increasing 76% sequentially and 2.5 times year-over-year. This performance reflects the shift to shale, high refinery utilization, disciplined cost management, efficiency gains across the company, and a better pricing scenario.

Speaker 3

On the production side, our shale oil output continued expanding, reaching 213,000 barrels per day, increasing 4% sequentially and 47% interannually. As Horacio mentioned, excluding the conventional assets under the investment process, around 95% of our oil production would have come from shale formation. In terms of investment, during the second quarter, we deployed over $1.3 billion, allocating 77% to our unconventional operations. CapEx increased by 37% sequentially and 16% interannually, primarily due to the signing bonus for the unconventional concessions of the five blocks dedicated for Argentina LNG project. Also, it was driven by the higher investment in facilities at La Angostura Sur and Norte fields. For the rest of the year, we expect further acceleration in line with the production ramp-up. On the financial front, despite acceleration in capital expenditures, we generated a very strong free cash flow of $824 million, which I will discuss in greater detail later.

Speaker 3

As a result, our net leverage ratio declined to 1.1 times, marking the third consecutive quarterly reduction since the Q3 of last year and reaching its lowest level in 11 years. Now, let me walk through the evolution of our free cash flow during the second quarter. The positive free cash flow represents the third highest free cash flow in YPF history and was primarily driven by the all-time high EBITDA of $2.8 billion. This outstanding result comfortably funded our accelerated CapEx program of over $1.3 billion, aligned with the expansion of our shale operations and key infrastructure projects. It also covered the $188 million payment related to the acquisition of Equinor assets in Vaca Muerta, as well as the $150 million interest payments. In addition, the negative working capital variation was mainly explained by higher seasonal natural gas sales.

Speaker 3

It is important to note that the higher planned gas price is fully reflected in the EBITDA during the quarter. However, given the related collection terms, most of these incremental sales are collected during the following quarter. This temporary working capital effect was partially offset by $85 million in dividends collected from affiliates. It is worth highlighting that excluding the M&A activity, the company will have delivered an even stronger performance, generating free cash flow of approximately $1 billion. As a result, our cash liquidity position increased to nearly $2.5 billion at the end of June, compared to approximately $1.7 billion at the end of March. This further strengthened the company liquidity position and marked the highest cash balance in our history. This improvement provided us with significant flexibility to execute our ambitious investment plan for the second half of the year, while comfortably covering our debt maturities.

Speaker 3

Turning to our financial position, we have continued improving our net leverage ratio since the third quarter of last year. This quarter, it declined to 1.1 times, nearly half the peak level reported in the third quarter of last year, primarily driven by a better international prices environment, reaching the lowest net leverage level in more than a decade. In addition, the strong liquidity position achieved during the quarter allowed us to pursue proactively liability management activities focused on reducing our overall cost of debt by prepaying higher-cost facilities with shorter tenors. In this context, in April, we issued a new local bond for $122 million with a four-year tenor and at 5.5% yield, taking advantage of a market opportunity to secure low-cost, long-tenor financing. The proceeds were used to prepay a higher-cost loan maturing in 2028, generating interest saving while further optimizing our debt maturity profile.

Speaker 3

Additionally, we amended our $450 million syndicated export refunding facility executed in the fourth quarter of last year, extending the drawdown period by two months and pushing the final maturity by one year. As a result, most principal maturities are now concentrated in 2029. During the second quarter, we also prepaid approximately $220 million of local bonds and trade facilities maturing primarily in 2027 and 2028. Separately, in June, we signed a mandate letter with IDB Invest to establish the framework conditions to structuring a potential AB loan facility of up to $500 million. Despite not representing a financial commitment, it provides additional flexibility and optionality to address potential funding needs for next year. More recently, in August, we successfully reopened a local bond originally issued in April, raising an additional $170 million with a three-and-a-half years tenor and a 5.5% yield.

Speaker 3

The proceeds will be used to repurchase our $140 million bond maturing in February 2027, further improving our debt maturity profile while reinforcing our commitment to proactive liability management and funding optimization. Looking at our debt profile, remaining maturities for the second half of this year amount to approximately $700 million. Nearly 40% corresponds to local bonds, 28% corresponds to amortizing international bonds, while the remainder is composed of other local and international financial loans. Finally, following the recent sovereign rating upgrade, in May, Fitch upgraded our rating to B- with a stable outlook. S&P upgraded YPF's rating to B in June, and Moody's also upgraded the company from B2 to B1 in July. This last new rating is the highest YPF has achieved in recent years, broadly in line with the level the company held between 2017 and 2018.

Speaker 3

Overall, these upgrades, together with our broad access to capital markets and financing opportunities, reinforce both the momentum and sustainability of our credit story, reflecting the strength of YPF's financial position and the market's confidence in our strategy and credit profile. I will now turn it to Max to walk through the operational performance. Thank you, Pedro, and good morning to everyone. Let me dive into the evolution of our upstream performance in the quarter. Our upstream strategy continues to deliver outstanding results with shale oil driving growth, improving efficiencies, and consolidating YPF's position as a best-in-class Vaca Muerta player. Importantly, shale oil output continues to more than offset the conventional divestments, supporting a more resilient and higher-margin production base.

Speaker 4

In that sense, shale oil production continues the growth path, hitting a new record high, reaching 213,000 barrels per day in the second quarter, representing a sequential increase of 4% and a 47% year-over-year. This performance was primarily driven by the strong contribution from La Angostura Sur.

Speaker 4

Followed by higher production recorded in the North Hub of Vaca Muerta. In addition, since May, we have incorporated the production associated with our 4.9% stake in Bandurria Sur block and our 15% stake in Bajo del Toro block, both recently acquired from Equinor. Looking ahead, we expect shale oil production growth to accelerate during the second half of the year as key infrastructure projects and other facilities, like the oil treatment plant in La Angostura Sur, continue to move closer to start-up, including VMOS, which reached around 77% completion as of June 2026. Shale oil expansion fully compensated the continuous divestment from conventional assets, which dropped 49% year-over-year. Excluding the conventional assets that are under the divestment process, conventional production would have been roughly 18,000 barrels per day in the second quarter.

Speaker 4

Total lifting cost, excluding specific well service costs, continued the downward trend, decreasing 31% year-over-year at $8.4 per BOE in the second quarter, reflecting the structural improvement in our cost base. Excluding the divestment assets mentioned before, lifting cost would have been below $7 per BOE. Focusing on our shale oil hub, we continue to operate at best-in-class levels at around $4 per BOE, essentially flat on a sequential basis. Turning to natural gas, the production averaged 37.3 million cubic meters per day, down 6% year-over-year, primarily reflecting the exit from conventional fields, partially offset by the expansion of shale gas production, mainly led by La Calera block. Additionally, let me point out that during the second quarter, a well located in Rincón del Mangrullo block reached production of 1.3 million cubic meters per day, becoming the highest-producing well within the basin's dry gas window.

Speaker 4

Our capital allocation is currently focused on the oil window of Vaca Muerta, reflecting the greater flexibility of oil demand supported by higher evacuation capacity, while natural gas still remains largely constrained by domestic consumption. Looking ahead, the development of integrated LNG projects is expected to unlock significant incremental demand, leveraging YPF's substantial acreage position, world-class resource base in Vaca Muerta gas window. Overall, these results highlight the consistency of our upstream strategy, where shale development not only drives production growth but also enhances efficiency, lower cost, and supports structurally stronger and more profitable results. Moving to our midstream and downstream segment, our processing levels set a new record in the second quarter, averaging 351,000 barrels per day, reconfirming the reliability and flexibility of our refining system. It grew by 2% sequentially and 16% interannually, where during the second quarter last year, La Plata refinery was under maintenance.

Speaker 4

This exceptional operational performance, together with a new record production of gasoline and middle distillates, enable us not only to fully meet domestic demand without imports, but also to supply local refiners and expand exports. Looking ahead, we expect processing to gradually normalize towards ordinary levels as scheduled maintenance activities will take place during the second half of the year, thereby ensuring sustained operational reliability and long-term efficiency. Regarding domestic sales of gasoline and diesel, dispatch volumes increased by 7% quarter-over-quarter, driven by an expansion in diesel seasonal demand. On a year-over-year basis, gasoline and diesel volumes grew by 10%, supported by stronger demand, particularly in diesel, across all commercial segments. As a result, we increased our market share to 59% from 57% in the first quarter and up to 61% when we consider gasoline and diesel produced by YPF and dispatched through third-party gas stations.

Speaker 4

It is worth mentioning that beyond local demand in the second quarter, YPF exported nearly 100,000 cubic meters of gasoline and diesel. In terms of pricing strategy, as Horacio explained before, in April, we decided to temporarily postpone further price adjustments alongside a 1% increase. This temporary measure, which concluded in late June, acted as an effective buffer, allowing us to preserve fuel demand during a period of elevated volatility while progressively reducing the gap with import parity as market conditions evolved, maintaining a competitive position in the local market. Lastly, let me highlight that our midstream and downstream adjusted EBITDA margin expanded to nearly $30 per barrel in the second quarter, benefiting from strong processing volumes and the successful execution of our commercial and pricing strategy. Now let me briefly walk you through the progress of our upstream efficiencies during the quarter.

Speaker 4

We continue to deliver consistent improvements in productivity across our shale operations, driven by execution and ongoing efficiency gains. Starting with drilling activity, we continued setting new efficiency gains in our core shale hubs. During the first half of 2026, we reached 354 meters per day, 9% above 2025's average, and recording roughly 30% increase compared to 274 meters per day recorded in 2023. In our unconventional fracking activities, we also delivered strong efficiency gains across our key operating metrics. During the first half of the year, we recorded 11.4 stages per day, 18% higher against 2025 levels, and representing a remarkable expansion of 50% compared to 2023, while pumping hours per day rose to 19.2 hours, 14% and 32% above the average of 2025 and 2023 respectively.

Speaker 4

It is worth highlighting that in June, we achieved record levels of fracking, completing nearly 1,400 stages and representing around half of the country's activity. Moreover, during July, we achieved another major hydraulic fracturing milestone by pumping continuously for 203 hours and completing 86 stages at Bandurria Sur block. It represents over 8 days and 11 hours of uninterrupted operations. This achievement was monitored through our real-time intelligence center and reflected a fully remote and autonomous fracturing operation completed with zero incidents. All these records performances in Vaca Muerta brings us even closer to Permian-level operating standards. In the downstream business, in the second quarter, we continued to strengthen YPF's position as a key player in Argentina's energy transformation.

Speaker 4

As part of our innovation program, we visited Tesla's Gigafactory in Texas, one of the most advanced industrial facilities in the world, and signed a letter of intent to explore collaboration opportunities in fast-charging networks and energy storage, combining Tesla's technology leadership with YPF's nationwide infrastructure platform. This initiative reflects our commitment to modernizing our energy system, advancing innovation, and supporting the adoption of next-generation energy and mobility solutions that will enhance the country's competitiveness and long-term sustainability. Moreover, as I mentioned before, our outstanding processing levels resulted in a surplus of gasoline and mid-distillates production, enabling YPF to avoid imports, supply local peers, and expand our exports. Additionally, during the quarter, we completed the works related to the new fuel specification project at our Luján de Cuyo refinery, marked by the successful start-up of the new diesel hydrotreating unit in July.

Speaker 4

In parallel, we made progress on engineering works for new hydrotreating units at La Plata and Plaza Huincul refineries to ensure full compliance with diesel specifications. Importantly, all these improvements are the result of continuous optimization efforts across all of our operations, supported by better well planning, disciplined execution, and a more efficient integration with our service providers. I am now turning to Horacio to continue with updates regarding LNG projects.

Speaker 2

Thank you, Max. Let me share the progress we achieved on the LNG projects. Regarding the tolling phase, I would like to highlight the recent approval of San Matías Gas Pipeline SPV under the RIGI framework. The project contemplates the contraction of a 470-kilometer gas pipeline connecting Tratayén in Vaca Muerta to the San Matías Gulf. It's expected to have transportation capacity of approximately 27 million cubic meter per day by mid-2028. The project will require a total investment of around $1.3 billion and is expected to be funded by a project finance scheme with 70% debt and 30% equity. Importantly, the project finance is progressing very well and is already at the advanced stage with financial closing expected during Q3 this year. Turning to Argentina LNG project, the most relevant milestone of the quarter was the agreement signed in June between YPF and the government of Neuquén.

Speaker 2

This set- The long-term regulatory and fiscal framework applicable to Argentina LNG. All of these steps provide a more predictable and competitive foundation to continue advancing the project. We also made significant progress in the upstream segment of the project through the agreement to incorporate Eni and XRG into the APCO Argentina LNG One, the upstream SPV that will hold 100% of the five wet gas blocks dedicated to the project. Under this structure, Eni and XRG will each hold 32% interest, while YPF remains the operator with a 36% stake. This reinforces alignment across the entire value chain, enhances execution capabilities, and represents another important step toward reaching the final investment decision. On the execution front, we have recently selected the front runners of the EPC of the gas NGL pipeline, as well as the integrated gas treatment plant.

Speaker 2

In addition, on the financial side, we have completed all the documentation required to open the virtual data room with the ECAs, which was successfully launched in July. This marks another important milestone in the project finance process and further demonstrates the continued progress of Argentina LNG. Overall, Argentina LNG continues to gain momentum. This project will not only accelerate the development of Vaca Muerta, but also has the potential to reshape Argentina's export profile over the coming decade. Finally, I would like to share our revision to our 2026 guidance. This reflects a stronger international price environment and its direct impact on profitability, cash generation, and balance sheet strength. We are assuming a Brent price of $75 per barrel for the second half of the year. This assumption remains subject to the high volatility seen in international markets over recent weeks.

Speaker 2

Under this scenario, the average Brent price for the year 2026 will be around $82 per barrel, 30% above our previous assumption of $63 per barrel. As a result, we now expect adjusted EBITDA in the area of $8 billion, representing a significant increase from our previous guidance for around $6 billion. This improvement is supported by a higher Brent environment, operational efficiency, and strong refined product crack spreads. Let me highlight that this new guidance compares very favorably with YPF's 2023 EBITDA. In fact, under exactly the same comparable Brent condition, in just three years, YPF is doubling the adjusted EBITDA from $4 billion to $8 billion. This clearly reflects the strength and discipline of the 4X4 plan and our ability to create tangible and sustainable value for our shareholders. On the operating side, we remain fully on track with our shale oil production targets.

Speaker 2

We continue to expect average shale oil production of around 215,000 barrels per day during 2026, and to reach an exit rate of approximately 250,000 barrels per day by the year-end. With respect to investment, we expect to accelerate deployment during the second half of the year. This is mainly driven by progress in facility construction, maintenance activity rescheduled for the second half, and the faster development of the southern half of Vaca Muerta through Loma La Lata Oil. As a result, we are increasing our full-year CapEx guidance by approximately 5%. The new range is $5.8 billion-$6.2 billion, remaining around 70% allocated to shale operations. Despite the minor increase in our CapEx plan, we expect to end the year with a positive free cash flow position of around $2 billion. This figure includes M&A proceeds already collected and assumes the proceeds expected from transactions currently under execution.

Speaker 2

This stronger cash flow outlook is also reflected in our balance sheet expectation. We now anticipate net leverage to decline significantly to nearly 1x. This compares with our previous guidance range from 1.6 to 1.7 times. In summary, this revised guidance reinforces the strength and resilience of YPF's business model. A more favorable pricing environment is translated into higher profitability, strong cash generation, and lower debt. At the same time, our strategic priorities remain unchanged. Most importantly, this provides further evidence that the 4X4 plan is delivering concrete results, positioning YPF for a stronger, more profitable, and more financially robust future. With this, we conclude our presentation and open the floor for questions.

Operator

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Michael Furrow with Pickering Energy Partners. Michael, your line is open. Please go ahead.

Speaker 5

Hello, good morning and nice quarter. Thanks for having us on the call and for taking our questions. I'd just like to start with CapEx. It came in notably below expectations this quarter, particularly on the upstream side, at just under $1.1 billion. So, just given the strong start to the year and the acceleration of spending and activity in the second half of this year, could you help us get a better understanding of the shape of CapEx or activity levels for the remainder of 2026?

Speaker 2

Okay. Good morning. Thank you very much for the question. You saw the guidance, no? We are going to accelerate because our results, and we secure the rigs and we secure also the sets, the fracture sets. At the end of the year, we are going to have 19 rigs, and now we have 16. The level that we think that we are going to finish at the end of the year, it will be $6 billion. And the end of the production for in December, 250. For sure, we are going to accelerate next year. We secured the rigs also for next year. In February, we are going to have 21 rigs.

Speaker 5

Great. Appreciate that, Horacio. Maybe just following up on that point, the shale productivity continues to look strong across the asset base, and to us at least, it seems like the company's more than on track to hit its 2026 guidance and 250,000 barrel per day shale exit rate. Horacio, are you seeing the same thing? And what would need to happen in the back half of the year to put that target out of reach?

Speaker 2

You are talking for next year? Ah, okay.

Speaker 5

No, for the 250,000 shale exit rate. Correct.

Speaker 2

Okay. We have the rigs, and we are finished the drilling, so we need to fracture all the wells. The only thing that we have to have from the facility point of view is a PTC in La Angostura Sur, that we think that in September it will be the COD. With that, we can reach the number, without problems.

Speaker 5

All right. Thanks for your time and nice quarter. I will turn it back.

Speaker 2

Okay, thank you.

Operator

Your next question comes from the line of George Gazdov with Latin Securities. George, your line is open. Please go ahead.

Speaker 6

Good morning to you, and congratulations on the good quarter. I have two related questions this morning on Vaca Muerta's evacuation capacity. For the first one, we have seen a few reports of delays to the Vaca Muerta Sur monobuoy delivery out of the Middle East, and I was wondering if you had any comments on that. As a follow-up, Oldelval is looking to temporarily increase capacity in Duplicar using polymers and upgrade the pumping stations. As its largest shareholder, I was wondering what your expectations for that initiative were and whether the additional capacity could allow YPF to sustain its production ramp if Vaca Muerta Sur were delayed. Thank you.

Speaker 2

Okay. Regarding Demos for the monobuoy, we are closing our figures. We have in the vessel, and now is passing the Strait of Hormuz. So maybe next week we will have very good news. Okay? Regarding, as we say, plan B, from in Demos, we bought another one that is going for sure not to refill in Dubai because of the strait. Okay? So we think that we have everything on track, and it will be success, the path of the vessel from the strait. That is what we have today. The Vaca, we are going to use all our capacity. Remember that we need capacity for the 3 refineries and also for export. Our plan is to export by Demos.

Speaker 2

Because of the production that we are going to have next year, that I will go on to say in better way, I think it's in April next year in New York, we are going to use the majority of the capacity that we have.

Speaker 6

Thank you. Very clear.

Speaker 2

No, thank you.

Operator

Your next question comes from the line of Andres Cardona with Citi. Andres, your line is open. Please go ahead.

Speaker 7

Hi, good morning. Horacio, Pedro, congratulations on this very strong record quarter and also on the execution on the capital allocation front. Two quick questions on my side. Given the projects being approved under the RIGI regime, does the industry see a need to accelerate the development of the Vaca Muerta Sur phases that were originally planned for 2028 and beyond? On the capital allocation front, you have completed many of the processes previously announced. Which ones are still pending? Are you also reviewing the portfolio to assess potential additional divestments? Thank you.

Speaker 2

Okay. To answer the first one, well, I know what is our north for YPF. Also, as I said before, we are going to present to you next April. Our numbers, is all industry need to improve the VMOS. If they go as quick as us, I think it could be 2028. If not, from 2029 beyond, okay? We have the plans to do that. Okay, we have. From the capital allocation for the portfolio, with Metrogas, we have finished all the selling that was no core. From the core ones, I would say no core. From AA Andes, what is the conventional, after the signature last week from Mendoza fields, YPF is going to be a company with 95% of production from Vaca Muerta. That means that we can say that we are almost just one, I say, unconventional integrated company.

Speaker 2

The other thing that is necessary to sell, we are in process to sell those fields also. So maybe at the end of the year, it could be 100% or 98% or 99%. But I think we finished that very difficult process that when we start, that everybody could doubt at that moment because it was something difficult to do in Argentina, and I think we were very success. I think I answered your question. I don't know if it's okay, or you need more explanation. Or I don't know if I answered your question.

Speaker 7

I think it helps. It helped. Yes, it answered. Thank you.

Speaker 2

Okay, thank you.

Operator

Your next question comes from the line of Milene Carvalho with J.P. Morgan. Milene, your line is open. Please go ahead.

Speaker 8

Hello, everyone. Good morning. Congrats on the very solid results, and thank you for taking my question. I would like to explore a little bit more on the downstream side. You had very strong results, very strong margin, despite prices being a little bit below international parity. Could you comment on what are your plans for the rest of the year in terms of fuel prices? If oil declines, should fuels follow, or should we see YPF sustaining prices to compensate for what we are seeing in this period below parity? Additionally, on the utilization rate, you have been running above the 100%. Should we expect maintenance in the second half? Thank you.

Speaker 2

Okay. Thank you for the two questions. I am going to the second, and after to the first, it will be more, I would say, long. For the second, we think because we have some topic at the, I would say, in the fourth quarter. In the fourth quarter, we think that we are going to have an average of 100% from the refinery, all YPF. From the prices, as everybody, I do not know, well, people that follow YPF, we can remember that we make a buffer prices because the demand was very difficult. It is going down, and it could be negative. We call at that moment for the buffer, we call YPF help you. Now we are in the phase of you have YPF. That is a compensation, and it depends on the prices what will happen.

Speaker 2

Our policy is international prices, and also we see the offer and the demand, the supply and demand, sorry. And remember that we have a real-time intelligence center where we are a unique company that we can see all the pumps in real time. We see the demand minute by minute, so we have plenty of information to take very good decisions, okay? So we have different policies, micro prices policies that will continue. And so we see the price of oil, I think nobody knows. 15 days ago, it was in almost 70. Today, it is 85, 86. So it is very volatile, and it depends on that what will happen there in the second half of the year. It is okay or I miss something?

Speaker 8

Thank you.

Speaker 2

Okay. Thank you.

Operator

Your next question comes from the line of Matias Cattaruzzi with AdCap. Matias, your line is open. Please go ahead. Your next question comes from the line of Daniel Guardiola with BTG. Daniel, your line is open. Please go ahead.

Speaker 9

Good morning, Horacio, and congrats on the results. I have one question on my side. Following the incorporation of Eni and XRG into the upstream JV, what are the next key milestones towards FID? And perhaps what remaining commercial or regulatory risks still need to be addressed before the project becomes fully sanctioned? Thank you.

Speaker 2

Because I am still sick, I will ask the guys and we'll open, so you will see that, and after I answer. [Foreign language] Tell me in English what was [Foreign language]

Speaker 9

It was about the project of Argentina LNG, and what are the things that are pending on that project.

Speaker 2

Okay, sorry. I was confused. Sorry about my English. The Argentina LNG, we are working very hard. We finish all the documents. We are in the VDR process with ECAs and banks. We have all the technical finishes, and we already build the plant in Neuquén, the EPC of the pipelines, what is the gas pipeline and the oil pipeline. We are going to build in 2 months, no more than that, the material of the pipelines. Also in a couple of months, no more than that, it will be also build the big, I would say a refinery, but it's not a refinery. It's the big plant of NGLs and conditioning the gas for the LNG. That will be in Rio Negro. That is a big one, area.

Speaker 2

From the point of the project, we are very ready to have the FID at the end or in the fourth quarter, and they start as soon as possible after that, all the work and all the, how do you say, constructions, and everything on that. From the point of the contracts, as I say, we finish all of that with the promise of Neuquén and the promise of Rio Negro. We have everything done. We have all the laws of LNG, we have all the proceeded, and also we have our partners now are partners of us in the upstream. We are very ready to have the FID this year, and that will be very important for YPF, for all the partners, and I think also for our country.

Speaker 9

Thank you.

Operator

Your next question comes from the line of Leonardo Marcon with Bank of America. Leonardo, your line is open. Please go ahead.

Speaker 10

Hi, everyone. Thank you for picking my questions. I have two from my end here. The first one is also on the Argentina LNG project. What LNG price are you assuming for the FID, and what is the IRR target are you underwriting for the project? My second question is regarding the CapEx for the upstream, right? With the improvement in drilling and frack speed, could you share your current drilling and completion costs? Additionally, on that point, is there still room for further efficiency gains? Thank you very much.

Speaker 2

Okay, let's go to the first. This project is very robust. I do not know if you know that it is so good because we are in the window of wet gas that this project produce, or the revenues is half, roughly, half liquid, half gas. So it is very, very robust. What are the price that we use? It is futures. In general, in YPF, we use market prices, okay? But it is very robust. Really, this is a very good project because you have a natural catching between the fluids for the project and for the investment.

Speaker 2

Talking about, you say you will totally do a different one, that is our cost for the wealth. If you take 3,000 meters of horizontal length, I have to explain to every one of you that we are using 3,500 now, what is more profitable because we have very good efficiency because of the real-time intelligence center, because our professionals. But if I take a 3,000 meter of lateral length, we are around $11.5 million for the cost of the wells.

Speaker 10

Got it. Thank you very much.

Operator

Your next question comes from the line of Matias Cattaruzzi with AdCap Grupo. Matias, your line is open. Please go ahead.

Speaker 11

Hi, Horacio. How are you doing? Hi, team. This was an amazing quarter that you presented, so congratulations on it. I have a few questions regarding capital allocation and the divestment process. You will be having $1.2 billion of extra cash this year, combined with an excellent EBITDA for this year with high oil prices. Are you expecting to accelerate CapEx, deleverage this year, or are you preparing for CapEx contributions for the Argentina LNG project? Is inorganic growth on the pipeline, or will you bring forward the dividend distribution expected for 2028? I got one more question about what should be the second half of the year, R&M margins going forward, and how do you see the buffer so far? It ended in July, but how do you see downstream prices going forward?

Speaker 11

Will be seeing a trajectory back to the $12-$14 per barrel of R&M margins you previously guided, or should expect it to keep at these levels?

Speaker 2

First of all, with the capital allocation, you have to remember now, the year was totally different that all the analysts thought. We prepared for very low prices and the life was different. It was high prices. We have better results, but also we work always, it does not matter the price, in optimization and efficiency. Operational efficiency in YPF are extremely good today. We have that, as I explained, in February, we had 21 rigs. If you are comparing, in last December, we had 12 for Vaca Muerta. We say be incremental, and you will see in April when we talk with you at the investor day. What else you ask me for capital allocation? I think it is okay there. Also-

Speaker 11

Yeah

Speaker 2

You ask me also Argentina LNG and also about the VMOS and the evacuation. We think that we have a good program. We have the capital, and also, we are working in improve our debt. If we need more money, it depends on the price. I think the market should know that we are doing very well and manage very well YPF. We don't see big difficulties for developing Argentina LNG at all. That's why we're preparing for that. We're preparing for all those projects, but with low prices. I think we are in very good shape. Regarding the prices in downstream, we don't see that it's going to work down, okay, to 12 or 14. We think that we can have good margin. Why? Because we improve so much the operational efficiency in all our refineries.

Speaker 2

Also we are improving a lot in the, no, in the logistics, in the logistics that we have excellent margin because we have an excellent system. YPF has, in my point of view, the best global system for downstream. As I explained before, of the prices, I already explained what we think, okay?

Speaker 11

Okay. One last question on YPF Agro. Is it still considered core? Do you have a sale process ongoing?

Speaker 2

YPF Agro. In YPF Agro, we made a bidding process, and it was not success. Because it was not success, we decide, because it was very difficult to take out, really, okay? What we thought that to make for a private investor was no good with us now. What we decide is to take out, we make like YPF Agro out of downstream, and we put now in another vice president what is in the new energies because we are making more focus. Today I was discussing before this call for 2 hours how to deliver more efficient that. I think we are going to have very good results in the future, and we are going to make a new company, YPF Agro, but it will be 100% of YPF.

Speaker 11

Okay. Thank you so much, and congratulations on the quarter.

Operator

We have reached the end of our Q&A session. I will now turn the call back to Horacio for closing remarks.

Speaker 2

Okay. Thank you very much for everybody, and thank you very much for the congrats. All the team of YPF, we are very proud to work in our company and to make value for all of you. We are going to continue to make value. That is our goal, and that is our proud. Thank you very much.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.

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