Argentine Oil Company YPF Reports Profit Drop Despite Surge in Vaca Muerta Output

The state-run energy company announced its second-quarter results, showcasing growth in shale production and investments, although its profit margins narrowed

Argentine Oil Company YPF Reports Profit Drop Despite Surge in Vaca Muerta Production
August 11, 2023 | 10:15 AM

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Buenos Aires — Argentina’s state-run oil and gas company YPF reported net income of US$380 million in the second quarter, down 53.1% compared to the same period of 2022. Revenues, on the other hand, decreased by only 12.4% to US$4.375 billion, year-over-year.

The deterioration of key figures on the firm’s balance sheet last quarter was largely down to higher inflation and faster currency devaluation in Argentina. The company has been struggling to pass on cost increases to consumers at the pump, with the the government limiting price hikes well below the Consumer Price Index.

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Vaca Muerta

With investors seemingly motivated by the company’s solid performance at the Vaca Muerta shale oil and gas formation, YPF’s ADR on the New York Stock Exchange was rising by 2.57% at 11:10AM ET.

According to a company statement, unconventional activities continued as the main driver of growth, with “total shale production reaching a new record.” During the second quarter, unconventional crude production grew by 28%, while unconventional gas production increased by 10%, both compared to the same quarter of the previous year.


YPF also celebrated the resumption of oil exports after 18 years. “The trans-andean pipeline was successfully put back in operation during the second quarter, allowing the evacuating of crude oil to Chile,” the company stated.

Adjusted EBITDA reached $1.005 billion, or 33.5% less than between April and June last year. In the first six months of the year, the net profit stood just below $721 million, down 33.1% year-over-year.

Earnings per share clocked in at $0.86 during the second quarter, down from 2.04 a year ago, while the company’s total debt rose 9.8% to $7.782 billion over the same period.


Production and Crude Oil Exports

Under the leadership of CEO Pablo Iuliano, the company highlighted that total hydrocarbon production during the second quarter reached 513,000 barrels of oil equivalent per day, with average daily oil production at 241,000 barrels. This represents a 7% growth compared to the second quarter of 2022 and a 1% increase over the previous quarter.

Gas production remained stable compared to the previous quarter, totaling 36.5 million cubic meters per day.

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YPF reported its Q2 earnings.dfd

YPF also reported having invested more than $2.65 billion in the first six months of the year, a more than 60% increase compared to the same period in 2022. They also reaffirmed their investment plan of a total of around $5 billion in 2023.

Regarding industrialization and commercialization, YPF stated that domestic fuel sales in the second quarter remained stable compared to the second quarter of 2022. Refinery processing levels reached historic highs, growing 8% compared to the previous year, with a utilization rate of 93%.

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Maxus lawsuit in New York

YPF mentioned that its free cash flow was negative at $284 million due to financial needs related to the closure of the Maxus international lawsuit. The resolution of the case, they noted, releases the company “from one of the most significant legal contingencies in its history.” In May, the U.S. justice system accepted the agreement for the Maxus case, initially estimated at over $14 billion. However, after 20 years of litigation, an agreement was reached for both the Argentinian and Spanish oil companies, YPF and Repsol, to each pay $287.5 million.

Excluding the impact of this agreement, the free cash flow would have been neutral for the quarter. The net debt level was $6.312 billion with a net debt-to-adjusted EBITDA ratio of 1.4 times.

It’s important to note that another process related to the Argentinian oil company began in New York in late July, involving the expropriation that occurred in 2012. However, this case will determine the amount that the country - not the company - must pay, with an agreed range between $4.999 billion and $16.1 billion. This lawsuit could result in the largest economic judgment against a sovereign country in the United States.