YPF Profit Climbs on Higher Local Oil Price, Output Increase

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YPF SA, Argentina’s state-run oil producer, posted second-quarter earnings that exceeded expectations as it increased output and sold crude at a premium to international prices.

Net income rose to 2.3 billion pesos ($250 million) from 1.5 billion pesos a year earlier, Buenos Aires-based YPF said in a statement Wednesday. Per-share profit of 5.86 pesos, excluding some items, beat the 5.36-peso average of five analysts’ estimates compiled by Bloomberg.

While major oil companies from Exxon Mobil Corp. to Chevron Corp. hunker down for a prolonged market rout, YPF has kept up spending as it increases crude and natural gas output. The producer that was nationalized in 2012 is benefiting from government-set prices that are higher than Brent, the international benchmark.

“Clearly this is one of those moments where we benefit from our integrated model,” Chief Financial Officer Daniel Gonzalez told investors on an earnings call.

The company will keep its 2015 capital expenditures budget unchanged at around $6 billion, he said, declining to provide an estimate for spending next year.

Argentina’s regulated domestic crude prices averaged $69.10 a barrel in the quarter, Gonzalez said. That compares with $63.50 on average for Brent.

Output Increase

YPF’s crude oil output rose 3.7 percent in the quarter to 249,800 barrels a day, while gas production jumped 2.3 percent to 44.6 million cubic meters a day. Sales rose 12 percent to 39.6 billion pesos.

YPF, which has 360 shale wells in production, will continue seeking partners to exploit the Vaca Muerta formation, an area the size of Belgium that holds the world’s second-largest shale gas reserves and the fourth for shale oil.

The task won’t be easy because of the oil price rout and the proximity to national elections that start Oct. 25, Gonzalez said.

Costs in Vaca Muerta currently stand at about $7 million for vertical wells and $14 million for horizontal wells, Gonzalez said.

In the downstream sector, which includes refining and marketing, sales increased 6.6 percent to 35.3 billion pesos, trailing the government’s 15 percent inflation rate for the 12 months through June. Independent analysts estimate the country’s annual inflation at about 25 percent.

The company is soon to reach a refinery utilization rate of 97 percent, Gonzalez said.

YPF’s board approved the sale of as much as $400 million of bonds on Wednesday, the company said in a separate filing.

YPF’s American depositary receipts gained 2.6 percent to $23.61 at 2:35 p.m. in New York. The ADRs, equivalent to one ordinary share, are down 11 percent for the year.

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