(Motley Fool, 6.Mar.2020) — YPF earnings call for the period ending December 31, 2019.
Operator
Good morning and welcome to the Fiscal Year End Fourth Quarter 2019 YPF SA Earnings Conference Call. My name is Brandon and I’ll be your operator for today. [Operator Instructions].
I will now turn the call over to Ignacio Rostagno. You may begin, sir.
Ignacio Rostagno — Investor and Market Relations Officer
Thank you, Brandon. Good morning, ladies and gentlemen. This is Ignacio Rostagno, IR Manager. I would like to thank you for joining us today. In this occasion, we will present YPF 2019 full year and fourth quarter results. With me on the call today are our new Chairman, Guillermo Nielsen; and our CEO, Daniel Gonzalez. Guillermo will start with some opening remarks. Daniel and I will go through the main aspects and events that explain our results and finally, we will open the call for questions.
Please Guillermo, go ahead.
Guillermo Emilio Nielsen — Chairman of the Board
Okay. Well, good morning to all of you and thank you for taking the time on this very difficult day for the markets to join us. This is one of these days in which most of you are glued to screens, looking at what happens in Vienna, and what we can envisage for the very near future on the energy sector in general, on a worldwide scale. We are looking closely to what happens to the Brent crude, as well as what happens — what is happening right now with the Texas Intermediate, which are on very low levels, as you know. Let’s say that crude has declined by almost a third since January. So this impacts all of us, without any doubt. But let’s assume for this call, that the coronavirus outbreak is largely contained in the second half of the year, at least. We have to make some bold assumptions, no matter what.
But let me focus a bit on Argentina, because we are also living challenging times in Argentina, and of course, Daniel Gonzalez, will explain to you the results of last year, as well as what’s going on and what we can envisage about the macro scenario that will make a very important impact on the decisions to come. So let me say, just to round this up this introductory statement, that I’m very proud and very committed to lead a company that has a 100-year history, a company that has discovered the main oil and gas basins in Argentina, and pioneered the development of the energy sector in in shale, which was something new at the time and very important. It’s also the fifth electric generator of Argentina. So in short, we can say that YPF is really a very important contribution to the Argentine economy. So, I’m fully committed in this very difficult international and national times to contribute — to steer the company through increasing value for our investors. And this is my main goal. So, in that respect, I want to convey to you, that I’m fully committed to propel up and to steer this big ship through this storm, as we qualify the situation today.
So, keeping our fingers crossed, I will pass the word to Daniel, and he will enter into the detail of the management and the results of last year, and then we’ll move forward to the questions you may have. Thank you very much.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Thank you, Guillermo. Good morning, everybody, and before we begin, I would like to ask you to carefully review the cautionary statement on slide 2. We will be making forward-looking statements that refer to our estimates to our plans and expectations that could differ materially due to factors we note on this slide. And also, although our financial currency is the U.S. dollar, our financial statements are published in Argentine pesos, based on IFRS, and on this occasion to let you better understand our key financial and operating results, unless otherwise explained, the calculation of the main financial figures is in U.S. dollars, unless derived from the calculation of the consolidated financial results expressed in Argentine pesos, using the average exchange rate for each period.
2019 was a very difficult year for Argentina, for the local oil industry and for YPF. We operated in a very adverse context, and believe we have performed extremely well in managing the different variables under our control. Strong operating cash flow, financial discipline, reduction in opex and improved oil production performance, especially in unconventionals. We now obtain about 90% of our revenues in Argentina, and the local economy was particularly weak, with a GDP reduction of 2%, internal consumption down more than 5%, inflation of almost 54%, and the revaluation around 60%. Although international crude oil prices were below the previous year, local prices were further affected by the devaluation in the first half of the year and by the freeze the previous government put in place in August.
Average local fuel prices expressed in dollars were the lowest of the last 10 years. In addition, natural gas local market prices were also well below the previous year, mainly as a consequence of a natural gas glut, resulting from the subsidy known as Resolution 46. The imposition of capital controls and the volatility around the presidential elections added to the negative investment climate in 2019, that YPF needed to adapt to and that as Ignacio will later explain, we did react rapidly and adjusted capex and opex in the fourth quarter. However, our low breakeven shale oil projects has allowed us to maintain a level of activity well above that of our competitors. Therefore, with less affection of long-term growth prospects.
In this context, full year revenues were down 11% to $13.7 billion and EBITDA was down 18% to $3.6 billion, just an inch short of our last guidance. However, operating cash flow stood very strong at $4.3 billion, in line with 2018. Therefore, net debt remained essentially flat, in line with our commitment to strict financial discipline. Full year earnings were negatively affected by the net impairment of our natural gas assets for $540 million, which had been recorded in the third quarter. As a consequence of the lower price environment, we expect for the near future. No further impairment was recorded in the fourth quarter.
Now, let me do a review of last year’s operations, going through some main highlights, and then share a flavor of what we are seeing for 2020. We took advantage of our broad portfolio to allocate capital into more profitable projects, which are all crude oil oriented. Natural gas resources are vast, and the results of our last wells in different shale blocks were all great, but low local prices and an oversupplied market thus incentivized our investments, and therefore, we shifted all of that activity to the oil window. Therefore, we consolidated our shale oil investments in the cluster around Loma Campana, La Amarga Chica and Bandurria Sur, achieving significant improvements that resulted in that breakeven price reduction I just mentioned. We know we do not control commodity prices, but we do control the breakeven price at which projects are profitable, and the combination of increasing productivities and a reduction in capex resulted in such reduction in breakeven prices for Vaca Muerta.
We also invested in delineation of additional potential development clusters, with encouraging results in the north of the play in Bajo del Toro, where we are partners with Equinor, and are already drilling a six well pad these days and also just south of Loma Campana. But with less clear results in other areas that we will not be pursuing for now. And as I have repeatedly said in the past, this is not just about Vaca Muerta. Last year after encouraging results in two pilot projects, we announced the decision to massively deploy enhanced oil recovery. I’m very proud to announce that we already have our first 10 polymer injection units displayed in our fields, and we are about to make a final investment decision for another 10 injection plants to be installed this year.
During 2019, we continued the divestment of non-core mature assets by closing the sale of four conventional blocks in Neuquen and additional two in Chubut. We also secured high quality shale oil acreage, first by purchasing 10,000 acres in Aguada del Chanar, which is contiguous to La Amarga Chica. In addition, we were granted a 35-year unconventional concession for Loma Amarilla block, a 43,000 acre position also situated in the shale oil window. This year, we intend to start development of Aguada del Chanar, similar geological properties to the nearby fields, and we therefore believe it is mostly de-risked. And also to conduct a pilot project in Loma Amarilla.
We are also announcing today, the sale of an 11% interest in Bandurria Sur to Shell and Equinor, to add to the 49% stake they recently acquired from Schlumberger. This transaction has been done at the highest price multiple paid so far in Vaca Muerta and it also reaffirms our strategy started in 2012 to develop unconventionals with first-class partners.
Another transaction that I would like to highlight at this time, is in the deep offshore off the coast of Argentina. We obtained three blocks in the bidding round in April, that were added to CAN 100 block, where we already had rights. In all cases, with best-in-class operating partners like Equinor and Total, and furthermore in CAN 100 block, in addition to the farm out already announced with Equinor, we are currently in advanced negotiations with a third partner, that should be entering the block very soon. With this transaction, this block is an opportunity that we can initially pursue, with very limited financial exposure.
With respect to natural gas, we set us a priority to minimize production cuts due to lack of demand outside of the winter peak season. We activated different levers, the FLNG barge that allowed us to export LNG out of Argentina for the first time in history. Although at current global LNG prices, it doesn’t add to the P&L of course. A more aggressive participation in auctions for both residential and power demand, and a significant increase in our exports to Chile, that range from 2 million to 3.5 million cubic meters a day on a monthly basis in the mild season.
In addition, we started our natural gas storage project in a depleted reservoir in Neuquen, where we are already injecting gas with the objective of injecting 1.2 million cubic meters per day during eight months and then with growing 2.4 million cubic meters per day during the other four months.
Finally, and despite all the turmoil in Argentina in 2019, we successfully managed to rollover or replace all our short-term maturities, including trade finance, maintaining our nominal debt almost flat. We also accessed the international capital markets when we saw a small window in mid-year and issued a 10 year $0.5 billion bond.
On the ESG side, I am proud to share with you the progress we have been making and that is best shown with a score we would have had, if we were part of the Dow Jones Sustainability Index, which has been assessed by a third-party and that puts us among the top 15 companies in our industry. You can see that in the right-hand side of the slide.
Safety of our personnel is our priority, and the injury frequency ratio improved again this year, to an all-time record. In 2018, we had launched a policy for operational excellence, that is part of a cultural change that we are trying to create. However in 2019, we were not able to avoid some fatal incidents from contractors working for us. There is still a long way to assure, that all of our suppliers and contractors have the culture, commitment and skill-set that we require to work in YPF.
With respect to emissions, we set an objective of reducing them by 10% by 2023, and are making good progress with a 2% reduction in 2019, based on our energy efficiency initiatives across the whole organization on production cuts in CO2-intensive fields and renewable energy through YPF Luz. We chose wind, and already have one wind farm in operation and another three under construction. When they are finalized later this year, YPF Luz will generate from renewable sources, the equivalent of more than two-thirds of what YPF consumes in its entire upstream and downstream operations. We are IMO 2020 fully compliant, and are investing heavily in our refineries to reduce the sulfur content of our fuels. As not only we want to make our operations cleaner, but also offer cleaner products to our customers. In summary, we have a full ESG agenda and significant achievements to show off.
Moving on to the upstream operations; in 2019 and despite the challenging pricing scenario, we have been able to maintain again our proven reserves above the 1 billion BOE mark. As we have been doing successfully over the last 10 years, which underscores the depth of our resource base. The 96% reserve replacement ratio was all organic, and we can see how our high-quality shale reserves have grown to represent 31% of total proven reserves. Maybe the other relevant change has to do with the reserve composition, as liquids now represents 63% of proven reserves, up from 50% a couple of years ago.
Total hydrocarbon production was 3% below the previous year, in line with our last guidance, but in the fourth quarter was actually 5% above the same quarter of 2018. Crude production during the year remained almost unchanged at 227,000 barrels of oil per day, and it is worth mentioning that by the end of 2018 and in July 2019, we completed the divestment of a few mature fields, that together represented an average of 2.400 barrels per day. Therefore, pro forma oil production would have been up vis-a-vis 2018.
Regarding natural gas, as we have been discussing, the local market experienced an oversupply. Actually demand was slightly lower than in 2018, mainly in the power generation segment. Consequently, gas production decreased 5% to 40 million cubic meters per day in the year, but again was up 10% in the quarter.
Moving now to shale, as shown in the graph on the right, we have steadily increased production during the year and shale now represents 18% of our total hydrocarbon production, compared with 11% in 2018. Net shale oil production in the quarter showed an increase of 48% compared with the fourth quarter of last year, reaching 40,000 net barrels per day and we have added another 3,000 barrels in the last two months.
So far we have always compared our performance with our own past performance, showing continuous improvement. This time, we decided to also share benchmarking against average performance in the different U.S. shale plays using IHS information. The graph on the left shows that YPF actual productivity in the oil window of Vaca Muerta is better than the average of selected U.S. plays. The bars in dark blue represent the production per stimulated lateral meter for Loma Campana, La Amarga Chica and Bandurria Sur in 2019 and 2018. The graph on the right shows the development cost for those same areas. Again, the comparison shows not only our progress, but the competitiveness we have achieved. Still, we are not yet first-in-class. But, we are definitely aiming to get there. La Amarga Chica and Bandurria are still $2 to $3 above Loma Campana, which has a much higher scale and longer history, and that is definitely an improvement opportunity we should be achieving soon.
Some initiatives recently put in place that partially explain this performance, we implemented for instance, water-based mud on the drilling stage that by the way, also has a positive impact on the environment. We optimized the well design, migrating to use 6.75 quarter inch casing, improving the rate of penetration. Also, we upgraded a quarter of the rig fleet to high spec. At the moment, we count with six high-spec rigs and we will have all of our rigs upgraded during this year. With all of this, we will definitely reduce our drilling days. We also keep going longer on our laterals. For instance, we are putting 64 frac stages in one four kilometer longwell. Every single well is geosteered, every single well is stimulated using high density completion, and we are not done yet.
Bandurria Sur is one of our main shale oil blocks, and I believe provides a good example of how we intend to create value, without taking any rationally high exposure for a company of our size. We obtained an unconventional concession in 2015, that entail significant commitments. Subsequently in 2017, we farmed out 49% of the block to Schlumberger at $7,200 per acre valuation. At the time, the field did not have a single horizontal well. Schlumberger carried us in the investments needed to derisk the block, while we jointly decided to accelerate the development of the core subleased part of the block. In 2019, Schlumberger decided to exit these type of equity investments globally, and run a sale process that resulted in Shell and Equinor jointly acquiring their stake at a valuation above $12,000 per acre, and this was approximately a month ago. Now Shell and Equinor already partners of YPF in other shale oil areas, are also acquiring an 11% stake from us at a premium, so we have a more balanced shareholder structure 40-30-30 where YPF remains as the operator. The implied valuation is $14,000 per acre. But as a pilot demonstrated, that not all of the acres are developable, the real multiple is still higher, better developable area. This use of transactions show the success of our model of bringing along partners to help us derisk and increase value of our assets, and it highlights the underlying value of our Vaca Muerta acreage.
In 2019, we committed to replicate the excellent results we had obtained in Loma Campana in the adjacent areas of La Amarga Chica and Bandurria. With the objective of expanding this core shale oil development hub. Last year, together with our partners, we invested $1.3 billion in these areas, and we have agreed to invest almost 40% more in 2020, to continue with the ramp up in production. By April 2019, we started evacuating our crude oil through the new 88 kilometer long Loma Campana-Lago Pellegrini pipeline, pumping production from this hub to the trunk pipeline system. We are doubling the capacity of our Loma Campana oil treating facility, and building new ones in each of the other two core blocks. We are also expanding our sand plan, to ensure that we can cope with the increasing activity, while keeping control on costs and achieving last mile efficiencies, through the utilization of our own sandboxes.
The bottom of the slide, we can see the full development for each of these fields, where we view a plateau production above 75,000 barrels per day in each of them, and actually much higher in Loma Campana. And that hub can still grow, as we have recently acquired acreage to the east in Aguada del Chanar and we also have to the west, with Pluspetrol in La Calera and there are still other areas to be derisked.
We believe many of our conventional fields are old, but not necessarily too mature, as recovery factors are still low and can grow from an average of 25% after secondary recovery, to an average of 33% with tertiary recovery. That is why in 2018, we decided to take EUR more seriously, and after a few years in pilot mode, we made the decision of accelerating its development. We purchased and installed 10 polymer injection plants in the Golfo San Jorge, and Neuquen basins and the initial results of the first two plants in Grimbeek in Chubut, were better and faster than expected. As shown in the graph at the top. The 10 plants implied an investment of $150 million, including the repair of a few injection wells, and should accumulate 29 million barrels from oil from these three different fields. As we can see in the bottom left.
Now that development already in motion, only represents a tiny fraction of the recoverable resources that we are visualizing, if we keep investing in tertiary, as we can see in the bottom right. Of course, we are only scratching the surface. There is plenty of learning ahead and the response in the form of increased oil production and therefore the reduction of the water-cut usually takes time. But it is definitely a great complement of the more front loaded behavior of the shale.
Moving on to natural gas; I mentioned the reduction of production cuts objective. We believe it is working, gas production in the fourth quarter of 2019 and very likely in this first quarter of 2020 as well, is significantly higher than comparable periods, precisely because of that. On the other hand, the significant recent reduction in drilling will result in less available gas during the winter. The different shares in each market segment also points to a successful commercial strategy, as we are not dependent on the less attractive power segment, where Gamesa, now purchases all the fuels, and has been conducting monthly auctions. Although they are sending a very positive sign of potentially entering into multi-year take-or-pay agreements. We also did well in exports, although it is still small and we believe both the market and our share in that market should grow. Now, prices have come down by almost 20% last year to an average of $3.7 per million BTU and we expect them to come down again this year. But we are bottoming and should start going up, as there is almost no activity in natural gas development these days, and therefore supply will decline.
Changing to our downstream business segment. The fuel market was obviously slow, in line with the rest of the economy, with gasoline sales down 1.4% and diesel sales down 2.1%. Jet fuel demand was strong, and most of the rest of the refined products were also up, with the notable exception of asphalts, with the collapse in public works resulted in historically low volumes. Our market share was slightly below the previous year, where we have been unusually high. But these levels, in the 55% to 56% area, should be sustainable.
At the same time, premium products under our Infinia brand had a positive performance and represent 27.5% of each of gasoline and diesel total sales. In the case of diesel, this represents a slight improvement, but in the case of gasoline, a decline vis-a-vis the previous year, but with a recovering trend toward the last part of the year. With respect to prices, the year was really volatile. The graph on the right shows our blended price of gasoline and diesel compared with what we call objective prices, which are built based on import parity plus the effects of biofuels, internalization costs and margin. There we can see that we started 2019 with prices just in line with that objective price, when the economic situation deteriorated in Argentina and simultaneously, international prices recovered, we started to fall behind, but gradually caught up toward mid-year. That is when the peso suffered its worst devaluation of the year, and the previous government decided to freeze prices. That resulted in a gap of 15% or higher, that again we significantly recovered with price increases. First in the wholesale market, and then in the retail market toward the end of the year.
The catch-up, that can be seen for the first months of 2020 is a consequence of international price declines and not of local price increases. Currently, and of course depending the average being used for international prices, given the high volatility, we are experiencing, we only have a 5% to 8% gap in gasoline prices, while diesel prices do not need any increase.
It is the first time in quite some time that we spend a few minutes to talk about our power generation subsidiary branded YPF Luz. My objective with this slide is to highlight how we created value for YPF shareholders, building a company that this year will have a generation capacity of 2,500 megawatt and will generate $265 million of EBITDA, without contributing any capital from YPF. Projects under construction are fully funded, over 80% of it’s capacity is sold under long-term dollar denominated contracts. A good part of them with YPF and other industries, and by the end of the year. It should be generating over 400 megas of renewable energy. The company is run by its own management team and is co-controlled by YPF and GE.
Now, I would like to ask Ignacio to go through some of the numbers for the quarter, and also discuss our balance sheet.
Ignacio Rostagno — Investor and Market Relations Officer
Thank you, Daniel. Vis-a-vis the fourth quarter of last year, in Q4 of 2019, our metrics were mainly affected by the freezing in fuel prices, driving down revenues 12% and reducing 31% adjusted EBITDA. Natural gas prices also affected revenues, as they were 26% lower than the same period of last year. As a response to Presidential Decree 566, reacted [Phonetic] recently. We focused on execution and continued our cash preservation strategy, leaned on our financial discipline. We immediately reassessed our budget and reduced capex from what we originally planned, to invest with the aim of minimizing the cash impact of our lesser EBITDA, but we renegotiated rates with suppliers and contractors. We also reached the government to explain the negative effects of the measures they have taken and proposed alternatives to reduce those effects. As a consequence, while the decree was still in place, they allowed us some price increases. Furthermore, after it expired, we were able to keep up with gradual adjustments to narrow the local prices with import parity, as Daniel said.
In terms of production, we had a significant increase of more than 5%, driven by higher sales of natural gas. Crude oil production remained flat through the quarter, while natural gas production increased compared to the previous summer, due to the short-term levers Daniel mentioned, that started to work and execution of our more aggressive pricing policy. We added new commercial agreements with customers, primarily external clients on power generators, that generated an increasing demand. All-in-all, although both prices of fuels and natural gas were lower, we had a strong flow quarter in cash flow generation and we were able to increase our cash position by year-end.
Going into the details of the annual cash flow, our cash position remained strong, including short-term and medium-term liquid cash investments, at $1.3 billion at the end of December of last year. Committed to a strict financial discipline, our cash flow from operations exceeded our capex program in more than $1 billion. This included a better performance in working capital, due to accruals we had from 2017 planned gas and our accurals from distribution companies. In fact in April 2019, we started collecting the installments of the bond issued by the government for that planned gas program and during the year, we see the approximately $300 million. As of today, the first two instalments of 2020 were collected.
Concerning financing activities, our debt remained essentially flat, amid the volatile Argentine scenario, having access to both the local and international markets through the year. Actually despite this complex scenario in 2019, we successfully managed to roll over our short-term maturities without experiencing any significant reduction in the banking facilities. Most of them were credit facilities. In 2020, we will keep on doing so, as we did this year. We continue to pursue all avenues to further maintain our debt levels. So far, by the first month of the year, we have already faced maturities for approximately $200 million, while we issued a series of local bonds and rollover facilities for $350 million. Finally, both our debt and cash positions are mainly denominated in dollars. Our leverage ratio stood slightly above two times net debt to adjusted EBITDA, while the average life of debt maturity remains in the six years area.
With this, I will let Daniel finish the presentation.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Thank you very much Ignacio. On this final slide, I would like to address our outlook for 2020. Clearly, the outcome of the sovereign debt restructuring will be key in determining the length and depth of the economic crisis we’re in. Obviously news from abroad are not encouraging either, as Guillermo mentioned. In this context, we are taking a step further our strategy of financial discipline. Last year, when our fuel prices were frozen, we reached rapidly — we reacted rapidly and communicated to you all our decision to cut investments and share the burden of the freeze with our value chain, with the objective of minimizing the impact which we did. For this year, we designed a budget, with a reduction in capex of more than $750 million, in order to have a positive free cash flow and avoid any debt increases. We have a manageable level of short-term debt rollover, which we have been successfully doing as Ignacio mentioned so far, and only have our first relevant maturity one year ahead of us, and we expect to deal with that during the course of this year.
We are being very strict in capital allocation and that is why I described at length our focus in profitable shale oil developments, while we take a wait and see approach toward natural gas projects, as this market stabilizes and starts growing again. This year we will have a lower than normal level of activity in the upstream. That should allow us to focus further in cost reductions and safety improvements. But we are not carrying capex in facilities, because we want to be prepared to react fast, when conditions improve and growth can be resolved.
We have been active in managing our portfolio, our upstream portfolio by divesting some smaller mature conventional fields, incorporating partners to develop and put in value at Vaca Muerta, and opportunistically adding acreage. The Bandurria Sur transaction I described earlier, underscores the value of our Vaca Muerta assets and the trust our partners are putting on us to operate for them in Argentina.
We believe 2020 EBITDA should be in the $3 billion area, above capex of $2.5 billion, and as I said, debt should remain flat, acknowledging of course that with lower EBITDA, the debt to EBITDA ratio will see a slight increase to the 2.3 times area. Crude oil production should start growing again, despite capital restrictions and we expect that growth in the 2% area. While natural gas production will decline again this year based on our perception of stagnant demand, and the low price environment and not based in lack of opportunities, which we believe we should be addressing again in 2021. In summary, I believe we got well in very difficult circumstances in 2019, and we have a consistent and realistic plan for 2020.
With this, I would like to thank you all for your participation today. And Guillermo, myself and the rest of the team are now open to answer your questions.
Questions and Answers:
Operator
[Operator Instructions]. And from Bank of America we have Frank McGann. Please go ahead.
Frank McGann — Bank of America — Analyst
Okay, thank you very much. I was wondering if you could just talk about your spending plans, not so much the level, but how you’re thinking about allocation of capital right now between oil and gas, between shale and tertiary investments? What factors are leading you to emphasize certain areas versus others, and what could change potentially, that might make you, for example, go back to a little bit more of a focus on gas?
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Good morning, Frank. Thank you. Well, in terms of the breakdown between oil and gas, what I can tell you is that, we are only investing in a few natural gas projects, which are not operated by us, and with good prospects. And in addition to that, in finalizing some facilities related to natural gas development. As I said earlier, to make sure that we are not putting at risk, long-term growth prospects. But in all we are talking about a couple of hundred million dollars of total capex. So really, really low.
In terms of the investment in oil and you asked conventional versus unconventional, I’d say 60% of the investment is in unconventionals and 40% in conventional. So we are trying to preserve a balance and we are still seeing opportunities in conventional production, in addition to the opportunities that everybody has discussed and that we have discussed at length during the call on the unconventionals.
Now, how we are going to be investing those monies in the unconventional? I would say the following. We are going to be much more focused in investing in those areas, which are already under full development mode, that is when — where we can bring that oil off the ground faster, where we have proven already the economics, and therefore, it makes all the sense in the world to us to focus on that and doing less delineation and less piloting as we have been doing in the last couple of years, which has worked very well for us. Otherwise, we would not be in a position to develop these blocks today. But given the restrictions, it’s probably not a year to invest that heavily in delineation. Having said that, we do believe that there are a few opportunities outside of the three main blocks. And as I mentioned, Aguada del Chanar is one, Bajo del Toro is another one, and Bajada de Anelo is the third one. So, we will keep investing, but less heavily in some other shale areas outside of the three core.
Frank McGann — Bank of America — Analyst
Okay, thanks. Just a follow-up is, how do the returns vary based on — and I know there are a whole range here for all of these categories, but the average returns in shale investments versus the conventional?
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Frank, as you know, we have never disclosed expected IRRs for any of our projects. You know that we have a cut-off rate of 13%. But I can tell you, shale oil projects have expected returns well above that cut off rate.
Frank McGann — Bank of America — Analyst
Okay, thank you very much.
Operator
From Credit Suisse, we have Regis Cardoso. Please go ahead.
Regis Cardoso — Credit Suisse — Analyst
Hi, good morning. Thanks, Daniel, Guillermo for the very in-depth presentation. So, I mean we have a bit of a deja vu during — I mean, past recent years at least have not been very easy for YPF, and I think you’ve done an extraordinary job in keeping capital discipline and maintaining leverage under control. So really, the point I want to understand is still, stay focused on that front going forward? How much capex flexibility do you have and how do you balance that, compared to your plan on integrating the rigs? What kind of assumptions are you using for 2020 guidance? What do you believe to be the capex required to maintain production? So, all of those questions if you could comment on the capex front?
And then just another topic, how do you plan to roll over the debt and our increasing costs? So, I’m referring to maturities now in the market around 10% compared to average cost about 7.5. Is it easy to roll over the trade financing? Is it easier to roll over to the bank loans? Can you go in the market and divest assets to make some liquidity, without having to tap the markets? So if you could share your views on how to maintain the — let’s call it, the financial health and balance sheet strong?
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Good morning, Regis. Thank you. Well, to elaborate further on capex, on top of what we just described on Frank’s question. I think at this level of $2.8 billion of capex, it’s really one where we feel extremely comfortable, we can fund, we can finance right. There is always flexibility and I think the perfect example to what we did in the fourth quarter of last year, when very rapidly we reacted and we cut capex — the company’s intention is not to cut capex further. I think that doing that would imply touching the bone, OK. We already dealt with the fat. We are dealing with some of the muscle. It’s not great, but we are definitely not wanting to touch the bone, right? So, I think that we are level which is really sustainable. But as I said, if things get worse, there’s always adjustments that can be made and I think that we have a track record of making those adjustments when necessary.
In terms of the debt question. So far, we have leaned toward — in the past, leaned toward international capital markets. That means that bank loans, local market, and to a lesser extent trade finance, were segments virtually unused for us. Okay. So, what we are doing today because, frankly 10% rates to me is the same as market close. We are not issuing debt at 10%. So we are issuing in the local market, actually, a couple of days ago we announced, really small, but that we are issuing dollars at 5% to 6% locally, and we are issuing pesos. Then we are rolling over trade, as I said, and still we have not gone to the banking market, because we don’t feel there is a need for that. The $1.3 billion, give or take, maturities that we have this year, as Ignacio explained what came due in January or February, we very easily either rolled over or replaced when we thought that there was alternative, which was more cost-efficient, right. So we will continue dealing in this way, and we do not have any intentions in tapping international markets at these market yields.
Regis Cardoso — Credit Suisse — Analyst
Thanks Daniel. If I may, just a follow-up again on the capex front. I understand you are very comfortable with financing the capex plans. I just wanted to understand, what are the assumptions behind that plan? I mean this $3 billion EBITDA guidance, what sort of oil price level are you maintaining? And and you have — I mean you could get some production growth still under that level of capex, if I get it correctly. Do you have any views on how low could you go and still maintain production?
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Well, we were using for crude oil projects, $60 per barrel Brent estimate. Obviously now it seems really high, it was not that high a month ago or so. But anyway, the good news again, is that we are investing, especially when we speak about the shale, is in projects which are already in development mode. Meaning that the breakevens that we look at — other breakevens of the new wells being drilled in those existing blocks, and there is where the breakevens are really low. Okay. It’d be more difficult today with the Brent at below $50, as I saw on the screen this morning, to make a final investment decision on a brand new shale development, where you have the facilities, you have the learning curve and probably the breakeven needed for a brand new development, is much higher than the one that we are seeing in the 30s for the existing blocks. Okay. So, what I’m trying to say with that is, obviously, higher the international crude oil price is, the better, but still at these prices, the investment decisions that we have made in the shale would not differ from those that we would make today with that knowledge.
Now, I did mention that we expect oil production to go up 2% this year. If your question is well how much capex you can actually cut, in order to see oil production flat vis-a-vis 2% growth. I really don’t know. But it would be very limited, the reduction needed for that. So, as I said previously, this is not about growing oil production by 2% or being flat, this is about pursuing only profitable projects, with the capital available that we are foreseeing at this stage.
Regis Cardoso — Credit Suisse — Analyst
Thanks. Very clear.
Operator
From UBS, we have Luiz Carvalho. Please go ahead.
Luiz Carvalho — UBS — Analyst
Hey Daniel, Guillermo, thanks for taking the question. If I may three questions here. The first one on slide 9, you just mentioned about the selected Vaca Muerta transactions and you are pointing to dollars per acreage. This is a kind of recurring question from my end in terms of what would be the potential divestments from the company? I mean, maybe, if you look at them over the next 12 months to 24 months, if there’s something that you consider, or due to the current economy environment in Argentina, that’s something that you should get a bit more? So just an update on this.
The second one, it’s just to understand and I do — how can I say, the simple limitations that you don’t have to answer the question. But when we look back to 2019, I mean a big chunk of the year — actually in the entire year you were below the import barrier, right? So now you’re back to, I don’t know let’s say to a neutral position. So of course it depends on several — I don’t know several assumptions. But how do you see the — I would say, the parity scenario for 2020? Thank you.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Thank you. Give us a second. Luiz, I’m translating the question internally.
Luiz Carvalho — UBS — Analyst
Okay. Yeah, sure.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Well, sorry, it took us some time to go over your question internally. But basically, first part of the question has to do with M&A, and what we expect to do going forward, and if we believe that state of affairs in Argentina in any way negatively impacts our possibility of doing more deals in Vaca Muerta that’s what I — that we understood.
And let me tell you two things; on the one hand, this transaction of Bandurria just happened a month ago and our 11% stake transaction happened today — or last night actually. So, clearly, people are willing to invest in high-quality assets today at values, which were much higher than those that we’ve been seeing in the transactions over the last five years. And frankly, this proves our theory, because we’ve always said that we did not want to dilute our asset base too early, and therefore, at lower valuations.
Again, Bandurria is a perfect example of how we de-risked our block with other people’s money and we created value. Of course, the other investor also created value, but we created value for the rest in a way that we — or most people would have not thought about. I mean, at the value that we are selling our 11% stake, the block is worth over $900 million, just one block, our third block. Well behind the first two blocks in terms of production. So I think that there is a market, if we want to — access of strategic investors in Vaca Muerta.
Now are we working on a potential transaction? No, we are not working specifically on a transaction, but there are a couple of fields that we plan to put in production the next couple of years, that we are discussing with different partners. As we always do, this is a dynamic process and we — I have to tell you, we’ve never had a lack of interest in terms of potential partners to invest with us in Vaca Muerta. So bottom line, nothing imminent to announce, but it’s looking good, in terms of what we have just seen and what we expect to see in the future.
Guillermo Emilio Nielsen — Chairman of the Board
Well, I quite frankly I had great difficulty in understanding your question. My guess is that you made a question about export parity versus import parity and what to expect for next year. I don’t know I go back to my formation as a professional economist. And quite frankly today, I’m waiting for news from Vienna to see what happens if Russia gets to an understanding with Saudi Arabia about what can we expect about international prices. I think we are discussing export parity or import parity at a very, very shaky time. I don’t think and I don’t feel comfortable elaborating further on this. It’s very unfortunately, but I think we are all — I’m sure that most of you share my view that we don’t have enough information as to confidently make projections for the coming months or for the rest of the exercise. Does it answer your question, because to begin with, I didn’t fully understood your question?
Luiz Carvalho — UBS — Analyst
Sorry, if I may make the question a different way. I’m not asking for the projections about the FX rate or the Brent prices per se. I’m just asking, how do you think that YPF would address or aim to follow this volatility from the different variables through the course of 2020, because clearly in 2019 the company was unable to follow this volatility from different variables. So just trying to get a bit of a better sense on how do you think that by 2020 onwards, I mean we should see a bit more correlation between the domestic prices I guess the international prices? That was my question. I’m sorry, if I was not clear in the first one?
Guillermo Emilio Nielsen — Chairman of the Board
Well it may be the case certainly, it may be the case in particular with this very low prices we are looking in the international markets, it may well be that we get to a situation in which domestic markets are more linked to international prices. But as I said with this level of I wouldn’t say volatility, but downside slide that we’re going through, I don’t feel confident as to elaborate further on this. But it’s possible. It’s possible that as you imply I think we will be more — the domestic prices will be more connected to international prices.
Luiz Carvalho — UBS — Analyst
Okay, thank you.
Operator
From Raymond James, we have Pavel Molchanov. Please go ahead.
Pavel Molchanov — Raymond James — Analyst
Thank you for taking the question. You said that there is almost no gas activity in Argentina now by you or by any other producers. Does the government understand this? And is there any suggestion of creating revising the subsidy program from similar for example to 2017 that would incentivize operators to begin investing in gas once again?
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Thank you, Pavel. Yes, I — maybe I oversimplified when I said there was no activities. Clearly no activity in Neuquen. There is some very limited drilling activity in the south, but really limited. And when I say there’s no activity in Neuquen, it’s not just us, it’s most of the market. Now prices in Argentina for natural gas are market prices. The — unfortunately, OK? Because we are in a oversupplied market, OK? And that’s why consumers in a way are profiting from oversupply.
And the alternative of import as you know because you follow closely LNG global markets. It’s not as dear as it was in the past, OK? So I think the one difference to a few years ago is that shale gas development in Argentina doesn’t need any subsidies, OK? And the subsidy program in place actually goes away in 2021 and 2022. I’m not sure, I think it’s 2021. And we haven’t heard of any plans of renewing any subsidy program, because again I don’t think there’s a need to renew the subsidy program.
Now as I said these are market prices today oversupply at some point, not very far from today, we’re going to go from oversupply to short of supply, OK? And I think prices at some point will stabilize above where they are today. And I think that’s the way we’re looking at — that’s why we said, hey listen, we have plenty of natural gas opportunities each and every well we have drilled in Vaca Muerta where natural gas objective has had very positive results.
So we wait and see. We are not eliminating in any way the prospects that — we are not writing off our opportunity for natural gas for the future. All we are saying is, we need a slightly higher price and more important that prices we need certainty that we’re going to be able to sell our gas 360 days a year another 180. So that’s what we’re looking at. I think everybody understands locally, the government, the rest of the players. It’s just a market in transition.
Pavel Molchanov — Raymond James — Analyst
Understood. And then following up on that last fall at the Analyst Day, you talked about growing production on average 5% to 7% per year over the next five years. Obviously, that will not happen in 2020. Are you still anticipating, accelerating growth to that 5% level in 2021 and beyond?
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
I think so Pavel. As we said, with all the capital restrictions, we are going to — we expect to grow crude oil production by 2% this year. So we have all the comfort that we can grow 5% or actually much higher next year. Now with gas, it’s tricky because the easy answer is — to your question is yes 2%. But from a much lower base, OK because we’re going to be producing 35 million cubic meters a day. This winter where two years ago, we were producing 45 million cubic meters a day. So can we grow 5% per year out of a 35 million, yes definitely. But the base is lower than before.
So all we are doing when we make restriction decisions on capex is try not to affect — there’s always some affection, but try to affect the less, the growth, the long-term growth prospects, OK? And I think they continue to be there. From the last Analyst Day meeting to today, we can tell you that productivity of our wells is higher costs are lower. So there’s no change in the strategic direction that we outlined at that point. And I do believe that we can grow at or beyond those levels, although we are not providing any long-term growth guidance today.
Pavel Molchanov — Raymond James — Analyst
Okay, thank you.
Operator
From Citigroup, we have Pedro Medeiros. Please go ahead.
Pedro Medeiros — Citigroup — Analyst
Hey, good morning guys. So I have a couple of questions. Most of them linked to your share development plans and results. Let me start with a question on how was the performance on the fourth quarter. So considering the ongoing changes in volatility in FX oil prices and production resuming growth in some of your core assets, would you mind sharing or giving some reference of how lifting costs behaved in your core shale developments, OK? You’ve given that disclosure before? So I just wanted to understand how those variables have impacted lifting costs in the fourth quarter?
My second question is, if you can give some business plan updates for the development of campaigns in Cluster 2 and Cluster 3, I think you have already collected some results from drilling Cluster 2. So if you mind sharing some color of how those results look like? And I have a third question around production. Thank you very much for disclosing results on your EOR tertiary pilot, it looks very interesting.
And I just want to make sure I’m looking at it in the right way? You disclosed an investment of $150 million for an expected incremental production of 29 million barrels. So does that mean development costs on a marginal basis for these projects will be around $5 to $7 a barrel? Is there any meaningful impact in lifting cost? Those are my questions. Thank you.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Hi Pedro. Well let me start from the last one. Yes the development cost for this initial deployment of EOR is very low, OK. It is the low-hanging fruit also, OK. So we cannot necessarily extrapolate this to 100% of the EOR opportunity. And as you know the EOR economics are really different to the shale, the capex is lower. And the opex is actually higher because of the cost of the polymer, OK. So I think to get deeper in terms of the economics, we need to wait some time. All we are saying today is listen, we made a decision 1.5 years, two years ago, we delivered in terms of making the investment plans. And the good news is that the initial reaction has been better and as I said faster than originally explained. And that probably speeds up the decision of duplicating or doubling what we have done in tertiary this year and that’s going to be on investments between 2020 and 2021.
But frankly only scratching the surface, most of the polymer injection plants have been in operation just a few months. So it’s not worth getting into more detail in my opinion. What we will commit is to continue to provide quarterly updates so everybody can actually see this opportunity is a huge as it could be or not, OK. And the other thing I would say is, the breakevens for EOR that we are seeing are consistent with current crude oil prices, OK. So this is not something that we need much higher crude oil prices to make it work, OK. That’s that on the EOR.
On the cluster on the North, we haven’t done a lot more than what we disclosed last year. You know that we have two wells in operation in Bajo del Toro. Those wells are producing very well at/or above the well type curve. So that there we are very comfortable. We are already drilling a 6-well pad in Bajo del Toro or about to start drilling these days. That’s all we’re going to be doing this year, just this 6-well pad. So hopefully in the second half of the year, we will have that information to see if the encouraging results of the first part can be replicated in the rest of the block.
We’ve also drilled a few wells with less compelling results so far. Of course all of them produce oil, OK, because we know that source rock is there. But the productivity is such that with current costs and opex — and the capex sorry, it’s probably — they probably go to the end of our priority list and we are not going to be pursuing in the short term. So as I said when I responded to Frank’s question at the beginning, we are going to be doing less piloting this year and therefore we’re going to be gaining less information this year regarding other blocks that are not under development.
But bottom line is, at least we have a block up there Bajo del Toro with very, very encouraging results and where we have a great partner Equinor and we have jointly decided to continue piloting that block. Now finally your first question in terms of lifting cost for the shale, it’s below $6 per barrel, OK. And it’s 15% below 2018. So lifting cost or opex generally this is more opex which is actually higher than lifting cost looks very, very promising on a shale. That’s not an issue. We also said the development cost is also looking good below $10 a barrel in Loma Campana in the low teens in La Amarga Chica Bandurria and there’s no reason over the long-term that the numbers for La Amarga Chica Bandurria should be different than those of Loma Campana.
Pedro Medeiros — Citigroup — Analyst
Perfect Daniel. Okay. This is very useful information. If I may I have one last question around your working capital, OK? Just to get a sense if you’re seeing any change in the pace of YPF receivables for your natural gas sales and around your gas and power business, OK? And if there is any change is that a concern for YPF?
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Pedro, well the most significant improvement in working capital last year had to do with the collections of the old subsidy program for natural gas supplying gas. We still have collections this year. So we should also experience a positive working capital this year. We have not seen any negative — significant at least developments in terms of collections for our sales generally and I think you probably referred to power natural gas sold to Gamesa to the power sector. There’s always a few days of delay here and there but nothing to — for us to worry about so far.
Pedro Medeiros — Citigroup — Analyst
Okay, Perfect. Thank you so much.
Operator
From Barclays, we have Andrew De Luca. Please go ahead.
Andrew De Luca — Barclays — Analyst
Yeah, hi guys, thanks for taking my question. The question is for Guillermo. I was wondering — I’m sorry to follow-up on this. But given your close linkages to the current administration is there any discussion that you guys are having with them about diesel and gasoline price increases in the near term? And just generally how should we think about this and how it ranks for importance for Argentina at this stage, given the recent downward move in international prices? And then for Dan, I have two questions for you, going back to the question on working capital. I was wondering can you just let us know what happened to inventory and the payables line during the fourth quarter, it was a pretty big contributor to liquidity?
And how should we expect this to behave for the remainder of the year? And the second question that I have also is, you mentioned that there’s no intention to tap the capital markets at 10% yields. But you also mentioned that your intention is to address the 2021 maturity this year. So the question is if the sovereign restructuring drives on and given your bonds are yielding anywhere from 10% to 12%, what other options are you guys considering to address the maturity, if tapping the market at 10% and above isn’t an option?
Guillermo Emilio Nielsen — Chairman of the Board
Yes. Regarding your first question, I used to keep in mind that YPF although it has a government majority it is essentially a private sector company. So we don’t shape up policymaking. We take government policies and we’ll do the best and we do the best we can as from a private sector perspective. Of course, this does not ignore that we give feedback to the government regarding where to go and how to go on the energy sector. We do that. No doubts about it. But we are not designing the policymaking of the government we are takers of the policies implemented by the government, many of whom are under discussion internally quite frankly.
Things are not — I would say, it’s not the last and final touches of policymaking what we are seeing today. This is something that is a work-in-progress let’s say, so we will see how things shape up. But essentially, although obviously, I come from a political appointment, my work is essentially a private sector work.
Ignacio Rostagno — Investor and Market Relations Officer
Andrew, this is Ignacio. Concerning inventory, it is true that this quarter we saw a significant difference compared to previous ones. But I would say that this is due to — that we — during the year we had been increasing stocks and they were a consuming impact, partially consumed and in addition to that, we also have a better position in the cash flow because of less product imported, OK? Due to the price increases but we try to minimize the imports. So looking forward, we don’t see that this would change. And if you see the whole year, in fact in 2019, it was quite balanced. So 2020 should be the same case.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Lastly your question regarding capital markets and it’s a good one. I — nobody knows if that 10% exit deal that you see today is going to be the same yield in the remainder of the year, right? All I’m saying as today when we look at the market and there’s no need for us to do anything because we don’t have a maturity before the next 12 months, we decided not to do anything at these levels.
We have always — if you look at our history over the last, at least since I’m around for last eight years, we’ve always been very opportunistic. Every time a window of opportunity opened and we were in need of financing, we were first out there. And I think that in all we did extremely well. And that’s going to be the same behavior that we’re going to be pursuing this year. We are monitoring the market on an hourly basis. And when we see an opportunity to deal with future maturities, we might decide to deal with them early on. And if there is no opportunity to deal with them early on, we will deal with them at maturity.
But frankly running the company with excess cash, remember that we have more than a $1 billion of cash, remember that we have put together a plan that is cash — at least cash flow negative if not positive for the year. So we feel very comfortable that we are in a very good position to deal with this at the right time. What I cannot anticipate today is the right time it’s going to be a few weeks down the road, a few months or closer to maturity.
Andrew De Luca — Barclays — Analyst
Great, thanks for your answers, guys.
Operator
From BTIG, we have Daniel Guardiola. Please go ahead.
Daniel Guardiola — BTIG — Analyst
Hi, good morning, guys. I have a couple of questions here. My first question is on geographic diversification. I wanted to know if you have ever considered to actually invest in oil and gas assets out of Argentina, in order to gradually diversify your geographic exposure? So that’s my first question. And my second question is regarding the performance of YPF shares. We have seen that the stocks has dramatically collapsed. And I wanted to know your thoughts on potentially putting in place a buyback program. So those are my two questions.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Thank you, Daniel. Yes, we have many times considered. But frankly, there’s no point on us with competitive advantages that we have in Argentina that we have developed in Argentina and a proof of that is how majors and some of the best players in the world come and give us money to operate for them, we don’t have those same competitive advantages outside of Argentina. So trying — maybe in the future we will but it’s definitely not the case today A. And B, we have limited CapEx. We did a good part of the call today explaining why is that we are limiting capex for the year and that we have more opportunities to pursue than the ones that we are actually pursuing today, OK. So I think that we have plenty of food in our plates in Argentina for the short term.
Now we are doing some studies of unconventionals outside of Argentina, OK? And I am not going to be elaborating further but we are doing studies. Because maybe in the future as we have become the largest shale player outside of the U.S., maybe in the future we can replicate those competitive advantages that we have in Argentina elsewhere. But it’s not something which is at the top of our priorities today. On share price, I can tell you, this is a priority. Guillermo is talking to us every day about that. It was a big part of our board discussion yesterday. But again in this situation in which we are trying to preserve capital, we probably don’t think that the best use of that capital again over the short-term is a buyback program. But it’s definitely something that is always out there in the works for us. And that if time comes and the financial situation improves, it’s something that we will seriously consider.
Daniel Guardiola — BTIG — Analyst
Thank you, Daniel.
Operator
From Goldman Sachs, we have Bruno Amorim. Please go ahead.
Bruno Amorim — Goldman Sachs — Analyst
Hi, good morning. So I have two questions. The first one, I just wanted some help to reconcile your guidance, you are guiding for flat net debt, which implies breakeven at the free cash flow level roughly. While you’re guiding for $3 billion EBITDA to $2.8 billion capex…
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
A bit louder please.
Bruno Amorim — Goldman Sachs — Analyst
Hi, can you hear me well?
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Got a bit louder please.
Ignacio Rostagno — Investor and Market Relations Officer
But a bit louder please? Can you repeat louder?
Bruno Amorim — Goldman Sachs — Analyst
Yes give you hear me now?
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Sure. It’s better.
Bruno Amorim — Goldman Sachs — Analyst
Okay. Sure. So my first question just wanted some help to reconcile the guidance. You are guiding for flat net debt which implies on breakeven at the free cash flow level. Why you are guiding for $3 billion in EBITDA and $2.8 billion in capex? And if you have to service the debt. So is it because you’re assuming proceeds from asset sales or even the subsidies from the natural gas market? And the second question, you have already mentioned where you are creating capex. I know it’s hard to quantify the impact on production, but is there any metric you can provide us with in terms of every $500 million or every $1 billion left that you invest, what’s the impact on production either in the short or the medium term? I understand you’re still positive on production growth but there is some impact, right? So any metric you could provide us with would be helpful? Thank you.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Hi, Bruno. Well on the guidance question, I think the answer to your question is twofold. On the one hand and the most relevant is definitely working capital, as it has been the case this year, look at what happened this year and you can replicate a good part of that next year. And the other part of the question is today, we are announcing a transaction in which we are going to be getting close to a $100 million. In addition to that, when Schlumberger exited, they had to contribute to us the remaining part of the carried interest commitment and that is also cash flow coming in. So rest assured that we did the math, OK? And we believe that we can have a net debt by the end of the year definitely.
Now your second question is a very good one but unfortunately we don’t have an answer to that other than saying that yes, there is an impact in production, definitely, especially in short term production. But as I said in one of the previous questions, I don’t expect that impact to be meaningful over the long term. In a way, it’s like delaying the whole development, OK? And some of our — some of our production that maybe a year or two ago we were seeing in 2020 or 2021 moves out to 2021 and 2022. But in terms of the opportunity out there, the size of the opportunity, that hasn’t changed, at least not in a negative way, because as I said earlier, every well we drill, every advance we make, we just improve our projections going forward.
Bruno Amorim — Goldman Sachs — Analyst
Thank you very much.
Operator
From J.P. Morgan, we have Barbara Halberstadt. Please go ahead.
Barbara Halberstadt — J.P. Morgan — Analyst
Hi, good morning. Actually, all my questions have been answered. So thank you.
Operator
Okay. And from Morgan Stanley, we have Darren Levy. Please go ahead.
Darren Levy — Morgan Stanley — Analyst
Hi, good morning. I just wanted to know if you could comment on the discussions regarding the new bill to protect your investments in Vaca Muerta? And if you — like a company if you have a wish list of factors that should be explored in it? And a second question if I may. If you can only repeat the current discount of fuels to — of gasoline and diesel to international parity, we did not hear it well when you commented it? Thank you.
Guillermo Emilio Nielsen — Chairman of the Board
Okay. Regarding your question about the bill, I think I do care of that with my previous intervention in the sense that we are policy takers, let’s say, we are not drafting policy for the government. At the initial stage, we contributed — myself, I contributed during the campaign for the new bill but this is a government problem. It’s not a YPF problem. So we are really waiting for announcements on that respect. We don’t have much to add to what you can read in the press of Argentina regarding this.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
And Darren, your second question regarding discount prices. What I said during the presentation is that our diesel prices are in no need of any further adjustment with Brent prices in the $50 range. And gasoline prices on the other hand still have some catch-up to make, which we are estimating in the 5% to 8% area.
Darren Levy — Morgan Stanley — Analyst
Great, thank you.
Operator
Okay. No further questions at this time. I will now turn it back to our speakers for closing remarks.
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Okay. Well, thank you very much everybody. As usually Ignacio and his team are available to follow-up on any further questions. Have a great weekend.
Operator
[Operator Closing Remarks].
Duration: 84 minutes
Call participants:
Ignacio Rostagno — Investor and Market Relations Officer
Guillermo Emilio Nielsen — Chairman of the Board
Daniel Cristian Gonzalez Casartelli — Chief Executive Officer
Frank McGann — Bank of America — Analyst
Regis Cardoso — Credit Suisse — Analyst
Luiz Carvalho — UBS — Analyst
Pavel Molchanov — Raymond James — Analyst
Pedro Medeiros — Citigroup — Analyst
Andrew De Luca — Barclays — Analyst
Daniel Guardiola — BTIG — Analyst
Bruno Amorim — Goldman Sachs — Analyst
Barbara Halberstadt — J.P. Morgan — Analyst
Darren Levy — Morgan Stanley — Analyst
***
