YPF CEO Sergio Affronti On 1Q:21 Results: Transcript

(Seeking Alpha, 12.May.2021) — Argentina’s state entity YPF SA (NYSE:YPF) hosted a 1Q:21 earnings conference call with analysts on 12 May 2021. What follows is the transcript from the call.

Company Participants

Santiago Wesenack – IR Manager

Sergio Affronti – CEO

Alejandro Lew – CFO

Conference Call Participants

Guilherme Levy – Morgan Stanley

Barbara Halberstadt – JPMorgan Chase & Co.

Frank McGann – Bank of America Merrill Lynch

Marcelo Gumiero – Crédit Suisse

Ezequiel Fernandez – Balanz

Luiz Carvalho – UBS

Operator

Good day, and thank you for standing by. Welcome to the YPF First Quarter 2021 Earnings Call. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Santiago Wesenack, IR manager.

Santiago Wesenack

Good morning, ladies and gentlemen. This is Santiago Wesenack, YPF’s IR Manager. Thank you for joining us today in our first quarter 2021 earnings call. I hope you all continue to be safe. This presentation will be conducted by our CEO, Sergio Affronti; our CFO, Alejandro Lew; and myself. During the presentation, we will go through the main aspects and events that explain our first quarter results. And finally, we will open up for questions.

Before we begin, I would like to draw your attention to our cautionary statement on Slide 2. Please take into consideration that our remarks today and answer 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. Also note the exchange rate used in calculations to reach our main financial figures in dollars.

Our financial figures are stated in accordance with IFRS. But during the call, we might discuss some non-IFRS measures such as adjusted EBITDA.

I will now turn the call to Sergio.

Sergio Affronti

Thank you, Santiago. Good morning, ladies and gentlemen. Thank you for joining us on the call today. First and foremost, let me highlight that health and safety of our people and business partners remains our top priority. As the COVID pandemic still impacts our region, we have continued working under a strict set of guidelines, both for our employees and contractors to ensure the protocols continue to be followed and precautionary measures to prevent contagion are not relaxed, thus assuring operational continuity and the achievement of our business plan.

Going into the economic and operating results for the first quarter. YPF has made a robust start to 2021 leaving one of our toughest years behind and giving us step forward towards recovery and growth. We have attained a solid rebound in profitability with adjusted EBITDA reaching $767 million increasing over 3x sequentially and coming just 10% below the levels reached a year ago. This improvement was mainly due to a significant comeback in demand for gasoline and diesel, higher realization prices and the materialization of cost efficiencies resulting from the company-wide cost cutting plan put in place last year.

We are now focused on fully consolidating these efficiencies making each dollar spend significantly more powerful.

As we kept ramping up activity, we completed 48 wells, 34 of which were in the unconventional segment, resulting in the quarter with the most completed horizontal wells since YPF started the development of Vaca Muerta. This, coupled with the better-than-expected initial performance on the recently connected wells, allowed for our total shale oil production to jump by 20% sequentially, backed by our core hub where output reached its record high in March and has already been outpaced in April, producing almost 43,000 barrels per day.

On the conventional side, we managed to mitigate natural decline and grow by 1% sequentially as we continue to have very good results by applying both secondary and tertiary recovery methods. As an example, production at Manantiales Behr, a 90-year-old block, continues growing and achieving new records, with additional production for treasury recovery reaching 4,800 barrels per day in the first quarter and even higher 5,400 barrels per day more recently in April.

As a whole, total oil production expanded by 4% on a sequential basis to 208,000 barrels per day in the first quarter, being well on track to meet our guidance for the whole year despite recent disruptions originated in the 20-day blockade in the Province of Neuquén which partially affected our operations and investment activities in the region.

On the back of this positive start of the year, our financial situation improved beyond our initial forecasts. Despite moving forward with our investment plan for the year, we delivered positive free cash flow of around $280 million. This in turn allowed us to reduce our net debt during the quarter, down by over $300 million, reaching $6.7 billion, a level not seen since 2015.

The first quarter provided encouraging results, making us more confident in our ability to fully execute our CapEx plan for the year and in turn, achieve our production targets. Nevertheless, the near future remains challenging. Ongoing and future mobility restrictions on the back of the evolution of the pandemic as well as macro volatility will probably continue to dictate the general business environment, requiring us to be even more focused in consolidating and further identifying efficiencies to become linear while we remain quick to react to the evolving landscape and keep on delivering value to our shareholders.

Let me end by saying that I am particularly proud of our employees of their commitment and their efforts. I also want to thank our clients for their fidelity and our investors, partners and suppliers for their continued support. I believe the challenges ahead are still many. But I am confident of what we have achieved so far. And this first quarter represents the first step towards getting back on a profitable growth cycle.

Now I leave you with Alejandro, who will go into further detail on our first quarter 2021 results.

Alejandro Lew

Thank you, Sergio, and good morning to you all. I will now go to our main financial results for the quarter that, although still somewhat impacted by the effects of the epidemic, had a solid recovery even beyond our initial estimates.

Top of the list, our revenues jumped by 17% sequentially, primarily on the back of a very strong recovery in gasoline sales and improved net prices at the pump. However, our revenues are still well below pre-pandemic levels, standing at minus 7% versus Q1 2020 and an even larger minus 20% when compared to the same quarter in 2019 as average net prices stood about 15% lower than those in 2019, and volumes sold of gasoline and diesel, although showcasing a very solid recovery this quarter, ended about 6% below when compared with pre-pandemic levels.

On the back of the significant jump in revenues, adjusted EBITDA for the quarter totaled $767 million, more than 4x that of the previous quarter and just 10% below Q1 2020. This result was further helped by the consolidation in OpEx efficiencies which declined by 21% when compared to the previous year, pushing our EBITDA margin higher to 29%, in line with historical levels.

Based on this solid recovery in adjusted EBITDA, and despite being quite on track on the execution of our CapEx plan, our free cash flow before debt financing totaled $284 million, allowing us to further reduce our net debt, which ended the quarter at its lowest levels since 2015 at $6.7 billion, declining by almost $900 million in the last 12 months.

Zooming into our cost structure. As mentioned before and fully in line with our comments during the last earnings call, our total OpEx was down by 21% compared to Q1 2020, clearly the result of the company-wide cost cutting plan launched last year. And going forward, although we still see room for some additional savings, particularly in relation to our development costs at Vaca Muerta, the main goal in coming months shall be to consolidate the efficiencies achieved so far, making these savings long laster.

More specifically, during the quarter, we managed to further reduce our overall lifting costs to $10.5 per barrel of oil equivalent, representing a reduction of 8% compared to Q1 2020. And in the case of our downstream segment, we have captured a significant reduction in refining and logistic costs per barrel, which were down by 12% year-over-year, averaging $9.3 for each processed barrel.

Separately, on the CapEx side, although total CapEx for the quarter was about $50 million below the previous quarter, activity in the upstream segment expanded by 17%, in line with the objectives laid out during our last earnings call, in terms of focusing activity on the upstream segment, particularly in shale oil. And we have also managed to put this activity forward more efficiently, which is particularly evidenced by the continuous reduction in the average development cost for our core shale oil hub, reaching an average of $10.2 per barrel of oil equivalent in Q1 2021, dropping by 14% year-over-year and in line with our full year target announced in the previous earnings call of $9.2 per barrel of oil equivalent for the full year 2021.

Although total hydrocarbon production was down by 14% year-over-year in Q1, it expanded by 3% on a sequential basis as the normalization in NGL more than compensated the decline in natural gas production, together with a 4% increase in crude production and a more specific 20% jump in share oil.

Furthermore, during April, we have marked a new production record at our core shale oil hub, totaling almost 43,000 barrels per day of net oil production, even despite the 20-day blockade carried out by health care workers in the Province of Neuquén that partially affected our operations.

Beyond Vaca Muerta, conventional production increased by 1% sequentially as we continued mobilizing pooling equipment and doing it in a more efficient way, while also managed to offset natural decline through secondary and tertiary recovery techniques.

It is worth mentioning that Manantiales Behr reached a new quarterly record with production averaging 24,000 barrels per day, increasing by 15% year-over-year. Thanks to the innovation and top-notch technology that allow us to improve the oil recovery factor. Particularly on EOR, tertiary production at this field averaged almost 5,000 barrels per day during the quarter compared to just about 700 barrels per day a year ago.

This quarter was also characterized by a stronger pricing environment across the board. Our crude oil realization price averaged $50 per barrel, 3% higher than the previous year and 25% up sequentially, partially reflecting the rally in international prices. However, this increase is not fully correlated with the rise of Brent as a transition scheme has been agreed between producers and refiners in the local market to smooth out the evolution of international crude prices, thus minimizing volatility and allowing for a gradual pass-through to the pump, leaving room for these reasonable margins within the downstream portion of the value chain.

On the natural gas side, prices were also higher, both on a sequential basis and compared to the previous year, as this was the first quarter under the new planned gas scheme. Our average realization price was $2.9 per million BTU compared to $2.8 for Q1 2020 and $2.4 in Q4.

Moving into the next slide. Let me go a little deeper into the upstream activity performed during Q1. This quarter, based on the ramp-up activity and our focus in Vaca Muerta, we managed to complete 48 wells, 34 of which were unconventional wells and more specifically, 25 in our core shale oil hub. This has marked a new record in terms of quarterly completed horizontal wells in Vaca Muerta ever, showcasing our renewed commitment to accelerate the development of this world-class asset. At the same time, as Sergio mentioned in his introductory remarks, we continue with our resumption in activity in a more efficient way, making each dollar we spend more powerful.

As a clear example of this, we have continued achieving a steady improvement in monthly frac stages per equipment, reaching an average of 139 stages in Q1 ’21, representing a 34% improvement compared to the average of 2019 and 24% higher than the average of 2020.

On the conventional side, we also continue to make very good progress. A good example of this continues to be the reduction in pooling intervention time as total hours per intervention in Q1 came up 22% below the average for 2019 and 8% below the average for 2020.

Switching to our downstream business. As previously commented, demand for refined products had a very solid start of the year with a faster-than-expected recovery. Domestic sales of gasoline and diesel increased by more than 5% on a sequential basis in Q1 and almost 4% when compared to the first quarter of 2020, when the initial outburst of the pandemic had a negative impact for about 10 days in March. Nevertheless, when compared to full pre-pandemic levels of Q1 2019, local fuel sales in the first quarter were 6% below, while recent renewed mobility restrictions have further affected demand with preliminary April figures ending at minus 11% for gasoline and minus 6% for diesel when compared to the same period of 2019.

However, even though local mobility restrictions could further affect demand for refined products in the country, strong international prices for both crude and refined products provide an attractive opportunity to compensate lower local sales with export demand, something that was not viable in 2020 as global demand collapsed simultaneously.

As an example, in the first 4 months of the year, we have already exported over 400,000 barrels of gasoline to Bolivia, while we are also evaluating potential exports to other regional markets in coming months.

In terms of refinery utilization, processing levels have recovered to levels very close to pre-pandemic, averaging 273,000 barrels per day in Q1, only about 1% below the same period of last year and the average for all of 2019.

Finally, with regards to prices for our main domestic refined products, we have continued with an active pricing strategy at the pump. While the increases in the first quarter were primarily oriented towards compensating tax increases and passing through regulated increases in biofuels, the net effect permitted us to stabilize our net prices in dollars and more recently, regain some margin. However, our average net prices for Q1 ’21 measured in dollars, although expanding by about 10% sequentially, still stood about 11% below the average realized prices for the same period last year.

Going forward, it was publicly announced by the President of our Board back in March to provide predictability to our clients. We have targeted a 15% net increase during a 3-month period with the last hike expected at some point this month. This should result in reasonable net prices in dollars that shall have their correlation with the gradual normalization of local crude prices. Furthermore, beyond May, we shall continue monitoring the evolution of international crude prices as well as local key variables such as inflation and devaluation to define future measures in terms of price normalization, focusing on maintaining reasonable margins along the value chain.

Turning to cash flow. The recovery in profitability during the quarter led to an increase in our cash flow from operations that more than covered our investments and interest payments, allowing for the possibility to further reduce our financial debt, given our defined strategy of maintaining liquidity relatively stable.

This resulted in negative net borrowing of $246 million during the quarter and a total reduction of our net debt of $324 million sequentially, while maintaining our consolidated liquidity almost unchanged at about $1 billion. Furthermore, we have recently negotiated a fully committed short-term revolving credit facility with a local financial institution denominated in pesos for an amount north of $40 million equivalent that provides us with extra flexibility to manage our liquidity more efficiently.

And in terms of cash management, we have continued administering our liquidity with an active asset management approach to maintain FX exposure within certain limits, while also considering the cost of carry of such strategy. As a result, as of March 31, our net FX exposure related to our liquidity position stood at around 20%. Even though Central Bank regulations continue to require all liquidity to be held onshore for companies like ours that have regular access to the official FX market for imports and cross-border debt servicing. Moving to our debt profile. Although we have already commented the results of the global exchange offer executed earlier this year during our previous earnings call, it is worth briefly highlighting once again the debt service relief achieved for this year and next one totaling close to $600 million, while at the same time, smoothing out our maturity profile for coming years.

Looking forward, with no major bulk maturities in the near-term and with most of the maturing debt for the rest of this year, composed mainly of local loans and bonds having less than $250 million in cross-border maturities and most of them trade related, we feel very comfortable in our ability to efficiently roll over maturing debt. And if needed, tap the local market for net new funding.

Finally, although we have managed to further reduce our net debt and despite the recovery in profitability seen during the first quarter of the year, our net leverage ratio calculated as net debt over last 12 months EBITDA remained unchanged at 4.9x as the full effect of the pandemic is included in the rolling 12 months used for EBITDA calculation purposes. However, we expect net leverage to significantly decrease in the near future as 12-month rolling EBITDA recovers provided that market conditions continue to normalize and no particular contingencies materialize.

Before taking your questions, let me once more thank you and the whole investor community for your continued support. Now we are open for your questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions]. Your first response is from Guilherme Levy with Morgan Stanley.

Guilherme Levy

My first question is on gas. I just wanted to touch base on the receivables from this plan. If the government is paying them on time, what is the current amount of receivables outstanding? And what options does the company has in case the government fails to pay this intensive on a regular basis going forward?

And then my second question is on asset sales. In previous calls, I remember that we have already discussed the possibility of YPF entering into new farm-down agreements in Vaca Muerta as well as the possibility of potential divestments from noncore maturities. I just wanted to understand the status of the studies and discussions with international players and the company’s perception of the current appetite of our investors to resume the client chapter in the country?

Alejandro Lew

Thank you for your questions. In terms of the planned gas receivables, so far, we have accumulated in the first quarter about $10 million in specific receivables from the government in terms of subsidies.

In terms of collections, we have not actually collected on them yet, although it’s relevant to mention that regular payment scheme takes between 60 and 70 days between the end of the month – of the actual month and the specific collection. So what we can say is that we are about a month behind schedule. We attribute that mostly – and we hope that will be the case. We attribute that mostly to the initial implementation of the program, which has some – had some administrative issues and some back and forth in terms of information that had to be provided to the Secretary of Energy.

But the good news is that last Friday, last week, at the end of last week, the first payment note was issued authorizing the treasury to actually pay for the month of January, and that should be collected in coming days.

So we expect once the process was finally fine-tuned that collections for the following months will work as planned by the scheme, by the program. And so we would expect no further delays in collections down the road. It’s important to note that the first quarter is clearly off-season, so the amount, it’s clearly not that relevant. As I said, for the full quarter, the total amount of receivables is in the order of $10 million.

So the first payment was issued – the first note for payment was issued last Friday for an amount of just north of ARS 160 million, and that is 75% of the amount that should be collected for January. And so as I said, we expect the system to normalize in coming months. In case the actual payment doesn’t take place, that is an automatic scheme, whereby producers can take – once the payment notice was issued, which has happened already for January, producers have the right, we have the right to actually use that payment notice against taxes that we have to pay, different taxes that can be used. So this can be used as a credit, a fiscal credit towards tax payments.

So generally speaking, once the payment notice was executed, you have no further payment risks as you can take that immediately to net out tax payments. So that’s basically the general scheme. And we expect, down the road, the flow to normalize and collections to happen on time. And then on your second question, I will let Sergio to answer on asset divestments.

Sergio Affronti

Yes. Let me, Alejandro, take the question, and thank you, Guilherme, for your question with respect to the potential divestments of assets. As we commented in the past, we are focusing on our strategy, and capital allocation in our core oil and gas activities in optimizing our portfolio. And in that regard, cash generation through divestitures of noncore assets would provide an additional capital to allow a more rapid deployment of resources into oil and gas included in the growth of the business.

A concrete example of this strategy is the sale of 2 real estate assets in recent months. That will provide us with more than $50 million. On the other hand, and also, as we commented in previous calls, we continue with having active conversations with key international players for the possibility of entering into new farm-in agreements in Vaca Muerta. However, it’s hard to predict whether closing of any new agreement might take place in the near future as valuation assessments seem to be well apart.

And with respect to mature conventional areas, along the same lines that we commented during our last earnings call, we are also working, although still is preliminary stage on a group of mature conventional areas, that might be subject to some form of divestment. In summary, our strategy is to continue analyzing our portfolio of nonoperating, nonstrategic assets and shall move forward with the monetization if a potential deal valuation result.

Operator

Your next response is from Barbara Halberstadt with JPMorgan.

Barbara Halberstadt

Congratulations on the results. I just wanted to follow-up on your maturity schedule for the next months into the end of the year and beginning of 2022 given the FX restrictions. If you could just confirm to us what are your expectations in terms of the exposure you have to those restrictions? If you could confirm the amount for that, so that would be helpful.

And also on the investment side, there’s been, of course, a lot of focus and activity on shale with a CapEx increase from the last quarter, but production increasing not to the same extent. So I just wanted to understand from the investments that have been done this quarter, how much we’re expecting it to reflect in future production for the second half? Or we should be looking at the investments in the other quarters for the increase you expect for second half?

Alejandro Lew

Thank you, Barbara, for your questions. So in terms of the maturity profile and coming maturities and the impact from the FX regulation. Well, as shown in the presentation, we have just a little bit less than $1 billion for the rest of the year. Actually less when taking out April, but let’s say that from April to December, around $950 million on a consolidated basis. And then the first quarter of next year is relatively small with just north of $100 million in coming maturities. So all in all, it’s about $1 billion for the 12-month period from April to March.

We feel that coming maturities are not significant – or that don’t pose a significant risk in terms of rolling those over. As you’ve seen, we – in the first quarter, we have reduced the amount of debt in a significant way by about $300 million. Probably, the second quarter will be relatively stable. And then probably, we will need to take some net new debt in the second half, but probably not as we had expected in our announcements in the previous call or the guidance in the previous call, we expect the amount of debt that will be required to be significantly less than previously anticipated.

In terms of FX restrictions, we don’t have major maturities exposed on that front. As you know, current regulations provide for some limitations in terms of debt repayment until the end of this year, but with some exceptions. One of those exceptions are maturities coming from liability management exercises executed recently to actually refinance coming debt. So the most relevant maturity that we have, which is about just south of $45 million on the amortization on our 25 – March 25 international bond will be the first installment out of that. That was the one coming out of the liability management executed in July of last year. But that particular amount is not subject to the regulations as provided by specific exemptions from the Central Bank.

So the reminder of the maturities affected between now and the end of the year are about $25 million, composed of 2 installments on a bank loan, on a cross-border bank loan for about $18 million, 1-8. And then about $6 million on the local bond issued in hard dollars. So all in all, we don’t expect any major complications to solve those issues, particularly on the installments on the bank facility. The first installment out of that was already refinanced last December within a similar scheme. And so we don’t expect coming maturities in June and December for $9 million each to be a problem at all. And then the bond maturity of $6 million in October. Again, it’s only $6 million in the local market. We don’t expect to face any major issue to resolve that.

But then on your CapEx question, clearly, it’s – the relationship is not linear, right? First of all, you have about a 6-month lag between the time where you put your investment into place and the actual production coming out, but that is considering the full cycle of the investment. However, on a regular basis, you have a combination of a portion of your CapEx that goes towards completion of wells that were in the middle of the process.

As you know, we’ve been commenting on the stock or the inventory of drilling but uncompleted wells that we have, that coming out of the pandemic, we were having a stock of – an inventory of about 80 wells. We have reduced that inventory, that backlog very significantly. As of today, we have just 34 remaining dug wells from that period, although we have created new backlog from new different stages of construction of new wells. So as of now, we are at about a little bit north of 70 wells in our backlog. So that’s why it’s not very linear how you can translate investment into production.

Nevertheless, of course, we – the improvement in production, primarily in our core hub in shale oil that was – that has an effect from the completion of wells in late 2020 and also in – during this first quarter. So I would say that about – close to 50% of the production increase during the quarter or close to 5,000 barrels per day are the result of the new wells that were put into place and in operation in recent months. And a reminder, it’s mostly reduction in losses, basically through pooling intervention and also the positive result from the evolution of our tertiary production at Manantiales Behr that we have been commenting also in the past. And as Sergio mentioned, and as was mentioned during the presentation, it’s up also in a significant way, particularly when compared to the first quarter of last year, right, growing to about 5,000 barrels a day when comparing to less than 1,000 barrels a day in the first quarter of 2020.

Operator

Your next response is from Frank McGann with Bank of America.

Frank McGann

Okay. I was just wondering if you could give us some update on what you’re hearing about the Hydrocarbons Law and what you currently think that will mean for YPF? And then maybe if you could also just talk a little bit about, in the past, you’ve had a lot of advantages being able to source crude when you needed in the local market. I’m just wondering how that is today with the current pricing changes or the pricing changes that have been made recently in the local market?

Sergio Affronti

Thank you for your question. I’m going to take the first one related to the Hydrocarbons Law. As you know, President, Alberto Fernandez, has publicly stated his intention to present new hydrocarbon law to promote investment in hydrocarbons in the country to congress this year. And also, there have been active conversations between government and the industry.

As far as we understand, there should be 3 main goals in the new law. The first one is to incentivize further investments in the upstream segment, particularly in crude to generate structural incremental volumes that will not only ensure that the local demand is met but further provide for extra production to increase exports.

To this end, we understand the project should contemplate guaranteeing some minimum exportable volumes based on incremental production and granting some minimum access to the foreign exchange market in relation to these exports. The second goal, we think, is to encourage the execution of hydrocarbon neutralization in the country, projects such as LNG, fertilizers and renewed refining infrastructure through some form of tax benefits that, in turn, will contribute to substitute high-value imports and generate exportable surpluses and significantly improve the quality of fuels.

And the third goal is regarding natural gas. We understand that the law should go beyond what has already been implemented as the new plan, Gas 4, and focus on incentivizing the production of gas under a scheme that allows producers to export 365 days a year, enabling for long-term contracts, while ensuring the supply of the local markets. We think that these are the 3 main goals that the law has.

And with respect to the impact in YPF, as I mentioned, this hydrocarbon law will provide specific benefits to the industry as a whole. And of course, this includes YPF as a part of the oil and gas industry. Some of those could include the possibility to gain oil export credits, that could be freely traded in the local market; long-term contracts, as I mentioned, to export gas; plus incentives to enable oil and gas industrialization projects that are currently in our portfolios such revamp infrastructure to improve fuel quality and some incremental production.

Additionally, the law may include holistic revision of fuel taxes adjustment in a more proportional way linked to how prices evolve. And of course, a specific focus on unconventional projects to accelerate production enabling some blocks to grow from pilot stages to development mode.

And with respect to conventional, I think – we think that conventional production will be also considered with a specific benefit for additional production that reverts the natural decline of mature wells. This is the conversation that we have with the government. And also, as I mentioned before, well, the industry had some conversation with the government officers. But of course, and just to clarify, while we have an active and constructive dialogue with the government authorities, we are not aware of the timing of the actual measures that the executive power might end up presented to Congress.

Alejandro Lew

I’ll take the second question, yes. Thank you, Sergio. Okay, Frank, in terms of your second question about sourcing crude in the local market. In the first quarter, we had a similar percentage to our recent historical average in the order of 20%. I think the exact number – the precise number was 21%. So roughly in line with the historical averages. Of course, there is some pressure from local producers, nonintegrated producers to push prices upwards following closer the evolution of international reference prices. But as commented during our presentation, there has been a constructive and reasonable dialogue between refiners and producers in that negotiation we act as a refiner, clearly, based on our net purchases of crude to third parties, primarily to our main partners.

And in that sense, I think there is a general understanding that we need to smooth out the evolution, the rapid evolution that international prices had because of the difficulties to translate and to pass-through those international prices to the pump in a faster way. So I think there has been, as I said, reasonable dialogue, constructive dialogue we managed to so far negotiate with the local producers relevant discounts to export parity. But of course, it’s a dynamic process.

In that process also, most producers also have been having the ability to export a portion of their production, capturing the full benefit of export parity in that portion of their production, and in that way sort of compensating the lower domestic prices. Down the road, we expect this reasonable dialogue and agreements to continue as we move along the year, clearly, in a difficult year in terms of macroeconomic environment. And our ability to keep on adjusting prices at the pump, of course, will dictate also ourselves and the rest of the refiners, right, the ability to push prices upwards at the pump.

If international prices stabilize at this level or continue to grow, of course, that ability to adjust prices at the pump will dictate our ability to pay higher prices to local producers. But that is still very unclear. We will have to see how everything evolves down the road.

Operator

Your next response is from Marcelo Gumiero, Crédit Suisse.

Marcelo Gumiero

I have two questions here. One is a follow-up. So first question about sales volumes. I mean we saw domestic consumption at 10% above the first quarter of 2020 and it was flat compared to 2019. However, total sales were flat, almost flat with – which reflects lower exports in the first quarter. My question is, did the domestic volumes fully recovered from COVID and should we expect exports to stay low going forward?

And the second question is a follow-up question about CapEx. And you commented on how many drilled but uncompleted wells you still have at the end of the quarter. My question is I wanted to understand if CapEx could be lower than the guidance or production could be higher than the guidance for 2021? Or – I mean if there is no – this is not the case, I mean, if guidance is still in place for 2021?

Alejandro Lew

Thank you, Marcelo. In terms of demand, what we’ve seen in the first quarter was a faster-than-anticipated recovery in local demand versus pre-COVID versus pre-pandemic. The ramp-up in demand that we had anticipated, and we commented that in the last earnings call, we were expecting the full year to be about 10% to 15% below pre-COVID, ending the year by December closer to 5% to 10% below pre-pandemic.

However, in the first quarter, we’ve seen a more rapid recovery being at – yes, as you mentioned, and probably closer to pre-pandemic in the case of gas oil on average and about an average 5% or slightly more below pre-pandemic in gasoline. However, based on the new mobility restrictions imposed by the government on the back of the second wave of COVID here in Argentina, what we’ve seen in April and mostly in the second part of April and the first week of May is a comeback or a setback in that recovery, whereby we are seeing demand for gasoline and sales of gasoline probably closer to 15% to 20% below pre-pandemic. And not that much in the case of gas oil, because of the increased demand – the seasonally increased demand from mostly agricultural – the agricultural sector.

So what to expect down the road? We continue to believe that by the end of the year, we should be at about 5% to 10% below pre-pandemic. So we would expect the coming months to still have somewhat of a lower demand scenario or demand environment vis-à-vis pre-pandemic and then recovery probably by the spring once probably mobility restrictions will start to be flexibilized. But again, this is all very premature. And so we are sticking with this idea that by the end of the year, we will probably remain about 5% to 10% below pre-pandemic.

And in terms of CapEx and production guidance, so far, during the first quarter, we are slightly behind schedule on our total CapEx versus what we had anticipated, although we expect to recover that in coming months. Even though April was also a setback given the 21-day blockade in the Province of Neuquén, which affected – partially affected our operations, primarily construction in that area. So – but we still stick to the guidance provided earlier in terms of the total CapEx for the year.

And in that sense, also in the guidance for production in – based on our estimates, the first quarter came a little bit over our guidance or the portion of that quarter for our guidance. However, because of the impact that the April blockade would have on production and also this delayed schedule for CapEx, we will then adjust probably – the second and the third quarter will come a little bit lower than our previous plans and then being fairly on plan for the full year.

So basically, in summary, and not to complicate things too much, we still believe that the full $2.7 billion CapEx for the year should be – and remains our target. And the same goes for total production to be relatively stable year-over-year. However, being about 5% higher in crude and about 7% to 8% higher in natural gas when comparing the second half of this year to the second half of 2020.

Operator

Your next response is from [indiscernible].

Unidentified Analyst

This question is with respect to pump prices for diesel and gasoline. How much room for price adjustments do you estimate for the next quarter? Can we expect prices to recover to early 2020 levels? And a second question, again, related with prices. With elections approaching on the third quarter and foreign exchange pressure on the peso, how exposed is your EBITDA under a major devaluation scenario?

Sergio Affronti

Thank you, Constantinos. Tough questions that you asked. Clearly, pump prices are hard to predict. Of course, we’ve been following the strategy that we’ve been commenting so far trying to regain our dollar margins as – and mostly as international crude prices continue to rally. We have continued with our active strategy in terms of adjusting prices higher. However, we are very cognizant of the overall delicate macroeconomic environment, particularly inflationary pressures. So it’s – so that’s why back in March, the President of our Board announced to provide some visibility for our consumers, announced a 3-month target, which was for 15% on aggregate in probably – that was announced in 3 installments. We have already performed 2 of those. One should happen during the rest of May. And so we are on target on that front.

Down the road, of course, it will depend on whether the – first of all, the elasticity, the price elasticity of demand. And we are back at more – closer to historical averages, still down versus when you compare it to the period of 2017 to 2019 the most recent years. Yes, we are still down on dollar terms about 15% to 20%. So there’s still some room to recover a little bit further there. Same when comparing to import parity. We are somewhat between 10% to 15% below import parity, closer to 10%. But of course, it depends on the exact – it depends on the volatility of international prices.

So going down the road, yes, we expect to at least maintain similar levels on the ones that we have today, although we cannot guarantee whether that will be possible. And of course, there will be pressure, as I mentioned before, from the price of local crude to push for further price improvements in the downstream segment so as – in pump prices, so as to maintain downstream [indiscernible] but all of that is hard to predict.

And definitely, in terms of the potential impact on a significant devaluation, yes, we are always subject to that. And of course, in the long run, as have been demonstrated, prices tend to correlate very well and maintain some reasonable dollar margins. However, in the short term, of course, our prices are in pesos, right? And it’s positive when, for example, things happen like in the first quarter of last year, with international prices collapsed, our margins improved because – and that allowed for the [indiscernible] to protect the price of local crude. But then the other way or the other side of the coin is when international prices rally, or when you have a significant devaluation of the currency, there is some lag to adjust our pump prices, and then you have some temporarily negative effect on your cash flow generation. But again, we don’t know what will happen with the evolution of the FX. And so far, at least in the near future, we expect our dollar margins to remain relatively stable.

Unidentified Analyst

Congratulations on very solid results.

Sergio Affronti

Thank you.

Alejandro Lew

Thank you.

Operator

Your next response is from Ezequiel Fernandez with Balanz.

Ezequiel Fernandez

Yes, it was great to see the turnaround in output. Congratulations. So I have 2 basic questions. The rest have been already asked. Regarding working capital cash sources, I believe that you previously indicated in the last quarter that you could get $500 million you needed during this year. In view of the first quarter results, do you think you will effectively need that much? Or should we expect something lower?

And the second question has to do with the current discussion in Congress regarding biofuels. If you could tell us a little bit of what you think is healthy biofuel cut for diesel and gasoline for the industry?

Alejandro Lew

In terms of working capital, clearly, and as commented during the last call, there are several factors affecting our working capital. All in all, we anticipated that amount also has to do with some tax receivables that we have and some collections in general. So we still believe that reasonably – it is reasonable to anticipate an amount close to that, between $400 million and $500 million for the full year. And so far, we have been collecting on the latest portion of the original planned gas installments, which is about $25 million per month. So the first quarter, we continue collecting that. And I think we have just one remaining installment to collect, and that’s it. But then – so as I said, there are several factors affecting our working capital. But generally speaking, we should still be seeing an improvement in working capital in the order of $400 million to $500 million for the full year.

In terms of whether we need it or not, I think we commented briefly during our presentation. We feel more confident now in terms of our – based on how the year has started and the way we are seeing our cash flow generation ability. We see less need for net new funding. We are anticipating a significantly lower amount of debt than previously expected. And as clearly seen in the evolution of our net debt in the first quarter. And so of course, if that working capital actually doesn’t materialize in full, that should not derail in any significant way our plans for the year. So I would say that we are less at risk on our CapEx plan when related to working capital or the reduction in our working capital, generally speaking.

In terms of biofuels, I think it’s a complicated question. Of course, there is a lot of debate in general, in the industry in terms of the whether that – what’s the impact on biofuels on sustainability in general on climate change and there are different views, and there are 2 sides of that library. So it’s impossible to say what’s the exact percentage of biofuel cut that is reasonable. Of course, for us, the lower, the better. Our business, that is a pass-through. And we would rather not have any biofuel cut, but we understand that there are different views to that. So we are more passive on that situation.

And of course – and as was commented, when our President of the Board announced the price adjustments of the pump back in March, he commented also that part of that price adjustment was related to a pass-through of the increased biofuel prices that, as you know, those are regulated. And based on the steep increase that was announced in biofuels, that’s why a portion of our pump prices increase was mostly to compensate for the incremental costs on our fuel purchases. So all in all, I would say that we don’t have a very – a company message or a company target. But definitely, we would look for – adjust our prices accordingly for whatever decision and stuff taking place on that front.

Operator

Your next response is from Luiz Carvalho of UBS.

Luiz Carvalho

I just would like to come back to one cash flow discussion. So you had, I would say, a good quarter, and let’s say that you can deliver maybe that close, let’s say, to $3 billion. You have a CapEx of $2.7 million, cash of close to, I don’t know, $1 billion. And that to be paid close to $950 million, right? So that will give you something close to $400 million cash by the end of the year. So just trying to understand if this cash flow breakdown makes sense to you? And secondly, what is the minimum cash amount that you need in order to run the company? That would be my first question.

The second question is, you had somehow, at least in our forecast, a bit better results on the downstream business or the back of the volumes and also the margins. So just trying to understand a bit better how recurring they are? And what are the risks? I think that you already mentioned part of the difficulties in order to follow the international prices. You’re below between 10%, 15% below the import parity. Just wanted to understand how recurring [indiscernible] were?

Sergio Affronti

Thank you for your questions. In terms of cash flow, well, generally speaking, as you know, we are still not providing guidance for full year EBITDA, not because we don’t want to, but clearly, because we still believe that there are too many uncertainties down the road to make us comfortable in providing such a guidance. We are trying to be very coherent in the guidance that we provide and what we deliver. And that’s why we don’t want to move too fast on that front given the type of fear that we have ahead of us.

In any case, I think the portion that you missed on your cash flow analysis is the interest payment portion. And I think that – it’s important to say that we see our interest payments going down this year when compared to the recent past to historical averages for the last few years, mostly as the stock of debt was coming down and also, we are doing good progress in terms of reducing our cost of financing. After the debt exchange, financial institutions that are our main partners have been offering lower rates.

We are getting closer to 5% to 6% on average for our trade – short-term trade finance line when comparing to an average of about 7% at the same time last year. So that’s good news. And also the overall reduction in the stock of debt, plus the cash relief that was obtained during the debt exchange earlier this year. So all in all, the cash portion – or our cash interest payments are coming down in a significant way this year.

So generally speaking, we – as of today, we feel very comfortable with roughly $1 billion in liquidity that we have and that is the consolidated liquidity that we entertain that we have at the end of March. During the last call, we have said that we expected that liquidity to be around $1 billion, plus/minus 10%, and we are exactly at the same level by the end of the first quarter.

To be completely honest, based on the revised short-term maturity profile, basically, the lack of bulk maturities in coming months and the way we see the cash flow from operations, we may even consider reducing that amount of liquidity but we are reviewing that for the rest of the year. So just as a feeling or as a sense that we feel very comfortable right now in our ability to, first of all, roll over maturing debt, which is, as I said, doesn’t have any concentration. The only major concentrations that we have, it’s a – a local syndicated loan that matures now in June for an amount of $250 million. We are actually – we were presented with the refinancing proposal, and we are analyzing it, but maybe not even taking the full amount because we don’t feel that, that’s the best financing alternative that we have in hand. We are looking at several financing alternatives, mostly local, but some cross-border as well for the second half. And that makes us more confident in our – in the financial front.

So because of all of that, and let me – sorry for being a little bit long on my answer. But – so we feel that cash flow should be better for the year than previously anticipated. That’s why the comment in the previous earnings call was that we were anticipating taking on a relevant amount of net new funding to be able to execute in full our CapEx plan, and that’s why we put some risk on our CapEx plan based on our financing achievements. I would say that today, we are less at risk from the financing side. We don’t see that much requirement of net new funding or not net new funding at all for the year as a whole. And so we feel more confident and probably even considering reducing the stock of liquidity to reduce our cost of carry and our net FX exposure on the liquidity side.

And in terms of your downstream margin question, when you just – when you calculate the average per barrel equivalent – per barrel processed for the quarter is at about $8.5. Of course, that is mix of several things. It includes petrochemicals in there. So it’s a mix of refining, logistics, petrochemicals and non-grain – sorry, nonfuel exports of agricultural products. So it’s a mix of many things.

But roughly speaking, that number, it’s a little bit below average from a historical perspective. So we do expect that number to improve a little bit, at least in the near future and hopefully stay there for the rest of the year and hopefully for the future. So – but we are getting closer to historical averages on our downstream segment. But as I said, that $8.50 per barrel a little bit below average and probably improving a little bit in the near future.

Operator

There are no further questions in the queue at this time.

Sergio Affronti

Thank you very much, guys, for your interest for following YPF, for your comments, for your reports. Have a good day.

Operator

This concludes today’s conference call. Thank you for participating. You may now disconnect.

____________________