YPF Sociedad Anónima — FY2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019. Although the request metadata says “2019 Q4,” this is an annual report; the supplied filing does not provide a separate standalone fourth-quarter income statement or cash-flow statement. Financial statements are prepared under IFRS and presented in Argentine pesos (Ps.), in millions unless stated otherwise. Argentina was considered hyperinflationary, and exchange-rate and inflation effects materially affect comparisons.
Business context and key financial metrics
YPF is Argentina’s integrated energy company, with upstream, downstream, and gas and power operations. The Argentine Republic owns 51% of its shares. Nearly all operations, properties, and customers are in Argentina.
| Metric | FY2019 | FY2018 | Change / context |
|---|---|---|---|
| Revenue | Ps. 678,595 | Ps. 435,820 | Up 55.7% |
| Gross profit | Ps. 102,987 | Ps. 76,250 | Gross margin 15.2%, versus 17.5% |
| Operating profit / (loss) | Ps. (21,012) | Ps. 43,780 | Operating margin (3.1%), versus 10.0% |
| Net profit / (loss) | Ps. (33,379) | Ps. 38,606 | Net margin approximately (4.9%) |
| Net financial results | Ps. 6,034 gain | Ps. 41,525 gain | Lower contribution year over year |
| Other comprehensive income | Ps. 221,367 | Ps. 172,600 | Primarily translation differences |
| Total comprehensive income | Ps. 187,988 | Ps. 211,206 | Positive despite the net loss |
| Net cash from operating activities | Ps. 217,137 | Ps. 125,058 | Up 73.6% |
| Cash used in investing activities | Ps. (163,879) | Ps. (82,251) | Higher capital investment and acquisitions |
| Cash used in financing activities | Ps. (56,082) | Ps. (43,656) | Includes interest, leases, and dividends |
| Cash and cash equivalents at year-end | Ps. 66,100 | Ps. 46,028 | Increase of Ps. 20,072 |
| Working capital | Ps. (5,451) | Ps. 29,446 | Moved to a deficit |
| Total loans | Ps. 526,760 | Ps. 335,078 | 92% denominated in U.S. dollars; 83% at fixed rates |
| Capital expenditures and investments | Ps. 174,681 | Ps. 97,493 | 79% allocated to upstream |
Cash from operations exceeded reported investing cash outflows in 2019, but the filing also reports Ps. 161,455 million of cash expenditure on property, plant, equipment, and intangible assets. Cash-flow classifications and other investing items should be reviewed in the audited statements.
Material changes versus FY2018
- Revenue growth was largely price- and currency-driven: domestic diesel and gasoline prices in pesos rose substantially, while sales volumes fell modestly. Natural-gas revenue increased, but gas sales volumes declined amid oversupply and weaker demand.
- Costs rose 60.1%, faster than revenue. Cost of sales increased to 84.8% of revenue from 82.5%, reflecting higher production costs, depreciation, lifting and refining costs, transportation, and purchases.
- Operating results swung to a loss. The principal unusual item was a Ps. 41,429 million impairment charge, mainly in the Gas—Neuquina Basin cash-generating unit; the specific impairment identified was Ps. 40,561 million.
- FY2018 included a Ps. 11,980 million gain from revaluing YPF’s interest in YPF Energía Eléctrica after a capitalization transaction; that benefit did not recur in 2019.
- Net financial results fell to a Ps. 6,034 million gain from Ps. 41,525 million. Management cited higher interest expense and less favorable exchange-difference effects.
- Cash from operations increased, while investing outflows rose materially. Total loans increased to Ps. 526,760 million, and working capital changed from a surplus to a deficit.
- Production was approximately 188 mmboe, or 514 mboe/d, down about 3% from 2018. Proved reserves were 1,073 mmboe versus 1,080 mmboe; the replacement ratio was 96%, compared with 178%.
Outlook, management commentary, risks and contingencies
- COVID-19 and oil-market shock: The annual plan approved in December 2019 was prepared before the pandemic and the sharp oil-price decline; management said its prior estimates could no longer be considered valid. By the filing date, gasoline and diesel demand had fallen approximately 70% and 40%, respectively, compared with prior sales levels. Management expected adverse effects on results, production, sales, margins, capital expenditure, and cash flows; the ultimate impact was not quantifiable.
- Capital plans: The pre-pandemic plan contemplated crude-oil production and declining natural-gas production. The filing’s wording gives a 2020 capital-expenditure estimate of “2.8 million” without a clear unit; it also says the estimate is no longer valid under the changed conditions. No updated quantitative guidance is provided.
- Argentina exposure: The peso depreciated about 59% against the U.S. dollar during 2019, while consumer and wholesale prices rose 53.8% and 58.5%. Foreign-exchange controls, export-duty changes, price controls, tariff freezes, public-debt restructuring, and state intervention may affect operations, cash repatriation, costs, and financing. The government’s emergency powers were extended through 2020.
- Prices, gas market, and government collections: Domestic fuel prices may not keep pace with international prices or cost increases. Natural-gas oversupply led to lower prices and suspended or delayed drilling in some areas. The company reported material receivables from government programs, including Ps. 26.2 billion related to a natural-gas stimulus program and Ps. 7.6 billion for exchange-rate-related gas payments; some scheduled payments were delayed or not received by the filing date.
- Debt and liquidity: Gross loans were Ps. 526,760 million, with 20% current; 92% was denominated in U.S. dollars. The company reported compliance with debt covenants at December 31, 2019, but warned that deteriorating conditions could constrain additional borrowing and refinancing. Moody’s downgraded YPF’s ratings in April 2020, with negative outlook. The filing lists contractual obligations of US$22.342 billion, including debt, leases, purchases, and other liabilities.
- Legal and environmental exposure: The Maxus Liquidating Trust lawsuit alleges damages of up to US$14 billion; the case remained active, and the company said the outcome could materially adversely affect its financial condition and results. The filing separately reports US$755 million of provisions for contingent liabilities, without implying that this covers the claimed amount. Other labor, tax, commercial, and environmental proceedings may result in losses exceeding recorded accruals.
- Operations and reserves: Mature fields create decline risk, while Vaca Muerta development depends on prices, financing, partners, infrastructure, and regulatory conditions. A 2019 well-control incident was contained; a prior Bandurria Sur blowout remediation was ongoing. Reserves are estimates sensitive to prices, costs, and assumptions; the filing estimates proved reserves could fall about 9% under a combined price-and-cost sensitivity scenario.
- Dividends: YPF paid Ps. 5.85 per share/ADS in July 2019. A proposed Ps. 3.7 billion reserve for future dividends was subject to shareholder consideration in 2020. The filing states that the 2020 loss outlook and oil-market conditions could prevent a dividend payment.
- Audit and controls: Deloitte issued an unqualified opinion on the IFRS financial statements and concluded internal control over financial reporting was effective. The auditor highlighted the impairment assessment for the Gas—Neuquina Basin CGU as a critical audit matter.
Most important facts for investors to verify
- Reconcile the Ps. 41.4 billion impairment, its assumptions, and the sensitivity of the Gas—Neuquina Basin valuation to lower prices and higher costs.
- Check the latest operating cash flow, capital spending, liquidity, debt maturities, covenant headroom, and ability to refinance U.S.-dollar debt under subsequent conditions.
- Confirm collection status and recoverability of government-related receivables and stimulus-program payments, including amounts overdue or subject to dispute.
- Track actual 2020 production, sales, margins, and updated capital plans; the annual plan predates COVID-19 and the filing provides no clear updated quantitative guidance.
- Monitor developments in Argentine exchange controls, fuel and gas pricing, export duties, tariffs, and sovereign-debt restructuring.
- Review the status and potential financial exposure of the Maxus litigation, environmental matters, and other material contingencies; distinguish asserted claims from recorded provisions.
- Validate proved-reserve additions, replacement rates, and reserve economics against realized prices, investment levels, and independent audit coverage.