UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of November, 2020

Commission File Number: 001-12102

 

 

YPF Sociedad Anónima

(Exact name of registrant as specified in its charter)

 

 

Macacha Güemes 515

C1106BKK Buenos Aires, Argentina

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐            No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐            No  ☒

 

 

 

YPF SOCIEDAD ANONIMA

CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020

AND COMPARATIVE INFORMATION (UNAUDITED)

 

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

CONTENT

 

Note		Description		Page
		Glossary of terms		1
		Legal Information		2
		Condensed interim consolidated statements of financial position		3
		Condensed interim consolidated statements of comprehensive income		4
		Condensed interim consolidated statements of changes in shareholders’ equity		5
		Condensed interim consolidated statements of cash flow		7
		Notes to the condensed interim consolidated financial statements:		8
1		General information, structure and organization of the business of the Group			8
2		Basis of preparation of the condensed interim consolidated financial statements			9
3		Seasonality of operations			16
4		Acquisitions and dispositions			16
5		Financial risk management			17
6		Segment information			19
7		Financial instruments by category			21
8		Intangible assets			22
9		Property, plant and equipment			23
10		Right-of-use assets			26
11		Investments in associates and joint ventures			27
12		Inventories			31
13		Other receivables			31
14		Trade receivables			31
15		Cash and cash equivalents			32
16		Provisions			32
17		Income Tax			33
18		Taxes payable			34
19		Salaries and social security			34
20		Lease liabilities			35
21		Loans			35
22		Other liabilities			37
23		Accounts payable			37
24		Revenues			37
25		Costs			39
26		Expenses by nature			40
27		Other net operating results			41
28		Net financial results			41
29		Investments in joint operations			41
30		Shareholders’ equity			42
31		Earnings per share			42
32		Issues related to Maxus Entities			43
33		Contingent assets and contingent liabilities			43
34		Contractual commitments			45
35		Main regulations and others			46
36		Balances and transactions with related parties			52
37		Employee benefit plans and similar obligations			54
38		Assets and liabilities in currencies other than the Peso			55
39		Subsequent events			56

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

GLOSSARY OF TERMS

 

Term		Definition
ADR		American Depositary Receipt
ADS		American Depositary Share
AESA		Subsidiary A-Evangelista S.A.
AFIP		Argentine Tax Authority
ANSES		National Administration of Social Security
ASC		Accounting Standards Codification
Associate		Company over which YPF has significant influence as provided for in IAS 28
BCRA		Central Bank of the Argentine Republic
BNA		Banco de la Nación Argentina
BO		Official Gazette of the Argentine Republic
BONAR		Argentine Treasury Bonds
CAMMESA		Compañía Administradora del Mercado Mayorista Eléctrico S.A.
CDS		Associate Central Dock Sud S.A.
CGU		Cash-Generating Units
CIMSA		Subsidiary Compañía de Inversiones Mineras S.A.
CNDC		Argentine Antitrust Authority
CNV		Argentine Securities Commission
CPI		Consumer Price Index
CSJN		Argentine Supreme Court
CT Barragán		Joint venture CT Barragán S.A.
DNU		Need and Urgency Decree
DOP		Deliver or pay
Eleran		Subsidiary Eleran Inversiones 2011 S.A.U.
ENARGAS		Argentine National Gas Regulatory Authority
FACPCE		Argentine Federation of Professional Councils in Economic Sciences
FASB		Financial Accounting Standards Board
FOB		Free on Board
Group		YPF and its subsidiaries
GPA		Associate Gasoducto del Pacífico (Argentina) S.A.
IAS		International Accounting Standard
IASB		International Accounting Standards Board
IDS		Associate Inversora Dock Sud S.A.
IEASA (former ENARSA)		Integración Energética Argentina S.A. (former Energía Argentina S.A.)
IFRIC		International Financial Reporting Interpretations Committee
IFRS		International Financial Reporting Standard
IIBB		Turnover tax
INDEC		National Institute of Statistics and Census
IWPI		Internal Wholesale Price Index
Joint venture		Company jointly owned by YPF as provided for in IFRS 11
JO		Joint operation
LGS		Argentine General Corporations Law No. 19,550 (T.O. 1984), as amended
LNG		Liquified natural gas
LPG		Liquefied Petroleum Gas
MEGA		Joint Venture Company Mega S.A.
MEGSA		Mercado Electrónico del Gas S.A.
Metroenergía		Subsidiary Metroenergía S.A.
Metrogas		Subsidiary Metrogas S.A.
MINEM		Former Ministry of Energy and Mining (Ministerio de Energía y Minería)
MMBtu		Million British thermal units
NO		Negotiable Obligations
Oiltanking		Associate Oiltanking Ebytem S.A.
Oldelval		Associate Oleoductos del Valle S.A.
OLCLP		Joint Venture Oleoducto Loma Campana – Lago Pellegrini S.A.
OPESSA		Subsidiary Operadora de Estaciones de Servicios S.A.
OTA		Associate Oleoducto Trasandino (Argentina) S.A.
OTC		Associate Oleoducto Trasandino (Chile) S.A.
PEN		National Executive Branch
Peso		Argentine Peso
Profertil		Joint Venture Profertil S.A.
Refinor		Joint Venture Refinería del Norte S.A.
RTI		Integral Tariff Review
SE		Secretariat of Energy
SEC		U.S. Securities and Exchange Commission
SGE		Government Secretariat of Energy
Subsidiary		Company controlled by YPF in accordance with the provisions of IFRS 10
Termap		Associate Terminales Marítimas Patagónicas S.A.
TSEP		Transportation system entry point
UHaF		Under-Secretariat of Hydrocarbons and Fuels
UNG		Unaccounted Natural Gas
US$		U.S. dollar
US$/Bbl		U.S. dollar per barrel
VAT		Value Added Tax
Y-GEN I		Joint venture Y-GEN Eléctrica S.A.U.
Y-GEN II		Joint venture Y-GEN Eléctrica II S.A.U.
YPF Brasil		Subsidiary YPF Brasil Comercio Derivado de Petróleo Ltda.
YPF Chile		Subsidiary YPF Chile S.A.
YPF EE		Joint venture YPF Energía Eléctrica S.A.
YPF Gas		Associate YPF Gas S.A.
YPF Holdings		Subsidiary YPF Holdings, Inc.
YPF International		Subsidiary YPF International S.A.
YPF or the Company		YPF Sociedad Anónima
YPF Ventures		Subsidiary YPF Ventures S.A.U.
YTEC		Subsidiary YPF Tecnología S.A.
WEM		Wholesale Electricity Market

 

1

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

 

LEGAL INFORMATION

Legal address

Macacha Güemes 515 – Ciudad Autónoma de Buenos Aires, Argentina

Fiscal year number 44

Beginning on January 1, 2020

Principal business of the Company

The Company’s purpose shall be to perform, on its own, through third parties or in association with third parties, the study, exploration, development and production of oil, natural gas and other minerals and refining, marketing and distribution of oil and petroleum products and direct and indirect petroleum derivatives, including petrochemicals, chemicals, including those derived from hydrocarbons, and non-fossil fuels, biofuels and their components, as well as production of electric power from hydrocarbons, through which it may manufacture, use, purchase, sell, exchange, import or export them. It shall also be the Company’s purpose to render, directly, through a subsidiary or in association with third parties, telecommunications services in all forms and modalities authorized by the legislation in force after applying for the relevant licenses as required by the regulatory framework, as well as the production, industrialization, processing, commercialization, conditioning, transportation and stockpiling of grains and products derived from grains, as well as any other activity complementary to its industrial and commercial business or any activity which may be necessary to attain its objective. In order to fulfill these objectives, the Company may set up, become associated with or have an interest in any public or private entity domiciled in Argentina or abroad, within the limits set forth in the Bylaws.

Filing with the Public Registry

Bylaws filed on February 5, 1991 under No. 404, Book 108, Volume “A”, Sociedades Anónimas, with the Public Registry of Buenos Aires City, in charge of the Argentine Registrar of Companies (Inspección General de Justicia); and Bylaws in substitution of previous Bylaws, filed on June 15, 1993, under No. 5109, Book 113, Volume “A”, Sociedades Anónimas, with the above mentioned Registry.

Duration of the Company

Through June 15, 2093.

Last amendment to the Bylaws

April 29, 2016 registered with the Argentine Registrar of Companies (Inspección General de Justicia) on December 21, 2016 under No. 25,244, Book 82 of Corporations.

Capital structure

393,312,793 shares of common stock, Pesos 10 par value and 1 vote per share.

Subscribed, paid-in and authorized for stock exchange listing (in Pesos)

3,933,127,930

GUILLERMO EMILIO NIELSEN

President                    

 

2

English translation of the financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019 (UNAUDITED) (Amounts expressed in millions of Pesos)

 

						September 30,				December 31,
		Notes				2020				2019
ASSETS
Noncurrent Assets
Intangible assets			8				44,228				37,179
Property, plant and equipment			9				1,198,888				1,069,011
Right-of-use assets			10				61,417				61,391
Investments in associates and joint ventures			11				92,149				67,590
Deferred income tax assets, net			17				2,676				1,583
Other receivables			13				12,764				11,789
Trade receivables			14				8,473				15,325
Total noncurrent assets							1,420,595				1,263,868
Current Assets
Inventories			12				104,272				80,479
Contract assets			24				426				203
Other receivables			13				29,670				36,192
Trade receivables			14				111,317				118,077
Investment in financial assets			7				16,765				8,370
Cash and cash equivalents			15				59,641				66,100
Total current assets							322,091				309,421
TOTAL ASSETS							1,742,686				1,573,289
SHAREHOLDERS’ EQUITY
Shareholders’ contributions							10,767				10,572
Reserves, other comprehensive income and retained earnings							562,055				531,977
Shareholders’ equity attributable to shareholders of the parent company							572,822				542,549
Non-controlling interest							6,640				5,550
TOTAL SHAREHOLDERS’ EQUITY							579,462				548,099
LIABILITIES
Noncurrent Liabilities
Provisions			16				191,600				144,768
Deferred income tax liabilities, net			17				105,765				97,231
Contract liabilities			24				—				294
Income tax liability			17				2,682				3,387
Taxes payable			18				20				1,428
Salaries and social security			19				2,923				—
Lease liabilities			20				40,741				40,391
Loans			21				480,407				419,651
Other liabilities			22				819				703
Accounts payable			23				1,832				2,465
Total noncurrent liabilities							826,789				710,318
Current Liabilities
Provisions			16				6,587				5,460
Contract liabilities			24				8,746				7,404
Income tax liability			17				1,048				1,964
Taxes payable			18				16,008				11,437
Salaries and social security			19				12,421				10,204
Lease liabilities			20				26,853				21,389
Loans			21				143,986				107,109
Other liabilities			22				1,548				1,310
Accounts payable			23				119,238				148,595
Total current liabilities							336,435				314,872
TOTAL LIABILITIES							1,163,224				1,025,190
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY							1,742,686				1,573,289

Accompanying notes are an integral part of these condensed interim consolidated financial statements.

GUILLERMO EMILIO NIELSEN

President                  

 

3

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE-MONTH AND THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) (Amounts expressed in millions of Pesos, except per share information, expressed in Pesos)

 

						For the nine-month period ended September 30,								For the three-month period ended September 30,
		Notes				2020				2019				2020				2019
Net income
Revenues			24				481,713				471,685				173,485				180,449
Costs			25				(455,089	)			(388,564	)			(162,353	)			(149,599	)
Gross profit							26,624				83,121				11,132				30,850
Selling expenses			26				(53,402	)			(32,935	)			(16,358	)			(11,898	)
Administrative expenses			26				(23,276	)			(16,577	)			(9,144	)			(6,053	)
Exploration expenses			26				(5,074	)			(4,493	)			(4,218	)			(1,916	)
Impairment of property, plant and equipment and intangible assets			8-9				(58,834	)			(41,429	)			(1,405	)			(41,429	)
Other net operating results			27				11,827				(513	)			(3,496	)			(179	)
Operating (loss) / profit							(102,135	)			(12,826	)			(23,489	)			(30,625	)
Income from equity interests in associates and joint ventures			11				8,250				3,218				4,530				(296	)
Financial income			28				73,874				85,922				22,251				66,120
Financial loss			28				(101,200	)			(64,630	)			(33,386	)			(33,967	)
Other financial results			28				14,467				(284	)			3,685				(4,726	)
Net financial results			28				(12,859	)			21,008				(7,450	)			27,427
Net (loss) / profit before income tax							(106,744	)			11,400				(26,409	)			(3,494	)
Income tax			17				(7,285	)			(34,423	)			(8,923	)			(9,049	)
Net loss for the period							(114,029	)			(23,023	)			(35,332	)			(12,543	)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Translation differences from subsidiaries, associates and joint ventures							(6,279	)			(7,311	)			(2,189	)			(5,751	)
Result from net monetary position in subsidiaries, associates and joint ventures (1)							6,242				5,630				2,480				1,287
Items that may not be reclassified subsequently to profit or loss:
Translation differences from YPF							145,234				192,799				45,888				144,672
Other comprehensive income / (loss) for the period							145,197				191,118				46,179				140,208
Total comprehensive income / (loss) for the period							31,168				168,095				10,847				127,665
Net profit / (loss) for the period attributable to:
Shareholders of the parent company							(113,884	)			(23,595	)			(35,466	)			(12,726	)
Non-controlling interest							(145	)			572				134				183
Other comprehensive income for the period attributable to:
Shareholders of the parent company							143,962				189,943				45,685				139,876
Non-controlling interest							1,235				1,175				494				332
Total comprehensive income / (loss) for the period attributable to:
Shareholders of the parent company							30,078				166,348				10,219				127,150
Non-controlling interest							1,090				1,747				628				515
Earnings per share attributable to shareholders of the parent company:
Basic and diluted			31				(290.13	)			(60.15	)			(90.29	)			(32.44	)

 

(1)	Result associated to subsidiaries, associates and joint ventures with the Peso as functional currency. See accounting policy in Note 2.b.1 to the annual consolidated financial statements.

Accompanying notes are an integral part of these condensed interim consolidated financial statements

GUILLERMO EMILIO NIELSEN

President                  

 

4

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) (Amounts expressed in millions of Pesos)

 

		For the nine-month period ended September 30, 2020
		Shareholders’ contributions
		Subscribed capital				Adjustment to contributions				Treasury shares				Adjustment to treasury shares				Share-based benefit plans				Acquisition cost of treasury shares				Share trading premium				Issuance premiums				Total
Balance at the beginning of the fiscal year			3,924				6,085				9				16				117				177				(396	)			640				10,572
Accrual of share-based benefit plans(4)			—				—				—				—				368				—				—				—				368
Settlement of share-based benefit plans(2)			4				7				(4	)			(7	)			(670	)			714				(217	)			—				(173	)
As decided by the Shareholders’ Meeting on April 30, 2020(3)			—				—				—				—				—				—				—				—				—
Other comprehensive income			—				—				—				—				—				—				—				—				—
Net loss			—				—				—				—				—				—				—				—				—
Balance at the end of the period			3,928				6,092				5				9				(185	)			891				(613	)			640				10,767
		Reserves																								Equity attributable to
		Legal				Future dividends				Investments				Purchase of treasury shares				Other comprehensive income				Retained earnings				Shareholders of the parent company				Non-controlling interest				Total shareholders’ equity
Balance at the beginning of the fiscal year			2,007				2,500				44,255				500				516,786				(34,071	)			542,549				5,550				548,099
Accrual of share-based benefit plans(4)			—				—				—				—				—				—				368				—				368
Settlement of share-based benefit plans (2)			—				—				—				—				—				—				(173	)			—				(173	)
As decided by the Shareholders’ Meeting on April 30, 2020(3)			—				1,200				(35,321	)			50				—				34,071				—				—				—
Other comprehensive income			—				—				—				—				143,962				—				143,962				1,235				145,197
Net loss			—				—				—				—				—				(113,884	)			(113,884	)			(145	)			(114,029	)
Balance at the end of the period			2,007				3,700				8,934				550				660,748	(1)			(113,884	)			572,822				6,640				579,462

 

(1)

Includes 673,379 corresponding to the effect of the translation of the financial statements of YPF and, (35,970) corresponding to the effect of the translation of the financial statements of investments in subsidiaries, associates and joint ventures with functional currencies other than the U.S. dollar and 23,339 corresponding to the recognition of the result for the net monetary position of subsidiaries, associates and joint ventures with the Peso as functional currency, as detailed in Note 2.b.1. to the annual consolidated financial statements.

(2)	Net of employees’ income tax withholdings related to the share-based benefit plans.

(3)	See Note 30.

(4)	See Note 37.

GUILLERMO EMILIO NIELSEN

President                  

 

5

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) (Cont.) (Amounts expressed in millions of Pesos)

 

		For the nine-month period ended September 30, 2019
		Shareholders’ contributions
		Subscribed capital				Adjustment to contributions				Treasury shares				Adjustment to treasury shares				Share-based benefit plans				Acquisition cost of treasury shares				Share trading premium				Issuance premiums				Total
Balance at the beginning of the fiscal year			3,923				6,084				10				17				115				11				(282	)			640				10,518
Accrual of share-based benefit plans(4)			—				—				—				—				371				—				—				—				371
Repurchase of treasury shares			(4	)			(6	)			4				6				—				(280	)			—				—				(280	)
Settlement of share-based benefit plans(2)			5				7				(5	)			(7	)			(491	)			446				(114	)			—				(159	)
As decided by the Shareholders’ Meeting on April 26, 2019(3)			—				—				—				—				—				—				—				—				—
As decided by the Board of Directors on June 27, 2019(3)			—				—				—				—				—				—				—				—				—
Other comprehensive income			—				—				—				—				—				—				—				—				—
Net income / (loss)			—				—				—				—				—				—				—				—				—
Balance at the end of the period			3,924				6,085				9				16				(5	)			177				(396	)			640				10,450
		Reserves																								Equity attributable to
		Legal				Future dividends				Investments				Purchase of treasury shares				Other comprehensive income				Retained earnings				Shareholders of the parent company				Non-controlling interest				Total shareholders’ equity
Balance at the beginning of the fiscal year			2,007				—				11,020				220				297,120				38,315				359,200				3,157				362,357
Accrual of share-based benefit plans(4)			—				—				—				—				—				—				371				—				371
Repurchase of treasury shares			—				—				—				—				—				—				(280	)			—				(280	)
Settlement of share-based benefit plans (2)			—				—				—				—				—				—				(159	)			—				(159	)
As decided by the Shareholders’ Meeting on April 26, 2019(3)			—				4,800				33,235				280				—				(38,315	)			—				—				—
As decided by the Board of Directors on June 27, 2019(3)			—				(2,300	)			—				—				—				—				(2,300	)			—				(2,300	)
Other comprehensive income			—				—				—				—				189,943				—				189,943				1,175				191,118
Net income / (loss)			—				—				—				—				—				(23,595	)			(23,595	)			572				(23,023	)
Balance at the end of the period			2,007				2,500				44,255				500				487,063	(1)			(23,595	)			523,180				4,904				528,084

 

(1)

Includes 500,519 corresponding to the effect of the translation of the financial statements of YPF and, (28,991) corresponding to the effect of the translation of the financial statements of investments in subsidiaries, associates and joint ventures with functional currencies other than the U.S. dollar and 15,535 corresponding to the recognition of the result for the net monetary position of subsidiaries, associates and joint ventures with the Peso as functional currency, as detailed in Note 2.b.1. to the annual consolidated financial statements.

(2)	Net of employees’ income tax withholdings related to the share-based benefit plans.

(3)	See Note 29 to the annual consolidated financial statements.

(4)	See Note 37.

Accompanying notes are an integral part of these condensed interim consolidated financial statements.

GUILLERMO EMILIO NIELSEN

President                  

 

6

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) (Amounts expressed in millions of Pesos)

 

		For the nine-month period ended September 30,
		2020				2019
Operating activities:
Net loss			(114,029	)			(23,023	)
Adjustments to reconcile net loss to cash flows provided by operating activities:
Income from equity interest in associates and joint ventures			(8,250	)			(3,218	)
Depreciation of property, plant and equipment			133,947				99,220
Depreciation of right-of-use assets			13,382				7,202
Amortization of intangible assets			2,409				1,665
Retirement of property, plant and equipment, intangible assets and consumption of materials			17,422				14,450
Charge on income tax			7,285				34,423
Net increase in provisions			23,694				1,091
Impairment of property, plant and equipment and intangible assets			58,834				41,429
Exchange differences, interest and other			8,930				(13,560	)
Share-based benefit plan			368				371
Accrued insurance			(3,189	)			(249	)
Result from assignment of interest in areas			(12,233	)			(965	)
Result from debt exchange			2,097				—
Result from financial instruments exchange			(1,330	)			—
Changes in assets and liabilities:
Trade receivables			18,510				(15,130	)
Other receivables			9,147				(9,789	)
Inventories			(929	)			(10,302	)
Accounts payable			(25,353	)			22,255
Taxes payables			2,042				2,288
Salaries and social security			5,270				2,167
Other liabilities			212				699
Decrease in provisions included in liabilities due to payment/use			(1,919	)			(3,417	)
Contract assets			(256	)			175
Contract liabilities			1,922				656
Dividends received			2,494				811
Proceeds from collection of business interruption insurance			3,034				758
Income tax payments			(2,164	)			(6,314	)
Net cash flows from operating activities(1)(2)			141,347				143,693
Investing activities:(3)
Acquisition of property, plant and equipment and intangible assets			(81,880	)			(114,864	)
Contributions and acquisitions of interests in associates and joint ventures			—				(4,731	)
Proceeds from sales of financial assets			30,885				957
Payment from purchase of financial assets			(28,841	)			—
Interests received from financial assets			15				452
Proceeds from assignment of interest in areas			13,867				319
Net cash flows used in investing activities			(65,954	)			(117,867	)
Financing activities:(3)
Payments of loans			(129,668	)			(70,061	)
Payments of interest			(47,941	)			(29,251	)
Proceeds from loans			102,684				70,916
Repurchase of treasury shares			—				(280	)
Payments of leases			(15,470	)			(9,961	)
Payment of interest in relation to income tax			(608	)			(250	)
Dividends paid			—				(2,300	)
Net cash flows used in financing activities			(91,003	)			(41,187	)
Translation differences of cash and cash equivalents			9,151				21,662
Net (decrease) / increase in cash and cash equivalents			(6,459	)			6,301
Cash and cash equivalents at the beginning of the fiscal year			66,100				46,028
Cash and cash equivalents at the end of period			59,641				52,329
Net (decrease) / increase in cash and cash equivalents			(6,459	)			6,301

 

(1)	Does not include exchange differences generated by cash and cash equivalents, which are disclosed separately in this statement.

(2)	Includes 8,537 and 6,737 for the nine-month period ended September 30, 2020 and 2019, respectively, for payment of short-term leases and of the variable charge of leases related to the underlying asset return/use.

(3)	The main investing and financing transactions that have not affected cash and cash equivalents correspond to:

 

		For the nine-month period ended September 30,
		2020				2019
Unpaid acquisitions of property, plant and equipment			8,489				13,626
Hydrocarbon wells abandonment obligation costs’ recalculation			—				(1,984	)
Additions of right-of-use assets			4,245				25,091
Capitalization of amortization of right-of-use assets			2,830				1,246
Capitalization of financial accretion for lease liabilities			707				125
Debt capitalization of joint ventures			—				738

Accompanying notes are an integral part of these condensed interim consolidated financial statements.

GUILLERMO EMILIO NIELSEN

President                  

 

 

7

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

(Amounts expressed in millions of Pesos, except for shares and per share amounts expressed in Pesos, or as otherwise indicated)

 

1. GENERAL INFORMATION, STRUCTURE AND ORGANIZATION OF THE BUSINESS OF THE GROUP

General information

YPF Sociedad Anónima is a stock corporation (sociedad anónima) incorporated under the laws of the Argentine Republic, with a registered office at Macacha Güemes 515, in the City of Buenos Aires.

YPF and its subsidiaries form the leading energy group in Argentina, which operates a fully integrated oil and gas chain with leading market positions across the domestic Upstream and Downstream segments.

Structure and organization of the economic Group

The following chart shows the organizational structure, including the main companies of the Group, as of September 30, 2020:

 

 

(1)	Held directly and indirectly.

(2)	See Note 3 to the annual consolidated financial statements.

(3)	See Note 34.h to the annual consolidated financial statements.

 

8

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

1. GENERAL INFORMATION, STRUCTURE AND ORGANIZATION OF THE BUSINESS OF THE GROUP (Cont.)

 

Organization of the business

As of September 30, 2020, the Group carries out its operations in accordance with the following structure:

 

•

Upstream;

 

•

Gas and Power;

 

•

Downstream;

 

•

Central administration and others, which covers the remaining activities not included in the previous categories.

Activities covered by each business segment are detailed in Note 6.

Almost all operations, properties and clients are located in Argentina. However, the Group also holds participating interests in exploratory areas in Bolivia and production areas in Chile. The Group also sells lubricants and derivatives in Brazil and Chile.

2. BASIS OF PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2.a) Basis of preparation

The condensed interim consolidated financial statements of YPF for the nine-month period ended September 30, 2020 are presented in accordance with IAS 34 “Interim Financial Reporting”. These condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements of the Group as of December 31, 2019 prepared in accordance with IFRS issued by the IASB and the interpretations issued by the IFRIC.

Moreover, some additional information required by the LGS and/or CNV’s regulations have been included.

These condensed interim consolidated financial statements were approved by the Board of Directors’ meeting and authorized to be issued on November 10, 2020.

These condensed interim consolidated financial statements corresponding to the nine-month period ended on September 30, 2020 are unaudited. The Company´s Management believes they have included all necessary adjustments to reasonably present the results of each period on a basis consistent with the audited annual consolidated financial statements. Loss for the nine-month period ended on September 30, 2020 does not necessarily reflect the proportion of the Group’s full-year loss.

2.b) Significant Accounting Policies

The most significant accounting policies are described in Note 2.b to the annual consolidated financial statements.

The accounting policies adopted in the preparation of these condensed interim consolidated financial statements are consistent with those used in the preparation of the annual consolidated financial statements, except for the valuation policy for income tax detailed in Note 17.

Functional and presentation currency

As mentioned in Note 2.b.1. to the annual consolidated financial statements, YPF has defined the U.S. dollar as its functional currency. Additionally, according to CNV Resolution No. 562, YPF must present its financial statements in Pesos.

 

9

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

2. BASIS OF PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Effects of the translation of investments in subsidiaries, associates and joint ventures with a functional currency corresponding to a hyperinflationary economy

The results and financial position of subsidiaries with the Peso as functional currency were translated into U.S dollars by the following procedures: all amounts (i.e., assets, liabilities, stockholders’ equity items, expenditures and revenues) were translated at the exchange rate effective at the closing date of the financial statements, except for comparative amounts, which were presented as current amounts in the financial statements of the previous fiscal year (i.e., these amounts were not adjusted to reflect subsequent variations in price levels or exchange rates). Thus, the effect of the restatement of comparative amounts was recognized in other comprehensive income.

These criteria were also implemented by the Group for its investments in associates and joint ventures.

Adoption of new standards and interpretations effective as of January 1, 2020

The Group has adopted all new and revised standards and interpretations, issued by the IASB, relevant to its operations which are of mandatory and effective application as of September 30, 2020, as specified in Note 2.b.26 to the annual consolidated financial statements.

Standards and interpretations issued as from January 1, 2020 by the IASB whose implementation is not mandatory as of the closing of these condensed interim consolidated financial statements and, therefore, have not been adopted by the Group

 

•

Amendments to IAS 1 – Classification of liabilities

In January 2020, the IASB issued amendments to IAS 1 in relation to the classification of liabilities into current and non-current, which are retroactively applicable for fiscal years beginning on January 1, 2022, , included, (date which was extended to January 1, 2023) and allow for their earlier application.

The amendments clarify that liabilities classification as current or non-current:

 

–

Must be based on existing rights at the end of the reporting period to defer settlement by at least twelve months and make explicit that only rights in place “at the end of the reporting period” should affect the classification of a liability.

 

–

Is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability.

It also clarifies that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

The Group does not expect that the implementation of these amendments will have a significant impact on its financial statements, though is currently evaluating the impact.

 

•

Amendments to IAS 16 – Proceeds before intended use

In May 2020, the IASB issued amendments that are applicable for fiscal years beginning on or after January 1, 2022, allowing their early application.

After the amendment to IAS 16, an entity may not deduct from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating. The proceeds from selling any such items, and the production cost of those items, will be recognized in the comprehensive income for the corresponding period. Entities shall disclose separetely the amounts of proceeds and costs, that relate to items that do not proceed from the entity’s ordinary activities.

The amendment also clarifies that an item of property, plant and equipment is in said preparation and testing process when assesing the technical and physical performance of the asset. Therefore, an asset may be able to operate in the manner intended by Management and consequently be subject to depreciation before it has reached the level of operating performance expected by Management.

According to the variables present at the end of the reporting period, the Group does not expect that the implementation of these amendments will have a significant impact on its financial statements.

 

10

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

2. BASIS OF PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

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Amendments to IAS 37 – Onerous Contracts

In May 2020, the IASB issued amendments that are applicable for fiscal years beginning on or after January 1, 2022, allowing their early application.

The amendment clarifies the meaning of “cost of fulfilling a contract” for the purpose of assessing whether the contract is onerous. The direct cost of fulfilling a contract consists of both, the incremental cost of fulfilling that contract (for example, direct labour and materials), as well as an allocation of other costs that relate directly to fulfilliment of contracts (for example, an allocation of the depreciation charge for an item of property, plant and equipment used to fulfill that contract).

The amendment also clarifies that an entity must recognize any impairment loss that has occurred in the assets used to fulfill the contract before recording an onerous loss and when determining such onerosity, the present obligation under an existing contract must be considered, and therofore, does not recognize future operating losses.

According to the variables present at the end of the reporting period, the Group does not expect that the implementation of these amendments will have a significant impact on its financial statements.

 

•

Amendments to IFRS 3 – Reference to the Conceptual Framework

In May 2020, the IASB issued amendments that are applicable for fiscal years beginning on or after January 1, 2022, allowing their early application.

After updating the reference that the Standard makes to the 2018 Conceptual Framework on the definition of the concepts of assets and liabilities in a business combination, its application could change which assets and liabilities that meet the requirements for recognition in a business combination. In some of these cases, the post-acquisition accounting required by other IFRS Standards could then lead to immediate derecognition of assets or liabilities recognised in a business combination, resulting in so called “Day 2 gains or losses” that do not depict an economic gain or loss.

To remedy this situation, the new exception in IFRS 3 for liabilities and contingent liabilities, specifies that, for some types of liabilities and contingent liabilities, an entity applying IFRS 3 should refer to IAS 37 “Provisions, contingent liabilities and contingent assets”, or IFRIC 21 “Levies”, instead of the 2018 Conceptual Framework. It has also been clarified that the acquirer must not recognize contingent assets on the acquisition date as defined in IAS 37.

The Group does not expect that the implementation of these amendments will have a significant impact on its financial statements.

 

•

Amendments to IFRS 16 –COVID-19 Related rent concessions

In May 2020, the IASB issued amendments that are applicable for fiscal years beginning on or after June 1, 2020, allowing their early application.

A lessee may elect to account for any change in lease payments as a consequence of the COVID-19 pandemic, arising from the rent concession the same way it would account for the change applying IFRS 16 if the change were not a lease modification.

This option applies only to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met:

(a) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

(b) any reduction in lease payments affects only payments originally due or before June 30, 2021 (for example, a rent concession would meet this condition if it results in reduced lease payments on or before June 30, 2021, and increased lease payments that extend beyond June 30, 2021); and

(c) there is no substantive change to other terms and conditions of the lease.

The Group does not expect that the implementation of these amendments will have a significant impact on its financial statements.

 

11

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

2. BASIS OF PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

•

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 17 and IFRS 16 – Interest Rate Benchmark Reform Phase 2.

On August 2020, the IASB issued amendments applicable to fiscal years beginning on or after January 1, 2021, allowing for their early application.

The purpose of these amendments is to provide entities with practical solutions to deal with the effects of the transition to alternative benchmark interest rates, when they generate changes in contractual cash flows or in the hedging relationships.

The amendments issued take place in the following key areas:

-Financial assets, financial liabilities and lease liabilities: a practical solution was issued for financial assets and liabilities measured at amortized cost which are modified as a direct consequence of the interbank benchmark interest rate reform. As a practical solution, the IASB establishes that these amendments are not to be treated as specified under IFRS 9 for changes to contractual cash flows, but rather as established under such standard for assets and liabilities at variable rate. This accounting treatment comprises the prospective revaluation of these financial instruments at the revised effective interest rate. This only applies when the change is a direct consequence of the rate reform and the basis used to determine the cash flows is economically equivalent to the basis immediately preceding rate replacement. In the case of lease liabilities revalued based on an interest rate that is being replaced with an alternative interest rate, a similar treatment is proposed.

-Hedges: The IASB issued further practical solutions in addition to those issued in Phase 1, seeking to prevent the benchmark rate reform from discontinuing hedge accounting or the designation of a new relationship of this type. They are the hedging relationships (and related documentation) must be amended to reflect the effects on i) the hedged item, ii) the hedging instrument and iii) the hedged risk. Any valuation adjustments resulting from the amendments are recognized as part of the ineffectiveness.

-Disclosure: The information disclosed must allow the user to understand the nature and extent of the risks to which the entity is exposed and how those risks generated by the interbank benchmark rate reform will be managed. The progress and management of the transition to alternative benchmark rates is also required to be informed.

The Group is evaluating the impact the application of these modifications may have on its financial statements.

 

•

Anual improvements to IFRS – Standards 2018-2020

In May 2020, the IASB issued the 2018-2020 cycle of annual improvements that are applicable for fiscal years beginning on or after January 1, 2022, allowing their early application.

 

12

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

2. BASIS OF PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

A summary of the main modified standards and their purpose follows:

 

Standard		Amended Subject		Detail
IFRS 1 “First-time adoption of IFRS”		Subsidiary as a First-time IFRS adopter		When a subsidiary becomes a first-time adopter later than its parent company, it may elect to measure its assets and liabilities, according to how their parent measured them in their consolidated financial statements, based on the parent´s date of transition to IFRSs (without considering consolidation adjustments and for the purposes of the business combination for which the parent company acquired the subsidiary). After the amendment, this exception is extended to accumulated translation differences.   A similar election is available to an associate or joint venture.
IFRS 9 “Financial Instruments”		Fees in the “10 per cent” Test for Derecognition of financial liabilities		An entity must derecognise the original financial liability and recognise a new financial liability when, among other requirements, there is a substantial modification of the terms of an existing financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms using the original effective interest rate is at least 10 per cent different from the discounted present value remaining cash flows of the original financial liability, including any fees paid net of any fees received in the 10 per cent test. The amendment clarifies that when determining this value, only the items paid or received between the borrower and the lender are included, including those paid or received by one or the other on behalf of the other.
IFRS 16 “Leases”		Ilustrative examples- Lease incentives		It is removed from Illustrative Example 13, reimbursement relating to leasehold improvements.
IAS 41 “Agriculture”		Taxation in fair value measurements		Paragraph 22 was amended to remove the requirement to exclude cash flows for taxation when measuring fair value, as to aline the requirements in IAS 41 on fair value measurements with those in IFRS 13 “Fair Value Measurement”.

The Group does not expect that the implementation of these amendments will have a material impact on its financial statements.

Additionally, amendments have been issued to IFRS 4 and IFRS 17 “Insurance contracts”, which were not included as they are not applicable to the Group since it does not carry out related activities.

2.c) Accounting Estimates and Judgments

The preparation of financial statements at a certain date requires Management to make estimates and assessments affecting the amount of assets and liabilities recorded, contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the period. Actual future results might differ from the estimates and assessments made as of the date of preparation of these condensed interim consolidated financial statements.

In preparing these condensed interim consolidated financial statements, significant estimates and judgments were made by Management in applying the Group’s accounting policies and the main sources of uncertainty were consistent with those applied by the Group in the preparation of the annual consolidated financial statements, which are disclosed in Notes 2.b and 2.c to the annual consolidated financial statements, about accounting estimates and judgments.

 

13

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

2. BASIS OF PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

Besides, the Company’s Management has considered the COVID-19 impact and the current economic context based on the preparation of these condensed interim consolidated financial statements and still considers appropriate to adopt the going-concern accounting principle for their presentation and valuation.

Considerations concerning COVID-19 (coronavirus) and the current economic environment

Since the beginning of 2020, a virus outbreak has taken place, causing potentially deadly respiratory infections (COVID-19) and adversely affecting the demand for refined products in geographical areas where the most relevant measures were implemented to control the virus’ spread. Particularly, since March, the lower global demand for refined products and the uncertainty in the supply of crude oil have caused an abnormally high volatility in this commodity.

On March 12, 2020, Decree No. 260/2020 was published in the BO, which extended the public health emergency established by Law No. 27,541 due to the pandemic, for a period of one year.

Also, since March 20, 2020, the Argentine Government adopted certain measures to protect the general population and fight the disease. These measures imposed a general restriction on economic activity, with some exceptions, which included, among other actions, price controls, the prohibition of dismissals without cause as well as for reasons of lack or reduction of activity and force majeure, general restriction to the free circulation during certain periods in Argentina, general travel restrictions, visas suspension, nation-wide lockdowns, closing of public and private institutions, sporting events suspension, restrictions to the operation of museums and tourist attractions and extension of holidays. These measures include several exceptions applicable to people engaged in activities and services declared as essential in the emergency. Among these exceptions, minimum work shifts are contemplated ensuring the operation and maintenance of oil and gas fields, oil and gas treatment and/or refining plants, transportation and distribution of electric energy, liquid fuels, oil and gas, fuel service stations and electric power generators.

Since the implementation of these measures, recurring sales of gasoline, diesel and jet fuel dropped significantly, reaching declines of 70%, 40% and 90%, respectively, as a daily average compared to the demand in the days prior to these measures. During the month of October, due to the gradual recovery of activity, these declines are within the 30%, 15% and 90%, respectively. Despite the recovery since certain flexibilization of the measures previously mentioned, current activity levels continue affecting the Group’s comprehensive results and cash flows. Consequently, the processing levels at the Group’s refineries are also adversely affected. The Group cannot assure the extent or duration of such conditions.

As mentioned above, the valuation of certain assets and liabilities is subject to a higher level of uncertainty, including those described below:

 

•

Review of impairment indicators of property, plant and equipment

As explained in Notes 2.b.8 and 2.b.9 to the annual consolidated financial statements, as a general criteria, the method used to estimate the recoverable amount of property, plant and equipment mainly consists of estimating the value-in-use based on the future expected cash flows arising from the use of such assets, discounted at a rate that reflects the weighted average cost of the capital employed.

Regarding interim periods, IAS 34 requires entities to apply the impairment testing. When an entity has previously recognized impairment losses, it is necessary to review the detailed calculations made at the end of the period if the indicators that gave rise to such losses continues to remain present. To such end, the entity shall revise the existence of significant indicators of impairment or reversals since the end of the last fiscal year and determine whether it has to proceed or not with such detailed testing.

The Group continuously monitors business perspectives in the market it operates. Specifically, in the domestic market of natural gas, as in 2019, an excess supply is observed with respect to the domestic demand at specific times of the year due to greater production in unconventional fields. This situation generated a reduction in natural gas sales price in the domestic market that deepened as of the second quarter of 2020, mainly due to lower sales prices to distributors (see Note 35.a) and lower prices obtained on gas’s biddings on power plants channel.

 

14

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

2. BASIS OF PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

As of June 30, 2020, based on the background and the method mentioned above, the Group recognized an impairment charge of property, plant and equipment, mainly for the CGU Gas – Neuquina Basin of 49,170 (36,877 net of the effect of income tax) and for the CGU Gas – Austral Basin of 8,126 (6,095 net of the effect of income tax), generated, mainly, by the expected fall in gas prices due to the situation the market is going through at global level, and also, to the specific dynamics mentioned above, at the domestic level. The discount rate after taxes used as of June 30, 2020 was 12.63% for 2020 and 2021 and 13.06% for 2022 and thereafter, being the recoverable value after taxes as of such date for the CGU Gas – Neuquina Basin and the CGU Gas – Austral Basin 107,911 and 7,835, respectively.

As of September 30, 2020, based on the fact that the critical assumptions used to estimate the value in use of the mentioned CGUs have not had significant changes, and considering the sensitivities run, the Group has not recognized additional charges for impairment or recovery of such impairments.

 

•

Impairment of financial assets measured at amortized cost

The Group applies the simplified approach to expected credit losses allowed under IFRS 9 for the trade receivables.

Considering the maximum exposure to financial credit risk based on counterparties’ concentration, receivables with the National Government, its direct agencies and companies with government participation account for approximately 34% (50,722), while the Group’s remaining debtors are diversified.

The current economic situation and future credit risk outlooks have been contemplated to review and update estimates of provisions. Even though they have not had a significant impact, the total economic impact of COVID-19 on expected credit losses is subject to significant uncertainty since the prospective information that is currently available is limited. The Group will continue thoroughly reviewing the assumptions used in such estimates.

 

•

Income tax

Under IAS 34, income tax expense is recognised in each interim period based on the best estimate of the effective income tax rate expected at the end of the fiscal year.

Considering the current economic context and future prospects, the Group has adjusted the projections used to estimate the effective tax rate.The Group has also reviewed the recoverability of tax losses carry-forwards, not having recorded impairment charges for the nine-month period ended on September 30, 2020.

 

•

Provisions assumptions for lawsuits and contingencies

The Group does not expect the current economic situation will significantly change the present value of the disbursements deemed to be required to settle the obligations related to existing provisions as of the date of issuance of these condensed interim consolidated financial statements. However, the Group will continue reviewing these assumptions.

 

•

Other accounting estimates and judgments

The rest of the accounting estimates and judgments disclosed in the annual consolidated financial statements are still applicable. No new significant accounting estimates or judgments have been identified.

 

15

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

2. BASIS OF PREPARATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

 

As of the date of these condensed interim consolidated financial statements, due to the uncertainties inherent to the scale and duration of these events, it is not reasonably possible to estimate the final negative impact this pandemic will have on the world’s economy and its financial markets, on Argentina’s economy, and consequently, on the Group’s comprehensive results, cash flows and financial position of the Group, nor its effect on access to debt markets, the contractual position with certain counterparties (including as a result of events of force majeure or other similar events under the Group’s contracts, see also Note 39), the Group’s capacity to meet its commitments and future asset impairments, among other issues.

2.d) Comparative information

Amounts and other information corresponding to the year ended on December 31, 2019 and to the nine-month period ended on September 30, 2019 are an integral part of these condensed interim consolidated financial statements and are intended to be read only in relation to these financial statements.

3. SEASONALITY OF OPERATIONS

Historically, the Group’s results have been subject to seasonal fluctuations throughout the year, particularly as a result of the increase in natural gas sales during the winter. After the devaluation of the Peso in 2002, and as a consequence of the natural gas price freeze imposed by the Argentine government until the last years, the use of natural gas has been diversified, generating an increase in demand throughout the entire year. However, recently, an excess of supply with respect to the domestic demand took place at specific times of the year. Consequently, the Group may be subject to seasonal fluctuations in its sales volumes and prices, which might adversely affect the level of production and sales of natural gas.

Besides, the current economic environment has been significantly affected by COVID-19, which will have a negative impact on the results of the Group’s operations, and that will be sensitive to the development of the pandemic and the measures adopted by the Argentine Government. See Note 2.c.

4. ACQUISITIONS AND DISPOSITIONS

 

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Bandurria Sur Area

As mentioned on Note 33.b to the annual consolidated financial statements, on January 2020, YPF was notified of the acquisition by Shell Argentina S.A. and Equinor Argentina AS (jointly, the “Consortium”) of the entire share package of Schlumberger Oilfield Eastern Ltd. (“SPM”), an affiliate of Schlumberger Argentina S.A. This assignment required payment by SPM of the outstanding price that amounted approximately to US$ 105 million, which has already been received by YPF. In consideration of the above, the Group recorded a profit of 6,356 included in “Other net operating results”.

On March 5, 2020, an agreement was executed, under which YPF assigned to Bandurria Sur Investments S.A. (“BSI”, formerly named SPM Argentina S.A.), an affiliate of Shell Argentina S.A. and Equinor Argentina AS (Argentina Branch), an 11% interest in the Bandurria Sur block. On April 29, 2020, Decree No. 512/2020 was issued, by which the Province of Neuquén approved the assignment in favor of BSI. On May 14, 2020, YPF and BSI entered into the final contracts for the joint exploitation of hydrocarbons in the Area, thereby complying with the precedent conditions for the entry into force of the agreement for the assignment of 11% of the unconventional exploitation concession of the Area to BSI. Consequently, YPF will continue to be the Operator of the Area, keeping a 40% interest in the concession, while BSI’s interest will be 60%. In consideration of the above, the Group recorded a profit of 4,420 included in “Other net operating results”.

 

16

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

4. ACQUISITIONS AND DISPOSITIONS (Cont.)

 

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CAN 100 exploration permit (offshore) –Block E-1 Reconversion

On April 16, 2020, having the conditions established under the assignment agreement been met, among them, the approval of the assignment pursuant to section 72 of the Hydrocarbons Law by the SE, which was granted through Resolution No. 55/2020, the closure of the transaction was made, efectivizing YPF’s assigment of its 50% interest in the area and the operation to Equinor Argentina B.V. Sucursal Argentina. On April 22, 2020, YPF received US$ 22 million. In consideration of the above, the Group recorded a profit of 1,457 included in “Other net operating results”.

5. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, interest rate risk, and price risks), credit risk and liquidity risk. Within the Group, risk management functions are conducted in relation to financial risks associated to financial instruments to which the Group is exposed during a certain period or as of a specific date. The administration and risk management policies applied by the Group are described in Note 4 to the annual consolidated financial statements. Moreover, given the current economic situation caused by the COVID-19, the Group has evaluated its exposure to the following risks:

 

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Market risk management

The market risk to which the Group is exposed consists of the possibility that the valuation of the Group’s financial assets and liabilities, as well as certain expected cash flows may be adversely affected by changes in interest rates, exchange rates and other price variables.

The Group has carried out a sensitivity analysis of possible changes in interest rates, which did not have a significant impact on the Group. Likewise, given the restrictions imposed by the BCRA for access to the exchange market, specifically since the publication of Communication No. 7030, the Group has been reducing its portion of cash and cash equivalents denominated in currencies other than the Argentine Peso, and, therefore it may be affected in case of exchange rate variation, on account of which the entity decided to operate with derivative financial instruments as a hedge following the accounting policy defined in Note 2.b.17) to the annual consolidated financial statements.

On the other hand, the Group was affected by the investments in financial instruments’ own price risk (variations in public securities and mutual funds prices), which are valued at fair value with changes in results. See Note 7.

 

17

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

5. FINANCIAL RISK MANAGMENT (Cont.)

 

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Liquidity risk management

Liquidity risk is associated with the possibility of a mismatch between the need of funds to meet short, medium or long-term obligations.

Based on the restrictions established by the BCRA for access to the foreign exchange market, specifically since the publication of Communication No. 7,106 that refers to maturities of principal amounts of offshore debts and the issuance of debt securities denominated in foreign currency scheduled between October 15, 2020 and March 31, 2021, the Group is evaluating alternatives to meet its obligations.

Besides, several loans of the Group contain Covenants, which include certain financial commitments and a negative impact due to material adverse judgments, among others. The Group monitors compliance with the Covenants on a quarterly basis. As of September 30, 2020, the Group had exceeded the leverage ratio required under the Covenants, and therefore, even though there is no acceleration of maturities of due amounts and restrictions to refinance existing loans, the Group has certain limitations in its capacity to incur further debt. However, there are certain exceptions that might allow the Group certain flexibility to manage its debt.

It should be noted that, under the terms and conditions of the loans that subsidiary Metrogas has taken with Industrial and Commercial Bank of China Limited - Dubai Branch and Itaú Unibanco - Miami Branch, the debt service coverage ratio would not have been complied with, which could have accelerated the maturities of these financial liabilities. However, on September 30, 2020, financial creditors formally accepted to waive Metrogas the contractual obligation to comply with such financial ratio, which should not be lower than 3.00 and be kept not lower than 1.50 as of September 30, 2020.

 

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Credit risk management

Credit risk is defined as the possibility of a third party not complying with its contractual obligations, generating Group losses.The main considerations are described in Note 2.c.

Moreover, the Group has recorded an impairment charge of accounts receivables related to the Decree No. 1053/2018. See Note 35.a.

 

18

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

 

6. SEGMENT INFORMATION

The different segments in which the Group is organized take into consideration the different activities from which the Group obtains income and incurs expenses. The aforementioned organizational structure is based on the way in which the highest decision-making authority analyzes the main financial and operating magnitudes for making decisions about resource allocation and performance assessment also considering the Group’s business strategy.

 

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Upstream

The Upstream segment carries out all activities relating to the exploration, development and production of oil and natural gas.

Revenue is generated from (i) the sale of produced crude oil to the Downstream segment and, marginally, from its sale to third parties; (ii) the sale of produced gas to the Gas and Power segment.

 

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Gas and Power

The Gas and Power segment generates its revenue from the development of activities relating to: (i) the natural gas and LNG transport and commercialization to third parties and the Downstream segment, (ii) the commercial and technical operation of the LNG regasification terminal in Escobar, by hiring one regasification vessel, and (iii) the natural gas distribution.

In addition to the proceeds derived from the sale of natural gas to third parties and the intersegment, which is then recognized as a “purchase” to the Upstream segment, and including Stimulus Plan for Natural Gas production in force (see Note 34.g to the annual consolidated financial statements), Gas and Power accrues a fee in its favor with the Upstream segment to carry out such commercialization.

 

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Downstream

The Downstream segment develops activities relating to: (i) crude oil refining and petrochemical production, (ii) commercialization of refined and petrochemical products obtained from such processes, (iii) logistics related to the transportation of crude oil and gas to refineries and the transportation and distribution of refined and petrochemical products to be marketed in the different sales channels.

It obtains its income from the marketing mentioned in item (ii) above, which is developed through the Retail, Industry, Aviation, Agro, LPG, Chemicals and Lubricants and Specialties businesses.

It incurs in all expenses relating to the aforementioned activities, including the purchase of crude oil from the Upstream segment and third parties and the natural gas to be consumed in the refinery and petrochemical industrial complexes from the Gas and Power segment.

 

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Central Administration and Others

It covers other activities, not falling into the aforementioned categories, mainly including corporate administrative expenses and assets and construction activities.

Sales between business segments were made at internal transfer prices established by the Group, which generally seek to approximate market prices.

Operating profit and assets for each segment have been determined after consolidation adjustments.

 

19

English translation of the condensed interim consolidated financial statements originally filed in Spanish with the Argentine Securities Commission (“CNV”). In case of discrepancy, the condensed interim consolidated financial statements filed with the CNV prevail over this translation

 

YPF SOCIEDAD ANONIMA NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND COMPARATIVE INFORMATION (UNAUDITED)

6. SEGMENT INFORMATION (Cont.)

 

 

		Upstream				Gas and Power				Downstream				Central Administration and Others				Consolidation Adjustments(1)				Total
For the nine-month period ended September 30, 2020
Revenues from sales			2,439				93,193				381,454				9,458				(4,831	)			481,713
Revenues from intersegment sales			211,495				6,275				2,469				18,423				(238,662	)			—
Revenues			213,934				99,468				383,923				27,881				(243,493	)			481,713
Operating profit / (loss)			(86,188	)			(8,389	)			(3,915	)			(15,685	)			12,042				(102,135	)
Income from equity interests in associates and joint ventures			—				5,315				2,935				—				—				8,250
Depreciation of property, plant and equipment			102,025	(2)			1,327				25,168				5,427				—				133,947
Impairment of property, plant and equipment and intangible assets			58,695				62				—				77				—				58,834
Acquisition of property, plant and equipment			48,062				3,862				12,935				3,534				—				68,393
Assets			784,815				222,694				588,668				138,742				7,767				1,742,686
For the nine-month period ended September 30, 2019
Revenues from sales			1,969				92,324				368,109				13,518				(4,235	)			471,685
Revenues from intersegment sales			204,357				6,814				2,448				17,819				(231,438	)			—
Revenues			206,326				99,138				370,557				31,337				(235,673	)			471,685
Operating profit / (loss)			(37,660	)			2,543				20,126				(8,878	)			11,043				(12,826	)
Income from equity interests in associates and joint ventures			—				2,094				1,124				—				—				3,218
Depreciation of property, plant and equipment			82,129	(2)			979				13,522				2,590				—				99,220
Impairment of property, plant and equipment			40,561				868				—				—				—				41,429
Acquisition of property, plant and equipment			90,993				3,830				12,742				3,931				—				111,496
As of December 31, 2019
Assets			742,850				199,357				508,026				129,331				(6,275	)			1,573,289

 

(1)	Corresponds to the elimination among segments of the YPF Group.

(2)	Includes depreciation of charges for impairment of property, plant and equipment.

 

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