YPF Cuts Pre-Operating Costs in Q3, Offsets Revenue Decline with Operational Efficiency

YPF Sociedad Anónima delivered per-share earnings of $0.84 for the third quarter of 2025, surpassing analyst projections of $0.82. This marked a decline from the $3.75 earned in the same quarter of the previous year. However, the company’s ability to control pre-operating expenses proved instrumental in boosting profitability despite headwinds elsewhere.

Quarterly revenues totaled $4.64 billion, falling short of the projected $5.05 billion and down from $5.3 billion in the corresponding 2024 period. Despite the top-line contraction, YPF managed to expand its bottom line through aggressive cost management and improved operational efficiency.

What Drove Q3 Performance?

The earnings beat stemmed largely from substantial reductions in pre-operating and total operating expenses, which declined 30.9% year-over-year to $1,356 million from $1,962 million. This cost compression reflected YPF’s strategic shift toward high-margin shale operations and reduced reliance on mature conventional fields.

Partially offsetting these gains were production declines and softer commodity prices. Total hydrocarbon output fell 6.4% to 523.1 thousand barrels of oil equivalent per day (Mboe/d) compared to 558.7 Mboe/d in Q3 2024. Simultaneously, crude oil price realizations contracted 12.1% to $60 per barrel, while natural gas prices fell 3% to $4.3 per MMBtu.

Production and Pricing Dynamics

Crude oil production averaged 239.8 thousand barrels daily, down from 255.8 in the year-ago quarter. This decline reflected reduced conventional output, though higher shale contribution provided partial relief. Natural gas production retreated 4.8% to 38.4 million cubic meters per day, primarily driven by weakness in mature conventional assets.

Despite lower volumes and prices, YPF’s upstream Adjusted EBITDA expanded 32.9% year-over-year to $1,042 million. This improvement was underpinned by lifting cost reductions and seasonal strength in natural gas sales.

Refining Segment Performance

The midstream and downstream segment processed 326.2 thousand barrels daily, up 9.3% from 298.3 in the prior-year quarter. Refinery utilization improved to 96.5% from 88.3%, demonstrating enhanced operational leverage. Adjusted EBITDA from this segment, adjusting for inventory price effects, slipped 25.6% to $354 million, primarily due to compressed local fuel margins.

Cash Generation and Balance Sheet

Operating cash flow reached $1,225 million during the quarter. However, the company posted negative free cash flow of $759 million as capital investments outpaced operating cash generation.

As of September 30, 2025, YPF maintained $1.02 billion in cash and short-term investments against total debt of $10.6 billion, maintaining its financial flexibility amid volatile commodity markets.

Investment Outlook

YPF carries a Zacks Rank #3 (Hold) rating, reflecting the company’s mixed operational performance and exposure to commodity price volatility. The company’s strategic repositioning toward shale assets and emphasis on cost discipline through reduced pre-operating expenses demonstrate management’s commitment to enhancing shareholder value in a challenging energy environment.